Form 10-Q Match Group, Inc. For: Jun 30
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E-mailAs filed with the Securities and Exchange Commission on August 5, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For the Quarterly Period Ended | ||||||||
| Or | ||||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For the transition period from__________to__________ | ||||||||
Commission File No. 001-34148
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of registrant’s principal executive offices)
(214 ) 576-9352
(Registrant’s telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each class | Trading Symbol | Name of exchange on which registered | ||||||||||||
| (Nasdaq Global Select Market) | ||||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of July 29, 2022, there were 282,986,452 shares of common stock outstanding.
TABLE OF CONTENTS
| Page Number | ||||||||
2
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
| June 30, 2022 | December 31, 2021 | ||||||||||
| (In thousands, except share data) | |||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
Accounts receivable, net of allowance of $ | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
Property and equipment, net of accumulated depreciation and amortization of $ | |||||||||||
| Goodwill | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| LIABILITIES | |||||||||||
| Current maturities of long-term debt, net | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Deferred revenue | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net | |||||||||||
| Income taxes payable | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Redeemable noncontrolling interests | |||||||||||
| Commitments and contingencies | |||||||||||
| SHAREHOLDERS’ EQUITY | |||||||||||
Common stock; $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock; | ( | ||||||||||
Total Match Group, Inc. shareholders’ equity | ( | ( | |||||||||
| Noncontrolling interests | |||||||||||
Total shareholders’ equity | ( | ( | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | |||||||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
Cost of revenue (exclusive of depreciation shown separately below) | |||||||||||||||||||||||
| Selling and marketing expense | |||||||||||||||||||||||
| General and administrative expense | |||||||||||||||||||||||
| Product development expense | |||||||||||||||||||||||
| Depreciation | |||||||||||||||||||||||
| Impairment and amortization of intangibles | |||||||||||||||||||||||
| Total operating costs and expenses | |||||||||||||||||||||||
Operating (loss) income | ( | ||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
Other income (expense), net | ( | ( | |||||||||||||||||||||
(Loss) earnings from continuing operations, before tax | ( | ||||||||||||||||||||||
Income tax benefit (provision) | ( | ( | |||||||||||||||||||||
Net (loss) earnings from continuing operations | ( | ||||||||||||||||||||||
Earnings from discontinued operations, net of tax | |||||||||||||||||||||||
| Net (loss) earnings | ( | ||||||||||||||||||||||
Net loss attributable to noncontrolling interests | |||||||||||||||||||||||
Net (loss) earnings attributable to Match Group, Inc. shareholders | $ | ( | $ | $ | $ | ||||||||||||||||||
Net (loss) earnings per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | $ | ||||||||||||||||||
| Diluted | $ | ( | $ | $ | $ | ||||||||||||||||||
Net (loss) earnings per share attributable to Match Group, Inc. shareholders: | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | $ | ||||||||||||||||||
| Diluted | $ | ( | $ | $ | $ | ||||||||||||||||||
Stock-based compensation expense by function: | |||||||||||||||||||||||
| Cost of revenue | $ | $ | $ | $ | |||||||||||||||||||
| Selling and marketing expense | |||||||||||||||||||||||
| General and administrative expense | |||||||||||||||||||||||
| Product development expense | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS (Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Net (loss) earnings | $ | ( | $ | $ | $ | ||||||||||||||||||
Other comprehensive loss, net of tax | |||||||||||||||||||||||
Change in foreign currency translation adjustment | ( | ( | ( | ( | |||||||||||||||||||
Total other comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
Comprehensive (loss) income | ( | ( | |||||||||||||||||||||
| Components of comprehensive loss attributable to noncontrolling interests: | |||||||||||||||||||||||
Net loss attributable to noncontrolling interests | |||||||||||||||||||||||
Change in foreign currency translation adjustment attributable to noncontrolling interests | |||||||||||||||||||||||
Comprehensive loss attributable to noncontrolling interests | |||||||||||||||||||||||
Comprehensive (loss) income attributable to Match Group, Inc. shareholders | $ | ( | $ | $ | ( | $ | |||||||||||||||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)
Three Months Ended June 30, 2022
| Match Group Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Noncontrolling Interests | $ | Shares | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | Total Match Group Shareholders’ Equity | Noncontrolling Interests | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings for the three months ended June 30, 2022 | ( | — | — | — | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of redeemable noncontrolling interests to fair value | — | — | ( | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests to fair value | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest created by the exercise of subsidiary denominated equity awards | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Settlement of notes warrants | — | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
6
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)
Three Months Ended June 30, 2021
| Match Group Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Noncontrolling Interests | $ | Shares | Additional Paid-in Capital | Retained (Deficit) Earnings | Accumulated Other Comprehensive Loss | Total Match Group Shareholders’ Equity | Noncontrolling Interests | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings for the three months ended June 30, 2021 | ( | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the acquisition of Hyperconnect | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of redeemable noncontrolling interests to fair value | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests to business acquisition | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest created by the exercise of subsidiary denominated equity award | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | ( | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
7
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)
Six Months Ended June 30, 2022
| Match Group Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Noncontrolling Interests | $ | Shares | Additional Paid-in Capital | Retained (Deficit) Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Match Group Shareholders’ Equity | Noncontrolling Interests | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings for the six months ended June 30, 2022 | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment of redeemable noncontrolling interests to fair value | ( | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests to fair value | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest created by the exercise of subsidiary denominated equity awards | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Settlement of notes warrants | — | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
8
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited) (Continued)
Six Months Ended June 30, 2021
| Match Group Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Noncontrolling Interests | $ | Shares | Additional Paid-in Capital | Retained (Deficit) Earnings | Accumulated Other Comprehensive Loss | Total Match Group Shareholders’ Equity | Noncontrolling Interests | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings for the six months ended June 30, 2021 | ( | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the acquisition of Hyperconnect | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of redeemable noncontrolling interests to fair value | — | — | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of noncontrolling interest | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests to business acquisition | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest created by the exercise of subsidiary denominated equity award | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | ( | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
9
MATCH GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In thousands) | |||||||||||
| Cash flows from operating activities attributable to continuing operations: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Add back: earnings from discontinued operations, net of tax | ( | ||||||||||
| Net earnings from continuing operations | $ | $ | |||||||||
Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities attributable to continuing operations: | |||||||||||
| Stock-based compensation expense | |||||||||||
| Depreciation | |||||||||||
| Impairment and amortization of intangibles | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Other adjustments, net | |||||||||||
| Changes in assets and liabilities | |||||||||||
| Accounts receivable | ( | ||||||||||
| Other assets | |||||||||||
| Accounts payable and other liabilities | ( | ( | |||||||||
| Income taxes payable and receivable | ( | ||||||||||
| Deferred revenue | |||||||||||
| Net cash provided by operating activities attributable to continuing operations | |||||||||||
| Cash flows from investing activities attributable to continuing operations: | |||||||||||
| Acquisitions, net of cash | ( | ||||||||||
| Capital expenditures | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net cash used in investing activities attributable to continuing operations | ( | ( | |||||||||
| Cash flows from financing activities attributable to continuing operations: | |||||||||||
| Payments to settle exchangeable notes | ( | ||||||||||
Proceeds from the settlement of exchangeable note hedges | |||||||||||
Payments to settle warrants related to exchangeable notes | ( | ||||||||||
| Debt issuance costs | ( | ||||||||||
| Proceeds from issuance of common stock pursuant to stock-based awards | |||||||||||
Withholding taxes paid on behalf of employees on net settled stock-based awards | ( | ( | |||||||||
Purchase of treasury stock | ( | ||||||||||
| Purchase of noncontrolling interests | ( | ( | |||||||||
| Other, net | |||||||||||
| Net cash (used in) provided by financing activities attributable to continuing operations | ( | ||||||||||
| Total cash used in continuing operations | ( | ( | |||||||||
| Net cash used in operating activities attributable to discontinued operations | |||||||||||
| Net cash used in investing activities attributable to discontinued operations | |||||||||||
| Net cash used in financing activities attributable to discontinued operations | |||||||||||
| Total cash used in discontinued operations | |||||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | ( | ( | |||||||||
| Net decrease in cash, cash equivalents, and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
10
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As used herein, “Match Group,” the “Company,” “we,” “our,” “us,” and similar terms refer to Match Group, Inc. and its subsidiaries, unless the context indicates otherwise.
Basis of Presentation and Consolidation
The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. Intercompany transactions and accounts have been eliminated.
In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in management’s opinion, all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of our consolidated financial position, consolidated results of operations and consolidated cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments, and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates, judgments, and assumptions impact the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
On an ongoing basis, the Company evaluates its estimates and judgments including those related to: the fair values of cash equivalents, the carrying value of accounts receivable, including the determination of the allowance for credit losses; the determination of revenue reserves; the carrying value of right-of-use assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the recoverability of goodwill and indefinite-lived intangible assets; the fair value of equity securities without readily determinable fair values; contingencies; unrecognized tax benefits; the valuation allowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets, and other factors that the Company considers relevant.
Accounting for Investments and Equity Securities
Investments in equity securities, other than those of our consolidated subsidiaries, are accounted for at fair value or under the measurement alternative of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, with any changes to fair value recognized within other income (expense), net 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 a similar investment of the same issuer; 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
11
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Revenue Recognition
Revenue is recognized when control of the promised services are transferred to our customers, and in the amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
Deferred Revenue
Deferred revenue consists of advance payments that are received or are contractually due in advance of the Company's performance. The Company’s deferred revenue is reported on a contract by contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the term of the applicable subscription period or expected completion of our performance obligation is one year or less. The current deferred revenue balance as of December 31, 2021 was $262.1 million. During the six months ended June 30, 2022, the Company recognized $249.7 million of revenue that was included in the deferred revenue balance as of December 31, 2021. The current deferred revenue balance at June 30, 2022 is $259.1 million. At June 30, 2022 and December 31, 2021, there was no
Practical Expedients and Exemptions
As permitted under the practical expedient available under ASU No. 2014-09, Revenue from Contracts with Customers, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed.
Disaggregation of Revenue
The following table presents disaggregated revenue:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Direct Revenue: | |||||||||||||||||||||||
| Americas | $ | $ | $ | $ | |||||||||||||||||||
| Europe | |||||||||||||||||||||||
| APAC and Other | |||||||||||||||||||||||
| Total Direct Revenue | |||||||||||||||||||||||
Indirect Revenue (principally advertising revenue) | |||||||||||||||||||||||
| Total Revenue | $ | $ | $ | $ | |||||||||||||||||||
Recent Accounting Pronouncements
Accounting pronouncements not yet adopted by the Company
In October 2021, the FASB issued ASU No. 2021-08, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. The update will generally result in an
12
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2—INCOME TAXES
At the end of each interim period, the Company estimates the annual effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects, is individually computed and recognized in the interim period in which it occurs. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of beginning-of-the-year deferred tax assets in future years or unrecognized tax benefits is recognized in the interim period in which the change occurs.
The computation of the estimated annual effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or our tax environment changes. To the extent that the estimated annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in the income tax provision in the quarter in which the change occurs.
For the three months ended June 30, 2022 and 2021, the Company recorded an income tax benefit of $8.0 million and a tax provision of $37.3 million, respectively. The effective tax rates in both three-month periods benefited from excess tax benefits generated by the exercise and vesting of stock-based awards, offset by the tax impact of certain nondeductible stock-based awards. For the six months ended June 30, 2022 and 2021, the Company recorded an income tax benefit of $14.9 million and a tax provision of $19.6 million, respectively. The effective tax rates in both six-month periods benefited from excess tax benefits generated by the exercise and vesting of stock-based awards.
Match Group is routinely under audit by federal, state, local, and foreign authorities in the area of income tax. These audits include a review of the timing and amount of income and deductions, and the allocation of such income and deductions among various tax jurisdictions. The Internal Revenue Service (“IRS”) has substantially completed its audit of the Company’s federal income tax returns for the years ended December 31, 2013 through 2017 and is currently auditing the years ended December 31, 2018 and 2019. The statute of limitations for the years 2013 to 2019 has been extended to December 31, 2023. We are no longer subject to U.S. federal income tax examinations for years prior to 2013. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2014. Although we believe that we have adequately reserved for our uncertain tax positions, the final tax outcome of these matters may vary significantly from our estimates.
At June 30, 2022 and December 31, 2021, unrecognized tax benefits, including interest and penalties, were $52.5 million and $51.8 million, respectively. If unrecognized tax benefits at June 30, 2022 are subsequently recognized, income tax expense would be reduced by $46.5 million, net of related deferred tax assets and interest. The comparable amount as of December 31, 2021 was $46.0 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $1.0 million by June 30, 2023 due to settlements and expirations of statutes of limitations, all of which would reduce the income tax provision.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Accruals of interest and penalties for the three months ended June 30, 2022 and 2021
13
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 3—DISCONTINUED OPERATIONS
Pursuant to the terms of the transaction agreement dated as of December 19, 2019 (as amended, the “Transaction Agreement”), on June 30, 2020, the companies formerly known as Match Group, Inc. (referred to as “Former Match Group”) and IAC/InterActiveCorp (referred to as “Former IAC”) completed the separation of the Company from IAC through a series of transactions that resulted in two, separate public companies—(1) Match Group, which consists of the businesses of Former Match Group and certain financing subsidiaries previously owned by Former IAC, and (2) IAC, formerly known as IAC Holdings, Inc., consisting of Former IAC’s businesses other than Match Group (the “Separation”). Accordingly, the businesses of Former IAC other than Match Group are presented as discontinued operations.
Earnings from discontinued operations for the three and six months ended June 30, 2021 consist of an income tax benefit of $0.5
NOTE 4—FINANCIAL INSTRUMENTS
Equity securities without readily determinable fair values
At both June 30, 2022 and December 31, 2021, the carrying value of the Company’s investments in equity securities without readily determinable fair values totaled $14.2 2.1 million. For both the six months ended June 30, 2022 and 2021, there were no
For all equity securities without readily determinable fair values as of June 30, 2022 and December 31, 2021, the Company has elected the measurement alternative. For the three and six months ended June 30, 2022 and 2021, under the measurement alternative election, the Company did not identify any fair value adjustments using observable price changes in orderly transactions for an identical or similar investment of the same issuer.
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
•Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.
•Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active, and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company’s Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.
•Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.
14
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:
| June 30, 2022 | |||||||||||||||||
| Quoted Market Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Total Fair Value Measurements | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Assets: | |||||||||||||||||
| Cash equivalents: | |||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||
| Time deposits | |||||||||||||||||
| Short-term investments: | |||||||||||||||||
| Time deposits | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| December 31, 2021 | |||||||||||||||||
| Quoted Market Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Total Fair Value Measurements | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Assets: | |||||||||||||||||
| Cash equivalents: | |||||||||||||||||
| Money market funds | $ | $ | $ | ||||||||||||||
| Time deposits | |||||||||||||||||
| Short-term investments: | |||||||||||||||||
| Time Deposits | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
Assets measured at fair value on a nonrecurring basis
The Company’s non-financial assets, such as goodwill, intangible assets, property and equipment, and right-of-use assets, are adjusted to fair value only when an impairment charge is recognized. The Company’s financial assets, comprised of equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.
During the second quarter of 2022, the Company recorded an impairment charge of $217.4 million, which is included within impairment and amortization of intangibles, on trade names and technology intangible assets associated with the Hyperconnect acquisition. The Company used avoided royalty discounted cash flow (“DCF”) valuations for the various intangibles to determine the current fair value of these intangible assets at June 30, 2022. Our expectations of future revenues and cash flows of Hyperconnect have declined since the time of the acquisition, including impacts of unfavorable foreign currency exchange rate changes in certain of Hyperconnect’s key markets. Additionally, the discount rates used in the valuations have increased since the time of the Hyperconnect acquisition, further negatively impacting the fair value of these intangible assets.
15
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Financial instruments measured at fair value only for disclosure purposes
The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes.
| June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Current maturities of long-term debt (a) (b) (c) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Long-term debt, net (b) (c) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
______________________
(a)At June 30, 2022 and December 31, 2021, the carrying value excludes $13.7 million and $15.6 million, respectively, of aggregate principal amount of the exchanged 2022 Exchangeable Notes (described in “Note 5—Long-term Debt, net”) as those amounts are carried at fair value.
(b)At June 30, 2022 and December 31, 2021, the carrying value of current maturities of long-term debt, net includes unamortized debt issuance costs of $0.1 million and $0.6 million, respectively. At June 30, 2022 and December 31, 2021, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $42.5 million and $45.6 million, respectively.
At June 30, 2022 and December 31, 2021, the fair value of long-term debt, net, is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.
16
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 5—LONG-TERM DEBT, NET
Long-term debt consists of:
| June 30, 2022 | December 31, 2021 | ||||||||||
| (In thousands) | |||||||||||
Credit Facility due February 13, 2025 | $ | $ | |||||||||
Term Loan due February 13, 2027 | |||||||||||
| Total debt | |||||||||||
| Less: Current maturities of long-term debt | |||||||||||
Less: Unamortized original issue discount | |||||||||||
| Less: Unamortized debt issuance costs | |||||||||||
| Total long-term debt, net | $ | $ | |||||||||
Credit Facility and Term Loan
Our wholly-owned subsidiary, Match Group Holdings II, LLC (“MG Holdings II”), is the borrower under a credit agreement (as amended, the “Credit Agreement”) that provides for the Credit Facility and the Term Loan. The Credit Agreement provides for a benchmark replacement should the LIBOR rate not be available in the future. The rate used would be agreed to between the administrative agent and the Company and may be based upon a secured overnight financing rate at the Federal Reserve Bank of New York. Additional information about the benchmark replacement can be found in Amendment No. 6 to the Credit Agreement.
The Credit Facility has a borrowing capacity of $750 million and matures on February 13, 2025. At both June 30, 2022 and December 31, 2021, there were no 0.4 749.6 25 basis points as of June 30, 2022. Borrowings under the Credit Facility bear interest, at MG Holdings II’s option, at a base rate or LIBOR, in each case plus an applicable margin, based on MG Holdings II’s consolidated net leverage ratio. If MG Holdings II borrows under the Credit Facility, it will be required to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0.
At both June 30, 2022 and December 31, 2021, the outstanding balance on the Term Loan was $425 1.75 %, which was 3.19 % and 1.91 % at June 30, 2022 and December 31, 2021, respectively. The Term Loan matures on February 13, 2027. Interest payments are due at
17
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
least quarterly through the term of the loan. The Term Loan provides for annual principal payments as part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio as set forth in the Credit Agreement.
The Credit Agreement includes covenants that would limit the ability of MG Holdings II to pay dividends, make distributions, or repurchase MG Holdings II’s stock in the event MG Holdings II’s secured net leverage ratio exceeds 2.0 to 1.0, while the Term Loan remains outstanding and, thereafter, if MG Holdings II’s consolidated net leverage ratio exceeds 4.0 to 1.0, or if an event of default has occurred. The Credit Agreement includes additional covenants that limit the ability of MG Holdings II and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. Obligations under the Credit Facility and Term Loan are unconditionally guaranteed by certain MG Holdings II wholly-owned domestic subsidiaries and are also secured by the stock of certain MG Holdings II domestic and foreign subsidiaries. The Term Loan and outstanding borrowings, if any, under the Credit Facility, rank equally with each other, and have priority over the Senior Notes to the extent of the value of the assets securing the borrowings under the Credit Agreement.
Senior Notes
The 5.00 % Senior Notes were issued on December 4, 2017. At any time prior to December 15, 2022, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The 4.625 % Senior Notes were issued on May 19, 2020. At any time prior to June 1, 2023, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The 5.625 % Senior Notes were issued on February 15, 2019. At any time prior to February 15, 2024, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The 4.125 % Senior Notes were issued on February 11, 2020. At any time prior to May 1, 2025, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The 3.625 % Senior Notes were issued on October 4, 2021. At any time prior to October 1, 2026, these notes may be redeemed at a redemption price equal to the sum of the principal amount, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter, these notes may be redeemed at redemption prices set forth in the indenture governing the notes, together with accrued and unpaid interest to the applicable redemption date.
The indenture governing the 5.00 % Senior Notes contains covenants that would limit MG Holdings II’s ability to pay dividends or to make distributions and repurchase or redeem MG Holdings II’s stock in the event a default has occurred or MG Holdings II’s consolidated leverage ratio (as defined in the indenture) exceeds 5.0 to 1.0. No such limitations were in effect at June 30, 2022. There are additional covenants in the 5.00 % Senior Notes indenture that limit the ability of MG Holdings II and its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event MG Holdings II is not in compliance with specified financial ratios, and (ii) incur liens, enter into agreements restricting their ability to pay dividends, enter into transactions with affiliates, or consolidate, merge or sell substantially all of their assets. The indentures governing the 3.625 %, 4.125 %, 4.625 %, and 5.625 % Senior Notes are less restrictive than the indenture governing the 5.00 % Senior Notes and generally only limit MG Holdings II’s and its subsidiaries’ ability to, among
18
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
other things, create liens on assets, or consolidate, merge, sell or otherwise dispose of all or substantially all of their assets.
The Senior Notes all rank equally in right of payment.
Exchangeable Notes
During 2017, Match Group FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company, issued $517.5 million aggregate principal amount of its 2022 Exchangeable Notes. During 2019, Match Group FinanceCo 2, Inc. and Match Group FinanceCo 3, Inc., direct, wholly-owned subsidiaries of the Company, issued $575.0 million aggregate principal amount of its 2026 Exchangeable Notes, and $575.0 million aggregate principal amount of its 2030 Exchangeable Notes, respectively.
The 2022, 2026, and 2030 Exchangeable Notes (collectively the “Exchangeable Notes”) are guaranteed by the Company but are not guaranteed by MG Holdings II or any of its subsidiaries.
The following table presents details of the exchangeable features:
Number of shares of the Company’s Common Stock into which each $1,000 of Principal of the Exchangeable Notes is Exchangeable(a) | Approximate Equivalent Exchange Price per Share(a) | Exchangeable Date | |||||||||||||||
| 2022 Exchangeable Notes | $ | July 1, 2022 | |||||||||||||||
| 2026 Exchangeable Notes | $ | March 15, 2026 | |||||||||||||||
| 2030 Exchangeable Notes | $ | October 15, 2029 | |||||||||||||||
______________________
(a)Subject to adjustment upon the occurrence of specified events.
As more specifically set forth in the applicable indentures, the Exchangeable Notes are exchangeable under the following circumstances:
(1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the exchange price on each applicable trading day;
(2) during the -business day period after any -consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company's common stock and the exchange rate on each such trading day;
(3) if the issuer calls the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
(4) upon the occurrence of specified corporate events as further described in the indentures governing the respective Exchangeable Notes.
On or after the respective exchangeable dates noted in the table above, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may exchange all or any portion of their Exchangeable Notes regardless of the foregoing conditions. Upon exchange, the issuer, in its sole discretion, has the option to settle the Exchangeable Notes with cash, shares of the Company’s common stock, or a combination of cash and shares of the Company's common stock. Any shares issued in further settlement of the notes would be offset by shares received upon exercise of the Exchangeable Note Hedges (described below).
The Company’s 2022 Exchangeable Notes were exchangeable as of June 30, 2022. A total of $40.6 million of the 2022 Exchangeable Notes were presented for exchange during the six months ended June 30, 2022 of which $14.6 million aggregate principal amount was not yet settled as of June 30, 2022. No other Exchangeable
19
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Notes were presented for exchange during the six months ended June 30, 2022. During the six months ended June 30, 2022, $41.6 million aggregate principal amount of the 2022 Exchangeable Notes were settled related to notes presented for exchange in the current period or prior periods.
The following table presents the if-converted value that exceeded the principal of each Exchangeable Note outstanding as of June 30, 2022 and December 31, 2021 based on the Company’s stock price on June 30, 2022 and December 31, 2021, respectively.
| June 30, 2022 | December 31, 2021 | ||||||||||
| (In millions) | |||||||||||
| 2022 Exchangeable Notes | $ | $ | |||||||||
| 2026 Exchangeable Notes | $ | $ | |||||||||
| 2030 Exchangeable Notes | $ | $ | |||||||||
Additionally, all or any portion of the 2026 Exchangeable Notes and 2030 Exchangeable Notes may be redeemed for cash, at the respective issuer’s option, on or after June 20, 2023 and July 20, 2026, respectively, if the last reported sale price of the Company’s common stock has been at least 130 % of the exchange price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the notice of redemption is provided, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the applicable issuer provides notice of redemption, at a redemption price equal to 100 % of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The following table sets forth the components of the outstanding Exchangeable Notes as of June 30, 2022 and December 31, 2021:
| June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| 2022 Exchangeable Notes | 2026 Exchangeable Notes | 2030 Exchangeable Notes | 2022 Exchangeable Notes | 2026 Exchangeable Notes | 2030 Exchangeable Notes | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Principal | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Less: Unamortized debt issuance costs | |||||||||||||||||||||||||||||||||||
Net carrying value included in current maturities of long-term debt, net | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Net carrying value included in long-term debt, net | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
20
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The following table sets forth interest expense recognized related to the Exchangeable Notes:
| Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||
| 2022 Exchangeable Notes | 2026 Exchangeable Notes | 2030 Exchangeable Notes | 2022 Exchangeable Notes | 2026 Exchangeable Notes | 2030 Exchangeable Notes | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Contractual interest expense | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Amortization of debt issuance costs | |||||||||||||||||||||||||||||||||||
| Total interest expense recognized | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||
| 2022 Exchangeable Notes | 2026 Exchangeable Notes | 2030 Exchangeable Notes | 2022 Exchangeable Notes | 2026 Exchangeable Notes | 2030 Exchangeable Notes | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Contractual interest expense | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Amortization of debt issuance costs | |||||||||||||||||||||||||||||||||||
| Total interest expense recognized | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
The effective interest rates for the 2022, 2026, and 2030 Exchangeable Notes are 1.6 %, 1.2 %, and 2.2 %, respectively.
Exchangeable Notes Hedges and Warrants
In connection with the Exchangeable Notes offerings, the Company purchased call options allowing the Company to purchase initially (subject to adjustment upon the occurrence of specified events) the same number of shares that would be issuable upon the exchange of the applicable Exchangeable Notes at the prices per share set forth below (the “Exchangeable Notes Hedge”), and sold warrants allowing the counterparty to purchase (subject to adjustment upon the occurrence of specified events) shares at the per share prices set forth below (the “Exchangeable Notes Warrants”).
The Exchangeable Notes Hedges are expected to reduce the potential dilutive effect on the Company’s common stock upon any exchange of Exchangeable Notes and/or offset any cash payment Match Group FinanceCo, Inc., Match Group FinanceCo 2, Inc. or Match Group FinanceCo 3, Inc. is required to make in excess of the principal amount of the exchanged notes. The Exchangeable Notes Warrants have a dilutive effect on the Company’s common stock to the extent that the market price per share of the Company common stock exceeds their respective strike prices.
During the six months ended June 30, 2022, in connection with the 2022 Exchangeable Notes presented for exchange, we exercised 0.9 million underlying shares of the related 2022 Exchangeable Notes Hedges, which were valued based on the volume weighted average price of Match Group common stock over a 40-day measurement period. During the six months ended June 30, 2022, the Company received $52.6 million in cash related to these hedge settlements.
During the quarter ended June 30, 2022, we paid $7.5 million to settle 0.4 million underlying shares of the 2022 Exchangeable Notes Warrants.
21
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
The following tables present details of the Exchangeable Notes Hedges and Warrants outstanding at June 30, 2022:
Number of Shares(a) | Approximate Equivalent Exchange Price per Share(a) | ||||||||||
| (Shares in millions) | |||||||||||
| 2022 Exchangeable Notes Hedge | $ | ||||||||||
| 2026 Exchangeable Notes Hedge | $ | ||||||||||
| 2030 Exchangeable Notes Hedge | $ | ||||||||||
Number of Shares(a) | Weighted Average Strike Price per Share(a) | ||||||||||
| (Shares in millions) | |||||||||||
| 2022 Exchangeable Notes Warrants | $ | ||||||||||
| 2026 Exchangeable Notes Warrants | $ | ||||||||||
| 2030 Exchangeable Notes Warrants | $ | ||||||||||
______________________
(a)Subject to adjustment upon the occurrence of specified events.
NOTE 6—ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the components of accumulated other comprehensive loss. For the three and six months ended June 30, 2022 and 2021, the Company’s accumulated other comprehensive loss relates to foreign currency translation adjustments.
| Three Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In thousands) | |||||||||||
| Balance at April 1 | $ | ( | $ | ( | |||||||
| Other comprehensive loss | ( | ( | |||||||||
| Balance at June 30 | $ | ( | $ | ( | |||||||
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In thousands) | |||||||||||
| Balance at January 1 | $ | ( | $ | ( | |||||||
Other comprehensive loss | ( | ( | |||||||||
| Balance at June 30 | $ | ( | $ | ( | |||||||
At both June 30, 2022 and 2021, there was no
22
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
NOTE 7—EARNINGS PER SHARE
The following table sets forth the computation of the basic and diluted earnings per share attributable to Match Group shareholders:
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Basic | Diluted | Basic | Diluted | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Numerator | |||||||||||||||||||||||
Net (loss) earnings from continuing operations | $ | ( | $ | ( | $ | $ | |||||||||||||||||
Net loss attributable to noncontrolling interests | |||||||||||||||||||||||
Impact from subsidiaries’ dilutive securities of continuing operations | — | — | ( | ||||||||||||||||||||
Interest on dilutive Exchangeable Notes, net of income tax(a) | — | — | |||||||||||||||||||||
Net (loss) earnings from continuing operations attributable to Match Group, Inc. shareholders | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Earnings from discontinued operations, net of tax | $ | $ | $ | $ | |||||||||||||||||||
| Net earnings from discontinued operations attributable to shareholders | |||||||||||||||||||||||
Net (loss) earnings attributable to Match Group, Inc. shareholders | $ | ( | $ | ( | $ | $ | |||||||||||||||||
| Denominator | |||||||||||||||||||||||
| Weighted average basic shares outstanding | |||||||||||||||||||||||
Dilutive securities(b)(c) | — | — | |||||||||||||||||||||
Dilutive shares from Exchangeable Notes, if-converted(a) | — | — | |||||||||||||||||||||
Denominator for (loss) earnings per share—weighted average shares(b)(c) | |||||||||||||||||||||||
| (Loss) earnings per share: | |||||||||||||||||||||||
(Loss) earnings per share from continuing operations | $ | ( | $ | ( | $ | $ | |||||||||||||||||
Earnings per share from discontinued operations, net of tax | $ | $ | $ | $ | |||||||||||||||||||
| (Loss) earnings per share attributable to Match Group, Inc. shareholders | $ | ( | $ | ( | $ | $ | |||||||||||||||||
23
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Basic | Diluted | Basic | Diluted | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Numerator | |||||||||||||||||||||||
| Net earnings from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Net loss attributable to noncontrolling interests | |||||||||||||||||||||||
Impact from subsidiaries’ dilutive securities of continuing operations | — | ( | — | ( | |||||||||||||||||||
Interest on dilutive Exchangeable Notes, net of income tax(a) | — | — | |||||||||||||||||||||
Net earnings from continuing operations attributable to Match Group, Inc. shareholders | $ | $ | $ | $ | |||||||||||||||||||
| Earnings from discontinued operations, net of tax | $ | $ | $ | $ | |||||||||||||||||||
| Net earnings from discontinued operations attributable to shareholders | |||||||||||||||||||||||
Net earnings attributable to Match Group, Inc. shareholders | $ | $ | $ | $ | |||||||||||||||||||
| Denominator | |||||||||||||||||||||||
| Weighted average basic shares outstanding | |||||||||||||||||||||||
Dilutive securities(b)(c) | — | — | |||||||||||||||||||||
Dilutive shares from Exchangeable Notes, if-converted(a) | — | — | |||||||||||||||||||||
Denominator for earnings per share—weighted average shares(b)(c) | |||||||||||||||||||||||
Earnings per share: | |||||||||||||||||||||||
| Earnings per share from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share from discontinued operations, net of tax | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share attributable to Match Group, Inc. shareholders | $ | $ | $ | $ | |||||||||||||||||||
______________________
(a)The Company uses the if-converted method for calculating the dilutive impact of the outstanding Exchangeable Notes. For the three months ended June 30, 2022, the 2022, 2026, and 2030 Exchangeable Notes were not more dilutive under the if-converted method and therefore the weighted average 0.9 million, 6.6 million, and 6.8 million shares, respectively, related to the 2022, 2026, and 2030 Exchangeable Notes are excluded from dilutive securities. For the six months ended June 30, 2022, the Company adjusted net earnings from continuing operations attributable to Match Group, Inc. shareholders for the cash interest expense, net of income taxes, incurred on the 2022 and 2026 Exchangeable Notes and dilutive shares were included for the same set of notes at the Match Group exchange rates. For the six months ended June 30, 2022, the 2030 Exchangeable Notes were not more dilutive under the if-converted method and therefore the weighted average 6.8 million shares related to the 2030 Exchangeable Notes are excluded from dilutive securities. For the three and six months ended June 30, 2021, the Company adjusted net earnings from continuing operations attributable to Match Group, Inc. shareholders for the cash interest expense, net of income taxes, incurred on the 2022, 2026, and 2030 Exchangeable Notes and dilutive shares were included for the same set of notes.
(b)If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options, warrants, and subsidiary
24
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
denominated equity and vesting of restricted stock units. For the three and six months ended June 30, 2022, 8.0 million and 2.6 million potentially dilutive securities, respectively, and for both the three and six months ended June 30, 2021, 0.7
(c)Market-based awards and performance-based restriced stock units (“PSUs”) are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs is dilutive for the respective reporting periods. For both the three and six months ended June 30, 2022, 1.5 1.0
NOTE 8—CONSOLIDATED FINANCIAL STATEMENT DETAILS
Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet to the total amounts shown in the consolidated statement of cash flows:
| June 30, 2022 | December 31, 2021 | June 30, 2021 | December 31, 2020 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
Restricted cash included in other current assets | |||||||||||||||||||||||
Total cash, cash equivalents, and restricted cash as shown on the consolidated statement of cash flows | $ | $ | $ | $ | |||||||||||||||||||
NOTE 9—CONTINGENCIES
In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where we believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against us, including claims where an unfavorable outcome is reasonably possible, 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 Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company. See “Note 2—Income Taxes” for additional information related to income tax contingencies.
Pursuant to the Transaction Agreement, we have agreed to indemnify IAC for matters relating to any business of Former Match Group, including indemnifying IAC for costs related to the matters described below.
The official names of legal proceedings in the descriptions below (shown in italics) reflect the original names of the parties when the proceedings were filed as opposed to the current names of the parties following the separation of Match Group and IAC.
Tinder Optionholder Litigation Against Former Match Group and Match Group
On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc. (“Tinder”), a former subsidiary of Former Match Group, filed a lawsuit in New York state court against Former Match Group and Match Group. See Sean Rad et al. v. IAC/InterActiveCorp and Match Group, Inc., No. 654038/2018 (Supreme
25
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Court, New York County). The complaint alleged that in 2017, the defendants: (i) wrongfully interfered with a contractually established process for the independent valuation of Tinder by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their Tinder stock options, and (ii) then wrongfully merged Tinder into Former Match Group, thereby depriving certain of the plaintiffs of their contractual right to later valuations of Tinder on a stand-alone basis. The complaint asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Former Match Group only), and interference with prospective economic advantage, and sought compensatory damages in the amount of at least $2 billion, as well as punitive damages. On August 31, 2018, four plaintiffs who were still employed by Former Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs. On June 13, 2019, the court issued a decision and order granting defendants’ motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichments, as well as the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and otherwise denying defendants’ motion to dismiss. On July 13, 2020, the four former plaintiffs filed arbitration demands with the American Arbitration Association asserting the same valuation claims and on September 3, 2020, the four arbitrations were consolidated. Trial commenced on November 8, 2021. In accordance with the parties’ agreement in December 2021, in June 2022 we paid $441 million to settle all claims in trial and in arbitration.
FTC Lawsuit Against Former Match Group
On September 25, 2019, the FTC filed a lawsuit in federal district court in Texas against Former Match Group. See FTC v. Match Group, Inc., No. 3:19:cv-02281-K (Northern District of Texas). The complaint alleges that, prior to mid-2018, for marketing purposes Match.com notified non-paying users that other users were attempting to communicate with them, even though Match.com had identified those subscriber accounts as potentially fraudulent, thereby inducing non-paying users to subscribe and exposing them to the risk of fraud should they subscribe. The complaint also challenges the adequacy of Match.com’s disclosure of the terms of its six-month guarantee, the efficacy of its cancellation process, and its handling of chargeback disputes. The complaint seeks among other things permanent injunctive relief, civil penalties, restitution, disgorgement, and costs of suit. On October 9, 2020, the court granted the Company’s motion to stay the case until the United States Supreme Court issued a decision in the consolidated appeal of Federal Trade Commission v. Credit Bureau Center, LLC and AMG Capital Management, LLC v. FTC. On April 22, 2021, the Supreme Court issued its decision, ruling that the FTC cannot seek equitable monetary relief under Section 13(b) of the FTC Act. On March 24, 2022, the court granted our motion to dismiss with prejudice on Claims I and II of the complaint relating to communication notifications and granted our motion to dismiss with respect to all requests for monetary damages on Claims III and IV relating to the guarantee offer and chargeback policy. The court otherwise denied our motion to dismiss. On July 19, 2022, the FTC filed its first amended complaint adding Match Group, LLC as a defendant. We believe that the FTC’s claims regarding Match.com’s practices, policies, and procedures are without merit and will defend vigorously against them.
NOTE 10—RELATED PARTY TRANSACTIONS
Relationship with IAC following the Separation
On June 30, 2020, the companies formerly known as Match Group, Inc. (referred to as “Former Match Group”) and IAC/InterActiveCorp (referred to as “Former IAC”) completed the separation of the Company from IAC through a series of transactions that resulted in two, separate public companies—(1) Match Group, which consists of the businesses of Former Match Group and certain financing subsidiaries previously owned by Former IAC, and (2) IAC/InterActiveCorp, formerly known as IAC Holdings, Inc. (“IAC”), consisting of Former IAC’s businesses other than Match Group (the “Separation”). The Separation was effected pursuant to the terms of the Transaction Agreement (the “Transaction Agreement”) dated as of December 19, 2019 and amended as of April 28, 2020 and as further amended as of June 22, 2020.
In connection with the Separation, the Company entered into certain agreements with IAC to govern the relationship between the Company and IAC following the Separation. These agreements, in certain cases, supersede the agreements entered into between Former Match Group and Former IAC in connection with Former Match Group’s IPO in November 2015 (the “IPO Agreements”) and include: a tax matters agreement; a
26
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
transition services agreement; and an employee matters agreement. The IPO Agreements that were not superseded were terminated at closing of the Separation.
In addition to the agreements entered into at the time of the Separation, Match Group leases office space to IAC in a building owned by the Company in Los Angeles. For the three and six months ended June 30, 2022, the Company received less than $0.1
Match Group has a receivable balance of $0.2 million due from IAC at June 30, 2022.
Tax Matters Agreement
Pursuant to the tax matters agreement, each of Match Group and IAC is responsible for certain tax liabilities and obligations following the transfer by Former IAC (i) to Match Group of certain assets and liabilities of, or related to, the businesses of Former IAC (other than Former Match Group) and (ii) to holders of Former IAC common stock and Former IAC Class B common stock, as a result of the reclassification and mandatory exchange of certain series of Former IAC exchangeable preferred stock (collectively, the “IAC Distribution”). Under the tax matters agreement, IAC generally is responsible for, and has agreed to indemnify Match Group against, any liabilities incurred as a result of the failure of the IAC Distribution to qualify for the intended tax-free treatment unless, subject to certain exceptions, the failure to so qualify is attributable to Match Group's or Former Match Group’s actions or failure to act, Match Group's or Former Match Group’s breach of certain representations or covenants or certain acquisitions of equity securities of Match Group, in each case, described in the tax matters agreement (a "Match Group fault-based action"). If the failure to so qualify is attributable to a Match Group fault-based action, Match Group is responsible for liabilities incurred as a result of such failure and will indemnify IAC against such liabilities so incurred by IAC or its affiliates.
Under the tax matters agreement, as of June 30, 2022, Match Group is obligated to remit to IAC $1.3 million of expected state tax refunds relating to tax years prior to the Separation. This obligation is included in “Accrued expenses and other current liabilities” in the accompanying consolidated balance sheet. Additionally, IAC is obligated to indemnify Match Group for IAC’s share of tax liabilities related to various periods prior to the Separation. At June 30, 2022, a receivable of $1.8 million is included in “Other current assets” in the accompanying consolidated balance sheet representing an estimate of the amount that Match Group expects to be indemnified for under this arrangement. At June 30, 2022, Match Group has an indemnification asset of $0.6 million included in “Other non-current assets” in the accompanying consolidated balance sheet for uncertain tax positions that related to Former IAC prior to the Separation.
Transition Services Agreement
Pursuant to the transition services agreement, IAC can provide certain services to Match Group that Former IAC had historically provided to Former Match Group. Match Group can also provide certain services to IAC that Former Match Group previously provided to Former IAC. The transition services agreement also provides that Match Group and IAC will make efforts to replace, amend, or divide certain joint contracts with third-parties relating to services or products used by both Match Group and IAC. Match Group and IAC also agreed to continue sharing certain services provided pursuant to certain third-party vendor contracts that were not replaced, amended, or divided prior to closing of the Separation.
For the three and six months ended June 30, 2022, the Company received $20.0 million and $20.5 million, respectively, from IAC for services provided to IAC under the transition services agreement.
Employee Matters Agreement
Pursuant to the amended and restated employee matters agreement, Match Group will reimburse IAC for the cost of any IAC equity awards held by the Company’s employees and former employees upon exercise or vesting.
For the three and six months ended June 30, 2022, the Company paid IAC less than $0.1 0.6 million as the estimated cost due to IAC for IAC equity awards held by Match Group employees.
27
MATCH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
Other Agreements
The Transaction Agreement provides that each of Match Group and IAC has agreed to indemnify, defend and hold harmless the other party from and against any liabilities arising out of: (i) any asset or liability allocated to such party or the other members of such party's group under the Transaction Agreement or the businesses of such party's group after the closing of the Separation; (ii) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of a member of such party's group contained in the Transaction Agreement that survives the closing of the Separation or is contained in any ancillary agreement; and (iii) any untrue or misleading statement or alleged untrue or misleading statement of a material fact or omission, with respect to information contained in or incorporated into the Form S-4 Registration Statement (the “Form S-4”) filed with the Securities and Exchange Commission (the “SEC”) by IAC and Former IAC in connection with the Separation or the joint proxy statement/prospectus filed by Former IAC and Former Match Group with the SEC pursuant to the Form S-4.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Key Terms:
Operating and financial metrics:
•Americas includes North America, Central America, South America, and the Caribbean islands.
•Europe includes continental Europe, the British Isles, Iceland, Greenland, and Russia, but excludes Turkey (which is included in APAC and Other).
•APAC and Other includes Asia, Australia, the Pacific islands, the Middle East, and Africa.
•Direct Revenue is revenue that is received directly from end users of our services and includes both subscription and à la carte revenue.
•Indirect Revenue is revenue that is not received directly from an end user of our services, substantially all of which is advertising revenue.
•Payers are unique users at a brand level in a given month from whom we earned Direct Revenue. When presented as a quarter-to-date or year-to-date value, Payers represents the average of the monthly values for the respective period presented. At a consolidated level, duplicate Payers may exist when we earn revenue from the same individual at multiple brands in a given month, as we are unable to identify unique individuals across brands in the Match Group portfolio.
•Revenue Per Payer (“RPP”) is the average monthly revenue earned from a Payer and is Direct Revenue for a period divided by the Payers in the period, further divided by the number of months in the period.
Operating costs and expenses:
•Cost of revenue - consists primarily of the amortization of in-app purchase fees, compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in data center and customer care functions, credit card processing fees, hosting fees, live video costs, and data center rent, energy and bandwidth costs. In-app purchase fees are monies paid to Apple and Google in connection with the processing of in-app purchases of subscriptions and service features through the in-app payment systems provided by Apple and Google.
•Selling and marketing expense - consists primarily of advertising expenditures and compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in selling and marketing, and sales support functions. Advertising expenditures include online marketing, including fees paid to search engines and social media sites, offline marketing (which is primarily television advertising), and payments to partners that direct traffic to our brands.
•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, and human resources, acquisition-related contingent consideration fair value adjustments (if any), fees for professional services (including transaction-related costs for acquisitions) and facilities costs.
•Product development expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs that are not capitalized for personnel engaged in the design, development, testing, and enhancement of product offerings and related technology.
Long-term debt:
•Credit Facility - The revolving credit facility under the credit agreement of MG Holdings II. As of both June 30, 2022 and December 31, 2021, there was $0.4 million outstanding in letters of credit and $749.6 million of availability under the Credit Facility.
29
•Term Loan - The term loan facility under the credit agreement of MG Holdings II. At December 31, 2021, the Term Loan bore interest at LIBOR plus 1.75% and the then applicable rate was 1.91%. As of June 30, 2022, the applicable rate was 3.19% and $425 million was outstanding.
•5.00% Senior Notes - MG Holdings II’s 5.00% Senior Notes due December 15, 2027, with interest payable each June 15 and December 15, which were issued on December 4, 2017. As of June 30, 2022, $450 million aggregate principal amount was outstanding.
•4.625% Senior Notes - MG Holdings II’s 4.625% Senior Notes due June 1, 2028, with interest payable each June 1 and December 1, which were issued on May 19, 2020. As of June 30, 2022, $500 million aggregate principal amount was outstanding.
•5.625% Senior Notes - MG Holdings II’s 5.625% Senior Notes due February 15, 2029, with interest payable each February 15 and August 15, which were issued on February 15, 2019. As of June 30, 2022, $350 million aggregate principal amount was outstanding.
•4.125% Senior Notes - MG Holdings II’s 4.125% Senior Notes due August 1, 2030, with interest payable each February 1 and August 1, which were issued on February 11, 2020. As of June 30, 2022, $500 million aggregate principal amount was outstanding.
•3.625% Senior Notes - MG Holdings II’s $500 million aggregate principal amount of 3.625% Senior Notes due October 1, 2031, with interest payable each April 1 and October 1, commencing on April 1, 2022, which were issued on October 4, 2021. As of June 30, 2022, $500 million aggregate principal amount was outstanding.
•2022 Exchangeable Notes - The 0.875% Exchangeable Senior Notes due October 1, 2022 issued by Match Group FinanceCo, Inc., a subsidiary of the Company, which are exchangeable into shares of the Company's common stock. Interest is payable each April 1 and October 1. As of June 30, 2022, $58.9 million aggregate principal amount was outstanding.
•2026 Exchangeable Notes - The 0.875% Exchangeable Senior Notes due June 15, 2026 issued by Match Group FinanceCo 2, Inc., a subsidiary of the Company, which are exchangeable into shares of the Company's common stock. Interest is payable each June 15 and December 15. As of June 30, 2022, $575 million aggregate principal amount was outstanding.
•2030 Exchangeable Notes - The 2.00% Exchangeable Senior Notes due January 15, 2030 issued by Match Group FinanceCo 3, Inc., a subsidiary of the Company, which are exchangeable into shares of the Company's common stock. Interest is payable each January 15 and July 15. As of June 30, 2022, $575 million aggregate principal amount was outstanding.
Non-GAAP financial measure:
•Adjusted Operating Income - is a Non-GAAP financial measure. See “Non-GAAP Financial Measures” below for the definition of Adjusted Operating Income and a reconciliation of net earnings attributable to Match Group, Inc. shareholders to operating (loss) income and Adjusted Operating Income.
Management Overview
Match Group, Inc., through its portfolio companies, is a leading provider of digital technologies designed to help people make meaningful connections. Our global portfolio of brands includes Tinder®, Match®, Hinge®, Meetic®, OkCupid®, Pairs™, PlentyOfFish®, OurTime®, Azar®, Hakuna Live™, and more, each built to increase our users’ likelihood of connecting with others. Through our trusted brands, we provide tailored services to meet the varying preferences of our users. Our services are available in over 40 languages to our users all over the world.
As used herein, “Match Group,” the “Company,” “we,” “our,” “us,” and similar terms refer to Match Group, Inc. and its subsidiaries, unless the context indicates otherwise.
For a more detailed description of the Company’s operating businesses, see “Item 1. Business” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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Additional Information
Investors and others should note that we announce material financial and operational information to our investors using our investor relations website at https://ir.mtch.com, our newsroom website at https://newsroom.mtch.com, Securities and Exchange Commission (“SEC”) filings, press releases, and public conference calls. We use these channels as well as social media to communicate with our users and the public about our company, our services and other issues. It is possible that the information we post on social media could be deemed to be material information. Accordingly, investors, the media, and others interested in our company should monitor the social media channels listed on our investor relations website in addition to following our newsroom website, SEC filings, press releases and public conference calls. Neither the information on our websites, nor the information on the website of any Match Group business, is incorporated by reference into this report, or into any other filings with, or into any other information furnished or submitted to, the SEC.
31
Results of Operations for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021
Revenue
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||||||||||||||||||||||
| (In thousands, except RPP) | |||||||||||||||||||||||||||||||||||||||||||||||
| Direct Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Americas | $ | 408,730 | $ | 34,342 | 9% | $ | 374,388 | $ | 808,708 | $ | 90,058 | 13% | $ | 718,650 | |||||||||||||||||||||||||||||||||
| Europe | 208,471 | 11,929 | 6% | 196,542 | 423,799 | 38,198 | 10% | 385,601 | |||||||||||||||||||||||||||||||||||||||
| APAC and Other | 162,952 | 39,560 | 32% | 123,392 | 331,479 | 86,227 | 35% | 245,252 | |||||||||||||||||||||||||||||||||||||||
| Total Direct Revenue | 780,153 | 85,831 | 12% | 694,322 | 1,563,986 | 214,483 | 16% | 1,349,503 | |||||||||||||||||||||||||||||||||||||||
| Indirect Revenue | 14,360 | 922 | 7% | 13,438 | 29,158 | 3,289 | 13% | 25,869 | |||||||||||||||||||||||||||||||||||||||
| Total Revenue | $ | 794,513 | $ | 86,753 | 12% | $ | 707,760 | $ | 1,593,144 | $ | 217,772 | 16% | $ | 1,375,372 | |||||||||||||||||||||||||||||||||
| Percentage of Total Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Direct Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Americas | 51% | 53% | 51% | 52% | |||||||||||||||||||||||||||||||||||||||||||
| Europe | 26% | 28% | 26% | 28% | |||||||||||||||||||||||||||||||||||||||||||
| APAC and Other | 21% | 17% | 21% | 18% | |||||||||||||||||||||||||||||||||||||||||||
| Total Direct Revenue | 98% | 98% | 98% | 98% | |||||||||||||||||||||||||||||||||||||||||||
| Indirect Revenue | 2% | 2% | 2% | 2% | |||||||||||||||||||||||||||||||||||||||||||
| Total Revenue | 100% | 100% | 100% | 100% | |||||||||||||||||||||||||||||||||||||||||||
| Payers: | |||||||||||||||||||||||||||||||||||||||||||||||
| Americas | 8,225 | 324 | 4% | 7,901 | 8,192 | 444 | 6% | 7,748 | |||||||||||||||||||||||||||||||||||||||
| Europe | 4,564 | 232 | 5% | 4,332 | 4,648 | 354 | 8% | 4,294 | |||||||||||||||||||||||||||||||||||||||
| APAC and Other | 3,606 | 870 | 32% | 2,736 | 3,524 | 872 | 33% | 2,652 | |||||||||||||||||||||||||||||||||||||||
| Total | 16,395 | 1,426 | 10% | 14,969 | 16,364 | 1,670 | 11% | 14,694 | |||||||||||||||||||||||||||||||||||||||
| RPP: | |||||||||||||||||||||||||||||||||||||||||||||||
| Americas | $ | 16.56 | $ | 0.77 | 5% | $ | 15.79 | $ | 16.45 | $ | 0.99 | 6% | $ | 15.46 | |||||||||||||||||||||||||||||||||
| Europe | $ | 15.23 | $ | 0.11 | 1% | $ | 15.12 | $ | 15.20 | $ | 0.23 | 2% | $ | 14.97 | |||||||||||||||||||||||||||||||||
| APAC and Other | $ | 15.06 | $ | 0.03 | —% | $ | 15.03 | $ | 15.68 | $ | 0.26 | 2% | $ | 15.42 | |||||||||||||||||||||||||||||||||
| Total | $ | 15.86 | $ | 0.40 | 3% | $ | 15.46 | $ | 15.93 | $ | 0.62 | 4% | $ | 15.31 | |||||||||||||||||||||||||||||||||
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
Americas Direct Revenue grew $34.3 million, or 9%, in 2022 versus 2021, driven by 5% growth in RPP and 4% growth in Payers. RPP growth was driven by both higher average prices paid for subscriptions and increased average à la carte purchases per Payer at Tinder and Hinge. Growth in Payers was primarily driven by Tinder with contributions from Hinge and the Swipe Apps (BLK, Chispa, and Upward), partially offset by decreases at PlentyOfFish, Match, Match Affinity, and OkCupid.
Europe Direct Revenue grew $11.9 million, or 6%, in 2022 versus 2021, driven by 5% growth in Payers and 1% growth in RPP. Growth in Payers was primarily due to Tinder and the acquisition of Hyperconnect in the second quarter of 2021, partially offset by decreases at Meetic. RPP growth was driven by the acquisition of Hyperconnect, which has a higher RPP relative to our other brands, and Tinder, partially offset by unfavorable impacts from the strength of the U.S. dollar compared to the Euro and British Pound between the two periods.
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APAC and Other Direct Revenue grew $39.6 million, or 32%, in 2022 versus 2021, driven by 32% growth in Payers. Payer growth was primarily driven by Tinder and the acquisition of Hyperconnect. RPP was positively impacted by the acquisition of Hyperconnect, offset by the strength of the U.S. dollar compared to the Japanese Yen and Turkish Lira.
Indirect Revenue increased primarily due to receiving a higher rate per impression.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
All revenue categories increased primarily due to the factors described above in the three-month discussion.
Cost of revenue (exclusive of depreciation)
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 240,840 | $ | 47,741 | 25% | $ | 193,099 | ||||||||||||||||
| Percentage of revenue | 30% | 27% | |||||||||||||||||||||
Cost of revenue increased due to the acquisition of Hyperconnect. Excluding the increase from the Hyperconnect acquisition, cost of revenue increased 14% primarily due to an increase in in-app purchase fees of $15.6 million, which included a $5.0 million escrow amount related to litigation regarding the fees paid to the Google Play store, as revenue continues to be increasingly sourced through mobile app stores; and an increase in hosting fees of $7.7 million.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 477,076 | $ | 104,522 | 28% | $ | 372,554 | ||||||||||||||||
| Percentage of revenue | 30% | 27% | |||||||||||||||||||||
Cost of revenue increased primarily due to the factors described above in the three-month discussion.
Selling and marketing expense
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Selling and marketing expense | $ | 125,679 | $ | (3,239) | (3)% | $ | 128,918 | ||||||||||||||||
| Percentage of revenue | 16% | 18% | |||||||||||||||||||||
Selling and marketing expense, excluding the increase from Hyperconnect due to the acquisition in the second quarter of 2021, decreased $12.7 million primarily due to reductions in marketing spend at multiple brands.
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For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Selling and marketing expense | $ | 277,567 | $ | 3,661 | 1% | $ | 273,906 | ||||||||||||||||
| Percentage of revenue | 17% | 20% | |||||||||||||||||||||
Selling and marketing expense increased primarily due to the acquisition of Hyperconnect. Excluding Hyperconnect, selling and marketing expense decreased $20.6 million due to lower marketing spend at multiple brands.
General and administrative expense
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| General and administrative expense | $ | 110,638 | $ | (2,755) | (2)% | $ | 113,393 | ||||||||||||||||
| Percentage of revenue | 14% | 16% | |||||||||||||||||||||
Excluding Hyperconnect and related acquisition expenses incurred in 2021, general and administrative expense increased 3% primarily due to an increase in compensation expense of $10.7 million primarily related to 1) an increase in stock-based compensation related to modifications of certain stock-based awards and new awards granted in the current year, and 2) an increase in headcount. Additionally, general and administrative expense increased due to an increase in travel expenses of $2.3 million as our return to office activities continue to progress; partially offset by a decrease in legal and other professional fees. General and administrative expense related to Hyperconnect decreased primarily due to a decrease in stock-based compensation related to grants in 2021 associated with the Hyperconnect acquisition and a decrease in professional fees related to the acquisition of Hyperconnect that were incurred in 2021.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| General and administrative expense | $ | 211,343 | $ | 10,285 | 5% | $ | 201,058 | ||||||||||||||||
| Percentage of revenue | 13% | 15% | |||||||||||||||||||||
Excluding Hyperconnect and related acquisition expenses incurred in 2021, general and administrative expense increased primarily due to the factors described above in the three-month discussion.
34
Product development expense
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Product development expense | $ | 86,410 | $ | 34,277 | 66% | $ | 52,133 | ||||||||||||||||
| Percentage of revenue | 11% | 7% | |||||||||||||||||||||
Product development expense increased in part due to the acquisition of Hyperconnect. Excluding Hyperconnect, product development expense increased 51% primarily due to an increase in compensation expense of $25.2 million related to increased headcount at Tinder and Hinge, and an increase in stock-based compensation associated with new awards granted in the current year.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Product development expense | $ | 165,204 | $ | 57,495 | 53% | $ | 107,709 | ||||||||||||||||
| Percentage of revenue | 10% | 8% | |||||||||||||||||||||
Product development expense increased primarily due to the factors described above in the three-month discussion.
Depreciation
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Depreciation | $ | 11,488 | $ | 1,427 | 14% | $ | 10,061 | ||||||||||||||||
| Percentage of revenue | 1% | 1% | |||||||||||||||||||||
Depreciation increased primarily due to an increase in internally developed software placed in service and building improvements.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Depreciation | $ | 21,985 | $ | 1,467 | 7% | $ | 20,518 | ||||||||||||||||
| Percentage of revenue | 1% | 1% | |||||||||||||||||||||
Depreciation increased primarily due to an increase in building and leasehold improvements.
35
Impairment and amortization of intangibles
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Impairment and amortization of intangibles | $ | 229,539 | $ | 229,297 | NM | $ | 242 | ||||||||||||||||
| Percentage of revenue | 29% | —% | |||||||||||||||||||||
________________________
NM = not meaningful
Impairment and amortization increased primarily due to an impairment of $217.4 million recognized in 2022 related to Hyperconnect intangible assets that stemmed from a decline in projections related to a lower outlook for the business, including foreign currency impacts in certain of Hyperconnect’s key markets, as well as the use of increased discount rates.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Impairment and amortization of intangibles | $ | 242,232 | $ | 241,777 | NM | $ | 455 | ||||||||||||||||
| Percentage of revenue | 15% | —% | |||||||||||||||||||||
Impairment and amortization of intangibles increased primarily due to the factor described above in the three-month discussion.
Operating (loss) income and Adjusted Operating Income
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating (loss) income | $ | (10,081) | $ | (219,995) | NM | $ | 209,914 | $ | 197,737 | $ | (201,435) | (50)% | $ | 399,172 | |||||||||||||||||||||||||||||||||
| Percentage of revenue | (1)% | 30% | 12% | 29% | |||||||||||||||||||||||||||||||||||||||||||
| Adjusted Operating Income | $ | 285,713 | $ | 23,100 | 9% | $ | 262,613 | $ | 559,016 | $ | 66,359 | 13% | $ | 492,657 | |||||||||||||||||||||||||||||||||
| Percentage of revenue | 36% | 37% | 35% | 36% | |||||||||||||||||||||||||||||||||||||||||||
For a reconciliation of net earnings attributable to Match Group, Inc. shareholders to Adjusted Operating Income, see “Non-GAAP Financial Measures.”
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
The operating loss of $10.1 million was driven by the impairment of Hyperconnect intangibles; the increase in cost of revenue due to higher in-app fees, including a $5.0 million escrow accrual in 2022; and an increase in product development expense primarily due to increases in compensation expense. Adjusted Operating Income increased 9% or $23.1 million primarily driven by the increase in revenue of $86.8 million which was driven by growth at Tinder and Hinge and the acquisition of Hyperconnect, and lower selling marketing expense as a percentage of revenue. These increases were partially offset by an increase in cost of revenue due to higher in-app fees and an increase in product development expense primarily due to increases in compensation expense.
36
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
Operating income decreased 50% or $201.4 million and Adjusted Operating Income increased 13% or $66.4 million primarily due to the factors described above in the three-month discussion.
At June 30, 2022, there was $427.3 million of unrecognized compensation cost, net of estimated forfeitures, related to equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.8 years.
Interest expense
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Interest expense | $ | 35,623 | $ | 3,404 | 11% | $ | 32,219 | ||||||||||||||||
Interest expense increased primarily due to the issuance of the 3.625% Senior Notes on October 4, 2021 and a higher LIBOR rate on the Term Loan in the current period; partially offset by decreases from the settlement of a portion of the 2022 Exchangeable Notes.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Interest expense | $ | 70,519 | $ | 6,462 | 10% | $ | 64,057 | ||||||||||||||||
Interest expense increased primarily due to the factors described above in the three-month discussion.
Other income (expense), net
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Other income (expense), net | $ | 5,291 | $ | 5,646 | NM | $ | (355) | ||||||||||||||||
Other income, net in 2022 includes gains of $3.5 million related to finalization of a legal settlement, income of $1.0 million related to a mark-to-market adjustments pertaining to liability classified equity instruments, and interest income of $1.0 million.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Other income (expense), net | $ | 6,109 | $ | 7,783 | NM | $ | (1,674) | ||||||||||||||||
Other income, net in 2022 includes gains of $3.5 million related to finalization of a legal settlement, income of $1.8 million related to a mark-to-market adjustments pertaining to liability classified equity instruments, and interest income of $1.2 million.
Other expense, net in 2021 includes foreign currency losses of $1.1 million.
37
Income tax (benefit) provision
For the three months ended June 30, 2022 compared to the three months ended June 30, 2021
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Income tax (benefit) provision | $ | (8,048) | $ | (45,368) | NM | $ | 37,320 | ||||||||||||||||
| Effective income tax rate | NM | 21% | |||||||||||||||||||||
The income tax benefit in 2022 and the income tax provision in 2021 both approximate the federal statutory rate.
For the six months ended June 30, 2022 compared to the six months ended June 30, 2021
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Income tax (benefit) provision | $ | (14,915) | $ | (34,488) | NM | $ | 19,573 | ||||||||||||||||
| Effective income tax rate | NM | 6% | |||||||||||||||||||||
The income tax benefit in 2022 and income tax provision in 2021 benefited from excess tax benefits generated by the exercise or vesting of stock-based awards.
For further details of income tax matters see “Note 2—Income Taxes” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”
Related party transactions
For a discussion of related party transactions see “Note 10—Related Party Transactions” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”
38
NON-GAAP FINANCIAL MEASURES
Match Group reports Adjusted Operating Income and Revenue excluding foreign exchange effects, both of which are supplemental measures to U.S. generally accepted accounting principles (“GAAP”). Adjusted Operating Income is among the primary metrics by which we evaluate the performance of our business, on which our internal budget is based, and by which management is compensated. Revenue excluding foreign exchange effects provides a comparable framework for assessing how our business performed without the effect of exchange rate differences when compared to prior periods. We believe that investors should have access to the same set of tools that we use in analyzing our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Match Group endeavors to compensate for the limitations of the non-GAAP measures presented by providing the comparable GAAP measures with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measures. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures, which we discuss below.
Adjusted Operating Income
Adjusted Operating Income is defined as operating (loss) 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, as applicable. We believe this measure is useful to analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. The above items are excluded from our Adjusted Operating Income measure because they are non-cash in nature. Adjusted Operating Income has certain limitations because it excludes the impact of certain expenses.
Non-Cash Expenses That Are Excluded From Adjusted Operating Income
Stock-based compensation expense consists principally of expense associated with the grants of stock options, restricted stock units (“RSUs”), performance-based RSUs and market-based awards. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method; however, performance-based RSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period). To the extent stock-based awards are settled on a net basis, we remit the required tax-withholding amounts from current funds.
Depreciation is a non-cash expense relating to our property and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.
Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as customer lists, trade names, and technology, are valued and amortized over their estimated lives. Value is also assigned to (i) acquired indefinite-lived intangible assets, which consist of trade names and trademarks, and (ii) goodwill, which are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.
39
The following table reconciles net (loss) earnings attributable to Match Group, Inc. shareholders to operating (loss) income and Adjusted Operating Income:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Net (loss) earnings attributable to Match Group, Inc. shareholders | $ | (31,858) | $ | 140,895 | $ | 148,675 | $ | 315,145 | |||||||||||||||
Add back: | |||||||||||||||||||||||
Net loss attributable to noncontrolling interests | (507) | (366) | (433) | (768) | |||||||||||||||||||
| Earnings from discontinued operations, net of tax | — | (509) | — | (509) | |||||||||||||||||||
Income tax (benefit) provision | (8,048) | 37,320 | (14,915) | 19,573 | |||||||||||||||||||
Other (income) expense, net | (5,291) | 355 | (6,109) | 1,674 | |||||||||||||||||||
Interest expense | 35,623 | 32,219 | 70,519 | 64,057 | |||||||||||||||||||
Operating (Loss) Income | (10,081) | 209,914 | 197,737 | 399,172 | |||||||||||||||||||
| Stock-based compensation expense | 54,767 | 42,396 | 97,062 | 72,512 | |||||||||||||||||||
| Depreciation | 11,488 | 10,061 | 21,985 | 20,518 | |||||||||||||||||||
Impairment and amortization of intangibles | 229,539 | 242 | 242,232 | 455 | |||||||||||||||||||
| Adjusted Operating Income | $ | 285,713 | $ | 262,613 | $ | 559,016 | $ | 492,657 | |||||||||||||||
Effects of Changes in Foreign Exchange Rates on Revenue
The impact of foreign exchange rates on the Company, due to its global reach, may be an important factor in understanding period over period comparisons if movement in exchange rates is significant. Since our results are reported in U.S. dollars, international revenue is favorably impacted as the U.S. dollar weakens relative to other currencies, and unfavorably impacted as the U.S. dollar strengthens relative to other currencies. We believe the presentation of revenue excluding the effects from foreign exchange, in addition to reported revenue, helps improve investors’ ability to understand the Company’s performance because it excludes the impact of foreign currency volatility that is not indicative of Match Group’s core operating results.
Revenue excluding foreign exchange effects compares results between periods as if exchange rates had remained constant period over period. Revenue excluding foreign exchange effects is calculated by translating current period revenue using prior period exchange rates. The percentage change in revenue excluding foreign exchange effects is calculated by determining the change in current period revenue over prior period revenue where current period revenue is translated using prior period exchange rates.
40
The following tables present the impact of foreign exchange effects on total revenue and Direct Revenue by geographic region, and RPP on a total basis and by geographic region, for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue, as reported | $ | 794,513 | $ | 86,753 | 12% | $ | 707,760 | $ | 1,593,144 | $ | 217,772 | 16% | $ | 1,375,372 | |||||||||||||||||||||||||||||||||
| Foreign exchange effects | 47,802 | 73,973 | |||||||||||||||||||||||||||||||||||||||||||||
| Revenue excluding foreign exchange effects | $ | 842,315 | $ | 134,555 | 19% | $ | 707,760 | $ | 1,667,117 | $ | 291,745 | 21% | $ | 1,375,372 | |||||||||||||||||||||||||||||||||
| Americas Direct Revenue, as reported | $ | 408,730 | $ | 34,342 | 9% | $ | 374,388 | $ | 808,708 | $ | 90,058 | 13% | $ | 718,650 | |||||||||||||||||||||||||||||||||
| Foreign exchange effects | 1,255 | 1,622 | |||||||||||||||||||||||||||||||||||||||||||||
Americas Direct Revenue, excluding foreign exchange effects | $ | 409,985 | $ | 35,597 | 10% | $ | 374,388 | $ | 810,330 | $ | 91,680 | 13% | $ | 718,650 | |||||||||||||||||||||||||||||||||
| Europe Direct Revenue, as reported | $ | 208,471 | $ | 11,929 | 6% | $ | 196,542 | $ | 423,799 | $ | 38,198 | 10% | $ | 385,601 | |||||||||||||||||||||||||||||||||
| Foreign exchange effects | 25,266 | 39,066 | |||||||||||||||||||||||||||||||||||||||||||||
| Europe Direct Revenue, excluding foreign exchange effects | $ | 233,737 | $ | 37,195 | 19% | $ | 196,542 | $ | 462,865 | $ | 77,264 | 20% | $ | 385,601 | |||||||||||||||||||||||||||||||||
| APAC and Other Direct Revenue, as reported | $ | 162,952 | $ | 39,560 | 32% | $ | 123,392 | $ | 331,479 | $ | 86,227 | 35% | $ | 245,252 | |||||||||||||||||||||||||||||||||
| Foreign exchange effects | 20,686 | 32,439 | |||||||||||||||||||||||||||||||||||||||||||||
| APAC and Other Direct Revenue, excluding foreign exchange effects | $ | 183,638 | $ | 60,246 | 49% | $ | 123,392 | $ | 363,918 | $ | 118,666 | 48% | $ | 245,252 | |||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | $ Change | % Change | 2021 | 2022 | $ Change | % Change | 2021 | ||||||||||||||||||||||||||||||||||||||||
| RPP, as reported | $ | 15.86 | $ | 0.40 | 3% | $ | 15.46 | $ | 15.93 | $ | 0.62 | 4% | $ | 15.31 | |||||||||||||||||||||||||||||||||
| Foreign exchange effects | 0.96 | 0.74 | |||||||||||||||||||||||||||||||||||||||||||||
| RPP, excluding foreign exchange effects | $ | 16.82 | $ | 1.36 | 9% | $ | 15.46 | $ | 16.67 | $ | 1.36 | 9% | $ | 15.31 | |||||||||||||||||||||||||||||||||
| Americas RPP, as reported | $ | 16.56 | $ | 0.77 | 5% | $ | 15.79 | $ | 16.45 | $ | 0.99 | 6% | $ | 15.46 | |||||||||||||||||||||||||||||||||
| Foreign exchange effects | 0.05 | 0.04 | |||||||||||||||||||||||||||||||||||||||||||||
| Americas RPP, excluding foreign exchange effects | $ | 16.61 | $ | 0.82 | 5% | $ | 15.79 | $ | 16.49 | $ | 1.03 | 7% | $ | 15.46 | |||||||||||||||||||||||||||||||||
| Europe RPP, as reported | $ | 15.23 | 0.11 | 1% | $ | 15.12 | $ | 15.20 | 0.23 | 2% | $ | 14.97 | |||||||||||||||||||||||||||||||||||
| Foreign exchange effects | 1.84 | 0.79 | |||||||||||||||||||||||||||||||||||||||||||||
| Europe RPP, excluding foreign exchange effects | $ | 17.07 | $ | 1.95 | 13% | $ | 15.12 | $ | 15.99 | $ | 1.02 | 7% | $ | 14.97 | |||||||||||||||||||||||||||||||||
| APAC and Other RPP, as reported | $ | 15.06 | $ | 0.03 | —% | $ | 15.03 | $ | 15.68 | $ | 0.26 | 2% | $ | 15.42 | |||||||||||||||||||||||||||||||||
| Foreign exchange effects | 1.92 | 1.53 | |||||||||||||||||||||||||||||||||||||||||||||
| APAC and Other RPP, excluding foreign exchange effects | $ | 16.98 | $ | 1.95 | 13% | $ | 15.03 | $ | 17.21 | $ | 1.79 | 12% | $ | 15.42 | |||||||||||||||||||||||||||||||||
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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Position
| June 30, 2022 | December 31, 2021 | ||||||||||
| (In thousands) | |||||||||||
| Cash and cash equivalents: | |||||||||||
United States | $ | 332,736 | $ | 642,686 | |||||||
All other countries | 130,950 | 172,698 | |||||||||
| Total cash and cash equivalents | 463,686 | 815,384 | |||||||||
| Short-term investments | 9,240 | 11,818 | |||||||||
| Total cash and cash equivalents and short-term investments | $ | 472,926 | $ | 827,202 | |||||||
| Long-term debt: | |||||||||||
Credit Facility due February 13, 2025 | $ | — | $ | — | |||||||
Term Loan due February 13, 2027 | 425,000 | 425,000 | |||||||||
5.00% Senior Notes due December 15, 2027 | 450,000 | 450,000 | |||||||||
| 4.625% Senior Notes due June 1, 2028 | 500,000 | 500,000 | |||||||||
5.625% Senior Notes due February 15, 2029 | 350,000 | 350,000 | |||||||||
| 4.125% Senior Notes due August 1, 2030 | 500,000 | 500,000 | |||||||||
| 3.625% Senior Notes due October 1, 2031 | 500,000 | 500,000 | |||||||||
2022 Exchangeable Notes | 58,896 | 100,500 | |||||||||
2026 Exchangeable Notes | 575,000 | 575,000 | |||||||||
2030 Exchangeable Notes | 575,000 | 575,000 | |||||||||
| Total long-term debt | 3,933,896 | 3,975,500 | |||||||||
| Less: Current maturities of long-term debt | 58,896 | 100,500 | |||||||||
Less: Unamortized original issue discount | 4,796 | 5,215 | |||||||||
| Less: Unamortized debt issuance costs | 37,670 | 40,364 | |||||||||
| Total long-term debt, net | $ | 3,832,534 | $ | 3,829,421 | |||||||
Long-term Debt
For a detailed description of long-term debt, see “Note 5—Long-term Debt, net” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”
Cash Flow Information
In summary, the Company’s cash flows are as follows:
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In thousands) | |||||||||||
Net cash provided by operating activities attributable to continuing operations | $ | 19,964 | $ | 350,815 | |||||||
Net cash used in investing activities attributable to continuing operations | (25,518) | (873,516) | |||||||||
Net cash (used in) provided by financing activities attributable to continuing operations | (335,368) | 23,629 | |||||||||
2022
Net cash provided by operating activities in 2022 includes adjustments to earnings of $242.2 million of impairment and amortization of intangibles, $97.1 million of stock-based compensation expense, and $22.0 million of depreciation, partially offset by deferred income taxes of $32.7 million. The decrease in cash from
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changes in working capital primarily consists of a decrease in accounts payable and other liabilities of $476.1 million due mainly to the settlement payment for Rad, et al. v. IAC/InterActiveCorp, et al. and related arbitrations and the timing of payments. These changes were partially offset by an increase from other assets of $30.6 million primarily due to the settlement of a derivative asset related to the 2022 Exchangeable Notes Hedges and the amortization of prepaid hosting services; and a decrease in income taxes payable of $15.1 million primarily related to the timing of payments related to international taxes.
Net cash used in investing activities in 2022 consists primarily of capital expenditures of $27.3 million that are primarily related to internal development of software and purchases of computer hardware to support our services.
Net cash used in financing activities in 2022 is primarily due to purchases of treasury stock of $191.0 million, payments of $101.1 million of withholding taxes paid on behalf of employees for net settled equity awards, payments of $94.3 million to repurchase a portion of the outstanding 2022 Exchangeable Notes, purchases of non-controlling interest for $10.6 million, and payments of $7.5 million to settle outstanding warrants associated with the 2022 Exchangeable Notes. These uses of cash were partially offset by proceeds of $52.6 million related to the settlement of certain outstanding note hedges associated with the 2022 Exchangeable Notes, and $16.4 million of proceeds from the issuance of common stock pursuant to stock-based awards.
2021
Net cash provided by operating activities attributable to continuing operations in 2021 includes adjustments to earnings of $72.5 million of stock-based compensation expense, $20.5 million of depreciation, and $7.4 million of other adjustments; partially offset by deferred income taxes of $20.7 million primarily related to the net operating loss created by the settlement of stock-based awards. The decrease in cash from changes in working capital primarily consists of an increase in accounts receivable of $103.1 million primarily related to the timing of cash receipts, including cash received in the fourth quarter of 2020 rather than in the first quarter of 2021, and an increase in revenue; and a decrease in accounts payable and other liabilities of $17.3 million due mainly to the timing of payments, including interest payments. These changes were partially offset by an increase from other assets of $32.6 million primarily due to the amortization of prepaid hosting services; an increase from deferred revenue of $25.7 million, due mainly to growth in subscription sales; and an increase in income taxes payable of $18.9 million primarily related to the timing of payments related to international taxes.
Net cash used in investing activities attributable to continuing operations in 2021 consists primarily of cash used to acquire Hyperconnect, net of cash acquired of $840.9 million, and capital expenditures of $32.4 million that are primarily related to internal development of software and purchased computer hardware to support our services.
Net cash provided by financing activities attributable to continuing operations in 2021 is primarily due to $37.3 million of proceeds from the issuance of common stock pursuant to stock-based awards, partially offset by payments of $11.4 million for withholding taxes paid on behalf of employees for net settled equity awards.
Liquidity and Capital Resources
The Company’s principal sources of liquidity are its cash and cash equivalents as well as cash flows generated from operations. As of June 30, 2022, $749.6 million was available under the Credit Facility that expires on February 13, 2025.
The Company has various obligations related to long-term debt instruments and operating leases. For additional information on long-term debt, including maturity dates and interest rates, see “Note 5—Long-term Debt, net” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.” For additional information on the operating lease payments, including a schedule of obligations by year, see “Note 13—Leases” to the consolidated financial statements included in “Item 8—Consolidated Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The Company believes it has sufficient cash flows from operations to satisfy these future obligations.
We paid $441 million from cash on hand in 2022 in connection with the settlement of Rad, et al. v. IAC/InterActiveCorp, et al. and related arbitrations.
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The Company anticipates that it will need to make capital and other expenditures in connection with the development and expansion of its operations. The Company expects that 2022 cash capital expenditures will be between $65 million and $70 million, a decrease from 2021 cash capital expenditures as several leasehold and building improvements were completed in 2021.
In connection with our agreement with Google to withdraw our temporary restraining order, we have agreed to pay $40 million into an escrow account with scheduled payments through July 2023.
We have entered into various purchase commitments, primarily consisting of web hosting services. Our obligations under these various purchase commitments are $6.0 million for the remainder of 2022 and between $7.0 million and $12.5 million per year from 2023 through 2026.
At June 30, 2022, we do not have any off-balance sheet arrangements, other than as described above.
On May 2, 2022, our Board of Directors approved a new share repurchase program (the “Share Repurchase Program”) to repurchase up to 12.5 million shares of our common stock. Under the Share Repurchase Program, shares of our common stock may be purchased on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means, including through Rule 10b5-1 trading plans. The Share Repurchase Program may be commenced, suspended or discontinued at any time. During the six months ended June 30, 2022, we repurchased 2.9 million shares for $215.5 million, on a trade date basis. Additionally, from July 1, 2022 to July 5, 2022, we purchased 0.2 million shares for $16.5 million. As of August 1, 2022, a total of 9.3 million shares remain available for repurchase under the repurchase program.
As of June 30, 2022, all of the Company’s international cash can be repatriated without significant tax consequences.
Our indebtedness could limit our ability to: (i) obtain additional financing to fund working capital needs, acquisitions, capital expenditures, debt service, or other requirements; and (ii) use operating cash flow to pursue acquisitions or invest in other areas, such as developing properties and exploiting business opportunities. The Company may need to raise additional capital through future debt or equity financing to make additional acquisitions and investments or to provide for greater financial flexibility. Additional financing may not be available on terms favorable to the Company or at all.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated financial statements in accordance with U.S. GAAP. These estimates, judgments and assumptions impact the reported amount of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
During the six months ended June 30, 2022, there were no material changes to the Company’s critical accounting policies and estimates since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2021.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
During the six months ended June 30, 2022, there were no material changes to the Company’s instruments or positions that are sensitive to market risk since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 4. Controls and Procedures
The Company monitors and evaluates on an ongoing basis its disclosure controls and procedures and internal control over financial reporting in order to improve their overall effectiveness. In the course of these evaluations, the Company modifies and refines its internal processes as conditions warrant.
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Match Group management, including our principal executive and principal financial officers, evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act. Based on this evaluation, management has concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report in providing reasonable assurance that information we are required to disclose in our filings with the Securities and Exchange Commission under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms, and includes controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
There were no changes to the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Overview
We are, and from time to time may become, involved in various legal proceedings arising in the normal course of our business activities, such as trademark and patent infringement claims, trademark oppositions, and consumer or advertising complaints, as well as stockholder derivative actions, class action lawsuits, mass arbitrations, and other matters. The amounts that may be recovered in such matters may be subject to insurance coverage. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these matters may be material to our financial position or operations based upon the standard set forth in the SEC’s rules.
Pursuant to the Transaction Agreement, we have agreed to indemnify IAC for matters relating to any business of Former Match Group, including indemnifying IAC for costs related to the matters described below other than the matter described under the heading “Newman Derivative and Stockholder Class Action Regarding Separation Transaction”.
The official names of legal proceedings in the descriptions below (shown in italics) reflect the original names of the parties when the proceedings were filed as opposed to the current names of the parties following the separation of Match Group and IAC.
Consumer Class Action Litigation Challenging Tinder’s Age-Tiered Pricing
On May 28, 2015, a putative state-wide class action was filed against Tinder in state court in California. See Allan Candelore v. Tinder, Inc., No. BC583162 (Superior Court of California, County of Los Angeles). The complaint principally alleged that Tinder violated California’s Unruh Civil Rights Act by offering and charging users age 30 and over a higher price than younger users for subscriptions to its premium Tinder Plus service. The complaint sought certification of a class of California Tinder Plus subscribers age 30 and over and damages in an unspecified amount. On December 29, 2015, in accordance with a prior ruling sustaining Tinder’s demurrer, the court entered judgment dismissing the action. On January 29, 2018, the California Court of Appeal (Second Appellate District, Division Three) issued an opinion reversing the judgment of dismissal. On May 9, 2018, the California Supreme Court denied Tinder’s petition seeking interlocutory review of the Court of Appeal’s decision and the case was returned to the trial court for further proceedings.
In a related development, on June 21, 2019, in a substantially similar putative class action asserting the same substantive claims and pending in federal district court in California, the court entered judgment granting final approval of a class-wide settlement, the terms of which are not material to the Company. See Lisa Kim v. Tinder, Inc., No. 18-cv-3093 (Central District of California). Because the approved settlement class in Kim subsumes the proposed settlement class in Candelore, the judgment in Kim would effectively render Candelore a single-plaintiff lawsuit. Accordingly, on July 11, 2019, two objectors to the Kim settlement, represented by the plaintiff’s counsel in Candelore, filed a notice of appeal from the Kim judgment with the U.S. Court of Appeals for the Ninth Circuit. Oral argument on the appeal occurred on January 15, 2021. On August 17, 2021, the U.S. Court of Appeals for the Ninth Circuit reversed and remanded the district court’s decision. On November 3, 2021, the trial court granted preliminary approval of the settlement. On December 13, 2021, plaintiff filed an amended motion for final approval of the proposed settlement agreement, the terms of which are not material to the Company. On March 4, 2022, the trial court granted final approval of the settlement agreement. On March 31, 2022, the same objectors as previously filed a notice of appeal from the Kim judgement with the U.S. Court of Appeals for the Ninth Circuit.
On June 27, 2022, the trial court issued an order staying the class claims in Candelore pending the Ninth Circuit’s decision on the Kim appeal. We believe that the allegations in the Candelore lawsuit are without merit and will continue to defend vigorously against it.
Tinder Optionholder Litigation Against Former Match Group and Match Group
On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc. (“Tinder”), a former subsidiary of Former Match Group, filed a lawsuit in New York state court against Former Match Group
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and Match Group. See Sean Rad et al. v. IAC/InterActiveCorp and Match Group, Inc., No. 654038/2018 (Supreme Court, New York County). The complaint alleged that in 2017, the defendants: (i) wrongfully interfered with a contractually established process for the independent valuation of Tinder by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of their Tinder stock options, and (ii) then wrongfully merged Tinder into Former Match Group, thereby depriving certain of the plaintiffs of their contractual right to later valuations of Tinder on a stand-alone basis. The complaint asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Former Match Group only), and interference with prospective economic advantage, and sought compensatory damages in the amount of at least $2 billion, as well as punitive damages. On August 31, 2018, four plaintiffs who were still employed by Former Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs. On June 13, 2019, the court issued a decision and order granting defendants’ motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichments, as well as the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and otherwise denying defendants’ motion to dismiss. On July 13, 2020, the four former plaintiffs filed arbitration demands with the American Arbitration Association asserting the same valuation claims and on September 3, 2020, the four arbitrations were consolidated. On August 24, 2021, the arbitrator granted our summary judgment with respect to the merger claims. On June 9, 2021, the plaintiffs in Rad filed a Note of Issue and Certificate of Readiness for Trial in which they amended the amount of damages they were claiming to “[m]ore than $5.6 billion”. On October 1, 2021, the court granted defendants’ motion for summary judgment on plaintiffs’ tort claims and breach of contract claims regarding the merger. Trial commenced on November 8, 2021. In accordance with the parties’ agreement in December 2021, in June 2022, we paid $441 million to settle all claims in trial and in arbitration.
FTC Lawsuit Against Former Match Group
On September 25, 2019, the United States Federal Trade Commission (the “FTC”) filed a lawsuit in federal district court in Texas against Former Match Group. See FTC v. Match Group, Inc., No. 3:19:cv-02281-K (Northern District of Texas). The complaint alleges that, prior to mid-2018, for marketing purposes Match.com notified non-paying users that other users were attempting to communicate with them, even though Match.com had identified those subscriber accounts as potentially fraudulent, thereby inducing non-paying users to subscribe and exposing them to the risk of fraud should they subscribe. The complaint also challenges the adequacy of Match.com’s disclosure of the terms of its six-month guarantee, the efficacy of its cancellation process, and its handling of chargeback disputes. The complaint seeks among other things permanent injunctive relief, civil penalties, restitution, disgorgement, and costs of suit. On October 9, 2020, the court granted the Company’s motion to stay the case until the United States Supreme Court issued a decision in the consolidated appeal of Federal Trade Commission v. Credit Bureau Center, LLC and AMG Capital Management, LLC v. FTC. On April 22, 2021, the Supreme Court issued its decision, ruling that the FTC cannot seek equitable monetary relief under Section 13(b) of the FTC Act. On March 24, 2022, the court granted our motion to dismiss with prejudice on Claims I and II of the complaint relating to communication notifications and granted our motion to dismiss with respect to all requests for monetary damages on Claims III and IV relating to the guarantee offer and chargeback policy. The court otherwise denied our motion to dismiss. On July 19, 2022, the FTC filed its first amended complaint adding Match Group, LLC as a defendant, We believe that the FTC’s claims regarding Match.com’s practices, policies, and procedures are without merit and will defend vigorously against them.
Securities Class Action Lawsuit Against Former Match Group
On October 3, 2019, a Former Match Group shareholder filed a securities class action lawsuit in federal district court in Texas against Former Match Group, its then Chief Executive Officer, and its Chief Financial Officer, on behalf of a class of acquirers of Former Match Group securities between August 6, 2019 and September 25, 2019. See Phillip R. Crutchfield v. Match Group, Inc., Amanda W. Ginsberg, and Gary Swidler, No. 3:19-cv-02356-C (Northern District of Texas). Invoking the allegations in the FTC lawsuit described above, the complaint alleges (i) that defendants failed to disclose to investors that Former Match Group induced customers to buy and upgrade subscriptions using misleading advertisements, that Former Match Group made it difficult for customers to cancel their subscriptions, and that, as a result, Former Match Group was likely to be subject to regulatory scrutiny; (ii) that Former Match Group lacked adequate disclosure controls and procedures; and (iii) that, as a result of the foregoing, defendants’ positive statements about Former Match Group’s business,
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operations, and prospects, were materially misleading and/or lacked a reasonable basis. On March 30, 2021, the court granted defendants’ motion to dismiss with leave to amend. Plaintiff filed an amended complaint on April 23, 2021. On November 19, 2021, the court denied defendants’ motion to dismiss. On February 24, 2022, plaintiffs filed their motion for class certification, and we have filed our opposition. We believe that the allegations in this lawsuit are without merit and will defend vigorously against them.
Derivative Complaint against Former Match Group
On February 28, 2020, a Former Match Group shareholder filed a shareholder derivative complaint in federal district court in Delaware against Former Match Group and its board of directors seeking to recover unspecified monetary damages on behalf of the Company and require the Company to implement and maintain unspecified internal controls and corporate governance practices and procedures. See Michael Rubin et al. v. Match Group, Inc. et al., Case No. 1:20-cv-00299 (District of Delaware). Invoking the allegations of the FTC lawsuit and Crutchfield securities class action lawsuit described above, the complaint alleges that the defendants caused or failed to prevent the alleged issues giving rise to the FTC complaint, received or approved compensation tied to the alleged wrongful conduct and sold Former Match Group stock with inside knowledge of the purported conduct. The parties filed a proposed stipulation and order staying the case until the motion to dismiss is decided in the Crutchfield litigation. The court granted the stay on April 9, 2020. In light of the Crutchfield decision, the stay was lifted, and plaintiff filed an amended complaint on March 16, 2022. On February 25, 2021, another Match Group shareholder filed a shareholder derivative complaint in the Delaware Court of Chancery on behalf of nominal defendant Match Group, Inc. against its board of directors seeking to recover unspecified monetary damages. See Daniel Ochoa v. Match Group, Inc. et al, C.A. No. 2021-0158-MTZ (Delaware Court of Chancery). The complaint alleges federal securities laws violations and that Match Group’s directors breached their fiduciary duties by purportedly exercising inadequate oversight to prevent the alleged issues giving rise to the FTC complaint and by purportedly transacting in Match Group stock while possessing knowledge of these issues. On January 10, 2022, Ochoa filed an amended complaint. On March 2, 2022, defendants filed a motion to dismiss. On May 16, 2022, both the Rubin and Ochoa cases were stayed until the motion for class certification is decided in the Crutchfield litigation. We believe that the allegations in these lawsuits are without merit and will defend vigorously against them.
Irish Data Protection Commission Inquiry Regarding Tinder’s Practices
On February 3, 2020, we received a letter from the Irish Data Protection Commission (the “DPC”) notifying us that the DPC has commenced an inquiry examining Tinder’s compliance with the EU’s General Data Protection Regulation, focusing on Tinder’s processes for handling access and deletion requests and Tinder’s user data retention policies. We are fully cooperating with the DPC in connection with this inquiry.
Newman Derivative and Stockholder Class Action Regarding Separation Transaction
On June 24, 2020, a Former Match Group shareholder filed a complaint in the Delaware Court of Chancery against Former Match Group and its board of directors, as well as Match Group, IAC Holdings, Inc., and Barry Diller seeking to recover unspecified monetary damages on behalf of the Company and directly as a result of his ownership of Former Match Group stock in relation to the separation of Former Match Group from its former majority shareholder, Match Group. See David Newman et al. v. IAC/Interactive Corp. et al., C.A. No. 2020-0505-MTZ (Delaware Court of Chancery). The complaint alleges that that the special committee established by Former Match Group’s board of directors to negotiate with Match Group regarding the separation transaction was not sufficiently independent of control from Match Group and Mr. Diller and that Former Match Group board members failed to adequately protect Former Match Group’s interest in negotiating the separation transaction, which resulted in a transaction that was unfair to Former Match Group and its shareholders. On January 21, 2021, the case was consolidated with other shareholder actions, and an amended complaint was filed on April 14, 2021. See In Re Match Group, Inc. Derivative Litigation, Consolidated C.A. No. 2020-0505-MTZ (Delaware Court of Chancery). Plaintiffs filed another amended complaint on November 2, 2021. Defendants filed a motion to dismiss on December 10, 2021. We believe that the allegations in this lawsuit are without merit and will defend vigorously against it.
FTC Investigation of Certain Subsidiary Data Privacy Representations
On March 19, 2020, the FTC issued an initial Civil Investigative Demand (“CID”) to the Company requiring us to produce certain documents and information regarding the allegedly wrongful conduct of OkCupid in 2014 and
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our public statements in 2019 regarding such conduct and whether such conduct and statements were unfair or deceptive under the FTC Act. On May 26, 2022, the FTC filed a Petition to Enforce Match Civil Investigative Demand. See FTC v. Match Group, Inc., No. 1:22-mc-00054 (District of Columbia). We believe the FTC's investigation and petition to enforce are without merit, and will defend vigorously against it.
Google Litigation
On May 9, 2022, Match Group, LLC, Humor Rainbow, Inc., PlentyofFish Media ULC, and People Media, Inc. (collectively, the “Match Group Parties”) filed a complaint in federal district court in California against Google LLC, Google Ireland Limited, Google Commerce Limited, Google Asia Pacific Pte. Limited, and Google Payment Corp. (collectively, “Google”). See Match Group, LLC et al. v. Google LLC et al., No. 3:22-cv-02746-JD (Northern District of California). In the lawsuit, the Match Group Parties allege that Google’s dominance and anti-competitive conduct in the Android app distribution and in-app payment markets violate federal antitrust laws and California state law, particularly with respect to Google’s requirement that the Match Group Parties use Google Play Billing exclusively and end their practice of offering users payment options for in-app purchases. The Match Group Parties seek injunctive relief preventing Google from requiring their apps to use Google Play Billing, as well as monetary and other relief. The lawsuit was deemed related to the multi-district litigation ("MDL") In re Google Play Store Antitrust Litigation, 3:21-md-02981-JD (Northern District of California) and coordinated with that MDL for certain pre-trial and trial purposes.
On July 11, 2022, Google filed its Answer and Counterclaims, asserting counterclaims against the Match Group Parties for (1) breach of contract, based on the Match Group Parties' alleged breach of the Google Play Developer Distribution Agreement (“DDA”) and Payments Policy by failing to exclusively offer Google Play Billing as the payment option for in-app purchases, (2) breach of the implied covenant of good faith and fair dealing, based on the Match Group Parties’ purportedly having misled Google to believe that the Match Group Parties would comply with the DDA’s Payment policy, (3) false promise, based on the Match Group Parties’ alleged promise and failure to comply with the DDA, (4) quasi-contract/unjust enrichment, based on the Match Group Parties’ alleged inducement to Google to make modifications to its billing systems and provide distribution and other services under the understanding that such services were in furtherance of complying with the DDA, and (5) declaratory judgment. Google seeks damages, as well as a declaratory judgment including the right to remove the Match Group Parties’ apps from the Google Play Store. We believe Google’s counterclaims are without merit and will defend vigorously against them.
Item 1A. Risk Factors
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that are not historical facts are “forward-looking statements.” The use of words such as “anticipates,” “estimates,” “expects,” “plans,” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: Match Group’s future financial performance, Match Group’s business prospects and strategy, anticipated trends and prospects in the industries in which Match Group’s businesses operate, and other similar matters. These forward-looking statements are based on Match Group management’s current expectations and assumptions about future events as of the date of this quarterly report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: competition, our ability to maintain user rates on our higher monetizing services, our ability to attract users to our services through cost-effective marketing and related efforts, foreign currency exchange rate fluctuations, our ability to distribute our services through third parties and offset related fees, the integrity and scalability of our systems and infrastructure (and those of third parties) and our ability to adapt ours to changes in a timely and cost-effective manner, our ability to protect our systems from cyberattacks and to protect personal and confidential user information, risks relating to certain of our international operations and acquisitions, certain risks relating to our relationship with IAC post-separation, the impact of the outbreak of COVID-19 coronavirus, the risks inherent in separating Match Group from IAC, including uncertainties related to, among other things, the expected benefits of the separation, any litigation arising out of or relating to the transaction, the tax treatment of the transaction, and the impact of the separation on the businesses of Match Group, and risks relating to the acquisition of Hyperconnect, including
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uncertainties related to, among other things, the expected benefits of the transaction, any litigation arising out of or relating to the transaction, and the impact of the transaction on the business of Match Group.
Certain of these and other risks and uncertainties are discussed in Match Group’s filings with the Securities and Exchange Commission, including in Part I “Item 1A. Risk Factors” of our annual report on Form 10-K for the fiscal year ended December 31, 2021. Other unknown or unpredictable factors that could also adversely affect Match Group’s business, financial condition, and results of operations may arise from time to time. In light of these risks and uncertainties, these forward-looking statements discussed in this quarterly report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of Match Group management as of the date of this quarterly report. Match Group does not undertake to update these forward-looking statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
The Company did not issue or sell any shares of its common stock or any other equity securities pursuant to unregistered transactions during the quarter ended June 30, 2022.
Issuer Purchases of Equity Securities
The following table sets forth purchases by the Company of its common stock during the quarter ended June 30, 2022:
| Period | (a) Total Number of Shares Purchased | (b) Average Price Paid Per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | (d) Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs(2) | |||||||||||||||||||
| April 2022 | — | $ | — | — | — | ||||||||||||||||||
| May 2022 | 802,776 | $ | 73.63 | 802,776 | 11,697,224 | ||||||||||||||||||
| June 2022 | 2,137,765 | $ | 73.18 | 2,137,765 | 9,559,459 | ||||||||||||||||||
| Total | 2,940,541 | $ | 73.30 | 2,940,541 | 9,559,459 | ||||||||||||||||||
(1)Reflects repurchases made pursuant to the 12.5 million share repurchase program authorized in May 2022, which has no expiration.
(2)Represents the total number of shares of common stock that remained available for repurchase pursuant to the Company’s repurchase program. The timing and actual number of any shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. The Company is not obligated to purchase any shares under the repurchase program, and repurchases may be commenced, suspended or discontinued from time to time without prior notice.
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Item 6. Exhibits
The documents set forth below, numbered in accordance with Item 601 of Regulation S-K, are filed herewith, incorporated by reference herein by reference to the location indicated or furnished herewith.
| Incorporated by Reference | Filed (†) or Furnished (‡) Herewith (as indicated) | |||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | SEC File No. | Exhibit | Filing Date | |||||||||||||||||||||||||||||||||
| † | ||||||||||||||||||||||||||||||||||||||
| 8-K | 001-34148 | 10.1 | 6/10/2022 | |||||||||||||||||||||||||||||||||||
| † | ||||||||||||||||||||||||||||||||||||||
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| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | † | ||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | † | ||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | † | ||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | † | ||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | † | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||||||||||||||||||||
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| August 5, 2022 | MATCH GROUP, INC. | |||||||||||||
| By: | /s/ GARY SWIDLER | |||||||||||||
| Gary Swidler | ||||||||||||||
| Chief Operating Officer and Chief Financial Officer | ||||||||||||||
| Signature | Title | Date | |||||||||
| /s/ GARY SWIDLER | Chief Operating Officer and Chief Financial Officer | August 5, 2022 | |||||||||
| Gary Swidler | |||||||||||
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Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (“Agreement”), effective as of May 3, 2022 (the “Effective Date”), is entered into by and between Bernard Kim (“Executive”) and Match Group, Inc., a Delaware corporation (the “Company”).
WHEREAS, the Company desires to establish its right to the services of Executive, in the capacity described below, on the terms and conditions hereinafter set forth, and Executive is willing to accept such employment on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, Executive and the Company have agreed and do hereby agree as follows:
1A. EMPLOYMENT. During the Term (as defined below), the Company shall employ Executive, and Executive shall be employed, as the Chief Executive Officer of the Company and Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities as are commensurate and consistent with such position and shall render such services on the terms set forth herein. During Executive’s employment with the Company, Executive shall report to the Board of Directors of the Company (the “Board”) and shall be nominated to stand for election to the Board during the Term. Executive shall have such powers and duties with respect to the Company as may be assigned to Executive by the Board, to the extent consistent with Executive’s position as Chief Executive Officer of the Company. Executive agrees to devote substantially all of Executive’s working time, attention and efforts to the Company and to perform the duties of Executive’s position in accordance with the Company’s written policies as in effect from time to time. Notwithstanding the foregoing, Executive may (i) participate in or serve or advise on the boards of directors of civic and charitable activities and corporate boards of directors unrelated to the Company and serve as a non-employee director as provided on Appendix A, (ii) engage in speaking activities, (iii) manage Executive’s and Executive’s immediate family’s personal investments, and (iv) purchase or own securities in any private or publicly traded companies; provided that such interest does not exceed five (5%) of the outstanding securities of any companies, so long as such activities do not conflict with or materially interfere with Executive’s performance of Executive’s duties hereunder. During the Term, Executive’s principal place of employment shall be at the Company’s offices located in Los Angeles, California(the “Principal Location”), except for travel to other locations as necessary to fulfill Executive’s duties and responsibilities to the Company and remote work consistent with applicable Company policy, as in effect from time to time.
2A. TERM. This Agreement, and Executive’s employment hereunder, shall commence on May 31, 2022 or such earlier date as may be mutually agreed between the parties hereto (the “Start Date”) and shall continue for a period of one (1) year following the Start Date (the “Initial Term”), unless earlier terminated in accordance with the terms of this Agreement. If not earlier terminated, the Term shall automatically be renewed for successive one (1)-year periods on each of (a) the first anniversary of the Start Date and (b) on each successive anniversary of the Start Date thereafter (each successive one-year renewal term together with the Initial Term, the “Term”), unless either party hereto provides written notice to the other, at least ninety (90) days prior to the end of the applicable Term, that it elects not to extend the Term, which notice shall be irrevocable (any such notice, a “Non-Renewal Notice”). Notwithstanding anything to the contrary in this Agreement, Executive’s employment hereunder is “at will” and may be terminated by the Company or Executive at any time for any reason or for no reason, with or without Cause (as defined below), subject to the provisions of Section 1 of the Standard Terms and Conditions attached as Exhibit A hereto (the “Standard Terms and Conditions”).
3A. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay Executive an annual base salary of $1,000,000 (the “Base Salary”), pro-rated for partial years of employment. The Base Salary shall be payable in equal biweekly installments (or, if different, in accordance with the Company’s payroll practice as in effect from time to time, but no less often than monthly). The Base Salary may be increased from time to time in the discretion of the Board (or its Compensation Committee (the “Committee”)). For all purposes under this Agreement, the term “Base Salary” shall refer to the Base Salary as in effect from time to time.
(b) DISCRETIONARY BONUS. For each calendar year ending during the Term, Executive shall be eligible to receive discretionary annual cash bonuses (payable at the same time as bonuses are paid to other executives at the Company, but in no event later than March 15 of the calendar year following the year with respect to which such bonuses are payable). The target amount of the annual bonuses shall be equal to 200% of Executive’s Base Salary (the “Target Bonus”), with the actual amount (which could be less or greater than the target amount above), if any, in all cases to be determined by the Committee, in consultation with the Board. Notwithstanding the foregoing, the actual amount of annual cash bonus for the 2022 calendar year shall be no less than the Target Bonus. The payment of any such bonus, to the extent payable, will be subject to Executive’s continued employment through the date on which the bonus is paid.
(c) BENEFITS. During the Term, Executive shall be entitled to participate in any welfare, health and life insurance, pension, retirement, benefit and incentive programs as may be adopted from time to time by the Company on the same basis as that provided to similarly situated senior executives of the Company. Without limiting the generality of the foregoing, Executive shall be entitled to the following benefits:
(i)Vacation. During the Term, Executive shall be entitled to paid vacation each year, in accordance with the plans, policies, programs and practices of the Company applicable to similarly situated senior executives of the Company generally.
(ii)Reimbursement for Expenses. During the Term, the Company shall reimburse Executive for all reasonable expenses incurred by Executive in performing Executive’s duties for the Company, on at least the same basis as similarly situated senior executives and in accordance with the Company’s policies as in effect from time to time.
(e) EQUITY AWARDS.
(i)Under and subject to the provisions of the Match Group, Inc. Amended and Restated 2017 Stock and Annual Incentive Plan (the “2017 Plan”), Executive will be granted on the first calendar day of the month that next follows the Start Date (the “Grant Date”):
(1) restricted stock units of the Company, with a value of $7,000,000 as of the Grant Date, determined using the volume-weighted average price, rounded to two decimal places, of Company common stock on the primary stock exchange on which shares of the Company’s common stock are traded for the period commencing on the Effective Date and ending on May 31, 2022, vesting in three equal installments on the first three (3) anniversaries of the Grant Date, subject to Executive’s continued employment with the Company through the applicable vesting date; and
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(2)performance stock units of the Company, with a target value of $9,000,000 as of the Grant Date, determined using the volume-weighted average price, rounded to two decimal places, of Company common stock on the primary stock exchange on which shares of the Company’s common stock are traded for the period commencing on the Effective Date and ending on May 31, 2022, on the terms set forth in Exhibit C and vesting subject to continued employment and attainment of applicable performance goals, each as set forth on Exhibit C.
(ii)In addition, during the Term, Executive shall be eligible to receive such periodic grants of stock options, restricted stock units, performance stock units and/or other equity or equity-linked awards of the Company (or its affiliates) (together with the foregoing grants, the “Awards”), commensurate with Executive’s role as the Company’s Chief Executive Officer, as may be determined by the Board (or the Committee) in its discretion; provided that, for the 2023 fiscal year, Executive shall receive such Awards with a target value not less than $12,000,000 as of the date of grant.
(iii)Notwithstanding anything to the contrary in this Agreement, in the event that (i) a Change in Control (as defined in the 2017 Plan) occurs or any other event pursuant to which the Company has retained the right to terminate any or all of Executive’s Awards occurs, and (ii) the surviving corporation or the acquiring corporation (as applicable) fails to either (A) assume Executive’s Awards or (B) substitute Executive’s Awards with similar awards (it being understood that similar stock awards include, but are not limited to, awards to acquire the same consideration paid to the stockholders or the Company, as the case may be), then any performance metrics applicable to any such Award shall be deemed satisfied at the greater of target and actual performance and Executive’s Awards shall become vested immediatley prior to the Change in Control.
4A. NOTICES. All notices and other communications under this Agreement shall be in writing and shall be given by first-class mail, certified or registered with return receipt requested, or by hand delivery, overnight delivery by a nationally recognized carrier, facsimile transmission or PDF, in each case to the applicable address set forth below (or, if by e-mail transmission or PDF, to an email account provided by the other party), and any such notice is deemed effectively given when received by the recipient (or if receipt is refused by the recipient, when so refused):
If to the Company: Match Group, Inc.
8750 North Central Expressway
Suite 1400
8750 North Central Expressway
Suite 1400
Dallas, TX 75231
Attention: Chief Business Affairs & Legal Officer
Email: jared.sine@match.com
If to Executive: At the most recent address for Executive on record at the Company.
Either party may change such party’s address for notices by notice duly given pursuant hereto.
5A. GOVERNING LAW; JURISDICTION. This Agreement and the legal relations thus created between the parties hereto (including, without limitation, any dispute arising out of or related to this Agreement) shall be governed by and construed under and in accordance with the internal laws of the State of Texas without reference to its principles of conflicts of laws. Any dispute between the parties hereto arising out of or related to this Agreement will be heard exclusively and determined before an appropriate federal court located in the State of Texas, or
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an appropriate Texas state court located in Dallas County, Texas and each party hereto submits itself and its property to the exclusive jurisdiction of the foregoing courts with respect to such disputes. The parties hereto acknowledge and agree that, in the course of performing duties hereunder for the Company, Executive shall have multiple contacts with the business and operations of the Company, as well as other businesses and operations in the State of Texas, and that for those and other reasons this Agreement and the undertakings of the parties hereunder bear a reasonable relation to the State of Texas. Each party hereto (a) agrees that service of process may be made by mailing a copy of any relevant document to the address of the party set forth above, (b) waives to the fullest extent permitted by law any objection which it may now or hereafter have to the courts referred to above on the grounds of inconvenient forum or otherwise as regards any dispute between the parties hereto arising out of or related to this Agreement, (c) waives to the fullest extent permitted by law any objection which it may now or hereafter have to the laying of venue in the courts referred to above as regards any dispute between the parties hereto arising out of or related to this Agreement and (d) agrees that a judgment or order of any court referred to above in connection with any dispute between the parties hereto arising out of or related to this Agreement is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.
6A. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.
7A. STANDARD TERMS AND CONDITIONS. Executive expressly understands and acknowledges that the Standard Terms and Conditions attached hereto are incorporated herein by reference, deemed a part of this Agreement and are binding and enforceable provisions of this Agreement. References to “this Agreement” or the use of the term “hereof” shall refer to this Agreement and the Standard Terms and Conditions attached hereto, taken as a whole.
8A. SECTION 409A OF THE INTERNAL REVENUE CODE.
(a)It is intended that any amounts payable under this Agreement and the Company’s and Executive’s exercise of authority or discretion hereunder shall comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the rules and regulations issued thereunder (“Section 409A”) or an available exemption therefrom, and thus avoid the imputation of any tax, penalty or interest under Section 409A. This Agreement shall be construed and interpreted consistent with that intent.
(b)For purposes of this Agreement, a “Separation from Service” occurs when Executive dies, retires or otherwise has a termination of employment with the Company that constitutes a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional alternative definitions available thereunder (the date of any such Separation from Service, a “Termination Date”).
(c)If Executive is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of Executive’s Separation from Service, Executive shall not be entitled to any payment or benefit pursuant to Section 1 of the Standard Terms and Conditions to the extent that any such payment would constitute “nonqualified deferred compensation” (if at all) within the meaning of Section 409A until the earlier of (i) the date which is six (6) months after his Separation from Service for any reason other than death, or (ii) the date of Executive’s death. The provisions of this paragraph shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A. Any amounts otherwise payable to Executive upon or in the six (6) month period following Executive’s Separation from Service that are not so paid by reason of this Section 8A(c) shall be paid (without interest) as soon as practicable after the date that is six (6) months after
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Executive’s Separation from Service (or, if earlier, as soon as practicable after the date of Executive’s death).
(d)To the extent that any reimbursement pursuant to this Agreement is taxable to Executive, Executive shall provide the Company with documentation of the related expenses promptly so as to facilitate the timing of the reimbursement payment contemplated by this paragraph, and any reimbursement payment due to Executive pursuant to such provision shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which the related expense was incurred. Such reimbursement obligations pursuant to this Agreement are not subject to liquidation or exchange for another benefit and the amount of such benefits that Executive receives in one taxable year shall not affect the amount of such benefits that Executive receives in any other taxable year.
(e)In no event shall the Company be required to pay Executive any “gross-up” or other payment with respect to any taxes or penalties imposed under Section 409A with respect to any benefit paid to Executive hereunder. The Company agrees to take any reasonable steps requested by Executive to avoid adverse tax consequences to Executive as a result of any benefit to Executive hereunder being subject to Section 409A, provided that Executive shall, if requested, reimburse the Company for any incremental costs (other than incidental costs) associated with taking such steps.
(f)Any right to a series of installment payments pursuant to this Agreement is to be treated as a right to a series of separate payments. All payments to be made upon a termination of employment under this Agreement may only be made upon a Separation from Service under Section 409A.
9A. INDEMNIFICATION. The Company shall indemnify and hold Executive harmless for acts and omissions in Executive’s capacity as an officer, director or employee of the Company to the maximum extent permitted under applicable law; provided, however, that, except as otherwise required by applicable law, neither the Company nor any of its subsidiaries and affiliates shall indemnify Executive for any losses incurred by Executive as a result of acts described in Section 1(c) of the Standard Terms and Conditions of this Agreement.
10A. REDUCTION OF CERTAIN PAYMENTS. Notwithstanding anything to the contrary in this Agreement, in any other agreement between Executive and the Company or any plan maintained by the Company, if there is a 280G Change in Control (as defined in Section 10A(e)(i) below), the following rules shall apply:
(a) Except as otherwise provided in Section 10A(c) below, if it is determined in accordance with Section 10A(d) below that any portion of the Contingent Compensation Payments (as defined in 10A(e)(ii) below) that otherwise would be paid or provided to Executive or for his benefit in connection with the 280G Change in Control would be subject to the excise tax imposed under Section 4999 of the Code (“Excise Tax”), then such Contingent Compensation Payments shall be reduced by the smallest total amount necessary in order for the aggregate present value of all such Contingent Compensation Payments after such reduction, as determined in accordance with the applicable provisions of Section 280G of the Code and the regulations issued thereunder, not to exceed the Excise Tax Threshold Amount (as defined in Section 10A(e)(iii) below).
(b) If the Auditor (as defined in Section 10A(d) below) determines that any reduction is so required, the Payments to be reduced, and the reduction to be made to such Payments, shall be determined by the Auditor in its sole discretion in a manner which will result in the least economic cost to Executive, and if the reduction with respect to two or more Payments would result in equivalent economic cost to Executive, such Payments shall be
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reduced in the inverse chronological order of the dates on which such Payments were otherwise scheduled to be made to Executive, until the required reduction has been fully achieved.
(c) Notwithstanding the foregoing, no reduction in any of the Executive’s Contingent Compensation Payments shall be made pursuant to Section 10A(a) above if it is determined in accordance with Section 10A(d) below that the After Tax Amount of the Contingent Compensation Payments payable to Executive without such reduction would exceed the After Tax Amount of the reduced Contingent Compensation Payments payable to Executive in accordance with Section 10A(a) above. For purposes of the foregoing, (x) the “After Tax Amount” of the Contingent Compensation Payments, as computed with, and as computed without, the reduction provided for under Section 10A(a) above, shall mean the amount of the Contingent Compensation Payments, as so computed, that Executive would retain after payment of all taxes (including without limitation any federal, state or local income taxes, the Excise Tax or any other excise taxes, any Medicare or other employment taxes, and any other taxes) imposed on such Contingent Compensation Payments in the year or years in which payable; and (y) the amount of such taxes shall be computed at the rates in effect under the applicable tax laws in the year in which the 280G Change in Control occurs, or if then ascertainable, the rates in effect in any later year in which any Contingent Compensation Payment is expected to be paid following the 280G Change in Control, and in the case of any income taxes, by using the maximum combined federal, state and (if applicable) local income tax rates then in effect under such laws.
(d) A determination as to whether any Excise Tax is payable with respect to Executive’s Contingent Compensation Payments and if so, as to the amount thereof, and a determination as to whether any reduction in Executive’s Contingent Compensation Payments is required pursuant to the provisions of Sections 10A(a) and 10A(c) above, and if so, as to the amount of the reduction so required, shall be made by no later than fifteen (15) days prior to the closing of the transaction or the occurrence of the event that constitutes the 280G Change in Control. Such determinations, and the assumptions to be utilized in arriving at such determinations, shall be made by an independent auditor (the “Auditor”) jointly selected by Executive and the Company, all of whose fees and expenses shall be borne and directly paid solely by the Company. The Auditor shall be a nationally recognized public accounting firm which has not, during the two years preceding the date of its selection, acted in any way on behalf of the Company or any of its affiliates. If Executive and the Company cannot agree on the firm to serve as the Auditor, then Executive and the Company shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor, all of whose fees and expenses shall be borne and directly paid solely by the Company. The Auditor shall provide a written report of its determinations, including detailed supporting calculations, both to Executive and to the Company. The determinations made by the Auditor pursuant to this Section 10A(d) shall be binding upon Executive and the Company.
(e) For purposes of the foregoing, the following terms shall have the following respective meanings:
(iii)“280G Change in Control” shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company, as determined in accordance with Section 280G(b)(2) of the Code and the regulations issued thereunder.
(iv)“Contingent Compensation Payment” shall mean any payment or benefit in the nature of compensation that is to be paid or provided to Executive or for Executive’s benefit in connection with a 280G Change in Control (whether under this Agreement or otherwise, including by the entity, or by any affiliate of the entity, whose acquisition of the stock of the Company or its assets constitutes the 280G Change in Control) if Executive is a “disqualified individual” (as defined in Section 280G(c) of the Code) at the time of the 280G
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Change in Control, to the extent that such payment or benefit is “contingent” on the 280G Change in Control within the meaning of Section 280G(b)(2)(A)(i) of the Code and the regulations issued thereunder.
(v)“Excise Tax Threshold Amount” shall mean an amount equal to (x) three times Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations issued thereunder, less (y) $1.
[The Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and delivered by its duly authorized officer and Executive has executed and delivered this Agreement, effective as of the Effective Date.
“COMPANY”
Match Group, Inc.
By: /s/ Jared F. Sine
Name: Jared F. Sine
Title: Chief Business Affairs and Legal Officer
By: /s/ Jared F. Sine
Name: Jared F. Sine
Title: Chief Business Affairs and Legal Officer
“EXECUTIVE”
/s/ Bernard Kim
Bernard Kim
Bernard Kim
[Signature Page to Employment Agreement]
Appendix A
1.Five Below Inc., Non-Employee Director
Appendix A
EXHIBIT A
STANDARD TERMS AND CONDITIONS
1.TERMINATION OF EXECUTIVE’S EMPLOYMENT.
(a)DEATH. Executive’s employment shall terminate automatically upon Executive’s death. In the event Executive’s employment hereunder is terminated by reason of Executive’s death, the Company shall pay Executive’s designated beneficiary or beneficiaries (or, if none, Executive’s estate), within thirty (30) days of Executive’s death (or such earlier date as may be required by applicable law) in a single, lump sum in cash, (i) Executive’s Base Salary through the end of the month in which Executive’s death occurs; and (ii) any Accrued Obligations (as defined below). In addition, any Awards held by Executive that are outstanding and unvested as of the Termination Date, shall vest (and, as applicable, become exercisable) on an accelerated basis as to a number of shares subject to such Award that would have vested (and, as applicable, become exercisable) at any time through the first anniversary of the Termination Date had Executive remained in continuous employment with the Company through such anniversary upon such Termination Date (or, if later, upon attainment of applicable performance goals during such one (1)-year period) and shall, as applicable, be settled in accordance with their terms. Notwithstanding the foregoing, (A) any Award that would vest under this provision but for the fact that outstanding performance conditions have not been satisfied shall vest only if, and at such point as, such performance conditions are satisfied (and shall not lapse on the Termination Date to the extent unvested, but shall instead remain outstanding and eligible to vest during such one (1)-year period), and (B) the terms of any future awards may be varied in the governing documents of such award.
(b)DISABILITY. As used herein, “Disability” shall mean such term (or word of like import) as defined under the long-term disability policy of the Company regardless of whether Executive is covered by such policy. If the Company does not have a long-term disability policy in place, “Disability” means that the Grantee is unable to carry out the responsibilities and functions of the position held by Executive by reason of any medically determinable physical or mental impairment for a period of four (4) consecutive months. If within thirty (30) days after written notice of a pending termination for Disability is provided to Executive by the Company (in accordance with Section 4A above), Executive is not able to substantially perform Executive’s duties hereunder, then Executive’s employment under this Agreement may be terminated by the Company due to such Disability. During any period prior to such termination during which Executive is absent from the full-time performance of Executive’s duties with the Company due to Disability, the Company shall continue to pay Executive’s Base Salary at the rate in effect at the commencement of such period of Disability, offset by any amounts payable to Executive under any disability insurance plan or policy provided by the Company. Upon termination of Executive’s employment due to Disability, the Company shall pay Executive within thirty (30) days of such termination (or such earlier date as may be required by applicable law) in a single, lump sum in cash (i) Executive’s Base Salary through the end of the month in which termination occurs, offset by any amounts payable to Executive under any disability insurance plan or policy provided by the Company and (ii) any Accrued Obligations.
(c)TERMINATION FOR CAUSE; TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. Upon the termination of Executive’s employment by the Company for Cause (as defined below) or by Executive without Good Reason (as defined below), the Company shall have no further obligation hereunder, except for the payment of any Accrued Obligations. As used herein, “Cause” shall mean: (i) the plea of guilty or nolo contendere to, or conviction for, a felony offense by Executive; provided, however, that (A) after
Exhibit A-1
indictment, the Company may suspend Executive from the rendition of services, but without limiting or modifying in any other way the Company’s obligations under this Agreement, and (B) Executive’s employment shall be immediately reinstated if the indictment is dismissed or otherwise dropped and there is not otherwise grounds to terminate Executive’s employment for Cause; (ii) a material breach by Executive of a fiduciary duty owed to the Company; (iii) a material breach by Executive of any of the covenants made by Executive in Section 2 below; (iv) Executive’s continued willful failure to perform or gross neglect of the material duties required by this Agreement (other than any such failure resulting from incapacity due to physical or mental illness); or (v) a knowing and material violation by Executive of any material Company policy pertaining to ethics, wrongdoing or conflicts of interest, which policy had been provided to Executive in writing or otherwise made generally available prior to such violation; provided, that in the case of conduct described in clauses (ii), (iii), (iv) or (v) above which is capable of being cured, Executive shall have a period of no less than ten (10) days after Executive is provided with written notice (specifying in reasonable detail the acts or omissions believed to constitute Cause and the steps necessary to remedy such condition, if curable) in which to cure, which such notice specifically identifies the breach, the nature of the willful or gross neglect or the violation that the Company believes constitutes Cause.
(d)TERMINATION BY THE COMPANY WITHOUT CAUSE OR DUE TO NON-RENEWAL; RESIGNATION BY EXECUTIVE FOR GOOD REASON WITHOUT A CHANGE IN CONTROL. If Executive’s employment hereunder is terminated prior to the expiration of the Term by the Company for any reason other than for Cause or due to Non-Renewal (as defined below), or if Executive terminates Executive’s employment hereunder prior to the expiration of the Term for Good Reason, in any case, outside of the Change in Control Period (as defined below), then:
(i)the Company shall pay to Executive an amount equal to twelve (12) months of the Base Salary, payable in substantially equal installments in accordance with the Company’s normal payroll practices over the twelve (12) months from the Termination Date (the “Severance Period”), which installments shall commence on the first payroll date following the effective date of the Release (as defined below) and amounts otherwise payable prior to such first payroll date shall be paid on such date without interest thereon (it being understood that if any applicable Release consideration/revocation period spans two calendar years, in no event shall any such payments be made prior to the first Company payroll date in the latter such calendar year, if later than the date such payments would otherwise commence);
(ii)in addition, the Company shall pay to Executive an amount equal to the sum of (A) Executive’s Target Bonus (i.e., an amount equal to two hundred percent (200%) of Executive’s then-current Base Salary) and (B) any annual bonus that would have been earned by Executive for the calendar year immediately preceding the year in which the Termination Date occurs (determined in accordance with Section 3A(b) above) but for the fact that Executive was not employed through the payment date and which remains unpaid as of the Termination Date (if any), in each case, payable within sixty (60) days after the Date Termination Date;
(iii)in addition, the Company shall pay Executive within thirty (30) days after the Termination Date (or such earlier date as may be required by applicable law) in a lump sum in cash any Accrued Obligations;
(iv) any Awards held by Executive that are outstanding and unvested as of the Termination Date, shall vest (and, as applicable, become exercisable) on an accelerated basis as to a number of shares subject to such Award that would have vested (and, as applicable, become exercisable) at any time through the second anniversary of the Termination Date had Executive remained in continuous employment with the Company through such anniversary
Exhibit A
Page 2
upon such Termination Date (or, if later, upon attainment of applicable performance goals during such two (2)-year period) and shall, as applicable, be settled in accordance with their terms. Notwithstanding the foregoing, (A) any Award that would vest under this provision but for the fact that outstanding performance conditions have not been satisfied shall vest only if, and at such point as, such performance conditions are satisfied (and shall not lapse on the Termination Date to the extent unvested, but shall instead remain outstanding and eligible to vest during such two (2)-year period), and (B) the terms of any future awards, other than any annual/periodic awards made to officers of the Company generally, may be varied in the governing documents of such awards with respect to terms other than the vesting accelerations described in this Section 1(d)(iv); and
(v) the Company shall, during the Severance Period, provide Executive with continued coverage under the Company’s group health plan, at the Company’s cost, or with an additional taxable monthly payment in an amount equal to the full premiums for continued healthcare coverage under the Company’s plans through COBRA, at the same coverage level as in effect for Executive as of the Termination Date. The payment under this clause (v) shall be grossed up for applicable taxes. Notwithstanding the foregoing, in the event Executive obtains alternative employment during the Severance Period offering employer-paid healthcare coverage that is no less favorable in the aggregate than the benefits provided under the Company’s group health plan for active employees, Executive shall enroll in and obtain coverage under such new employer’s plan at the earliest opportunity and the Company’s obligations under this clause (v) shall cease as of the effective date of such alternate coverage.
For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following without Executive’s prior written consent: (A) the Company requiring Executive to report to any person or persons other than the Board and its Chairman, (B) a material diminution in title or the assignment of duties and responsibilities to, or limitation on duties of, Executive inconsistent with Executive’s position as Chief Executive Officer of the Company, excluding for this purpose any such instance that is an isolated and inadvertent action not taken in bad faith or that is authorized pursuant to this Agreement, (C) the Company changing Executive’s role such that he ceases to be an “officer” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) who is required to make filings under Section 16(a)(1) of the Exchange Act (other than for Cause), (D) a material reduction in Executive’s Base Salary or Target Bonus, (E) the Company requiring Executive’s Principal Location to be in a location outside of the Los Angeles Metropolitan Area, (F) the failure of the Company during the Term to cause Executive to be nominated to stand for election to the Board or the Company’s removal of the Executive from the Board (in each case, other than for Cause), or (F) any material breach by the Company of this Agreement or any other written agreement between Executive and the Company or any Company affiliate; provided that in no event shall Executive’s resignation be for “Good Reason” unless (x) an event or circumstance constituting “Good Reason” shall have occurred and Executive provides the Company with written notice thereof within thirty (30) days after Executive has knowledge of the occurrence or existence of such event or circumstance, which notice specifically identifies the event or circumstance that Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within thirty (30) days after the receipt of such notice, and (z) Executive resigns within ninety (90) days after the date of delivery of the notice referred to in clause (x) above.
(a)TERMINATION BY THE COMPANY WITHOUT CAUSE OR DUE TO NON-RENEWAL; RESIGNATION BY EXECUTIVE FOR GOOD REASON IN CONNECTION WITH A CHANGE IN CONTROL. If Executive’s employment hereunder is terminated during the Term by the Company for any reason other than for Cause or due to Non-Renewal, or if Executive terminates Executive’s employment hereunder during the Term for Good Reason, in any case, within twelve (12) months following a Change in Control (the
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“Change in Control Period”), then Executive shall be entitled to receive the same severance entitlements described in Section 1(d), except that:
(vi)the total amount of payments pursuant to Section 1(d)(i) shall be equal to eighteen (18) months of the Base Salary, payable in substantially equal installments in accordance with the Company’s normal payroll practices over the eighteen (18) months from the Termination Date (the “CIC Severance Period”);
(vii)the total amount of payments payable pursuant to Section 1(d)(ii) shall be equal to the sum of (A) 1.5x Executive’s Target Bonus (i.e., an amount equal to three hundred percent (300%) of Executive’s then-current Base Salary) and (B) any annual bonus that would have been earned by Executive for the calendar year immediately preceding the year in which the Termination Date occurs (determined in accordance with Section 3A(b) above) but for the fact that Executive was not employed through the payment date and which remains unpaid as of the Termination Date (if any);
(viii)the performance conditions with respect to any outstanding Awards shall be deemed satisfied at the greater of target and actual performance as of the date of such Change in Control and such Awards shall become vested as soon as practicable following the Termination Date; and
(ix) the benefits payable pursuant to Section 1(d)(v) shall be paid or provided during the CIC Severance Period (i.e., up to eighteen (18) months rather than up to twelve (12) months).
(e)RELEASE. The payments and severance benefits described in Sections 1(d) and 1(e), with the exception of Section 1(d)(iii), shall be subject to Executive’s compliance in all material respects with the restrictive covenants set forth in Section 2 below (and, for clarity, the Company shall provide Executive with written notice and reasonable opportunity to cure (to the extent capable cure) any breach of such restrictive covenants) and Executive’s execution within twenty-one (21) days following the Termination Date (or such longer period as may be required by applicable law) and non-revocation of a mutual general release of claims in substantially the form annexed hereto as Exhibit B (the “Release”). For the avoidance of doubt, all Awards eligible for accelerated vesting pursuant to Sections 1(d)(iv) and 1(e)(iii) hereof shall remain outstanding and eligible to vest following the Termination Date and shall actually vest and become exercisable (if applicable) and non-forfeitable as of the Termination Date, subject to the Release becoming effective by its own terms.
(f)EXCLUSIVE BENEFIT. Except as expressly provided in this Section 1, Executive shall not be entitled to any additional payments or benefits upon or in connection with Executive’s termination of employment.
(g)ACCRUED OBLIGATIONS. As used in this Agreement, “Accrued Obligations” shall mean the sum of (i) any portion of Executive’s accrued but unpaid Base Salary through the Termination Date; (ii) any unreimbursed business expenses incurred by Executive prior to the Termination Date that are reimbursable in accordance with Section 3A(c)(ii) above; (iii) the value of any accrued and unused vacation days; and (iv) any compensation previously earned but deferred by Executive (together with any interest or earnings thereon) that has not yet been paid and that is not otherwise scheduled to be paid at a later date pursuant to any deferred compensation arrangement of the Company to which Executive is a party, if any (provided, that any election made by Executive pursuant to any deferred compensation arrangement that is subject to Section 409A regarding the schedule for payment of such deferred compensation shall prevail over this Section 1(h) to the extent inconsistent herewith).
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(h)NON-RENEWAL. If the Company delivers a Non-Renewal Notice to Executive then, provided Executive’s employment hereunder continues through the expiration date of the ninety (90)-day notice period then in effect (and that Executive would, absent such Non-Renewal Notice, be willing to continue employment on the terms and conditions contained in this Agreement at such time), effective as of such expiration date, Executive’s employment with the Company automatically will terminate (such termination, a “Non-Renewal”).
(i)RESIGNATION FROM ALL POSITIONS. Notwithstanding any other provision of this Agreement, upon the termination of Executive’s employment for any reason, unless otherwise requested by the Board, Executive shall immediately resign as of the Termination Date from all positions that Executive holds with the Company and any of its subsidiaries, including, without limitation, the Board and all boards of directors of any subsidiary of the Company or any parent company of the Company. Executive hereby agrees to execute all documentation and to take all reasonable actions necessary to effectuate such resignations upon request by the Company.
(j)POST-TERMINATION EXERCISE PERIOD FOR STOCK OPTIONS. In the event of Executive’s termination of employment for any reason other than a termination of employment by the Company for Cause and subject to Executive’s timely execution and non-revocation of a Release (as provided in Section 1(f) above), any then-vested options to purchase Company stock or parent stock (including options vesting as a result of any accelerated vesting upon such termination of employment, if any), shall remain outstanding and exercisable through the date that is twelve (12) months following the date of such termination or, if earlier, through the scheduled expiration date of such options.
2.CONFIDENTIAL INFORMATION; NON-COMPETITION; NON-SOLICITATION; AND PROPRIETARY RIGHTS.
(a)CONFIDENTIALITY. Executive acknowledges that, while employed by the Company, Executive has occupied and will occupy a position of trust and confidence. The Company has provided and shall provide Executive with Confidential Information (as defined below). Executive shall not, except as Executive in good faith deems appropriate to perform Executive’s duties hereunder or as required by applicable law or regulation, governmental investigation, subpoena, or in connection with enforcing the terms of this Agreement (or any agreement referenced herein) without limitation in time, communicate, divulge, disseminate, disclose to others or otherwise use, whether directly or indirectly, any Confidential Information regarding the Company or any of its subsidiaries or affiliates. For purposes of this Agreement, “Confidential Information” shall mean information about the Company or any of its subsidiaries or affiliates, and their respective businesses, employees, consultants, contractors, clients and customers that is not disclosed by the Company or any of its subsidiaries or affiliates for financial reporting purposes or otherwise generally made available to the public (other than by Executive’s breach of the terms hereof or the terms of any previous confidentiality obligation by Executive to the Company) and that was learned or developed by Executive in the course of employment by the Company or any of its subsidiaries or affiliates, including (without limitation) any proprietary knowledge, trade secrets, data, formulae, information and client and customer lists and all papers, resumes, and records (including computer records) of the documents containing such Confidential Information, provided, that Confidential Information shall not include any information that is generally known to the public or in the relevant industry or which becomes known through no fault of Executive. Executive acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Company and its subsidiaries or affiliates, and that such information gives the Company and its subsidiaries or affiliates a competitive advantage. Executive agrees to deliver, return to the Company (or destroy, to the extent physically returning the following is not possible), at the Company’s written request at any time or upon termination or expiration of Executive’s employment or as
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soon thereafter as possible, whether kept in tangible form or intangible form in the cloud or otherwise, all documents, computer tapes and disks, records, lists, data, drawings, prints, notes and written and digital information (and all copies thereof) furnished by the Company and its subsidiaries or affiliates or prepared by Executive in the course of Executive’s employment by the Company and its subsidiaries or affiliates; provided, that, Executive may retain Executive’s personal effects, contacts, copies of documentation reasonably necessary for Executive to prepare Executive’s tax returns and documents relating to Executive’s compensation. As used in this Agreement, “subsidiaries” and “affiliates” shall mean any company controlled by, controlling or under common control with the Company.
(b)NON-COMPETITION.
(i)In consideration of this Agreement, and for other good and valuable consideration provided hereunder, the receipt and sufficiency of which are hereby acknowledged by Executive, Executive hereby agrees and covenants that, during the Term and for a period of eighteen (18) months thereafter, Executive shall not, without the prior written consent of the Company, directly or indirectly, engage in or become associated with a Competitive Activity.
(ii)For purposes of this Section 2(b), a “Competitive Activity” means engaging in the business of providing online or app-based dating or similar match-making services or in any other business providing similar or related services or products that the Company is engaged in as of the Termination Date (the “Company Products or Services”); provided such business or endeavor is in the United States, or in any foreign jurisdiction in which the Company provides, or has provided during the Term, the relevant Company Group Products or Services. For the avoidance of doubt, “Competitive Activity” shall not include any gaming products or services business (including online, mobile, PC, console, or blockchain based gaming) to the extent such business does not relate to online or app-based dating services.
(iii)For purposes of this Section 2(b), Executive shall be considered to have become “associated with a Competitive Activity” if Executive becomes directly or indirectly involved as an owner, principal, employee, officer, director, independent contractor, representative, stockholder, financial backer, agent, partner, member, advisor, lender, consultant or in any other individual or representative capacity with any individual, partnership, corporation or other organization that is engaged in a Competitive Activity.
(i)Notwithstanding anything else in this Section 2(b), (A) Executive may become employed by or provide services to a partnership, corporation or other organization that is engaged in a Competitive Activity so long as Executive has no direct or indirect responsibilities or involvement in the Competitive Activity, and (B) Executive may own, for investment purposes only, up to five percent (5%) of the outstanding capital stock of any publicly-traded corporation engaged in a Competitive Activity if the stock of such corporation is either listed on a national stock exchange or on the NASDAQ National Market System and if Executive is not otherwise affiliated with such corporation.
(a)NON-SOLICITATION OF EMPLOYEES. Executive recognizes that Executive possesses and will possess Confidential Information about other employees, consultants and contractors of the Company and its subsidiaries and affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with suppliers to and customers of the Company and its subsidiaries and affiliates. Executive recognizes that the information Executive possesses and will possess about these other employees, consultants and contractors is not generally known, is of substantial value to the Company and its subsidiaries and affiliates in developing their respective businesses and in securing and retaining customers, and has been and will be acquired by Executive because of
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Executive’s business position with the Company. Executive agrees that, during the Term, and for a period of eighteen (18) months thereafter, Executive will not, directly or indirectly, solicit, recruit or hire any employee of the Company or any of its subsidiaries and affiliates (or any individual who was an employee of the Company or any of its subsidiaries at any time during the six (6) months prior to such act of hiring, solicitation or recruitment) for the purpose of being employed by Executive or by any business, individual, partnership, firm, corporation or other entity on whose behalf Executive is acting as an agent, representative or employee and that Executive will not convey any such Confidential Information or trade secrets about other employees of the Company or any of its subsidiaries to any other person except within the scope of Executive’s duties hereunder. Notwithstanding the foregoing, Executive is not precluded from soliciting or hiring any individual who (i) initiates discussions regarding employment on his or her own, (ii) responds to any public advertisement or general solicitation, or (iii) has resigned or been terminated by the Company prior to the solicitation.
(b)NON-SOLICITATION OF BUSINESS PARTNERS. During the Term, and for a period of eighteen (18) months thereafter, Executive shall not, without the prior written consent of the Company, persuade or encourage any business partners or business affiliates of the Company or its subsidiaries or affiliates to cease doing business with the Company or any of its subsidiaries or affiliates or to engage in any Competitive Activity.
(c)PROPRIETARY RIGHTS; ASSIGNMENT. All Employee Developments (as defined below) are and shall be considered works made for hire by Executive for the Company or any of its subsidiaries or affiliates. Executive agrees that all rights of any kind in any Employee Developments belong exclusively to the Company. In order to permit the Company to exploit such Employee Developments, Executive shall promptly and fully report all such Employee Developments to the Company. Except in furtherance of his obligations as an employee of the Company, Executive shall not use or reproduce any portion of any record associated with any Employee Development without prior written consent of the Company or, as applicable, its subsidiaries or affiliates. Executive agrees that in the event actions of Executive are required to ensure that such rights belong to the Company under applicable laws, Executive will cooperate and take whatever such actions are reasonably requested by the Company, whether during or after the Term, and without the need for separate or additional compensation. For purposes of this Agreement, “Employee Developments” means any discovery, invention, design, method, technique, improvement, enhancement, development, computer program, machine, algorithm or other work or authorship that (i) relates to the business or operations of the Company or any of its subsidiaries or affiliates, or (ii) results from or is suggested by any undertaking assigned to Executive or work performed by Executive for or on behalf of the Company or any of its subsidiaries or affiliates, whether created alone or with others, during or after working hours (including before the Effective Date). All Confidential Information and all Employee Developments shall remain the sole property of the Company or any of its subsidiaries or affiliates. Executive has not acquired and shall not acquire any proprietary interest in any Confidential Information or Employee Developments developed or acquired during the Term. To the extent Executive may, by operation of law or otherwise, acquire any right, title or interest in or to any Confidential Information or Employee Development, Executive hereby assigns to the Company all such proprietary rights. Executive shall, both during and after the Term, upon the Company’s request, promptly execute and deliver to the Company all such assignments, certificates and instruments, and shall promptly perform such other acts, as the Company may from time to time in its discretion deem necessary or desirable to evidence, establish, maintain, perfect, enforce or defend the Company’s rights in Confidential Information and Employee Developments. THIS PARAGRAPH DOES NOT APPLY TO ANY EMPLOYEE DEVELOPMENT WHICH QUALIFIES FULLY UNDER THE PROVISIONS OF SECTION 2870 OF THE LABOR CODE OF THE STATE OF CALIFORNIA, A COPY OF WHICH IS ATTACHED TO THIS AGREEMENT AS EXHIBIT A-1 hereto.
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(d)CERTAIN EXCEPTIONS. Notwithstanding the foregoing or anything herein to the contrary, nothing contained herein shall prohibit Executive from (i) filing a charge with, reporting possible violations of federal law or regulation to, participating in any investigation by, or cooperating with any governmental agency or entity or making other disclosures that are protected under the whistleblower provisions of applicable law or regulation and/or (ii) communicating directly with, cooperating with, or providing information (including trade secrets) in confidence to, any federal, state or local government regulator (including, but not limited to, the U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission, or the U.S. Department of Justice) for the purpose of reporting or investigating a suspected violation of law, or from providing such information to Executive’s attorney or in a sealed complaint or other document filed in a lawsuit or other governmental proceeding. Pursuant to 18 USC Section 1833(b), Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (y) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Without limiting the foregoing, nothing in this Agreement prevents Executive from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that the undersigned has reason to believe is unlawful.
(e)COMPLIANCE WITH POLICIES AND PROCEDURES. During the period that Executive is employed with the Company hereunder, Executive shall adhere to the policies and standards of professionalism set forth in the Company’s Policies and Procedures as they may exist from time to time.
(f)SURVIVAL OF PROVISIONS. The obligations contained in this Section 2 shall, to the extent provided in this Section 2, survive the termination or expiration of Executive’s employment with the Company and, as applicable, shall be fully enforceable thereafter in accordance with the terms of this Agreement. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 2 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.
3.TERMINATION OF PRIOR AGREEMENTS / EXISTING CLAIMS / AUTHORITY. This Agreement constitutes the entire agreement between the parties hereto and, as of the Effective Date, terminates and supersedes any and all prior agreements and understandings (whether written or oral) between the parties with respect to the subject matter of this Agreement. Executive acknowledges and agrees that neither the Company nor anyone acting on its behalf has made, and no such person or entity is making, and in executing this Agreement, Executive has not relied upon, any representations, promises or inducements except to the extent the same is expressly set forth in this Agreement. The Company represents that it has due authority to enter into this Agreement and has taken all necessary corporate action to enter into this Agreement and provide the compensation set forth herein.
4.ASSIGNMENT; SUCCESSORS. This Agreement is personal in its nature and none of the parties hereto shall, without the consent of the others, assign or transfer this Agreement or any rights or obligations hereunder, other than Executive to his heirs and beneficiaries upon his death to the extent provided in this Agreement; provided that in the event of the merger, consolidation, transfer, or sale of all or substantially all of the assets of the Company with or to any other individual or entity, this Agreement shall, subject to the provisions hereof, be binding upon and inure to the benefit of such successor and such successor shall discharge and perform all the promises, covenants, duties, and obligations of the Company
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hereunder, and in the event of any such assignment or transaction, all references herein to the “Company” shall refer to the Company’s assignee or successor hereunder.
5.WITHHOLDING. The Company shall make such deductions and withhold such amounts from each payment and benefit made or provided to Executive hereunder, as may be required from time to time by applicable law, governmental regulation or order.
6.HEADING REFERENCES. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. References to “this Agreement” or the use of the term “hereof” shall refer to these Standard Terms and Conditions and the Employment Agreement attached hereto, taken as a whole.
7.REMEDIES FOR BREACH.
(g)Executive expressly agrees and understands that Executive will notify the Company in writing of any alleged breach of this Agreement by the Company, and the Company will have thirty (30) days from receipt of Executive’s notice to cure any such breach, subject to Section 1(d) above. Executive expressly agrees and understands that in the event of any termination of Executive’s employment by the Company during the Term, the Company’s contractual obligations to Executive shall be fulfilled through compliance with its obligations under these Standard Terms and Conditions.
(h) Executive expressly agrees and understands that the remedy at law for any breach by Executive of Section 2 of these Standard Terms and Conditions will be inadequate and that damages flowing from such breach are not usually susceptible to being measured in monetary terms. Accordingly, it is acknowledged that, upon Executive’s violation of any provision of such Section 2, the Company shall be entitled to seek from any court of competent jurisdiction immediate injunctive relief and a temporary order restraining any threatened or further breach as well as an equitable accounting of all profits or benefits arising out of such violation. Nothing in this Agreement shall be deemed to limit the Company’s remedies at law or in equity for any breach by Executive of any of the provisions of this Agreement, including Section 2, which may be pursued by or available to the Company.
8.WAIVER; MODIFICATION. Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of, or failure to insist upon strict compliance with, any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. This Agreement shall not be modified in any respect except by a writing executed by each party hereto.
9.SEVERABILITY. In the event that a court of competent jurisdiction determines that any portion of this Agreement is in violation of any law or public policy, only the portions of this Agreement that violate such law or public policy shall be stricken. All portions of this Agreement that do not violate any statute or public policy shall continue in full force and effect. Further, any court order striking any portion of this Agreement shall modify the stricken terms as narrowly as possible to give as much effect as possible to the intentions of the parties under this Agreement.
10.SARBANES-OXLEY ACT OF 2002. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that any transfer or deemed transfer of funds hereunder is likely to be construed as a personal loan prohibited by Section 13(k) of the Exchange Act, and the rules and regulations promulgated thereunder, then such
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transfer or deemed transfer shall be provided to Executive as compensation (and not as a loan) to Executive (and as such shall be subject to tax withholding obligations).
11.EXECUTIVE ACKNOWLEDGEMENTS. Executive hereby represents and warrants to the Company that (a) Executive is entering into this Agreement voluntarily and that Executive’s acceptance of employment with the Company and the performance of Executive’s duties and responsibilities hereunder will not, in any case, violate any agreement between Executive and any other person, firm, organization or other entity; and (b) Executive is not bound by the terms of any agreement with any previous employer or other party to refrain from competing, directly or indirectly, with the business of such previous employer or other party, in any case, that would be violated by Executive’s entering into this Agreement and/or providing services to the Company pursuant to the terms of this Agreement.
* * * * *
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EXHIBIT A-1
CALIFORNIA LABOR CODE
SECTION 2870-2872
2870. (a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:
1.Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or
2.Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.
2871. No employer shall require a provision made void and unenforceable by Section 2870 as a condition of employment or continued employment. Nothing in this article shall be construed to forbid or restrict the right of an employer to provide in contracts of employment for disclosure, provided that any such disclosures be received in confidence, of all of the employee’s inventions made solely or jointly with others during the term of his or her employment, a review process by the employer to determine such issues as may arise, and for full title to certain patents and inventions to be in the United States, as required by contracts between the employer and the United States or any of its agencies.
2872. If an employment agreement entered into after January 1, 1980, contains a provision requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer, the employer must also, at the time the agreement is made provide a written notification to the employee that the agreement does not apply to an invention which qualifies fully under the provisions of Section 2870. In any suit or action arising thereunder, the burden of proof shall be on the employee claiming the benefits of its provisions.
Exhibit A-1
EXHIBIT B
FORM OF RELEASE
THIS RELEASE (the “Release”) is entered into between Bernard Kim (“Executive”) and Match Group, Inc., a Delaware corporation (the “Company”), for the benefit of the Company and other Releasees (as defined below). The entering into and non-revocation of this Release is a condition to Executive’s right to receive certain payments and benefits under Section 1 of the Standard Terms and Conditions attached as Exhibit A (the “Standard Terms and Conditions”) to that certain employment agreement entered into by and between Executive and the Company, dated as of [ ], 2022 (the “Employment Agreement”). Capitalized terms used and not defined herein shall have the meaning provided in the Employment Agreement.
Accordingly, Executive and the Company agree as follows.
1. In consideration for the payments and other benefits provided to Executive by the Employment Agreement, to which Executive is not otherwise entitled, and the sufficiency of which Executive acknowledges, Executive represents and agrees, as follows:
(a) Executive, for Executive’s self and Executive’s heirs, administrators, representatives, executors, successors and assigns (collectively “Releasers”), hereby irrevocably and unconditionally releases, acquits and forever discharges and agrees not to sue the Company or any of its parents, subsidiaries, divisions, affiliates and related entities and their current and former directors, officers, shareholders, trustees, employees, consultants, independent contractors, representatives, agents, servants, successors and assigns and all persons acting by, through or under or in concert with any of them (collectively “Releasees”), from all claims, rights and liabilities up to and including the date of this Release arising from or relating to Executive’s employment with, or termination of employment from, the Company, and from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of actions, suits, rights, demands, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected and any claims of wrongful discharge, breach of contract, implied contract, promissory estoppel, defamation, slander, libel, tortious conduct, employment discrimination or claims under any federal, state or local employment statute, law, order or ordinance, including any rights or claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq. (“ADEA”), or any other federal, state or municipal ordinance relating to discrimination in employment. Nothing contained herein shall restrict the parties’ rights to enforce the terms of this Release.
(b) To the maximum extent permitted by law, Executive agrees that Executive has not filed, nor will Executive ever file, a lawsuit asserting any claims which are released by this Release, or to accept any benefit from any lawsuit which might be filed by another person or government entity based in whole or in part on any event, act, or omission which is the subject of this Release.
(c) This Release specifically excludes (i) Executive’s rights and the Company’s obligations to provide severance payments under Section 1 of the Standard Terms and Conditions; (ii) Executive’s right to indemnification under Section 9A of the Employment Agreement or otherwise under the Company’s organizational documents, applicable insurance policies or applicable law; (iii) Executive’s right to assert claims for workers’ compensation or unemployment benefits; (v) Executive’s vested rights under any retirement or welfare benefit plan of the Company or under any equity or equity-linked award that remains outstanding following the Termination Date (as defined in the Employment Agreement); or (vi) any other rights that may not be waived by an employee under applicable law. Nothing contained in this Release shall release Executive from Executive’s obligations, including any obligations to abide
by restrictive covenants, under the Employment Agreement that continue or are to be performed following termination of employment.
(d) The parties agree that this Release shall not affect the rights and responsibilities of the US Equal Employment Opportunity Commission (hereinafter “EEOC”) to enforce ADEA and other laws. In addition, the parties agree that this Release shall not be used to justify interfering with Executive’s protected right to file a charge or participate in an investigation or proceeding conducted by the EEOC. The parties further agree that Executive knowingly and voluntarily waives all rights or claims (that arose prior to Executive’s execution of this Release) the Releasers may have against the Releasees, or any of them, to receive any benefit or remedial relief (including, but not limited to, reinstatement, back pay, front pay, damages, attorneys’ fees, experts’ fees) as a consequence of any investigation or proceeding conducted by the EEOC.
2. Executive acknowledges that the Company has specifically advised Executive of the right to seek the advice of an attorney concerning the terms and conditions of this Release. Executive further acknowledges that Executive has been furnished with a copy of this Release, and Executive has been afforded at least twenty-one (21) days in which to consider the terms and conditions set forth above prior to this Release. If Executive signs this Release prior to the expiration of the twenty-one (21) day period, Executive waives the remainder of that period. Executive waives the restarting of the twenty-one (21) day period in the event of any modification of this Release, whether or not material.
3. By executing this Release, Executive affirmatively states that Executive has had sufficient and reasonable time to review this Release and to consult with an attorney concerning Executive’s legal rights prior to the final execution of this Release. Executive further agrees that Executive has carefully read this Release and fully understands its terms. Executive understands that Executive may revoke this Release within seven (7) days after signing this Release. Revocation of this Release must be made in writing and must be received by the General Counsel of the Company, 8750 North Central Expressway, 14th Floor, Dallas, TX 75231 on or before 5:00 p.m. (CT) on the seventh (7th) day after the date on which Executive signs this Release.
4. Executive agrees that because the general releases herein specifically cover known and unknown claims, Executive waives his rights under Section 1542 of the California Civil Code or any other comparable statute of any jurisdiction. Section 1542 states as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.” Executive, being aware of said Code section, hereby expressly waives any rights he may have thereunder, as well as under any other statutes or common law principles of similar effect.
5. This Release will be governed by and construed in accordance with the laws of the state of Texas, without giving effect to any choice of law or conflicting provision or rule (whether of the state of Texas or any other jurisdiction) that would cause the laws of any jurisdiction other than the state of Texas to be applied. In furtherance of the foregoing, the internal law of the state of Texas will control the interpretation and construction of this agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.
6. The provisions of this Release are severable, and if any part or portion of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable.
7. This Release shall become effective and enforceable on the eighth day following its execution by Executive, provided Executive does not exercise Executive’s right of
Exhibit B
Page 2
revocation as described above. If Executive fails to sign and deliver this Release or revokes Executive’s signature, this Release will be without force or effect, and Executive shall not be entitled to the payments and benefits of Sections 1(d) and 1(e), with the exception of Section 1(d)(ii), of the Standard Terms and Conditions.
“EXECUTIVE” | ||||||||||||||
| Date: | ||||||||||||||
Name: Bernard Kim
Exhibit B
Page 3
EXHIBIT C
Terms & Conditions of Performance Stock Units
Performance-Based Vesting Conditions: In order for the performance-based restricted stock units (“PSUs”) to vest, the award recipient must be continuously employed as a service provider by Match Group or one of its subsidiaries through the Vesting Date (as defined below) (the “Continuous Service Requirement”).
Assuming the satisfaction of the Continuous Service Requirement, the number of PSUs that will be earned and vest on the Vesting Date shall be determined by application of the Performance Conditions as set forth below, subject to the terms set forth in the 2017 Plan, award notice and the PSU T&C’s.
Final determinations regarding the levels of Performance Conditions achieved (and corresponding number of PSUs earned) shall be made by the Committee in good faith.
Impact of a Termination of Employment: Except as otherwise provided in the attached PSU T&C’s or the 2017 Plan or the Employment Agreement, upon your Termination of Employment prior to the Vesting Date, any and all PSUs underlying your Award will be forfeited and canceled in their entirety.
Performance Conditions: Assuming the satisfaction of the Continuous Service Requirement, the total number of PSUs that may be earned ranges from zero percent (0%) to two-hundred and twenty-five percent (225%) of the Target PSUs based on the achieved results against the Performance Conditions as set forth in this Exhibit C. The number of PSUs that will be earned and vest on the Vesting Date shall be determined as described below.
Following the conclusion of the Performance Period, the number of earned PSUs, if any, are adjusted by applying a modifier (the “Relative TSR Multiplier”) to the number of Target PSUs, as set forth in the table below.
| rTSR Percentile Ranking Among TSR Peer Group | Relative TSR Multiplier(1)(2) | ||||
Below 30th (Below Threshold) | 0% | ||||
30th (Threshold) | 30% | ||||
55th (Target) | 100% | ||||
85th and above (Maximum) | 225% | ||||
(1) For performance between the Threshold and Target performance levels or between the Target and Maximum performance levels, the Relative TSR Multiplier will be interpolated between the levels on a straight-line basis, rounded down to the nearest whole number of PSUs. Failure to achieve the Threshold performance level will result in no Shares (as defined in the 2017 Plan) being issued for the PSUs, and no additional Shares will be issued for performance exceeding the Maximum performance level.
(2) Notwithstanding the foregoing, if Match Group’s TSR is negative for the applicable Performance Period, the maximum Relative TSR Multiplier possible will be 100% regardless of relative performance.
“NASDAQ-100” means the stock market index known as the “Nasdaq-100 Total Return Index” or, in the event such index is no longer published at any given time, an alternative stock market index deemed comparable by the Committee.
“Performance Period” means the three-year period beginning on June 1, 2022 and ending on June 1, 2025.
“Total Shareholder Return (TSR)” means the stock price appreciation from the beginning to the end of the Performance Period, plus dividends and distributions made or declared during the Performance Period (it shall be assumed that such dividends or distributions are reinvested in the common stock of Match Group or the applicable member of the NASDAQ-100 as of the ex-dividend date), expressed as a percentage return. TSR for Match Group and each company in the TSR Peer Group will be calculated as follows:
| TSR = | (Ending Average + Dividends Paid) - Beginning Average | ||||
| Beginning Average | |||||
“Beginning Average”: the volume-weighted average closing price of a share of Match Group’s or the respective TSR Peer Group company’s common stock, as applicable, for the 30 trading days prior to and including the first day of the Performance Period on the primary stock exchange on which shares of such company’s common stock were traded.
“Ending Average”: the volume-weighted average closing price of a share of Match Group’s or the respective TSR Peer Group company’s common stock, as applicable, over the 30 trading days prior to and including the last day of the Performance Period on the primary stock exchange on which shares of such company’s common stock were traded.
“Dividends Paid”: the total of all dividends paid on one share of Match Group’s or the respective TSR Peer Group company’s common stock, as applicable, during the Performance Period, provided that the record date occurs during the Performance Period, and provided further that dividends shall be treated as though they are reinvested on the ex-dividend date using the closing price of a share of the respective company’s common stock on that day.
With respect to the computation of TSR, Beginning Average and Ending Average, to the extent deemed appropriate by the Committee, in its good faith judgment, there shall also be an equitable and proportionate adjustment to the extent (if any) necessary to preserve the intended incentives of the awards and mitigate the impact of any stock dividend, stock split, reverse stock split, reorganization, share combination, or recapitalization or similar event affecting the capital structure of Match Group or each company in the TSR Peer Group occurring during the Performance Period (or during the applicable 30-day period in determining Beginning Average or Ending Average, as the case may be).
Match Group’s TSR will be measured relative to the TSR Peer Group companies for the Performance Period (the “rTSR”).
“TSR Peer Group” means the member companies in the NASDAQ-100 at both the beginning and the end of the Performance Period, excluding Match Group.
“Vesting Date” means the date the Committee certifies the actual performance achieved compared to the target performance level. The Committee will review the level of achievement
Exhibit C
Page 2
within a reasonable period of time following the end of the Performance Period and any earned portion of the award will be converted into Shares and distributed as promptly as practicable thereafter, but in no event later than March 15th of the year next-following the year in which the Vesting Date occurs.
* * * * *
Exhibit C
Page 3
Exhibit 31.1
Certification
I, Bernard Kim, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2022 of Match Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Dated: | August 5, 2022 | /s/ BERNARD KIM | |||||||||
Bernard Kim Chief Executive Officer | |||||||||||
Exhibit 31.2
Certification
I, Gary Swidler, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2022 of Match Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Dated: | August 5, 2022 | /s/ GARY SWIDLER | |||||||||
Gary Swidler Chief Operating Officer and Chief Financial Officer | |||||||||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Bernard Kim, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:
(1) the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 of Match Group, Inc. (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Match Group, Inc.
| Dated: | August 5, 2022 | /s/ BERNARD KIM | |||||||||
Bernard Kim Chief Executive Officer | |||||||||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary Swidler, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:
(1) the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 of Match Group, Inc. (the "Report") which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Match Group, Inc.
| Dated: | August 5, 2022 | /s/ GARY SWIDLER | |||||||||
Gary Swidler Chief Operating Officer and Chief Financial Officer | |||||||||||
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