Business context and reporting period
The source is IAC/InterActiveCorp’s Form 10-Q, filed May 9, 2012, for the quarter ended March 31, 2012—not a standalone Match Group filing. Match is one of IAC’s reportable segments. Amounts below are IAC consolidated unless identified as Match segment results.
Financial performance and position
| Metric | Q1 2012 | Q1 2011 or comparison |
|---|---|---|
| Revenue | $640.6 million | $460.2 million; up 39% |
| Operating income | $62.8 million; 9.8% margin | $37.3 million; 8.1% margin |
| Operating Income Before Amortization (non-GAAP) | $91.3 million; 14.2% of revenue | $60.0 million; 13.0% of revenue |
| Continuing-operations earnings | $31.2 million | $20.2 million |
| Net earnings attributable to IAC shareholders | $34.5 million; diluted EPS $0.38 | $18.1 million; diluted EPS $0.19 |
| Operating cash flow, continuing operations | $59.1 million | $53.9 million |
| Cash and cash equivalents | $624.1 million at March 31 | $704.2 million at December 31, 2011 |
| Marketable securities | $151.5 million at March 31 | $165.7 million at December 31, 2011 |
| Debt | $95.8 million, including $15.8 million current | $95.8 million at December 31, 2011 |
Match segment revenue was $174.3 million, up 56%, and operating income was $29.9 million, up 28%. Match Operating Income Before Amortization was $37.3 million, up 49%. Match Core revenue rose 17% to $108.9 million; Developing revenue declined 8% to $16.8 million. Meetic contributed $48.6 million of revenue, including a $5.2 million deferred-revenue write-off related to its acquisition.
IAC’s current ratio was approximately 2.1x ($1.08 billion current assets divided by $524.8 million current liabilities). Cash declined by $80.1 million during the quarter, principally reflecting share repurchases and dividends. IAC repurchased 4.9 million shares for $222.9 million and paid $10.6 million in dividends.
Material changes versus the prior comparable period
- Revenue growth was driven mainly by Search, up 47%, and Match, up 56%. Match’s increase includes Meetic, consolidated from September 1, 2011, and therefore absent from the prior-year reported period.
- Search operating income increased 51% to $73.5 million, while Match operating income increased 28% to $29.9 million. Local operating income fell 35% to $3.8 million; Media & Other’s operating loss widened to $8.4 million.
- Selling and marketing expense rose 57% to $219.8 million, increasing to 34% of revenue from 30%, reflecting higher marketing at Search and the inclusion of Meetic. Cost of revenue rose 29%, but fell to 35% of revenue from 38%.
- Operating cash flow improved modestly, but investing cash flow shifted to a $12.2 million use from $43.2 million provided in Q1 2011. Financing cash flow was a $127.7 million use, versus $8.6 million provided in the prior-year quarter.
- Segment reporting was realigned for 2012, including the creation of Local; comparative figures were reclassified. The Match segment itself was unchanged.
Outlook, commentary, risks and unusual items
- Management expected 2012 capital expenditures to exceed 2011 levels and said cash, marketable securities, and anticipated operating cash flow should fund normal operating needs, capital expenditures, repurchases, dividends, and commitments for the foreseeable future. This is not quantified earnings guidance.
- IAC reported that $328.9 million of Q1 revenue came from Google, compared with $214.9 million a year earlier. The paid-listing supply agreement expires March 31, 2016; changes in Google’s relationship or policies are identified as a risk.
- Continuing-operations income tax provision was $27.1 million, a 47% effective rate, versus 44% a year earlier. The filing describes substantial tax reserves and ongoing federal, state, local, and foreign examinations; management said reserve changes or audit outcomes could be material.
- The filing reported $468.5 million of unrecognized tax benefits including interest at March 31, 2012. It also stated that a $59.8 million decrease in unrecognized tax benefits was reasonably possible within twelve months, of which about $12.6 million could reduce continuing-operations tax provision.
- Other stated risks include online advertising competition and market changes, acquisition and international-expansion risks, consumer acceptance of products, and adverse economic conditions. Management reported no material change in market-risk exposures and no material change in internal control over financial reporting.
- After quarter-end, IAC repurchased 1.9 million shares for $91.4 million through April 27 and received $201.2 million from warrant exercises through May 7; no warrants remained. On May 1, the board authorized repurchases of up to 10 million additional shares and declared a $0.12 quarterly dividend.
Important facts for investors to verify
- Confirm the issuer and scope: this is IAC’s consolidated 10-Q, and Match results are a segment, not standalone Match Group financial statements.
- Separate Match’s underlying growth from the effect of Meetic’s consolidation; review the reported Core, Developing, and Meetic results and acquisition-related write-offs.
- Assess dependence on Google: $328.9 million of quarterly revenue was attributed to Google, and the agreement expires in 2016.
- Review tax contingencies, including the unrecognized-tax-benefit disclosures and audit developments; the filing notes outcomes and timing may be uncertain.
- Evaluate capital allocation and liquidity together: quarter-end cash was $624.1 million, but repurchases, dividends, future capital spending, and contractual obligations affect available resources.
- Interpret Operating Income Before Amortization as a non-GAAP measure and compare it with GAAP operating income; the measure excludes non-cash compensation and amortization, among other items.