Filing summary
Important entity note: The supplied filing is IAC/InterActiveCorp’s Form 10-Q, not a standalone Match Group filing. Match is reported as one of IAC’s segments. The filing covers the quarter ended March 31, 2013; amounts below are in U.S. dollars.
Business context and reporting period
IAC operates businesses in search and applications, online dating, local services, media and other areas. Its Match segment includes Match.com, Meetic and developing dating businesses. Results compare the three months ended March 31, 2013 with the same period in 2012.
Financial performance and position
| Metric | Q1 2013 | Q1 2012 or prior date |
|---|---|---|
| Revenue | $742.2 million | $640.6 million; up 16% |
| Operating income | $84.6 million; 11.4% margin | $62.8 million; 9.8% margin |
| Operating Income Before Amortization, a company-defined non-GAAP measure | $112.8 million; 15.2% of revenue | $91.3 million; 14.3% of revenue |
| Net earnings attributable to IAC shareholders | $53.6 million; diluted EPS $0.61 | $34.5 million; diluted EPS $0.38 |
| Cash from continuing operations | $92.4 million operating cash flow | $59.1 million |
| Cash and cash equivalents | $673.8 million at March 31, 2013 | $750.0 million at December 31, 2012 |
| Debt | $580.0 million long-term debt; no revolver borrowings | $595.8 million total debt, including $15.8 million current maturities |
| Current assets / current liabilities | $1,055.7 million / $591.4 million | $1,156.8 million / $624.9 million at December 31, 2012 |
Match segment revenue was $188.9 million, up 8%. Segment operating income was $41.0 million, up 37%; Operating Income Before Amortization was $46.3 million, up 24%.
Changes versus the prior comparable period
- Revenue growth was led by Search & Applications, up 16%, and Match, up 8%. Media revenue rose 185%, primarily reflecting the consolidation of News_Beast and growth at Electus and Vimeo.
- Match growth was attributed to higher subscribers. Core revenue rose 5%, Meetic rose 13%, and Developing revenue rose 20%; Twoo contributed following its acquisition in January 2013.
- Operating income increased 35%. Company-defined Operating Income Before Amortization increased 24%; lower non-cash compensation helped, while acquired-intangible amortization increased by $7.0 million.
- Operating cash flow improved, while investing cash outflow increased to $52.1 million, including $33.6 million of capital expenditures and acquisition-related spending. Financing outflow was $113.9 million, including share repurchases, dividends and repayment of notes due in January.
Outlook, commentary, risks and unusual items
- Management expected 2013 capital expenditures to exceed 2012 levels and said cash, expected operating cash flows and the $300 million revolving facility should fund normal needs for the next 12 months. This is not specific earnings guidance.
- IAC reported $376.1 million of quarterly revenue from Google, mostly within Search & Applications. Its Google services agreement expires March 31, 2016; policy or relationship changes could affect products and revenue.
- Twoo was acquired for $25 million cash, plus potential contingent consideration of up to €83.2 million. The liability’s fair value was $42.3 million at quarter-end and depends on forecasts of earnings and user growth.
- Income tax contingencies remain significant: the notes report $497.8 million in unrecognized tax benefits, including interest, and describe ongoing audits. Management said unrecognized tax benefits could decrease by $132.8 million within 12 months, though the outcome is uncertain.
- Other cited risks include online advertising competition and market changes, acquisition risks, international expansion, technology and consumer trends, and tax estimates. Management reported effective disclosure controls and no material change in internal control over financial reporting.
- The Board authorized repurchases of an additional 10 million shares on April 30, 2013 and declared a $0.24 quarterly dividend payable June 1, 2013.
Most important facts for investors to verify
- Confirm the intended issuer: this filing reports IAC consolidated results, not standalone Match Group financials.
- Review the Match segment’s subscriber trends and the extent to which revenue growth reflects acquisitions, especially Twoo.
- Assess Google revenue concentration and the terms, renewal prospects and risks of the agreement expiring in 2016.
- Track cash generation against acquisition spending, higher expected capital expenditures, repurchases and dividends.
- Examine the resolution and potential cash impact of tax audits, unrecognized tax benefits and Twoo’s contingent consideration.
- Consider the limitations of Operating Income Before Amortization alongside GAAP operating income and cash flow.