Document

As filed with the Securities and Exchange Commission on August 8, 2019

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		June 30, 2019
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. 001-37636

Match Group, Inc.

(Exact name of registrant as specified in its charter)



Delaware		26-4278917
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

8750 North Central Expressway, Suite 1400, Dallas, Texas 75231

(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
Common Stock, par value $0.001	MTCH	The Nasdaq Stock Market LLC
		(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.

Large accelerated filer

☑

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 August 2, 2019, the following shares of the registrant’s common stock were outstanding:



Common Stock	71,058,751
Class B Common Stock	209,919,402
Class C Common Stock	—
Total outstanding Common Stock	280,978,153

TABLE OF CONTENTS



		Page Number
PART I
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheet	3
	Consolidated Statement of Operations	4
	Consolidated Statement of Comprehensive Operations	5
	Consolidated Statement of Shareholders’ Equity	6
	Consolidated Statement of Cash Flows	8
	Note 1—The Company and Summary of Significant Accounting Policies	9
	Note 2—Revenue Recognition	10
	Note 3—Leases	11
	Note 4—Income Taxes	13
	Note 5—Financial Instruments	14
	Note 6—Long-term Debt, net	17
	Note 7—Accumulated Other Comprehensive Loss	19
	Note 8—Earnings per Share	20
	Note 9—Consolidated Financial Statement Details	21
	Note 10—Contingencies	21
	Note 11—Related Party Transactions	22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	41
PART II
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 5.	Other Information	45
Item 6.	Exhibits	46
	Signatures	47

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MATCH GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Unaudited)



	June 30, 2019			December 31, 2018
	(In thousands, except share data)
ASSETS
Cash and cash equivalents	$	266,374		$	186,947
Accounts receivable, net of allowance of $904 and $724, respectively	160,622			99,052
Other current assets	78,115			57,766
Total current assets	505,111			343,765
Right-of-use assets	46,879			—
Property and equipment, net of accumulated depreciation and amortization of $118,643 and $113,025, respectively	63,941			58,351
Goodwill	1,251,693			1,244,758
Intangible assets, net of accumulated amortization of $12,656 and $11,843, respectively	237,005			237,640
Deferred income taxes	149,574			134,347
Long-term investments	9,076			9,076
Other non-current assets	22,492			25,124
TOTAL ASSETS	$	2,285,771		$	2,053,061
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Accounts payable	$	13,798		$	9,528
Deferred revenue	225,657			209,935
Accrued expenses and other current liabilities	143,902			135,971
Total current liabilities	383,357			355,434
Long-term debt, net	1,602,607			1,515,911
Income taxes payable	12,845			13,918
Deferred income taxes	20,285			20,174
Other long-term liabilities	55,726			21,760
Redeemable noncontrolling interests	1,035			—
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Common stock; $0.001 par value; authorized 1,500,000,000 shares; 75,584,202 and 71,513,087 shares issued; and 71,244,933 and 68,460,563 shares outstanding at June 30, 2019 and December 31, 2018, respectively	76			72
Class B convertible common stock; $0.001 par value; authorized 1,500,000,000 shares; 209,919,402 shares issued and outstanding	210			210
Class C common stock; $0.001 par value; authorized 1,500,000,000 shares; no shares issued and outstanding	—			—
Preferred stock; $0.001 par value; authorized 500,000,000 shares; no shares issued and outstanding	—			—
Additional paid-in capital	(146,116		)	(57,575		)
Retained earnings	704,785			453,778
Accumulated other comprehensive loss	(134,906		)	(137,166		)
Treasury stock; 4,339,269 and 3,052,524 shares, respectively	(214,312		)	(133,455		)
Total Match Group, Inc. shareholders’ equity	209,737			125,864
Noncontrolling interests	179			—
Total shareholders’ equity	209,916			125,864
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,285,771		$	2,053,061

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

MATCH GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In thousands, except per share data)
Revenue	$	497,973		$	421,196		$	962,598		$	828,563
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below)	126,665			97,334			246,889			191,278
Selling and marketing expense	94,888			90,261			213,551			208,432
General and administrative expense	62,233			42,165			116,627			84,926
Product development expense	32,680			32,635			76,954			64,504
Depreciation	8,197			8,399			16,028			16,546
Amortization of intangibles	412			237			823			479
Total operating costs and expenses	325,075			271,031			670,872			566,165
Operating income	172,898			150,165			291,726			262,398
Interest expense	(23,817		)	(18,276		)	(45,903		)	(36,082		)
Other income, net	2,538			11,004			1,050			3,783
Earnings before income taxes	151,619			142,893			246,873			230,099
Income tax (provision) benefit	(23,651		)	(11,535		)	4,129			937
Net earnings	127,968			131,358			251,002			231,036
Net loss attributable to noncontrolling interests	5			1,142			5			1,200
Net earnings attributable to Match Group, Inc. shareholders	$	127,973		$	132,500		$	251,007		$	232,236

Net earnings per share attributable to Match Group, Inc. shareholders:
Basic	$	0.46		$	0.48		$	0.90		$	0.84
Diluted	$	0.43		$	0.45		$	0.85		$	0.78

Stock-based compensation expense by function:
Cost of revenue	$	676		$	642		$	1,941		$	1,275
Selling and marketing expense	1,330			889			2,726			1,781
General and administrative expense	13,290			7,590			23,061			15,250
Product development expense	6,719			7,585			22,284			15,363
Total stock-based compensation expense	$	22,015		$	16,706		$	50,012		$	33,669

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

MATCH GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS (Unaudited)



	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
	(In thousands)
Net earnings	$	127,968	$	131,358		$	251,002	$	231,036
Other comprehensive income (loss), net of tax
Change in foreign currency translation adjustment	3,046		(39,346		)	2,264		(8,745		)
Total other comprehensive income (loss)	3,046		(39,346		)	2,264		(8,745		)
Comprehensive income	131,014		92,012			253,266		222,291
Comprehensive loss attributable to noncontrolling interests	1		1,413			1		1,267
Comprehensive income attributable to Match Group, Inc. shareholders	$	131,015	$	93,425		$	253,267	$	223,558

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

MATCH GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)

Three Months Ended June 30, 2019 and 2018



				Match Group Shareholders’ Equity
				Common Stock $0.001 Par Value			Class B Convertible Common Stock $0.001 Par Value
	Redeemable Noncontrolling Interests			$		Shares	$		Shares	Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total Match Group Shareholders’ Equity			Noncontrolling Interests			Total Shareholders’ Equity
				(In thousands)
Balance as of March 31, 2019	$	—		$	75	74,768	$	210	209,919	$	(136,151	)	$	576,812	$	(137,948	)	$	(158,761	)	$	144,237		$	—		$	144,237
Net (loss) earnings for the three months ended June 30, 2019	(7		)	—		—	—		—	—			127,973		—			—			127,973			2			127,975
Other comprehensive income, net of tax	—			—		—	—		—	—			—		3,042			—			3,042			4			3,046
Stock-based compensation expense	—			—		—	—		—	22,009			—		—			—			22,009			—			22,009
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			1		665	—		—	(31,801		)	—		—			—			(31,800		)	—			(31,800		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			—		151	—		—	—			—		—			—			—			—			—
Purchase of treasury stock	—			—		—	—		—	—			—		—			(55,551		)	(55,551		)	—			(55,551		)
Noncontrolling interests created in an acquisition	1,042			—		—	—		—	—			—		—			—			—			—			—
Noncontrolling interest created by the exercise of subsidiary denominated equity award	—			—		—	—		—	(173		)	—		—			—			(173		)	173			—
Balance as of June 30, 2019	$	1,035		$	76	75,584	$	210	209,919	$	(146,116	)	$	704,785	$	(134,906	)	$	(214,312	)	$	209,737		$	179		$	209,916

Balance as of March 31, 2018	$	6,202		$	68	67,512	$	210	209,919	$	25,938		$	631,947	$	(81,921	)	$	(37,937	)	$	538,305		$	—		$	538,305
Net earnings (loss) for the three months ended June 30, 2018	133			—		—	—		—	—			132,500		—			—			132,500			(1,275		)	131,225
Other comprehensive loss, net of tax	(271		)	—		—	—		—	—			—		(39,075		)	—			(39,075		)	—			(39,075		)
Stock-based compensation expense	—			—		—	—		—	16,680			—		—			—			16,680			26			16,706
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			—		240	—		—	(43,185		)	—		—			—			(43,185		)	—			(43,185		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			1		1,185	—		—	(1		)	—		—			—			—			—			—
Purchase of treasury stock	—			—		—	—		—	—			—		—			(41,869		)	(41,869		)	—			(41,869		)
Noncontrolling interests created in an acquisition	—			—		—	—		—	—			—		—			—			—			14,246			14,246
Balance as of June 30, 2018	$	6,064		$	69	68,937	$	210	209,919	$	(568	)	$	764,447	$	(120,996	)	$	(79,806	)	$	563,356		$	12,997		$	576,353

Table of Contents

MATCH GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited) (Continued)

Six Months Ended June 30, 2019 and 2018



				Match Group Shareholders’ Equity
				Common Stock $0.001 Par Value			Class B Convertible Common Stock $0.001 Par Value
	Redeemable Noncontrolling Interests			$		Shares	$		Shares	Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total Match Group Shareholders’ Equity			Noncontrolling Interests			Total Shareholders’ Equity
				(In thousands)
Balance as of December 31, 2018	$	—		$	72	71,513	$	210	209,919	$	(57,575	)	$	453,778	$	(137,166	)	$	(133,455	)	$	125,864		$	—		$	125,864
Net (loss) earnings for the six months ended June 30, 2019	(7		)	—		—	—		—	—			251,007		—			—			251,007			2			251,009
Other comprehensive income, net of tax	—			—		—	—		—	—			—		2,260			—			2,260			4			2,264
Stock-based compensation expense	—			—		—	—		—	50,006			—		—			—			50,006			—			50,006
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			4		3,697	—		—	(138,333		)	—		—			—			(138,329		)	—			(138,329		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			—		374	—		—	(41		)	—		—			—			(41		)	—			(41		)
Purchase of treasury stock	—			—		—	—		—	—			—		—			(80,857		)	(80,857		)	—			(80,857		)
Noncontrolling interests created in an acquisition	1,042			—		—	—		—	—			—		—			—			—			—			—
Noncontrolling interest created by the exercise of subsidiary denominated equity award	—			—		—	—		—	(173		)	—		—			—			(173		)	173			—
Balance as of June 30, 2019	$	1,035		$	76	75,584	$	210	209,919	$	(146,116	)	$	704,785	$	(134,906	)	$	(214,312	)	$	209,737		$	179		$	209,916

Balance as of December 31, 2017	$	6,056		$	64	64,370	$	210	209,919	$	81,082		$	532,211	$	(112,318	)	$	—		$	501,249		$	—		$	501,249
Net earnings (loss) for the six months ended June 30, 2018	75			—		—	—		—	—			232,236		—			—			232,236			(1,275		)	230,961
Other comprehensive loss, net of tax	(67		)	—		—	—		—	—			—		(8,678		)	—			(8,678		)	—			(8,678		)
Stock-based compensation expense	—			—		—	—		—	33,643			—		—			—			33,643			26			33,669
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			3		2,272	—		—	(115,291		)	—		—			—			(115,288		)	—			(115,288		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			2		2,295	—		—	(2		)	—		—			—			—			—			—
Purchase of treasury stock	—			—		—	—		—	—			—		—			(79,806		)	(79,806		)	—			(79,806		)
Noncontrolling interests created in an acquisition	—			—		—	—		—	—			—		—			—			—			14,246			14,246
Balance as of June 30, 2018	$	6,064		$	69	68,937	$	210	209,919	$	(568	)	$	764,447	$	(120,996	)	$	(79,806	)	$	563,356		$	12,997		$	576,353

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

MATCH GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)



	Six Months Ended June 30,
	2019			2018
	(In thousands)
Cash flows from operating activities:
Net earnings	$	251,002		$	231,036
Adjustments to reconcile net earnings to net cash provided by operating activities:
Stock-based compensation expense	50,012			33,669
Depreciation	16,028			16,546
Amortization of intangibles	823			479
Deferred income taxes	(15,227		)	(13,812		)
Acquisition-related contingent consideration fair value adjustments	—			210
Other adjustments, net	2,468			(622		)
Changes in assets and liabilities
Accounts receivable	(61,414		)	(9,154		)
Other assets	(13,742		)	(26,099		)
Accounts payable and other liabilities	(6,441		)	(8,982		)
Income taxes payable and receivable	(6,374		)	5,485
Deferred revenue	15,483			14,732
Net cash provided by operating activities	232,618			243,488
Cash flows from investing activities:
Net cash (used) acquired in business combinations	(3,759		)	1,136
Capital expenditures	(20,720		)	(14,785		)
Purchases of investments	—			(3,000		)
Other, net	1,118			38
Net cash used in investing activities	(23,361		)	(16,611		)
Cash flows from financing activities:
Borrowings under the Credit Facility	40,000			—
Proceeds from Senior Notes offering	350,000			—
Principal payments on Credit Facility	(300,000		)	—
Debt issuance costs	(5,593		)	—
Withholding taxes paid on behalf of employees on net settled stock-based awards	(138,465		)	(115,288		)
Purchase of treasury stock	(76,086		)	(73,943		)
Acquisition-related contingent consideration payments	—			(185		)
Other, net	27			(616		)
Net cash used in financing activities	(130,117		)	(190,032		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	224			289
Net increase in cash, cash equivalents, and restricted cash	79,364			37,134
Cash, cash equivalents, and restricted cash at beginning of period	187,140			272,761
Cash, cash equivalents, and restricted cash at end of period	$	266,504		$	309,895

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

MATCH GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Match Group, Inc. is a leading provider of dating products available in over 40 languages to our users all over the world. Our portfolio of brands includes Tinder^®, Match^®, PlentyOfFish^®, Meetic^®, OkCupid^®, OurTime^®, Pairs™, and Hinge^®, as well as a number of other brands, each designed to increase our users’ likelihood of finding a meaningful connection. Through our portfolio of trusted brands, we provide tailored products to meet the varying preferences of our users. Match Group has one operating segment, Dating, which is managed as a portfolio of dating brands.

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.

As of June 30, 2019, IAC/InterActiveCorp’s (“IAC”) economic ownership interest and voting interest in Match Group were 80.4% and 97.5%, respectively.

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 audited consolidated financial statements and reflect, in management’s opinion, all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of our financial position, results of operations and 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 and combined statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

For the purposes of these consolidated financial statements, income taxes have been computed on an as if Match Group stand-alone, separate tax return basis.

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, following its adoption on January 1, 2018, with any changes to fair value recognized within other 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 similar rights to the equity securities held by the Company. The Company reviews its equity securities for impairment each reporting period when there are qualitative indicators or events that indicate possible impairment. Factors we consider in making this determination include negative change in industry and market conditions, financial performance, business prospects, and other relevant events and factors. When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of our equity securities, which require judgment and the use of estimates. When our assessment indicates that the fair value of the security is below the carrying value, the Company writes down the security to its fair value and records the corresponding charge within other income (expense), net.

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MATCH GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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. Actual results could differ from these estimates.

On an ongoing basis, the Company evaluates its estimates and judgments including those related to: contingencies; the recoverability of goodwill and indefinite-lived intangible assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the fair values of cash equivalents and the fair value of equity securities without readily determinable fair values; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts; the determination of revenue reserves; 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.

Recent Accounting Pronouncements Adopted by the Company

The Company adopted ASU 2016-02, Leases (Topic 842) (“ASC 842”) effective January 1, 2019. ASC 842 superseded previously existing guidance on accounting for leases and generally requires all leases to be recognized in the statement of financial position.

The adoption of ASC 842 resulted in the recognition of right-of-use assets (the “ROU assets”) and related lease liabilities of $53.0 million and $57.9 million, respectively, as of January 1, 2019, with no cumulative effect adjustment. The adoption of ASC 842 had no impact on the Company’s consolidated statement of operations and consolidated statement of cash flows. In addition, the adoption of ASC 842 did not impact the leverage calculations set forth in the agreements governing the outstanding debt or credit agreements of the Company, because, in each circumstance, the leverage calculations are not affected by the lease liabilities that were recorded upon adoption of ASC 842.

The Company adopted ASC 842 prospectively and, therefore, did not revise comparative period information or disclosure. In addition, the Company elected the package of practical expedients permitted under ASC 842.

See “Note 3—Leases” for additional information on the adoption of ASC 842.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2—REVENUE RECOGNITION

General 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, 2018 was $209.9 million. During the six months ended June 30, 2019, the Company recognized $199.1 million of revenue that was included in the deferred revenue balance as of December 31, 2018. The current deferred revenue balance at June 30, 2019 is $225.7 million. At June 30, 2019 and December 31, 2018, there was no non-current portion of deferred revenue.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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,
	2019		2018		2019		2018
	(In thousands)
Direct Revenue:
North America	$	251,499	$	222,163	$	489,272	$	433,520
International	235,801		185,564		451,990		366,944
Total Direct Revenue	487,300		407,727		941,262		800,464
Indirect Revenue (principally advertising revenue)	10,673		13,469		21,336		28,099
Total Revenue	$	497,973	$	421,196	$	962,598	$	828,563

NOTE 3—LEASES

The Company leases office space, data center facilities, and equipment used in connection with its operations under various operating leases, many of which contain escalation clauses. Several of these lease agreements relate to properties owned by IAC. See “Note 11—Related Party Transactions” for additional information on the intercompany lease agreements.

ROU assets represent the Company’s right to use the underlying assets for the lease term and lease liabilities represent the present value of the Company’s obligation to make payments arising from leases. ROU assets and related lease liabilities are based on the present value of fixed lease payments over the lease term using the Company’s incremental borrowing rates on the lease commencement date or January 1, 2019 for leases that commenced prior to that date. The Company combines the lease and non-lease components of lease payments in determining ROU assets and related lease liabilities. If the lease includes one or more options to extend the term of the lease, the renewal option is considered in the lease term if it is reasonably certain the Company will exercise the options. Lease expense is recognized on a straight-line basis over the term of the lease. As permitted by ASC 842, leases with an initial term of twelve months or less (“short-term leases”) are not recorded on the accompanying consolidated balance sheet.

Variable lease payments consist primarily of common area maintenance, utilities, and taxes, which are not included in the recognition of ROU assets and related lease liabilities. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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Leases	Balance Sheet Classification	June 30, 2019
		(In thousands)
Assets:
Right-of-use assets	Right-of-use assets	$	46,879

Liabilities:
Current lease liabilities	Accrued expenses and other current liabilities	$	14,010
Long-term lease liabilities	Other long-term liabilities	36,910
Total lease liabilities		$	50,920



Lease Cost	Income Statement Classification	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
		(In thousands)
Fixed lease cost	Cost of revenue	$	987	$	1,819
Fixed lease cost	General and administrative expense	3,851		7,616
Total fixed lease cost^(a)		4,838		9,435

Variable lease cost	Cost of revenue	91		182
Variable lease cost	General and administrative expense	883		1,591
Total variable lease cost		974		1,773
Net lease cost		$	5,812	$	11,208

______________________


(a)	Includes approximately $0.9 million and $1.6 million of short-term lease cost, and $0.1 million and $0.2 million of sublease income, for the three and six months ended June 30, 2019, respectively.

Maturities of lease liabilities as of June 30, 2019:



	(In thousands)
Remainder of 2019	$	7,841
2020	15,798
2021	13,860
2022	7,961
2023	3,379
After 2023	8,633
Total	57,472
Less: Interest	(6,552		)
Present value of lease liabilities	$	50,920

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

The following are the weighted average assumptions used for lease term and discount rate as of June 30, 2019:



Remaining lease term	4.4 years
Discount rate	5.06	%



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
	(In thousands)
Other information:
Right-of-use assets obtained in exchange for lease liabilities	$	584	$	620
Cash paid for amounts included in the measurement of lease liabilities	$	4,106	$	8,956

NOTE 4—INCOME TAXES

Match Group is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings. In all periods presented, current income tax provision and deferred income tax benefit have been computed on an as if Match Group stand-alone, separate return basis. Match Group’s payments to IAC for its share of IAC’s consolidated federal and state tax return liabilities have been reflected within cash flows from operating activities in the accompanying consolidated statement of cash flows.

At the end of each interim period, the Company estimates the annual expected 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 are individually computed and recognized in the interim period in which they occur. 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 annual expected 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 expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision in the quarter in which the change occurs.

For the three months ended June 30, 2019 and 2018, the Company recorded an income tax provision from continuing operations of $23.7 million and $11.5 million, respectively, which represents an effective tax rate of 16% and 8%, respectively. The effective income tax rate is lower than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards. For the six months ended June 30, 2019 and 2018, the Company recorded an income tax benefit from continuing operations of $4.1 million and $0.9 million, respectively, due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards.

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Accruals for interest and penalties are not material.

Match Group is routinely under audit by federal, state, local and foreign authorities in the area of income tax as a result of previously filed separate company tax returns and consolidated tax returns with IAC. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service is currently auditing IAC’s federal

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

income tax returns for the years ended December 31, 2010 through 2016, which includes the operations of Match Group. The statute of limitations for the years 2010 through 2012 has been extended to July 31, 2020, and the statute of limitations for the years 2013 to 2015 has been extended to December 31, 2020. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from examination of prior year tax returns. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustments. Although management currently believes changes in unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

At June 30, 2019 and December 31, 2018, unrecognized tax benefits, including interest and penalties, are $36.8 million and $37.6 million, respectively. At both June 30, 2019 and December 31, 2018, approximately $22.6 million was included in unrecognized tax benefits for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at June 30, 2019 are subsequently recognized, $34.9 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2018 was $35.6 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $16.6 million by June 30, 2020 due to settlements and expirations of statutes of limitations, all of which would reduce the income tax provision.

NOTE 5—FINANCIAL INSTRUMENTS

Equity securities without readily determinable fair values

At both June 30, 2019 and December 31, 2018, the carrying value of the Company’s investments in equity securities without readily determinable fair values totaled $9.1 million and is included in “Long-term investments” in the accompanying consolidated balance sheet. The cumulative downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values, since the adoption of ASU 2016-01 on January 1, 2018 through June 30, 2019, were $2.1 million. For both the six months ended June 30, 2019 and 2018, there were no adjustments to the carrying value of equity securities without readily determinable fair values held.

For all equity securities without readily determinable fair values as of June 30, 2019 and December 31, 2018, the Company has elected the measurement alternative. As of June 30, 2019, 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.

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•	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.

The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:



	June 30, 2019
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	50,002	$	—	$	—	$	50,002
Time deposits	—		40,000		—		40,000
Total	$	50,002	$	40,000	$	—	$	90,002



	December 31, 2018
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	72,546	$	—	$	—		$	72,546

Liabilities:
Contingent consideration arrangement	$	—	$	—	$	(1,974	)	$	(1,974	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

The Company’s financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are its contingent consideration arrangements.



	Three Months Ended June 30,
	2018
	(In thousands)
Balance at April 1	$	(1,965	)
Total net losses:
Fair value adjustments	(54		)
Included in other comprehensive income	109
Balance at June 30	$	(1,910	)



	Six Months Ended June 30,
	2019			2018
	(In thousands)
Balance at January 1	$	(1,974	)	$	(2,647	)
Total net losses:
Fair value adjustments	—			(210		)
Included in other comprehensive loss	(14		)	(1		)
Settlements	1,988			948
Balance at June 30	$	—		$	(1,910	)

Contingent consideration arrangements

As of June 30, 2019, there are no contingent consideration arrangements related to business acquisitions. The contingent consideration arrangement liability at December 31, 2018 of $2.0 million is included in “Accrued expenses and other current liabilities.”

Assets measured at fair value on a nonrecurring basis

The Company’s non-financial assets, such as goodwill, intangible assets, and property and equipment, 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.

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, 2019						December 31, 2018
	Carrying Value			Fair Value			Carrying Value			Fair Value
	(In thousands)
Long-term debt, net ^(a)	$	(1,602,607	)	$	(1,686,058	)	$	(1,515,911	)	$	(1,513,683	)

______________________


(a)	At June 30, 2019 and December 31, 2018, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $22.4 million and $19.1 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

At June 30, 2019 and December 31, 2018, the fair value of long-term debt, net, is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs. At December 31, 2018, we considered the Company’s $500 million revolving credit facility (the “Credit Facility”), which has a variable interest rate, to have a fair value equal to its carrying value. The outstanding borrowings under the Credit Facility as of December 31, 2018 were repaid with a portion of the net proceeds from the 5.625% Senior Notes issued on February 15, 2019. See “Note 6—Long-term Debt, net” for additional information on the repayment of the Credit Facility.

NOTE 6—LONG-TERM DEBT, NET

Long-term debt consists of:



	June 30, 2019		December 31, 2018
	(In thousands)
Credit Facility due December 7, 2023	$	—	$	260,000
Term Loan due November 16, 2022 (the “Term Loan”)	425,000		425,000
6.375% Senior Notes due June 1, 2024 (the “6.375% Senior Notes”); interest payable each June 1 and December 1	400,000		400,000
5.00% Senior Notes due December 15, 2027 (the “5.00% Senior Notes”); interest payable each June 15 and December 15	450,000		450,000
5.625% Senior Notes due February 15, 2029 (the “5.625% Senior Notes”); interest payable each February 15 and August 15, commencing August 15, 2019	350,000		—
Total debt	1,625,000		1,535,000
Less: Unamortized original issue discount	6,695		7,352
Less: Unamortized debt issuance costs	15,698		11,737
Total long-term debt, net	$	1,602,607	$	1,515,911

Senior Notes:

The 5.625% Senior Notes were issued on February 15, 2019. The proceeds from these notes were used to repay outstanding borrowings under the Credit Facility, to pay expenses associated with the offering, and for general corporate purposes. 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 5.625% Senior Notes, together with accrued and unpaid interest to the applicable redemption date.

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 5.00% Senior Notes, together with accrued and unpaid interest to the applicable redemption date.

The 6.375% Senior Notes were issued on June 1, 2016. These notes may be redeemed at redemption prices set forth in the indenture governing the 6.375% Senior Notes, together with accrued and unpaid interest to the applicable redemption date.

The indentures governing the 5.00% and 6.375% Senior Notes contain covenants that would limit the Company’s ability to pay dividends or to make distributions and repurchase or redeem Match Group stock in the event a default has occurred or Match Group’s consolidated leverage ratio (as defined in the indentures) exceeds 5.0 to 1.0. At June 30, 2019, there were no limitations pursuant thereto. There are additional covenants in those indentures that limit the ability of the Company and its subsidiaries to, among other things, (i) incur indebtedness,

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make investments, or sell assets in the event the Company is not in compliance with certain financial ratios set forth in the indentures, and (ii) incur liens, enter into agreements restricting the ability of the Company’s subsidiaries to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets. The indenture governing the 5.625% Senior Notes is less restrictive than the indentures governing the 6.375% and 5.00% Senior Notes and generally only limits the Company’s and its subsidiaries’ ability to, among other things, create liens on assets, and our ability to consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.

The 5.00%, 5.625%, and 6.375% Senior Notes rank equally in right of payment.

Term Loan and Credit Facility:

The Company entered into the Term Loan under a credit agreement (the “Credit Agreement”) on November 16, 2015. At both June 30, 2019 and December 31, 2018, the outstanding balance on the Term Loan was $425 million and the loan bears interest at LIBOR plus 2.50%. The interest rate of the Term Loan was 4.90% and 5.09% at June 30, 2019 and December 31, 2018, respectively. Interest payments are due at 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 contained in the Credit Agreement.

As of June 30, 2019, the Company has a $500 million revolving credit facility that expires on December 7, 2023. At June 30, 2019, there were no outstanding borrowings under the Credit Facility. At December 31, 2018, the outstanding borrowings under the Credit Facility were $260 million, which bore interest at LIBOR plus 1.50%, or 3.97%, and were repaid with a portion of the net proceeds from the issuance of the 5.625% Senior Notes, described above. The annual commitment fee on undrawn funds is based on the current leverage ratio, and is 30 basis points. Borrowings under the Credit Facility bear interest, at the Company’s option, at a base rate or LIBOR, in each case plus an applicable margin, based on the Company’s consolidated net leverage ratio. The terms of the Credit Facility require the Company to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0 (in each case as defined in the Credit Agreement).

There are additional covenants under the Credit Facility and the Term Loan that limit the ability of the Company and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. While the Term Loan remains outstanding, these same covenants under the Credit Agreement are more restrictive than the covenants that are applicable to the Credit Facility. Obligations under the Credit Facility and Term Loan are unconditionally guaranteed by certain Match Group wholly-owned domestic subsidiaries and are also secured by the stock of certain Match Group 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 5.00%, 5.625%, and 6.375% Senior Notes to the extent of the value of the assets securing the borrowings under the Credit Agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE 7—ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the components of accumulated other comprehensive loss. For the three and six months ended June 30, 2019 and 2018, the Company’s accumulated other comprehensive income (loss) relates to foreign currency translation adjustments.



	Three Months Ended June 30,
	2019			2018
	(In thousands)
Balance at April 1	$	(137,948	)	$	(81,921	)
Other comprehensive income (loss)	3,042			(39,075		)
Balance at June 30	$	(134,906	)	$	(120,996	)



	Six Months Ended June 30,
	2019			2018
	(In thousands)
Balance at January 1	$	(137,166	)	$	(112,318	)
Other comprehensive income (loss)	2,260			(8,678		)
Balance at June 30	$	(134,906	)	$	(120,996	)

At both June 30, 2019 and 2018, there was no tax benefit or provision on the accumulated other comprehensive loss.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE 8—EARNINGS PER SHARE

The following tables set forth the computation of the basic and diluted earnings per share attributable to Match Group shareholders:



	Three Months Ended June 30,
	2019					2018
	Basic		Diluted			Basic		Diluted
	(In thousands, except per share data)
Numerator
Net earnings	$	127,968	$	127,968		$	131,358	$	131,358
Net loss attributable to noncontrolling interests	5		5			1,142		1,142
Impact from subsidiaries' dilutive securities	—		(133		)	—		—
Net earnings attributable to Match Group, Inc. shareholders	$	127,973	$	127,840		$	132,500	$	132,500

Denominator
Basic weighted average common shares outstanding	281,244		281,244			277,115		277,115
Dilutive securities^(a)(b)	—		14,640			—		19,881
Dilutive weighted average common shares outstanding	281,244		295,884			277,115		296,996

Earnings per share:
Earnings per share attributable to Match Group, Inc. shareholders	$	0.46	$	0.43		$	0.48	$	0.45



	Six Months Ended June 30,
	2019					2018
	Basic		Diluted			Basic		Diluted
	(In thousands, except per share data)
Numerator
Net earnings	$	251,002	$	251,002		$	231,036	$	231,036
Net loss attributable to noncontrolling interests	5		5			1,200		1,200
Impact from subsidiaries' dilutive securities	—		(218		)	—		—
Net earnings attributable to Match Group, Inc. shareholders	$	251,007	$	250,789		$	232,236	$	232,236

Denominator
Basic weighted average common shares outstanding	280,418		280,418			276,198		276,198
Dilutive securities^(a)(b)	—		15,591			—		21,376
Dilutive weighted average common shares outstanding	280,418		296,009			276,198		297,574

Earnings per share:
Earnings per share attributable to Match Group, Inc. shareholders	$	0.90	$	0.85		$	0.84	$	0.78

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

______________________

(a)

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 and subsidiary denominated equity or vesting of restricted stock units. For the three and six months ended June 30, 2019, less than 0.1 million and 0.2 million potentially dilutive securities, respectively, and for the three and six months ended June 30, 2018, 0.1 million and 0.3 million, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

(b)

Market-based awards and performance-based stock options (“PSOs”) and units (“PSUs”) are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards, PSOs, 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, PSOs and PSUs is dilutive for the respective reporting periods. For both of the three and six months ended June 30, 2019, 0.8 million shares underlying market-based awards, PSOs, and PSUs, and for both of the three and six months ended June 30, 2018, 1.9 million shares underlying market-based awards, PSOs, and PSUs, were excluded from the calculation of diluted earnings per share because the market or performance conditions had not been met.

NOTE 9—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, 2019		December 31, 2018		June 30, 2018		December 31, 2017
	(In thousands)
Cash and cash equivalents	$	266,374	$	186,947	$	309,761	$	272,624
Restricted cash included in other current assets	130		193		134		137
Total cash, cash equivalents and restricted cash as shown on the consolidated statement of cash flows	$	266,504	$	187,140	$	309,895	$	272,761

NOTE 10—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 4—Income Taxes” for additional information related to income tax contingencies.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Tinder Optionholder Litigation against IAC and Match Group

On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc. (“Tinder”), an operating business of Match Group, filed a lawsuit in New York state court against IAC 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 alleges 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 Match Group, thereby depriving one of the plaintiffs (Mr. Rad) of his contractual right to later valuations of Tinder on a stand-alone basis. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Match Group only), and interference with prospective economic advantage, and seeks 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 Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs.

On October 9, 2018, the defendants filed a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks was an expert determination any challenge to which is both time-barred under applicable law and available only on narrow substantive grounds that the plaintiffs have not pleaded in their complaint; the plaintiffs opposed the motion. On June 13, 2019, the court issued a decision and order (i) granting the motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichment, (ii) granting the motion to dismiss the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and (iii) otherwise denying the motion to dismiss. The defendants have appealed from the court’s partial denial of their motion to dismiss. On June 3, 2019, the defendants filed a second motion to dismiss based upon certain provisions of the plaintiffs’ agreement with a litigation funding firm; the plaintiffs have opposed the motion, which remains pending. Discovery in the case is proceeding. We believe that the allegations in this lawsuit are without merit and will continue to defend vigorously against it.

FTC Investigation of Certain Match.com Business Practices

In March 2017, the Federal Trade Commission (“FTC”) requested information and documents in connection with a civil investigation regarding certain business practices of Match.com. The FTC raised certain potential claims relating to Match.com’s marketing, chargeback and online cancellation practices. In November 2018, the FTC offered to resolve its potential claims via a consent judgment mandating certain changes in the company’s business practices, as well as a payment in the amount of $60 million. Discussions between Match Group and the FTC ensued but no resolution was reached. On August 7, 2019, the FTC voted to assert claims against the Company and referred the matter to the U.S. Department of Justice (“DOJ”). The Company expects to continue discussions with the FTC and DOJ. In the event no settlement is reached and litigation ensues, the amount sought may be substantially higher than the amounts discussed in settlement. Match Group believes that the FTC’s claims regarding Match.com’s practices, policies, and procedures are without merit and is prepared to defend vigorously against them.

NOTE 11—RELATED PARTY TRANSACTIONS

Relationship with IAC

In connection with the IPO in November 2015, the Company entered into certain agreements relating to our relationship with IAC after the IPO. These agreements include a master transaction agreement; an investor rights agreement; a tax sharing agreement; a services agreement; an employee matters agreement and a subordinated loan agreement.

For the three and six months ended June 30, 2019, the Company incurred $2.0 million and $3.9 million, respectively, and for the three and six months ended June 30, 2018, the Company incurred $1.9 million and $3.7 million, respectively, pursuant to agreements with IAC, including the services agreement. Included in these

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MATCH GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

amounts for the three and six months ended June 30, 2019 is $1.5 million and $2.9 million, respectively, and for the three and six months ended June 30, 2018 is $1.3 million and $2.6 million, respectively, for the leasing of office space for certain of our businesses at properties owned by IAC. All such amounts were paid in full by the Company at June 30, 2019.

At June 30, 2019, $16.0 million of both the ROU assets and the lease liabilities represented leases between the Company and IAC.

The master transaction agreement provides, among other things, that the Company will indemnify IAC for matters relating to any business of the Company. Under this provision, the Company may be required to indemnify IAC for costs related to the lawsuit brought by current and former employees of the Tinder business against IAC and the Company.

The employee matters agreement provides, among other things, that: (i) with respect to equity awards denominated in shares of certain of the Company’s subsidiaries, IAC may elect to cause such equity awards to be settled in either shares of IAC common stock or Company common stock and, to the extent that shares of IAC common stock are issued in settlement of such equity awards, the Company will reimburse IAC for the cost of such shares of IAC common stock by issuing to IAC additional shares of Company common stock; and (ii) the Company will reimburse IAC for the cost of any IAC equity awards held by the Company’s employees and former employees and that IAC may elect to receive payment either in cash or Company common stock.

During the six months ended June 30, 2019 and 2018, 0.4 million and 2.3 million shares, respectively, of Company common stock were issued to IAC pursuant to the employee matters agreement. This includes 0.4 million and 1.9 million shares issued during the six months ended June 30, 2019 and 2018, respectively, as reimbursement for shares of IAC common stock issued in connection with the exercise of equity awards originally denominated in shares of a subsidiary of the Company and less than 0.1 million and 0.4 million shares issued during the six months ended June 30, 2019 and 2018, respectively, as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by Company employees.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Key Terms:

Operating metrics:


•	North America - consists of the financial results and metrics associated with users located in the United States and Canada.


•	International - consists of the financial results and metrics associated with users located outside of the United States and Canada.


•	Direct Revenue - is revenue that is received directly from end users of our products and includes both subscription and à la carte revenue.


•	Indirect Revenue - is revenue that is not received directly from an end user of our products, substantially all of which is advertising revenue.


•	Subscribers - are users who purchase a subscription to one of our products. Users who purchase only à la carte features are not included in Subscribers.


•	Average Subscribers - is the number of Subscribers at the end of each day in the relevant measurement period divided by the number of calendar days in that period.

•

Average Revenue per Subscriber (“ARPU”) - is Direct Revenue from Subscribers in the relevant measurement period (whether in the form of subscription or à la carte revenue) divided by the Average Subscribers in such period and further divided by the number of calendar days in such period. Direct Revenue from users who are not Subscribers and have purchased only à la carte features is not included in ARPU.

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, 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 product 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 (such as 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 (described below), 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.

•

Acquisition-related contingent consideration fair value adjustments - relate to the portion of the purchase price of certain acquisitions that is contingent upon the financial performance and/or operating metric targets of the acquired company. The fair value of the liability is estimated at the date of acquisition and adjusted each reporting period until the liability is settled. Significant changes in financial performance and/or operating metrics will result in a significantly higher or lower fair value measurement. The changes in the estimated fair value of the contingent consideration arrangements during each reporting period, including the accretion of the discount if the arrangement is longer than

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one year, are recognized in “General and administrative expense” in the accompanying consolidated statement of operations.

Long-term debt:


•	Credit Facility - The Company’s $500 million revolving credit facility, which matures on December 7, 2023, and currently bears interest at LIBOR plus 1.50%. At June 30, 2019, $500 million is available under the Credit Facility.


•	Term Loan - The Company’s seven-year term loan due November 16, 2022. The Term Loan bears interest at LIBOR plus 2.50%. The current rate at June 30, 2019 is 4.90%. At June 30, 2019, $425 million is outstanding.


•	6.375% Senior Notes - The Company’s 6.375% Senior Notes due June 1, 2024, with interest payable each June 1 and December 1, which were issued on June 1, 2016. At June 30, 2019, $400 million aggregate principal amount is outstanding.


•	5.00% Senior Notes - The Company’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. At June 30, 2019, $450 million aggregate principal amount is outstanding.


•	5.625% Senior Notes - The Company’s 5.625% Senior Notes due February 15, 2029, with interest payable each February 15 and August 15, commencing on August 15, 2019, which were issued on February 15, 2019. At June 30, 2019, $350 million aggregate principal amount is outstanding.

Non-GAAP financial measure:


•	Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) - is a Non-GAAP financial measure. See “Principles of Financial Reporting” for the definition of Adjusted EBITDA and a reconciliation of net earnings attributable to Match Group, Inc. shareholders to operating income and Adjusted EBITDA.

Management Overview

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, 2018.

2019 Developments

On February 15, 2019, we issued $350 million aggregate principal amount of the 5.625% Senior Notes. The proceeds from the issuance of the 5.625% Senior Notes were used to repay outstanding borrowings under the Credit Facility, to pay expenses associated with the offering, and for general corporate purposes.

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, 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 SEC filings, press releases and public conference calls. Neither the information on our website, nor the information on the website of any Match Group business, is incorporated by

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reference into this report, or into any other filings with, or into any other information furnished or submitted to, the SEC.

Second Quarter and Year to Date June 30, 2019 Consolidated Results

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018, revenue, operating income, and Adjusted EBITDA grew 18%, 15%, and 16%, respectively, primarily due to strong contributions from Tinder and lower selling and marketing expense as a percentage of revenue, partially offset by higher cost of revenue, due to in-app purchase fees, as revenue is increasingly sourced through mobile app stores, and higher legal costs and other professional fees.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018, revenue, operating income, and Adjusted EBITDA grew 16%, 11%, and 14%, respectively, primarily due to the factors described above in the three-month discussion. Additionally, operating income grew slower than revenue primarily due to $16.3 million higher stock-based compensation expense, primarily as a result of $9.4 million in expense related to the vesting of certain awards for which the market condition was met.

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Results of Operations for the three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018

Revenue



	Three Months Ended June 30,								Six Months Ended June 30,
	2019		$ Change			% Change	2018		2019		$ Change			% Change	2018
	(In thousands, except ARPU)
Direct Revenue:
North America	$	251,499	$	29,336		13%	$	222,163	$	489,272	$	55,752		13%	$	433,520
International	235,801		50,237			27%	185,564		451,990		85,046			23%	366,944
Total Direct Revenue	487,300		79,573			20%	407,727		941,262		140,798			18%	800,464
Indirect Revenue	10,673		(2,796		)	(21)%	13,469		21,336		(6,763		)	(24)%	28,099
Total Revenue	$	497,973	$	76,777		18%	$	421,196	$	962,598	$	134,035		16%	$	828,563

Percentage of Total Revenue:
Direct Revenue:
North America	51%						53%		51%						53%
International	47%						44%		47%						44%
Total Direct Revenue	98%						97%		98%						97%
Indirect Revenue	2%						3%		2%						3%
Total Revenue	100%						100%		100%						100%

Average Subscribers:
North America	4,518		387			9%	4,131		4,440		386			10%	4,054
International	4,562		970			27%	3,592		4,408		883			25%	3,525
Total	9,080		1,357			18%	7,723		8,848		1,269			17%	7,579

(Change calculated using non-rounded numbers)
ARPU:
North America	$	0.60				4%	$	0.58	$	0.60				3%	$	0.58
International	$	0.56				1%	$	0.56	$	0.56				(1)%	$	0.56
Total	$	0.58	$	0.01		2%	$	0.57	$	0.58	$	0.01		1%	$	0.57

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018

International Direct Revenue grew $50.2 million, or 27%, in 2019 versus 2018, primarily driven by 27% growth in Average Subscribers, and a 1% increase in ARPU. North America Direct Revenue grew $29.3 million, or 13%, in 2019 versus 2018, driven by 9% growth in Average Subscribers and 4% growth in ARPU.

Growth in International and North America Average Subscribers was primarily driven by Tinder globally with Pairs also contributing to subscriber growth internationally. North America ARPU increased primarily due to increases at Tinder as Subscribers purchased premium subscriptions, such as Tinder Gold. International ARPU was favorably impacted by increases at Pairs and Tinder, but was unfavorably impacted by the strength of the U.S. dollar relative to the Euro, British pound (“GBP”), and certain other currencies.

Indirect Revenue decreased $2.8 million primarily due to lower impressions and a lower price per impression received from an advertising network provider.

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For the six months ended June 30, 2019 compared to the six months ended June 30, 2018

International Direct Revenue grew $85.0 million, or 23%, in 2019 versus 2018, primarily driven by 25% growth in Average Subscribers, partially offset by a 1% decrease in ARPU. North America Direct Revenue grew $55.8 million, or 13%, in 2019 versus 2018, driven by 10% growth in Average Subscribers and 3% growth in ARPU. Indirect Revenue decreased $6.8 million.

The changes are 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, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Cost of revenue	$	126,665	$	29,331	30%	$	97,334
Percentage of revenue	25%					23%

Cost of revenue increased primarily due to the increase in in-app purchase fees of $23.0 million, as revenue is increasingly sourced through mobile app stores; an increase in hosting fees of $4.0 million; and an increase in compensation expense of $1.6 million. Many brands in our portfolio have historically offered subscribers a variety of payment methods to purchase subscriptions and à la carte features. Tinder began to offer subscribers an alternative payment method to Google’s in-app payment system similar to the payment alternatives other brands in our portfolio have historically offered to subscribers through our mobile apps on Android. If we continue to offer these alternative payment methods to Tinder subscribers, depending on the adoption levels, we may see a reduction in Google’s in-app purchases fees as a percentage of Android revenue in the future.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Cost of revenue	$	246,889	$	55,611	29%	$	191,278
Percentage of revenue	26%					23%

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, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Selling and marketing expense	$	94,888	$	4,627	5%	$	90,261
Percentage of revenue	19%					21%

Selling and marketing expense increased primarily due to an increase in compensation expense of $1.8 million, related to increased headcount and investments in Tinder and Hinge, partially offset by decreases at Match. Selling and marketing expense declined as a percentage of revenue as we continue to generate revenue growth from brands with relatively lower marketing expense.

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For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Selling and marketing expense	$	213,551	$	5,119	2%	$	208,432
Percentage of revenue	22%					25%

Selling and marketing expense increased primarily due to the factors described above in the three-month discussion.

General and administrative expense

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
General and administrative expense	$	62,233	$	20,068	48%	$	42,165
Percentage of revenue	12%					10%

General and administrative expense increased, driven primarily by an increase of $8.6 million in legal and other professional fees; an increase in compensation of $7.9 million primarily related to a modification charge to stock-based compensation expense, new awards made since the prior year quarter, and an increase in headcount; an increase of $1.1 million for non-income taxes; and an increase in rent expense of $0.9 million due to growth at Tinder.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
General and administrative expense	$	116,627	$	31,701	37%	$	84,926
Percentage of revenue	12%					10%

General and administrative expense increased primarily due to the factors described above in the three-month discussion.

Product development expense

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Product development expense	$	32,680	$	45	—%	$	32,635
Percentage of revenue	7%					8%

Product development expense was flat compared to the prior year period.

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For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Product development expense	$	76,954	$	12,450	19%	$	64,504
Percentage of revenue	8%					8%

Product development expense increased driven primarily by an increase of $11.3 million in compensation, including an increase of $6.9 million in stock-based compensation expense, primarily due to the vesting of certain awards for which the market condition was met in the first quarter of 2019, and increased headcount at Tinder.

Depreciation

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019		$ Change			% Change	2018
	(Dollars in thousands)
Depreciation	$	8,197	$	(202	)	(2)%	$	8,399
Percentage of revenue	2%						2%

Depreciation decreased primarily due to certain internally developed software being fully depreciated, partially offset by increased depreciation related to leasehold improvements.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change			% Change	2018
	(Dollars in thousands)
Depreciation	$	16,028	$	(518	)	(3)%	$	16,546
Percentage of revenue	2%						2%

Depreciation decreased primarily due to the factors described above in the three-month discussion.

Operating income and Adjusted EBITDA



	Three Months Ended June 30,				Six Months Ended June 30,
	2019	$ Change	% Change	2018	2019		$ Change		% Change	2018
	(Dollars in thousands)
Operating income	$172,898	$22,733	15%	$150,165	$	291,726	$	29,328	11%	$	262,398
Percentage of revenue	35%			36%	30%					32%

Adjusted EBITDA	$203,522	$27,961	16%	$175,561	$	358,589	$	45,287	14%	$	313,302
Percentage of revenue	41%			42%	37%					38%

For a reconciliation of net earnings attributable to Match Group, Inc. shareholders to Adjusted EBITDA, see “Principles of Financial Reporting.”

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018

Operating income and Adjusted EBITDA increased 15% and 16%, respectively, primarily driven by revenue growth at Tinder and lower selling and marketing expense as a percentage of revenue, partially offset by higher cost of revenue, due to in-app purchase fees, as revenue is increasingly sourced through mobile app stores, and higher legal costs and other professional fees.

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At June 30, 2019, there was $128.5 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.5 years.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018

Operating income and Adjusted EBITDA increased 11% and 14%, respectively, primarily due to the factors described above in the three-month discussion. Operating income was further impacted by higher stock-based compensation expense as a percentage of revenue primarily due to the vesting of certain awards for which the market condition was met, resulting in reduced growth compared to Adjusted EBITDA.

Interest expense

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Interest expense	$	23,817	$	5,541	30%	$	18,276

Interest expense increased primarily due to the issuance of the 5.625% Senior Notes in February 2019, and a higher LIBOR rate in the current year.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Interest expense	$	45,903	$	9,821	27%	$	36,082

Interest expense increased primarily due to the factors described above in the three-month discussion. Additionally, interest expense was incurred on the Credit Facility which was drawn for a portion of the current period.

Other income, net

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019		$ Change			% Change	2018
	(Dollars in thousands)
Other income, net	$	2,538	$	(8,466	)	(77)%	$	11,004

Other income, net, in 2019 includes income of $1.8 million in net foreign currency exchange gains due primarily to a strengthening of the Euro relative to GBP during the three months ended June 30, 2019 and interest income of $1.1 million, partially offset by $0.4 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity instrument.

Other income, net, in 2018 includes income of $9.6 million in net foreign currency exchange gains due primarily to a strengthening of the U.S. dollar relative to GBP during the three months ended June 30, 2018 and interest income of $1.1 million.

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For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change			% Change	2018
	(Dollars in thousands)
Other income, net	$	1,050	$	(2,733	)	(72)%	$	3,783

Other income, net, in 2019 includes interest income of $1.7 million, partially offset by expense of $1.0 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity instrument.

Other income, net, in 2018 includes income of $2.3 million in net foreign currency exchange gains due primarily to the strengthening of the U.S. dollar relative to GBP during the six months ended June 30, 2018 and interest income of $1.9 million.

Income tax (provision) benefit

For the three months ended June 30, 2019 compared to the three months ended June 30, 2018



	Three Months Ended June 30,
	2019			$ Change			% Change	2018
	(Dollars in thousands)
Income tax provision	$	(23,651	)	$	(12,116	)	105%	$	(11,535	)
Effective income tax rate	16%							8%

The income tax provisions in 2019 and 2018 are lower than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards.

For the six months ended June 30, 2019 compared to the six months ended June 30, 2018



	Six Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands)
Income tax benefit	$	4,129	$	3,192	341%	$	937
Effective income tax rate	NM					NM

________________________

NM = not meaningful

The income tax benefits in 2019 and 2018, despite pre-tax income, are due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards.

For further details of income tax matters see “Note 4—Income Taxes” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”

Related party transactions

For discussions of related party transactions see “Note 11—Related Party Transactions” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”

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PRINCIPLES OF FINANCIAL REPORTING

Match Group reports Adjusted EBITDA and Revenue excluding foreign exchange effects, both of which are supplemental measures to U.S. generally accepted accounting principles (“GAAP”). Adjusted EBITDA 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, and we are obligated to provide, 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 EBITDA

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. We believe this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. The above items are excluded from our Adjusted EBITDA measure because they are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.

Non-Cash Expenses That Are Excluded From Non-GAAP Measure

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, the Company remits the required tax-withholding amounts from its 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 acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.

Gains and losses recognized on changes in the fair value of contingent consideration arrangements are accounting adjustments to report contingent consideration liabilities at fair value. These adjustments can be highly variable and are excluded from our assessment of performance because they are considered non-operational in nature and, therefore, are not indicative of current or future performance or the ongoing cost of doing business.

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The following table reconciles net earnings attributable to Match Group, Inc. shareholders to Adjusted EBITDA:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In thousands)
Net earnings attributable to Match Group, Inc. shareholders	$	127,973		$	132,500		$	251,007		$	232,236
Add back:
Net loss attributable to noncontrolling interests	(5		)	(1,142		)	(5		)	(1,200		)
Income tax provision (benefit)	23,651			11,535			(4,129		)	(937		)
Other income, net	(2,538		)	(11,004		)	(1,050		)	(3,783		)
Interest expense	23,817			18,276			45,903			36,082
Operating Income	172,898			150,165			291,726			262,398
Stock-based compensation expense	22,015			16,706			50,012			33,669
Depreciation	8,197			8,399			16,028			16,546
Amortization of intangibles	412			237			823			479
Acquisition-related contingent consideration fair value adjustments	—			54			—			210
Adjusted EBITDA	$	203,522		$	175,561		$	358,589		$	313,302

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 foreign currencies, and unfavorably impacted as the U.S. dollar strengthens relative to other foreign currencies. We believe the presentation of revenue excluding the effects from foreign exchange, in addition to reported revenue, helps improve the 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.

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The following table presents the impact of foreign exchange on total revenue, ARPU, and International ARPU for the three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018, respectively:



	Three Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands, except ARPU)
Revenue, as reported	$	497,973	$	76,777	18%	$	421,196
Foreign exchange effects	15,783
Revenue excluding foreign exchange effects	$	513,756	$	92,560	22%	$	421,196

(Percentage change calculated using non-rounded numbers)
ARPU, as reported	$	0.58			2%	$	0.57
Foreign exchange effects	0.02
ARPU, excluding foreign exchange effects	$	0.60			5%	$	0.57

International ARPU, as reported	$	0.56			1%	$	0.56
Foreign exchange effects	0.04
International ARPU, excluding foreign exchange effects	$	0.60			7%	$	0.56



	Six Months Ended June 30,
	2019		$ Change		% Change	2018
	(Dollars in thousands, except ARPU)
Revenue, as reported	$	962,598	$	134,035	16%	$	828,563
Foreign exchange effects	33,792
Revenue excluding foreign exchange effects	$	996,390	$	167,827	20%	$	828,563

(Percentage change calculated using non-rounded numbers)
ARPU, as reported	$	0.58			1%	$	0.57
Foreign exchange effects	0.02
ARPU, excluding foreign exchange effects	$	0.60			5%	$	0.57

International ARPU, as reported	$	0.56			(1)%	$	0.56
Foreign exchange effects	0.04
International ARPU, excluding foreign exchange effects	$	0.60			6%	$	0.56

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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Position



	June 30, 2019		December 31, 2018
	(In thousands)
Cash and cash equivalents:
United States	$	142,123	$	83,851
All other countries	124,251		103,096
Total cash and cash equivalents	$	266,374	$	186,947

Long-term debt:
Credit Facility due December 7, 2023	$	—	$	260,000
Term Loan due November 16, 2022	425,000		425,000
6.375% Senior Notes	400,000		400,000
5.00% Senior Notes	450,000		450,000
5.625% Senior Notes	350,000		—
Total long-term debt	1,625,000		1,535,000
Less: Unamortized original issue discount	6,695		7,352
Less: Unamortized debt issuance costs	15,698		11,737
Total long-term debt, net	$	1,602,607	$	1,515,911

Long-term Debt

For a detailed description of long-term debt, see “Note 6—Long-term Debt, net” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”

IAC Subordinated Loan Facility:

The Company has an uncommitted subordinated loan facility with IAC (the “IAC Subordinated Loan Facility”), which allows the Company to make one or more requests to IAC to borrow funds from it. If IAC agrees to fulfill any such borrowing request from the Company, such borrowing will be incurred in accordance with the terms of the IAC Subordinated Loan Facility. Any indebtedness outstanding under the IAC Subordinated Loan Facility will be by its terms subordinated in right of payment to the obligations under the Credit Facility, the Term Loan, and the 5.00%, 5.625%, and 6.375% Senior Notes. The IAC Subordinated Loan Facility has a scheduled final maturity date of no earlier than 90 days after the maturity date of the Credit Facility or the latest maturity date in respect of any Term Loan outstanding under the Credit Agreement. At June 30, 2019, the Company has no indebtedness outstanding under the IAC Subordinated Loan Facility.

Cash Flow Information

In summary, the Company’s cash flows are as follows:



	Six Months Ended June 30,
	2019			2018
	(In thousands)
Net cash provided by operating activities	$	232,618		$	243,488
Net cash used in investing activities	(23,361		)	(16,611		)
Net cash used in financing activities	(130,117		)	(190,032		)

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2019

Net cash provided by operating activities in 2019 includes adjustments to earnings of $50.0 million of stock-based compensation expense and $16.0 million of depreciation. Partially offsetting these adjustments was deferred income tax of $15.2 million primarily related to the net operating loss created by settlement of stock-based awards. The decrease in cash from changes in working capital primarily consists of an increase in accounts receivable of $61.4 million primarily related to the timing of cash receipts, including cash received in the fourth quarter of 2018 rather than in the first quarter of 2019 and an increase in revenue; an increase in other assets of $13.7 million primarily due to prepaid hosting services; a decrease in accounts payable and other liabilities of $6.4 million, due mainly to the timing of payments, including interest payments; and a decrease from income taxes payable and receivable of $6.4 million due primarily to tax payments in excess of tax accruals in foreign jurisdictions. These changes were partially offset by an increase in deferred revenue of $15.5 million, due mainly to growth in subscription sales.

Net cash used in investing activities in 2019 consists primarily of capital expenditures of $20.7 million that are primarily related to internal development of software and computer hardware to support our products and services.

Net cash used in financing activities in 2019 is primarily due to cash payments of $300 million for the repayment of borrowings under the Credit Facility, $138.5 million for withholding taxes paid on behalf of employees for net settled equity awards, and purchases of treasury stock of $76.1 million. Partially offsetting these payments were proceeds of $350.0 million from the issuance of the 5.625% Senior Notes and proceeds of $40.0 million from borrowings under the Credit Facility.

2018

Net cash provided by operating activities in 2018 includes adjustments to earnings of $33.7 million of stock-based compensation expense and $16.5 million of depreciation. Partially offsetting these adjustments was deferred income taxes of $13.8 million primarily related to the net operating loss created by the exercise and vesting of stock-based awards. The decrease in cash from changes in working capital primarily consists of an increase in other assets of $26.1 million primarily related to an increase in prepaid hosting services and capitalized mobile app store fees, an increase in accounts receivable of $9.2 million primarily related to the growth in revenue, and a decrease in accounts payable and other liabilities of $9.0 million, due mainly to the timing of payments, including interest payments. These changes were partially offset by an increase in deferred revenue of $14.7 million, due mainly to growth in subscription sales, and an increase in income taxes payable and receivable of $5.5 million due primarily to the timing of tax payments.

Net cash used in investing activities in 2018 consists primarily of capital expenditures of $14.8 million that are primarily related to computer hardware and internal development of software to support our products and services, and purchases of investments of $3.0 million, partially offset by cash acquired, net of cash paid, in a business combination of $1.1 million.

Net cash used in financing activities in 2018 is primarily due to cash payments of $115.3 million for withholding taxes paid on behalf of employees for net settled stock awards and the purchase of treasury stock of $73.9 million.

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. The Company has a $500 million Credit Facility that expires on December 7, 2023. At June 30, 2019, there were no outstanding borrowings under the Credit Facility.

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 2019 capital expenditures will be approximately $40 million, an increase compared to 2018 capital expenditures, primarily related to additional leasehold improvements as Tinder expands office space.

The Company believes its expected positive cash flows generated from operations together with its existing cash and cash equivalents and available borrowing capacity under the Credit Facility will be sufficient to fund its normal operating requirements, capital expenditures, debt service, the payment of withholding taxes paid on

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behalf of employees for net settled stock-based awards, investing, and other commitments for the foreseeable future. The Company’s liquidity could be negatively affected by a decrease in demand for our products and services.

In May 2017, the Board of Directors of the Company authorized Match Group to repurchase up to 6 million shares of its common stock. 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. During the six months ended June 30, 2019, we repurchased 1.3 million shares for $80.9 million, on a trade date basis. Additionally, from July 1, 2019 to August 2, 2019, we purchased approximately 0.2 million shares for $15.3 million. As of August 2, 2019, a total of 1.4 million shares remain available for repurchase under the previously announced repurchase program.

The Company currently settles substantially all equity awards on a net basis. Assuming all equity awards outstanding on August 2, 2019 were net settled, we would issue 8.3 million common shares (of which 1.8 million are related to vested shares and 6.5 million are related to unvested shares) and, assuming at 50% withholding rate, would remit $623.7 million in cash for withholding taxes (of which $138.2 million is related to vested shares and $485.5 million is related to unvested shares). If we decided to issue a sufficient number of shares to cover the $623.7 million employee withholding tax obligation, 8.3 million additional shares would be issued by the Company.

The Company does not currently expect to be a material U.S. federal cash income tax payer until 2021. The ultimate timing is dependent primarily on the performance of the Company and the amount and timing of tax deductions related to stock-based awards. At June 30, 2019, 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. As of June 30, 2019, IAC owns 80.4% of our outstanding shares of capital stock and has 97.5% of the combined voting power of our outstanding capital stock. As a result of IAC’s ability to control the election and removal of our Board of Directors, IAC effectively has the ability to control our financing activities, including the issuance of additional debt and equity securities, the incurrence of other indebtedness, or distributions to shareholders. While the Company believes we will have the ability to access debt and equity markets if needed, such transactions may require the concurrence of IAC.

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CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS



	Payments Due by Period
Contractual Obligations^(a)	Less Than 1 Year		1–3 Years		3–5 Years		More Than 5 Years		Total
	(In thousands)
Long-term debt^(b)	$	85,072	$	176,913	$	972,118	$	977,188	$	2,211,291
Operating leases^(c)	16,154		25,653		8,480		7,185		57,472
Purchase obligation^(d)	23,732		1,785		—		—		25,517
Total contractual obligations	$	124,958	$	204,351	$	980,598	$	984,373	$	2,294,280

_______________________________________________________________________________

^(a)

The Company has excluded $34.9 million in unrecognized tax benefits and related interest from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid. For additional information on income taxes, see “Note 4—Income Taxes” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”

^(b)

Represents contractual amounts due including interest on both fixed and variable rate instruments. Long-term debt at June 30, 2019 consists of the 6.375%, 5.00%, and 5.625% Senior Notes of $400 million, $450 million, and $350 million, respectively, which bear interest at fixed rates, and the Term Loan balance of $425 million which bears interest at a variable rate. The Term Loan bears interest at LIBOR plus 2.50%, or 4.90% at June 30, 2019. The amount of interest ultimately paid on the Term Loan may differ based on changes in interest rates and outstanding balances. For additional information on long-term debt, see “Note 6—Long-term Debt, net” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”

^(c)

The Company leases office space, data center facilities and equipment used in connection with its operations under various operating leases, many of which contain escalation clauses. The Company is also committed to pay a portion of the related operating expenses under certain lease agreements. These operating expenses are not included in the table above. For additional information on operating leases, see “Note 3—Leases” to the consolidated financial statements included in “Item 1—Consolidated Financial Statements.”


^(d)	The purchase obligations consist primarily of a web hosting commitment.

We also had $0.1 million of letters of credit and surety bonds outstanding as of June 30, 2019 that could potentially require performance by the Company in the event of demands by third parties or contingent events.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s long-term debt.

At June 30, 2019, the Company’s outstanding long-term debt was $1.6 billion, of which $1.2 billion of Senior Notes bear interest at fixed rates. If market rates decline, the Company runs the risk that the required payments on the fixed rate debt will exceed those based on market rates. A 100-basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by $73.2 million. Such potential increase or decrease in fair value is based on certain simplifying assumptions, including a constant level and rate of fixed-rate debt for all maturities and an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period. The $425 million Term Loan bears interest at a variable rate, which is LIBOR plus 2.50%. As of June 30, 2019, the rate in effect was 4.90%. If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense and payments on the Term Loan would increase or decrease, respectively, by $4.3 million based upon the outstanding balance at June 30, 2019.

Foreign Currency Exchange Risk

The Company conducts business in certain foreign markets, primarily in the European Union, and is exposed to foreign exchange risk for both the Euro and GBP.

We have exposure to foreign currency exchange risk related to transactions carried out in a currency other than the U.S. dollar, and investments in foreign subsidiaries with a functional currency other than the U.S. dollar. As foreign currency exchange rates change, translation of the statements of operations of our international businesses into U.S. dollars affects year-over-year comparability of operating results. For the three and six months ended June 30, 2019, the impact on revenue for all foreign currencies was unfavorable by $15.8 million and $33.8 million, respectively, compared to the comparable prior year period due to the Euro, GBP, and certain other currencies. For a reconciliation of Revenue excluding foreign exchange effects, see “Principles of Financial Reporting.”

Foreign currency exchange gains included in the Company’s earnings for the three and six months ended June 30, 2019 were $1.8 million and $0.1 million, respectively. Foreign currency exchange gains for the three and six months ended June 30, 2018 were $9.6 million and $2.3 million, respectively. Historically foreign currency exchange gains and losses have not been material to the Company. The gains in 2018 are primarily related to a U.S. dollar denominated intercompany loan for which the receivable is held by a foreign subsidiary with a GBP functional currency, which was settled in December 2018. As the U.S. Dollar fluctuates against GBP, this intercompany loan experienced volatility, which resulted in foreign currency exchange gains or losses.

Historically, the Company has not hedged foreign currency exposures. Our continued international expansion increases our exposure to exchange rate fluctuations and as a result such fluctuations could have a significant impact on our future results of operations.

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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 include 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 patent infringement claims, trademark oppositions and consumer or advertising complaints, as well as stockholder derivative actions, class action lawsuits 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.

Consumer Class Action 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 (the “Unruh 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 September 21, 2015, Tinder filed a demurrer seeking dismissal of the complaint. On October 26, 2015, the court issued an opinion sustaining Tinder’s demurrer to the complaint without leave to amend, ruling that the age-based pricing differential for Tinder Plus subscriptions did not violate California law in essence because offering a discount to users under age 30 was neither invidious nor unreasonable in light of that age group’s generally more limited financial means. On December 29, 2015, in accordance with its ruling, the court entered judgment dismissing the action. On February 1, 2016, the plaintiff filed a notice of appeal from the judgment, and the parties thereafter briefed the appeal. On January 29, 2018, the California Court of Appeal (Second Appellate District, Division Three) issued an opinion reversing the judgment of dismissal, ruling that the lower court had erred in sustaining Tinder’s demurrer because the complaint, as pleaded, stated a cognizable claim for violation of the Unruh Act. Because we believe that the appellate court’s reasoning was flawed as a matter of law and runs afoul of binding California precedent, on March 12, 2018, Tinder filed a petition with the California Supreme Court seeking interlocutory review of the Court of Appeal’s decision. On May 9, 2018, the California Supreme Court denied the petition. The case was then returned to the trial court for further proceedings and is currently in discovery.

In a related development, on June 19, 2019, in a substantially similar putative class action asserting the same substantive claims and pending in federal district court in California, the court issued an order granting final approval to a class-wide settlement, the terms of which are not material to the Company. See Lisa Kim v. Tinder, Inc., No. 18-cv-3093 (U.S. District Court, Central District of California). On June 21, 2019, the Kim court entered judgment in accordance with its prior order. 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 to the U.S. Court of Appeals for the Ninth Circuit. We believe that the allegations in the Candelore lawsuit are without merit and will continue to defend vigorously against it.

Tinder Optionholder Litigation against IAC and Match Group

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asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (as against Match Group only), and interference with prospective economic advantage, and seeks 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 Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs.

On October 9, 2018, the defendants filed a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks was an expert determination any challenge to which is both time-barred under applicable law and available only on narrow substantive grounds that the plaintiffs have not pleaded in their complaint; the plaintiffs opposed the motion. On June 13, 2019, the court issued a decision and order (i) granting the motion to dismiss the claims for breach of the implied covenant of good faith and fair dealing and for unjust enrichment, (ii) granting the motion to dismiss the merger-related claim for breach of contract as to two of the remaining six plaintiffs, and (iii) otherwise denying the motion to dismiss. On June 21, 2019, the defendants filed a notice of appeal from the court’s partial denial of their motion to dismiss. On July 2, 2019, the defendants filed their opening brief on appeal.

On June 3, 2019, the defendants filed a second motion to dismiss or for other relief based upon certain provisions of the plaintiffs’ agreement with a litigation funding firm; the plaintiffs have opposed the motion, which remains pending. On July 15, 2019, the defendants filed an answer denying the material allegations of the complaint, as well as counterclaims against Sean Rad for breach of contract and unjust enrichment based upon his alleged misappropriation of confidential company information. Discovery in the case is proceeding. We believe that the allegations against Match Group and IAC in this lawsuit are without merit and will continue to defend vigorously against it.

FTC Investigation of Certain Match.com Business Practices

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. 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 dating products, our ability to attract users to our dating products through cost-effective marketing and related efforts, foreign currency exchange rate fluctuations, our ability to distribute our dating products 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 and certain risks relating to our relationship with IAC/InterActiveCorp (“IAC”), among other risks.

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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, 2018 and in Part II “Item 1A. Risk Factors” of our quarterly report on Form 10-Q for the quarter ended March 31, 2019. 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

Under the terms of the Employee Matters Agreement dated as of November 24, 2015, by and between IAC/InterActiveCorp (“IAC”) and Match Group, Inc. (the “Company”), as amended effective as of April 13, 2016 (the “Employee Matters Agreement”), IAC may cause certain equity awards of the Company to be settled in shares of IAC common stock, par value $0.001 (“IAC Common Stock”) and cause the Company to reimburse IAC for the cost of such shares of IAC Common Stock by issuing shares of Company common stock, par value $0.001 (“Company Common Stock”) to IAC. The Employee Matters Agreement also provides that the Company will reimburse IAC for the cost of any IAC equity awards held by the Company’s employees and former employees and that IAC may elect to receive payment either in cash or Company Common Stock.

On May 31, 2019, 3,670 shares of Company Common Stock were issued to IAC as reimbursement for shares of IAC Common Stock issued in connection with the exercise of IAC stock options held by Match Group employees.

On May 31, 2019 and June 30, 2019, 119,350 and 27,502 shares of Company Common Stock, respectively, were issued to IAC as reimbursement for shares of IAC Common Stock issued in connection with the exercise and settlement of equity awards formerly denominated in shares of a subsidiary of the Company pursuant to the Employee Matters Agreement.

The issuances of Company Common Stock described above did not involve any underwriters or public offerings and the Company believes that such issuances were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) of such act.

Issuer Purchases of Equity Securities

The following table sets forth purchases by the Company of its common stock during the quarter ended June 30, 2019:



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 2019	157,787	$	56.79	157,787	2,334,689
May 2019	228,958	$	68.73	228,958	2,105,731
June 2019	445,000	$	69.34	445,000	1,660,731
Total	831,745	$	66.79	831,745	1,660,731

______________________


(1)	Reflects repurchases made pursuant to the 6 million share repurchase authorization previously announced in May 2017, which has no expiration.

(2)

Represents the total number of shares of common stock that remained available for repurchase pursuant to the May 2017 repurchase authorization. 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

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program, and repurchases may be commenced, suspended or discontinued from time to time without prior notice.

Item 5. Other Information

On August 7, 2019, IAC/InterActiveCorp disclosed its intention to explore the possibility of a distribution of its equity interest in Match Group to IAC’s shareholders, and that no decisions have been made as to the details of, or whether to pursue or consummate, such transaction.

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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

31.1

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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31.2

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

†

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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

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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)

Table of Contents

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 8, 2019	MATCH GROUP, INC.
	By:	/s/ GARY SWIDLER
		Gary Swidler
		Chief Financial Officer




Signature	Title	Date

/s/ GARY SWIDLER	Chief Financial Officer	August 8, 2019
Gary Swidler