IAC Annual Report 2017 | Quarterlytics

Plain-text annual report

Table of ContentsAs filed with the Securities and Exchange Commission on March 1, 2018UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2017 Commission File No. 000-20570IAC/INTERACTIVECORP(Exact name of registrant as specified in its charter)Delaware(State or other jurisdictionof incorporation or organization) 59-2712887(I.R.S. Employer Identification No.)555 West 18th Street, New York, New York (Address of Registrant's principal executive offices) 10011 (Zip Code)(212) 314-7300(Registrant's telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of exchange on which registered Common Stock, par value $0.001 The Nasdaq Stock Market LLC(Nasdaq Global Select Market)Securities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No oIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No xIndicate 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 preceding12 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 x No oIndicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted 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 and post suchfiles). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of theRegistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. oIndicate 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 growthcompany. 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 ý Accelerated filer o Non-accelerated filer o(Do not check if a smallerreporting company) Smaller reporting company o Emerging growthcompany oIf 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 financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xAs of February 2, 2018, the following shares of the Registrant's Common Stock were outstanding:Common Stock 76,869,350Class B Common Stock 5,789,499Total 82,658,849The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2017 was $7,528,899,120. For the purpose of the foregoingcalculation only, all directors and executive officers of the Registrant are assumed to be affiliates of the Registrant.Documents Incorporated By Reference:Portions of the Registrant's proxy statement for its 2018 Annual Meeting of Stockholders are incorporated by reference into Part III herein.TABLE OF CONTENTS PageNumberPART IItem 1.Business2Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments28Item 2.Properties28Item 3.Legal Proceedings29Item 4.Mine Safety Disclosures30PART IIItem 5.Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities31Item 6.Selected Financial Data32Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations33Item 7A.Quantitative and Qualitative Disclosures About Market Risk63Item 8.Consolidated Financial Statements and Supplementary Data64Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure133Item 9A.Controls and Procedures133Item 9B.Other Information135PART IIIItem 10.Directors, Executive Officers and Corporate Governance135Item 11.Executive Compensation135Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters135Item 13.Certain Relationships and Related Transactions, and Director Independence135Item 14.Principal Accounting Fees and Services135PART IVItem 15.Exhibits and Financial Statement Schedules1361Table of ContentsPART IItem 1. BusinessOVERVIEWWho We AreIAC is a leading media and Internet company composed of widely known consumer brands, such as Match, Tinder, PlentyOfFish and OkCupid, which arepart of Match Group’s online dating portfolio, and HomeAdvisor and Angie’s List, which are operated by ANGI Homeservices, as well as Vimeo, Dotdash,Dictionary.com, The Daily Beast and Investopedia.For information regarding the results of operations of IAC’s segments, as well as their respective contributions to IAC’s consolidated results ofoperations, see “Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8-Consolidated FinancialStatements and Supplementary Data.”All references to “IAC,” the “Company,” “we,” “our” or “us” in this report are to IAC/InterActiveCorp.Our HistoryIAC, initially a hybrid media/electronic retailing company, was incorporated in 1986 in Delaware under the name Silver King BroadcastingCompany, Inc. After several name changes (first to HSN, Inc., then to USA Networks, Inc., USA Interactive and InterActiveCorp, and finally, toIAC/InterActiveCorp) and the completion of a number of significant corporate transactions over the years, the Company transformed itself into a leadingmedia and Internet company.From 1997 through 2002, the Company acquired a controlling interest in Ticketmaster Group, Hotel Reservations Network (later renamed Hotels.com)and Expedia, as well as acquired Match.com and other smaller e-commerce companies. In 2002, the Company contributed its entertainment assets to VivendiUniversal Entertainment LLLP, a joint venture, and sold its interests in that venture to NBC Universal in 2005.In 2003, the Company continued to grow its portfolio of e-commerce companies by acquiring all of the shares of Expedia, Hotels.com and Ticketmasterthat it did not previously own, together with a number of other e-commerce companies (including LendingTree and Hotwire).In 2005, IAC acquired Ask Jeeves, Inc. and completed the separation of its travel and travel‑related businesses and investments into an independentpublic company called Expedia, Inc. In 2008, IAC separated into five independent, publicly traded companies: IAC, HSN, Inc., Interval Leisure Group, Inc.,Ticketmaster (now part of Live Nation, Inc.) and Tree.com, Inc.In 2009, we sold the European operations of Match.com to Meetic, a leading European online dating company based in France, in exchange for a 27%interest in Meetic and a €5 million note. In 2010, we exchanged the stock of a wholly-owned subsidiary that held our Evite, Gifts.com and IAC AdvertisingSolutions businesses and approximately $218 million in cash for substantially all of Liberty Media Corporation’s equity stake in IAC.In 2011, we increased our ownership stake in Meetic to 81%. In 2012, we acquired About.com (now known as Dotdash).In 2014, we acquired the remaining publicly traded shares of Meetic, ValueClick’s “owned and operated” website businesses, including Investopediaand PriceRunner, and The Princeton Review.In 2015, we acquired Plentyoffish Media Inc., a leading provider of subscription-based and ad-supported online personals servicing North America,Europe, Latin America and Australia, for $575 million in cash, and completed the initial public offering of Match Group, Inc.In 2016, we acquired VHX, a platform for premium over-the-top (OTT) subscription video channels, as well as a controlling interest in MyHammerHolding AG, the leading home services marketplace in Germany, and sold PriceRunner, ASKfm and ShoeBuy.In 2017, we acquired controlling interests in HomeStars Inc. and MyBuilder Limited, leading home services platforms in the United Kingdom andCanada, respectively, as well as sold The Princeton Review. We also completed the combination of the businesses in our former HomeAdvisor segment withthose of Angie’s List, Inc. under a new publicly traded holding company that we control, ANGI Homeservices Inc. Lastly, through our Vimeo subsidiary, weacquired Livestream Inc., a leading live video solution.2Table of ContentsEQUITY OWNERSHIP AND VOTEIAC has outstanding shares of common stock, with one vote per share, and shares of Class B common stock, with ten votes per share and which areconvertible into common stock on a share for share basis. As of the date of this report, Mr. Diller, his spouse, Diane von Furstenberg, and his stepson,Alexander von Furstenberg, collectively beneficially own 5,789,499 shares of IAC Class B common stock by virtue of their respective voting and/orinvestment power(s) over these securities, 4,530,075 of which are held in trusts for the benefit of Mr. Diller and certain members of his family and theremainder of which are held by Mr. Diller personally. Shares of IAC Class B common stock beneficially owned by Mr. Diller, his spouse and his stepsoncollectively represent 100% of IAC’s outstanding Class B common stock and, together with shares of IAC common stock held as of the date of this report byMr. von Furstenberg (58,542), a trust for the benefit of certain members of Mr. Diller's family (136,711) and a family foundation (1,711), representapproximately 43.1% of the total outstanding voting power of IAC (based on the number of shares of IAC common stock outstanding on February 2, 2018).As of the date of this report, Mr. Diller also holds 800,000 vested options and 500,000 unvested options to purchase IAC common stock.In addition, pursuant to an amended and restated governance agreement between IAC and Mr. Diller, for so long as Mr. Diller serves as IAC’s Chairmanand Senior Executive and he beneficially owns (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) at least 5,000,000shares of IAC Class B common stock and/or common stock in which he has a pecuniary interest (including IAC securities beneficially owned by him directlyand indirectly through trusts for the benefit of him and certain members of his family), he generally has the right to consent to limited matters in the eventthat IAC’s ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds four to one over a continuous twelve-month period.As a result of IAC securities beneficially owned by Mr. Diller and certain members of his family, Mr. Diller and these family members are, collectively,currently in a position to influence, subject to our organizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcomeof corporate actions requiring shareholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions.3Table of ContentsDESCRIPTION OF IAC BUSINESSESMatch GroupOverviewOur Match Group segment consists of the businesses and operations of Match Group, Inc. (“Match Group”). Through Match Group, we operate a datingbusiness that consists of a portfolio of brands, available in 42 languages across more than 190 countries. As of December 31, 2017, IAC’s ownership andvoting interests in Match Group were 81.2% and 97.6%, respectively.ServicesThrough the brands within our dating business, we are a leading provider of subscription dating products servicing North America, Western Europe,Asia and many other regions around the world through websites and applications that we own and operate.All of our dating products enable users to establish a profile and review the profiles of other users without charge. Each product also offers additionalfeatures, some of which are free and some of which are paid, depending on the particular product. In general, access to premium features requires asubscription, which is typically offered in packages (primarily ranging from one month to six months), depending on the product and circumstance. Pricesdiffer meaningfully within a given brand by the duration of subscription purchased, the bundle of paid features that a user chooses to access and whether ornot a subscriber is taking advantage of any special offers. In addition to subscriptions, many of our dating products offer users certain features, such as theability to promote themselves for a given period of time or to review certain profiles without any signaling to other users, and these features are offered on apay‑per‑use (or à la carte) basis. The precise mix of paid and premium features is established over time on a brand‑by‑brand basis and is constantly subject toiteration and evolution.RevenueMatch Group revenue is primarily derived directly from users in the form of recurring subscriptions. Revenue is also earned from online advertising, thepurchase of à la carte features (where users pay a non-recurring fee for a specific action or event) and offline events.MarketingWe attract the majority of users of our dating products through word-of-mouth and other free channels. In addition, many of our brands rely on paid useracquisition efforts for a significant percentage of their users. Our online marketing activities generally consist of purchasing social media advertising, bannerand other display advertising, search engine marketing, e-mail campaigns, video advertising, business development or partnership deals and hiringinfluencers to promote our dating products. Our offline marketing activities generally consist of television advertising and related public relations efforts, aswell as events.CompetitionThe dating industry is competitive and has no single, dominant brand globally. We compete with a number of other companies that provide similardating and matchmaking products. In addition to other online dating brands, we compete with social media platforms and offline dating services, such asin‑person matchmakers. Arguably, our biggest competition in the case of our dating business comes from the traditional ways that people meet each other andthe choices some people make to not utilize dating products or services.We believe that our ability to compete successfully in the case of our dating business will depend primarily upon the following factors:•our ability to continue to increase consumer acceptance and adoption of online dating products, including in emerging markets and other parts ofthe world where the stigma is only beginning to erode;•continued growth in Internet access and smart phone adoption in certain regions of the world, particularly emerging markets;•the continued strength of Match Group’s brands;•the breadth and depth of Match Group’s active user communities relative to those of its competitors;•our ability to evolve our dating products in response to competitor offerings, user requirements, social trends and the technological landscape;•our ability to efficiently acquire new users for our dating products;•our ability to continue to optimize our monetization strategies; and4Table of Contents•the design and functionality of our dating products.Lastly, we believe our broad portfolio of dating brands is a competitive advantage, given that a large portion of online dating customers use multipledating products over a given period of time, either concurrently or sequentially.ANGI HomeservicesOverviewOur ANGI Homeservices segment consists of the North America (United States and Canada) and European businesses and operations ofANGI Homeservices Inc. (“ANGI Homeservices”). ANGI Homeservices is a new publicly traded holding company that was formed to facilitate thecombination of the businesses within our former HomeAdvisor segment with Angie’s List, Inc. ("Angie's List"), which transaction was completed onSeptember 29, 2017 (the “Combination”).Following the completion of the Combination, we own and operate the HomeAdvisor business, which includes the Marketplace (described below) in theUnited States and the various entities operating its international businesses, plus Angie's List, mHelpDesk, CraftJack and Felix.ANGI Homeservices is the world’s largest digital marketplace for home services, connecting millions of homeowners across the globe with home serviceprofessionals. ANGI Homeservices operates leading brands in eight countries, including HomeAdvisor® and Angie's List® (United States), HomeStars(Canada), Travaux.com (France), MyHammer (Germany and Austria), MyBuilder (UK), Werkspot (Netherlands) and Instapro (Italy).As of December 31, 2017, IAC’s economic and voting interests in ANGI Homeservices were 86.9% and 98.5%, respectively.ServicesOverview. We own and operate the HomeAdvisor digital marketplace service in the United States (formerly known as our HomeAdvisor domesticbusiness, the “Marketplace”), which matches consumers with service professionals nationwide for home repair, maintenance and improvement projects. TheMarketplace provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals, as well as instantlybook appointments with those professionals online. The Marketplace also matches consumers with service professionals instantly by telephone, as well asoffers several home services-related resources, such as cost guides for different types of home services projects. We provide all Marketplace services and toolsto consumers free of charge.As of December 31, 2017, the Marketplace had a network of approximately 181,000 service professionals, each of whom had an active networkmembership and/or paid for consumer matches in December 2017. These service professionals provided services in more than 500 categories and 400 discretemarkets in the United States, ranging from simple home repairs to larger home remodeling projects. The Marketplace generated approximately 18.1 millionfully completed and submitted customer service requests during the year ended December 31, 2017.We also own and operate Angie’s List, which connects consumers with service professionals for local services through a nationwide online directory ofservice professionals in over 700 service categories nationwide. Angie’s List also provides consumers with valuable tools, services and content, includingmore than ten million verified reviews of local service professionals, to help them research, shop and hire for local services. We provide consumers withaccess to the Angie's List nationwide directory and related basic tools and services free of charge.Marketplace Consumer Services. Consumers can submit a service request for a service professional through HomeAdvisor platforms (website and mobileapplication), as well as through certain paths on the Angie’s List website and various third-party affiliate platforms. When a consumer submits a request for aservice professional, we generally match that consumer (through our proprietary algorithms) with up to four service professionals from our network based onseveral factors, including the type of services desired, location and the number of service professionals available to fulfill the request. When a consumersubmits a service request through an Angie’s List platform, we generally match that consumer (through our proprietary algorithms) with a combination ofMarketplace service professionals and selected certified service professionals (described below) from the Angie’s List nationwide online directory (as and ifavailable for the given service request).5Table of ContentsService professionals may contact consumers with whom they have been matched through the Marketplace directly and consumers can review profiles,ratings and reviews of presented service professionals and select the service professional whom they believe best meets their specific needs. In all cases,consumers are under no obligation to work with any service professional(s) referred by or found through the Marketplace (including any from the Angie’sList nationwide online directory).We also provide several on-demand services, including Instant Booking and Instant Connect (patent-pending). Through our Instant Booking offering,consumers can schedule appointments for select home services with a Marketplace service professional instantly across HomeAdvisor platforms (website ormobile application). Through our Instant Connect offering, consumers can connect with a Marketplace service professional instantly by phone, as well asaccess the service through digital voice assistant platforms. In certain markets, we also provide Same Say Service and Next Day Service for certain homeservices.In addition to matching and on-demand services, consumers can access the online HomeAdvisor True Cost Guide, which provides project costinformation for more than 400 project types nationwide, as well as an online library of home services-related resources, which consists primarily of articlesabout home improvement, repair and maintenance, tools to assist consumers with the research, planning and management of their projects and general advicefor working with service professionals.Marketplace Service Professional Services. We primarily offer and sell Marketplace memberships and related products and services to serviceprofessionals through our sales force (described below). Our basic annual membership package includes membership in our network of service professionals,as well as access to consumer connections through the Marketplace and a listing in the HomeAdvisor online directory and certain other affiliate directories,among other benefits. In addition to the membership subscription fee, Marketplace service professionals pay fees for consumer matches. We also offer certainother subscription products to Marketplace service professionals through mHelpDesk, a provider of cloud based field service software for small to mid-sizeservice professionals, as well as custom website development and hosting services.Angie's List Consumer Services. When consumers visit an Angie’s List platform (website or mobile application), they can choose to register in order tosearch for a service professional in the Angie’s List nationwide online directory or be matched with a service professional through the Marketplace.We provide consumers who register with access to ratings and reviews and the ability to search for service professionals through the Angie’s Listnationwide online directory, as well as the Angie’s List digital magazine and access to certain promotions. For a fee, we offer two premium membershippackages, which include varying degrees of online and phone support, access to exclusive promotions and features and the award-winning Angie’s List printmagazine. Consumers who choose the Marketplace option will be matched with a combination of Marketplace service professionals and selected certifiedservice professionals (described below) from the Angie’s List nationwide online directory (as and if available for the given service request).Angie's List Service Professional Services. We provide service professionals with a variety of services and tools through Angie’s List. Generally, serviceprofessionals who do not have an overall member grade below a “B” are eligible for certification. Service professionals must satisfy certain criteria forcertification, including retaining the requisite member grade, passing certain criminal background checks and attesting to proper licensure requirements.Once eligibility criteria are satisfied, service professionals must purchase term-based advertising from us to obtain certification. As of December 31,2017, we had approximately 45,000 certified service professionals under contract for advertising. If a certified service professional fails to meet anyeligibility criteria during the term of his or her contract, refuses to participate in our complaint resolution process or engages in what we determine to beprohibited behavior through any of our service channels, we suspend any existing advertising and exclusive promotions and the related advertising contractis subject to termination.Certified service professionals rotate among the first service professionals listed in directory search results for an applicable category (together with theircompany name, overall rating, number of reviews, certification badge and basic profile information), with non-certified service professionals appearing belowcertified service professionals in directory search results. Certified service professionals can also provide exclusive promotions to members. When consumerschoose the Marketplace option, our proprietary algorithms will determine where a given service professional appears within search results.6Table of ContentsRevenueOur revenue is primarily derived from consumer connection revenue, which are fees paid by Marketplace service professionals for consumer matches(regardless of whether the service professional ultimately provides the requested service), and membership subscription fees paid by service professionals.Fees paid by Marketplace service professionals for consumer matches vary based upon several factors, including the service requested, type of match (such asInstant Booking, Instant Connect, Same Day Service or Next Day Service) and geographic location of service. Our consumer connection revenue is generatedand recognized when a consumer match is delivered to a Marketplace service professional. Membership subscription revenue is generated throughsubscription sales to Marketplace service professionals and is deferred and recognized over the term (primarily one year) of the applicable membership.Revenue is also derived from the sale of time-based advertising to certified service professionals listed in the Angie’s List nationwide directory andmembership subscription fees from consumers for premium membership packages. Service professionals generally pay for advertisements in advance on amonthly or annual basis, at their option, with the average advertising contract term being approximately one year. Advertising contracts generally include anearly termination penalty. Revenue from the sale of website, mobile and call center advertising is recognized ratably over the time period in which theadvertisements run. Revenue from the sale of advertising in the Angie’s List Magazine is recognized in the period in which the publication, containing theadvertisement is published and distributed. Angie's List prepaid membership subscription fees are recognized as revenue ratably over the term of theassociated subscription, which is typically one year.MarketingWe market our various products and services to consumers primarily through digital marketing (primarily paid search engine marketing, displayadvertising and third party affiliate agreements) and traditional offline marketing (national television and radio campaigns), as well as through email.Pursuant to third party affiliate agreements, third parties agree to advertise and promote Marketplace products and services and those of Marketplace serviceprofessionals on their platforms. In exchange for these efforts, we agree to pay these third parties a fixed fee when visitors from their platforms click throughto one of our platforms and submit a valid service request through the Marketplace, or when visitors submit a valid service request on the affiliate platformand the affiliate transmits the service request to the Marketplace. We also market our products and services to consumers through partnerships with othercontextually related websites and, to a lesser extent, through relationships with certain retailers and direct mail.We market subscription packages and related products and services to service professionals primarily through our Golden, Colorado based sales force, aswell as through sales forces in Denver and Colorado Springs, Colorado, Lenexa, Kansas, New York, New York and Indianapolis, Indiana. We also marketthese products and services through search engine marketing, digital media advertising and direct relationships with trade associations and manufacturers.We market term-based advertising and related products to service professionals primarily through our Indianapolis based sales force.CompetitionThe home services industry is highly competitive and fragmented, and in many important respects, local in nature. We compete with, among others: (i)search engines and online directories, (ii) home and/or local services-related lead generation platforms, (iii) providers of consumer ratings, reviews andreferrals and (iv) various forms of traditional offline advertising (primarily local in nature), including radio, direct marketing campaigns, yellow pages,newspapers and other offline directories. We also compete with local and national retailers of home improvement products that offer or promote installationservices. We believe our biggest competition comes from the traditional methods most people currently use to find service professionals, which is by word-of-mouth and through referrals.We believe that our ability to compete successfully will depend primarily upon the following factors:•the size, quality, diversity and stability of our network of Marketplace service professionals and the breadth of our online directory listings;•the functionality of our websites and mobile applications and the attractiveness of their features and our products and services generally toconsumers and service professionals, as well as our continued ability to introduce new products and services that resonate with consumers andservice professionals generally;7Table of Contents•our ability to continue to build and maintain awareness of, and trust in and loyalty to, our various brands, particularly our Angie’s List andHomeAdvisor brands;•our ability to consistently generate service requests through the Marketplace and leads through our online directories that convert into revenue forour service professionals in a cost-effective manner; and•the quality and consistency of our service professional pre-screening processes and ongoing quality control efforts, as well as the reliability, depthand timeliness of customer ratings and reviews.VideoOverviewOur Video segment consists primarily of Vimeo, Electus, IAC Films and Daily Burn.VimeoServices. Vimeo operates a global video sharing platform for creators and their audiences. Through Vimeo, we provide creators with professional tools tohost, manage, review, distribute and monetize videos online, as well as provide audiences with a high quality, ad-free viewing experience across devices.We offer basic video hosting and sharing services free of charge. For certain fees, we offer premium capabilities for creators, including: additional videostorage space, advanced video privacy controls, video player customization options, team collaboration and management, review and workflow tools, leadgeneration, premium support and the ability to sell videos (on a subscription or transactional basis) directly to consumers in a customized viewingexperience. As of December 31, 2017, there were approximately 873,000 subscribers to Vimeo's SaaS video tools, and for the quarter endedDecember 31, 2017, Vimeo reached over 260 million unique users worldwide.We also provide creators with professional live streaming capabilities directly through Vimeo, as well as through Livestream, a leading live videosolution that we acquired in October 2017. Through Livestream, we also provide creators with production hardware, tools and services for capturing,broadcasting and editing live events, including: (i) our Mevo® camera, a pocket-sized live event camera that allows creators to edit video live as their eventsunfold, as well as stream their events live to multiple destinations, including other live streaming and social media platforms, (ii) live editing software fordesktop, laptops and certain other devices that provides creators with live production control room-like features and (iii) professional services to assistcreators with the planning, set up, production and management of live events.Marketing. We market Vimeo’s services primarily through online marketing efforts, including search engine marketing, social media, e-mail campaigns,display advertising and affiliate marketing, as well as through our owned and operated website and mobile applications.Revenue. Vimeo revenue is derived primarily from annual and monthly subscription fees paid by creators for premium capabilities and, to a lesser extent,sales of live streaming hardware, software and professional services.Competition. Vimeo competes with a variety of online video providers, from general purpose video sharing sites for consumers and creators to nicheworkflow and distribution solutions for professionals and enterprises. We believe that Vimeo differentiates itself from its competitors by offering acustomizable, high definition video player, proprietary uploading and encoding infrastructure, a high quality, ad-free viewing experience and a turnkeysolution for the production, distribution and monetization of video content.We believe that our ability to compete successfully will depend primarily on:•the quality of our technology platform, premium offerings, live streaming tools and services and user (creator and viewer) experience;•whether our premium offerings and live streaming tools and services resonate with creators;•the ability of creators to distribute Vimeo-hosted content across third party platforms and the prominence and visibility of such content withinsearch engine results and social media platforms;•the recognition and strength of the Vimeo brand relative to those of our competitors; and•our ability to drive new subscribers to our platform through various forms of direct marketing.ElectusServices. Through Electus, we provide production and producer services for both unscripted and scripted television and digital content, primarily forinitial sale and distribution in the United States. Our content is distributed on a wide range of8Table of Contentsplatforms, including broadcast television, premium and basic cable television, subscription-based and ad-supported video-on-demand services and otheroutlets. We also sell and distribute Electus programming and other content, together with programming and other content developed by third parties, outsideof the United States through Electus International, as well as work with various brands to integrate their products into, as well as sponsor, Electus contentthrough our Content Marketing team.In addition, we operate Electus Digital, which consists of the following websites and properties: CollegeHumor.com, Dorkly.com and Drawfee.com;YouTube channels WatchLOUD, Nuevon and Hungry; and Big Breakfast (a production company). The various brands and businesses within Electus Digitalspecialize in creating and distributing content for digital and television platforms across a variety of genres, as well as provide branded and third partycreative production services. Through Electus, we also operate Notional.Revenue. Electus revenue is derived primarily from media production and distribution and display advertising.Marketing. We do not engage in any formal marketing efforts in the case of our production and producer services, instead relying on referrals and thequality of our services and projects. For content distribution, we rely on our sales force, referrals and the quality of our services and projects, and forinternational distribution only, attendance at industry trade shows. In addition, the platforms to which we license our content for distribution market ourcontent through their own independent marketing efforts. Electus Digital attracts users and audience primarily through social media, search engine marketingand affiliate agreements.Competition. We compete with entertainment studios, production companies, distribution companies, creative agencies and content websites. Webelieve that our ability to compete successfully will depend primarily upon the following factors:•the quality and diversity of our content relative to that of our competitors and the third parties to whom we license our content, as well as the qualityof the services provided by licensees of our content;•our continued ability to create new content that resonates with licensees and viewers; and•our ability to sell integration and sponsorship opportunities for our content.IAC FilmsServices. IAC Films provides production and producer services for feature films (primarily for initial sale and distribution in the United States andinternationally). Our content is distributed through theatrical releases and video-on-demand services.Revenue. IAC Films revenue is derived primarily from media production and distribution.Marketing. We pay third parties to market our films to consumers through traditional offline marketing (national television and radio campaigns), trailersin theaters and digital marketing (primarily paid marketing through search engine and social media platforms), and to a lesser extent through viral marketingand paid advertisement in print media.Competition. We compete with major studios, independent motion picture companies, distribution companies and digital media platforms. We believethat our ability to compete successfully will depend primarily upon the following factors:•the quality and diversity of our films relative to those of our competitors;•our continued ability to retain the services of quality actors, directors, producers and other creative and technical personnel, as well as productionfinancing; and•our continued ability to create new films that resonate with viewers and distribute them to a broad viewing audience through theaters and video-on-demand channels.Daily BurnServices. Daily Burn is a health and fitness property that provides streaming fitness and workout videos across a variety of platforms, including iOS,Android, Roku and other Internet-enabled television platforms, as well as audio workouts downloadable to iOS and Android devices for workouts on the go.Revenue. Daily Burn’s revenue consists primarily of subscription fees.Marketing. We market our streaming fitness and workout videos primarily through television advertising, advertising on ad-supported video-on-demandservices and content platforms and search engine marketing.Competition. The fitness and workout market is highly competitive and barriers to entry, particularly in the case of online platforms, are minimal. Wecompete primarily with other streaming fitness and workout platforms and, to a lesser extent, fitness and workout DVDs.9Table of ContentsApplications OverviewOur Applications segment consists of:•Consumer, which develops and distributes downloadable desktop and mobile applications and includes Apalon, which houses our mobileapplications, and SlimWare; and•Partnerships, which includes our business-to-business partnership operations.ConsumerThrough our Consumer business, we develop, market and distribute a variety of applications, primarily browser extensions, which consist of a browsertab page and related technology that together enable users to run search queries directly from their new tab page and web browsers. Many of our browserextensions are coupled with other applications that we have developed that provide users with access to various forms of content and software capabilities.These applications include: FromDoctoPDF, through which users can convert documents from one format into various others and share them across multipleplatforms; MapsGalaxy, through which users can access accurate street maps, local traffic conditions and aerial and satellite street views; and WeatherBlink,through which users can access local weather conditions and satellite radar maps directly from their web browsers. Other applications target users with aspecial or passionate interest in select vertical categories (such as recipes, entertainment and astrology, among others) or provide users with particularreference information or access to specific capabilities (such as internet speed, online forms and package tracking, among others). We distribute theseapplications directly to consumers free of charge.The Consumer business also includes: (i) Apalon, a mobile development company with one of the largest and most popular portfolios of mobileapplications worldwide and (ii) SlimWare, a provider of community-powered software and services that clean, repair, update, secure and optimize computers,mobile phones and digital devices.PartnershipsThrough our Partnerships business, we work closely with partners in the software, media and other industries to design and develop customized browser-based search applications to be bundled and distributed with these partners’ products and services.RevenueSubstantially all of the Applications segment's revenue consists of advertising revenue generated principally through the display of paid listings inresponse to search queries. Paid listings are advertisements displayed on search results pages that generally contain a link to advertiser websites. Paid listingsare generally displayed based on keywords selected by advertisers. The substantial majority of the paid listings displayed by our Applications businesses aresupplied to us by Google Inc. ("Google") in the manner provided by and pursuant to a services agreement with Google, which expires on March 31, 2020.The Company may choose to terminate this agreement effective March 31, 2019.Pursuant to this agreement, those of our Applications businesses that provide search services transmit search queries to Google, which in turn transmits aset of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occurs independently of, butconcurrently with, the generation of algorithmic search results for the same search queries. Google paid listings are displayed separately from algorithmicsearch results and are identified as sponsored listings on search results pages. Paid listings are priced on a price per click basis and when a user submits asearch query through one of our Applications businesses and then clicks on a Google paid listing displayed in response to the query, Google bills theadvertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with us. We recognize paid listing revenue fromGoogle when it delivers the user's click. In cases where the user’s click is generated due to the efforts of a third party distributor, we recognize the amount duefrom Google as revenue and record a revenue share or other payment obligation to the third party distributor as traffic acquisition costs. See “Item 1A-RiskFactors-We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition andresults of operations.”To a significantly lesser extent, the Applications segment's revenue also consists of fees related to subscription downloadable applications and services,fees related to paid mobile downloadable applications and display advertisements.CompetitionWe compete with a wide variety of parties in connection with our efforts to develop, market and distribute applications and related technology directlyand through third parties. Competitors of our Applications businesses include Google, Yahoo!, Bing and other third party browser extension, conveniencesearch and desktop and mobile applications providers, as well as other search technology and convenience service providers.10Table of ContentsMoreover, some of the current and potential competitors of our Applications businesses have longer operating histories, greater brand recognition, largercustomer bases and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparativelygreater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products andservices relative to those offered by us.We believe that the ability of our Applications businesses to compete successfully will depend primarily upon our continued ability to:•create browser extensions and other applications that resonate with consumers (which requires that we continue to bundle attractive features, contentand services, some of which may be owned by third parties, with quality search services);•maintain industry-leading monetization solutions for our applications;•differentiate our browser extensions and other applications from those of our competitors (primarily through providing customized browser tabpages and access to multiple search and other services through our browser extensions);•secure cost-effective distribution arrangements with third parties; and•market and distribute our browser extensions and other applications directly to consumers in a cost-effective manner.PublishingOverviewOur Publishing segment consists of:•our Premium Brands business, which includes Dotdash (formerly About.com), Dictionary.com, Investopedia and The Daily Beast; and•our Ask & Other business, which primarily includes Ask Media Group, CityGrid and, for periods prior to its sale on June 30, 2016, ASKfm.Our Publishing businesses publish digital content and/or provide search services to users. Those of our Publishing businesses that publish digital content(our Premium Brands) generate such content through various sources, including, for example, through a combination of internal and independent freelancesubject matter "experts" in the case of Dotdash and internal editorial staff in the case of The Daily Beast, and/or acquire such content (or the rights to publishsuch content) from third parties. Those of our Publishing businesses that provide search services generally generate and display of a set of algorithmic searchresults, or hyperlinks to websites deemed relevant to search queries entered by users. In addition to these algorithmic search results, paid listings are alsogenerally displayed in response to search queries. The paid listings displayed by our Publishing businesses are supplied to us by Google in the mannerprovided by and pursuant to our services agreement with Google, which is described above.Premium BrandsOur Premium Brands business primarily consists of the following businesses:•Dotdash, which operates a network of digital brands that provide reliable information and inspiration in select vertical categories, including TheSpruce (Home), The Balance (Money), Verywell (Health), Lifewire (Tech), TripSavvy (Travel) and ThoughtCo (Lifelong Learning);•Dictionary.com, which primarily provides online and mobile dictionary, thesaurus and reference services;•Investopedia, a resource for investment and personal finance education and information, as well as online courses through Investopedia Academy fora fee; and•The Daily Beast, a website dedicated to news, commentary, culture and entertainment that curates and publishes existing and original online contentfrom its own roster of contributors in the United States.Ask & OtherOur Ask & Other business consists primarily of:•Ask Media Group, a collection of websites (including Ask.com) that provide general search services and information; and•CityGrid, an advertising network that integrates local content and advertising for distribution to affiliated and third party publishers across web andmobile platforms.11Table of ContentsRevenueThe Publishing segment's revenue consists principally of advertising revenue, which is generated primarily through the display of paid listings inresponse to search queries, display advertisements (sold directly and through programmatic ad sales) and fees related to paid mobile downloadableapplications. The substantial majority of the paid listings that our Publishing businesses display are supplied to us by Google in the manner provided by andpursuant to our services agreement with Google, which is described above.CompetitionWe compete with a wide variety of parties in connection with our efforts to attract and retain users and advertisers to our Publishing businesses.In terms of publishing digital content, our competitors include destination websites that primarily acquire traffic through paid and algorithmic searchresults in relevant vertical categories and social channels. In terms of providing search services, generally our competitors include Google, Yahoo!, Bing andother destination search websites and search-centric portals (some of which provide a broad range of content and services and/or link to various desktopapplications).Moreover, some of the current and potential competitors of our Publishing businesses have longer operating histories, greater brand recognition, largercustomer bases and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparativelygreater resources to the development and promotion of their products and services, which could result in greater market acceptance of their products andservices relative to those offered by us.We believe that the ability of our Publishing businesses to compete successfully will depend primarily upon:•the quality of the content and features on our various Publishing platforms (websites and mobile applications), and the attractiveness of the servicesprovided by these platforms generally, relative to those of our competitors;•our ability to successfully generate and acquire content (or the rights thereto) in a cost-effective manner;•the relevance and authority of the content and search results featured on our various Publishing platforms; and•our ability to successfully market the content and search services offered by our Publishing businesses in a cost-effective manner.OtherOur Other segment consisted of The Princeton Review, which provided a variety of educational test preparation, academic tutoring and collegecounseling services, ShoeBuy, an Internet retailer of footwear and related apparel and accessories, and PriceRunner, a shopping comparison website. ThePrinceton Review, ShoeBuy and PriceRunner were sold in March 2017, December 2016 and March 2016, respectively.EmployeesAs of December 31, 2017, IAC and its subsidiaries employed approximately 7,000 employees. We believe that we generally have good relationshipswith our employees.Additional InformationCompany Website and Public Filings. The Company maintains a website at www.iac.com. Neither the information on the Company’s website, nor theinformation on the website of any IAC business, is incorporated by reference into this annual report, or into any other filings with, or into any otherinformation furnished or submitted to, the SEC.The Company makes available, free of charge through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and CurrentReports on Form 8-K (including related amendments) as soon as reasonably practicable after they have been electronically filed with (or furnished to) theSEC.Code of Ethics. The Company’s code of ethics applies to all employees (including IAC’s principal executive officers, principal financial officer andprincipal accounting officer) and directors and is posted on the Investor Relations section of the Company's website at www.iac.com/Investors under the"Code of Ethics" tab. This code of ethics complies with Item 406 of SEC Regulation S-K and the rules of The Nasdaq Stock Market LLC. Any changes to thecode of ethics that affect the provisions required by Item 406 of Regulation S-K, and any waivers of such provisions of the code of ethics for IAC’s executiveofficers, senior financial officers or directors, will also be disclosed on IAC’s website.Item 1A. Risk Factors12Table of ContentsCautionary Statement Regarding Forward-Looking InformationThis annual report on Form 10-K 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. Theseforward-looking statements include, among others, statements relating to: IAC’s future financial performance, IAC’s business prospects and strategy,anticipated trends and prospects in the industries in which IAC’s businesses operate and other similar matters. These forward-looking statements are based onIAC management's expectations and assumptions about future events as of the date of this annual report, which are inherently subject to uncertainties, risksand 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, the riskfactors set forth below. Other unknown or unpredictable factors that could also adversely affect IAC’s business, financial condition and results of operationsmay arise from time to time. In light of these risks and uncertainties, the forward‑looking statements discussed in this annual report may not prove to beaccurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of IAC management as of thedate of this annual report. IAC does not undertake to update these forward‑looking statements.Risk FactorsOur success depends, in substantial part, on our continued ability to market, distribute and monetize our products and services through search engines,social media platforms and digital app stores.The marketing, distribution and monetization of our products and services depends on our ability to cultivate and maintain cost-effective and otherwisesatisfactory relationships with search engines, social media platforms and digital app stores, in particular, those operated by Google, Facebook and Apple.These platforms could decide not to market and distribute some or all of our products and services, change their terms and conditions of use at any time (andwithout notice), favor their own products and services over ours and/or significantly increase their fees. While we expect to maintain cost-effective andotherwise satisfactory relationships with these platforms, no assurances can be provided that we will be able to do so and our inability to do so in the case ofone or more of these platforms could have a material adverse effect on our business, financial condition and results of operations. The risk factors belowdiscuss these risks in the case of certain of our businesses in greater detail.Our success depends, in part, upon the continued migration of certain markets and industries online and the continued growth and acceptance of onlineproducts and services as effective alternatives to traditional offline products and services.Through our various businesses, we provide a variety of online products and services that continue to compete with their traditional offline counterparts.We believe that the continued growth and acceptance of online products and services generally will depend, to a large extent, on the continued growth incommercial use of the Internet (particularly abroad) and the continued migration of traditional offline markets and industries online.For example, the success of the businesses within our Match Group segment depends, in substantial part, on the continued migration of the dating marketonline. We believe this migration will be driven, in substantial part, by the continued proliferation of mobile devices worldwide, which continues to expandthe ways in which people can interact and build relationships, and increasing social acceptance and adoption of online dating products generally. Thesuccess of these businesses will also depend, in part, on our ability to continue to provide dating products that users find more efficient, effective,comfortable and convenient relative to traditional means of meeting people. The failure of a meaningful number of users to embrace our dating productsand/or the return of a meaningful number of users to offline dating products and services could adversely affect the businesses within our Match Groupsegment, and in turn, our business, financial condition and results of operations.Similarly, the success of the businesses within our ANGI Homeservices segment depends, in substantial part, on the continued migration of the homeservices market online. We believe that the digital penetration of the home services market remains low, with the vast majority of consumers continuing tosearch for, select and hire service professionals offline. While many consumer demographics have historically been (and remain) averse to finding serviceprofessionals online, others have demonstrated a greater willingness to embrace the online shift (for example, millennials). Service professionals must alsoembrace the online shift, which will depend, in substantial part, on whether online products and services help them to better connect and engage withconsumers relative to traditional offline efforts. The speed and ultimate outcome of the shift of the home services market online for consumers and serviceprofessionals is uncertain and may not occur as quickly as we expect or at all. The failure or delay of a meaningful number of consumers and/or serviceprofessionals to migrate online and/or the return of a meaningful number of existing participants in the online home services market to offline markets couldadversely13Table of Contentsaffect the businesses within our ANGI Homeservices segment, and in turn, our business, financial condition and results of operations.Lastly, our success also depends, in part, on our ability to compete for a share of available advertising expenditures as more traditional offline andemerging media companies continue to enter the online advertising market, as well as the continued growth and acceptance of online advertising generally.In addition to the factors discussed above in the case of online products and services generally, we believe that the continued growth and acceptance ofonline advertising generally will depend, in large part, on its perceived effectiveness and the acceptance of related advertising models (particularly in thecase of mobile advertising), the extent to which web browsers, software programs and/or other applications that limit or prevent advertising from beingdisplayed become commonplace and the extent to which the industry is able to effectively manage the continuing and increasing problem of click fraud. Anylack of growth in the market for online advertising (particularly for paid listings) and/or any decrease in the effectiveness and value of online advertising(whether due to changes in laws, changes in industry practices, the emergence of technologies that can block the display of advertisements across platformsor other developments) could adversely affect our business, financial condition and results of operations.Our success depends, in part, on our continued ability to introduce new and enhanced products and services that resonate with consumers.We may not be able to convert traffic to our various platforms into repeat users, nor increase user engagement levels, unless we continue to introduce newand enhanced products and services in response to evolving trends and technologies in the various markets in which we operate, as well as provide qualityproducts and services that otherwise resonate with consumers.Online products and services and related systems, technology and infrastructure, as well as the manner in which consumers access online products andservices generally, have historically been, and are expected to continue to be, subject to rapid change and continuing evolution. We may not be able to adaptquickly enough or at all to online trends generally and/or trends in the various markets and industries in which we operate (including changes in thepreferences and needs of our users and consumers generally), appropriately time the introduction of new and enhanced products and services and/or identifynew business opportunities in a timely manner. Moreover, the evolving preferences and needs of our users and consumers could require timely and costlyupdates to our products and services and related systems, technology and infrastructure.While the continued introduction of new and/or enhanced products and services is critical to our success, by definition, new products and services havelimited operating histories, which could make it difficult for us to evaluate our then current business and future prospects. For example, through MatchGroup, we seek to tailor each of our dating brands and products to meet the preferences of specific user communities. Building a given dating brand orproduct is generally an iterative process that occurs over a meaningful period of time and involves considerable resources and expenditures. Although certainof our newer dating brands and products have experienced significant growth over relatively short periods of time, the historical growth rates of these datingbrands and products may not be an indication of future growth rates for our newer dating brands and products generally. We have encountered, and maycontinue to encounter, risks and difficulties as we build new and/or enhanced products and services.Lastly, new technologies and policies could interfere with our ability to offer our products and services. For example, third parties continue to introducetechnologies (including new and enhanced web browsers and operating systems) that may limit or prevent consumers from installing certain types ofapplications and/or have features and policies that significantly lessen the likelihood that consumers will install our applications or that previously installedapplications will remain in active use. Our failure to successfully modify our products and services in a cost-effective manner in response to the introductionand adoption of new technologies, features and policies and/or find alternative sources of revenue to support products and services that currently generaterevenue through advertising, could adversely affect our business, financial condition and results of operations.The failure to successfully address any of these risks could adversely affect our business, financial condition and results of operations.Marketing efforts designed to drive traffic to our various brands and businesses may not be successful or cost-effective.Traffic building and conversion initiatives involve considerable expenditures for online and offline advertising and marketing. We have made, andexpect to continue to make, significant expenditures for search engine marketing (primarily in the form of the purchase of keywords, which we purchaseprimarily through Google and, to a lesser extent, Microsoft and Yahoo!), online display advertising and traditional offline advertising (including televisionand radio campaigns) in connection14Table of Contentswith these initiatives, which may not be successful or cost-effective. Historically, we have had to increase advertising and marketing expenditures over timein order to attract and convert consumers, retain users and sustain our growth.In the case of paid advertising generally, our ability to market our brands on any given property or channel is subject to the policies of the relevant thirdparty seller, publisher of advertising (including search engines and social media platforms) or marketing affiliate. As a result, a third party could limit ourability to purchase certain types of advertising and/or advertise certain of our products and services, which could affect our ability to compete effectivelyand, in turn, adversely affect our business, financial condition and results of operations. We cannot assure you that third parties will not limit or prohibit oneor more of our businesses from using certain current or prospective marketing channels in the future. If a significant marketing channel were to impose such alimitation or prohibition on one of more of our businesses generally, for a significant period of time and/or on a recurring basis, our business, financialcondition and results of operations could be adversely affected. In addition, if we fail to comply with the policies of third party sellers, publishers ofadvertising and/or marketing affiliates, our advertisements could be removed without notice and/or our accounts could be suspended or terminated, any ofwhich could adversely affect our business, financial condition and results of operations.In the case of our search engine marketing and optimization efforts, our failure to respond successfully to rapid and frequent changes in the pricing andoperating dynamics of search engines, as well as changing policies and guidelines applicable to keyword advertising (which may be unilaterally updated bysearch engines without advance notice), could adversely affect both our paid search engine marketing efforts and free search engine traffic. Such changescould adversely affect paid listings (both their placement and pricing), as well as the ranking of our brands and businesses within search results, any or all ofwhich could increase our costs (particularly if free traffic is replaced with paid traffic) and adversely affect the effectiveness of our marketing efforts overall.Certain of our businesses engage in efforts similar to search engine optimization through Facebook and other social media platforms (for example,developing content designed to appear higher in a given Facebook News Feed and generate "likes") that involve challenges and risks similar to those we facein connection with our search engine marketing efforts.Evolving consumer behavior can also affect the availability of cost-effective marketing opportunities. For example, as traditional television viewershipdeclines and media is increasingly consumed through various digital means, the reach of traditional advertising channels is contracting and the number ofdigital advertising channels is expanding. To continue to reach consumers, engage with users and continue to grow in this environment, we will need toidentify and devote more of our overall marketing expenditures to newer digital advertising channels (such as online video and other digital platforms), aswell as targeted consumer and user campaigns via these channels. Generally, the opportunities in (and sophistication of) newer advertising channels areundeveloped and unproven relative to traditional channels, which could make it difficult for us to assess returns on our marketing investment in the case ofthese channels. In addition, as we increasingly depend on newer digital means for traffic, these efforts will involve challenges and risks similar to those weface in connection with our search engine marketing efforts.Lastly, we also enter into various arrangements with third parties in an effort to drive traffic to our various brands and businesses, which arrangements aregenerally more cost-effective than traditional marketing efforts. If we are unable to renew existing (and enter into new) arrangements of this nature, sales andmarketing costs as a percentage of revenue would increase over the long-term.Any failure to attract and acquire new (and retain existing) consumer traffic and users in a cost-effective manner could adversely affect our business,financial condition and results of operations.Certain of our brands and businesses operate in especially competitive industries and innovation by our competitors in these industries could adverselyaffect our business, financial condition and results of operations.The dating and home services industries are competitive, with a consistent and growing stream of new products and entrants. Some of our competitorsmay enjoy better competitive positions in certain geographical areas and/or with consumer demographics that we currently serve or may serve in the future.In addition, some of our competitors, given the primary business in which they engage, can market their products and services online in a more prominentand cost-effective manner than we can. Any of these advantages could enable our competitors to offer products and services that are more appealing toconsumers than our products and services and/or respond more quickly and/or cost effectively than we do to evolving market opportunities and trends. Forexample, search engine providers continue to expand their product and service offerings into non-search-related categories, including home services. Searchengine providers can and may display their own integrated or related home services products and services in a more prominent manner than our products andservices in search results. This could result in a substantial decrease in free and paid traffic to the businesses within our ANGI Homeservices segment and, inturn, increased marketing expenditures (particularly if free traffic is replaced with paid traffic).15Table of ContentsIn addition, within the dating and home services industries, costs for consumers to switch among products and services are low or non-existent. And inthe case of service providers, while they would lose amounts paid for Marketplace membership packages and advertising if they switched to a competitorbefore the expiration of the related term, costs for switching over the long term are low. Low switching costs, coupled with the propensity of consumers to trynew products and services generally, will most likely result in the continued emergence of new products and services, entrants and business models in thedating and home services industries. Our inability to compete effectively against current or future competitors and new products and services that mayemerge could result in decreases in the size and level of engagement of our user and service provider bases, which could have an adverse effect on ourbusiness, financial condition and results of operations.Our success depends, in part, on our ability to build, maintain and/or enhance our various brands.Through our various businesses, we own and operate a number of widely known consumer brands with strong brand appeal within their respectivemarkets and industries, as well as a number of emerging brands that we are in the process of building. We believe that our success depends, in large part, onour continued ability to maintain and enhance our established brands, as well as build awareness of (and loyalty to) our emerging brands. Our brands andbrand-building efforts could be negatively impacted by a number of factors, including product and service quality concerns, consumer complaints, actionsbrought by consumers, inappropriate and/or criminal actions taken by users and related media coverage, actions taken by governmental or regulatoryauthorities and data protection and security breaches. In addition, trust in the integrity and objective, unbiased nature of the ratings and reviews found acrossour home services brands (particularly Angie’s List) contributes significantly to public perception of these brands and their ability to attract consumers andconvert them into users. If consumers perceive that ratings and reviews are not authentic in general, the reputation and the strength of the relevant brandcould be materially and adversely affected. Moreover, the inability to develop and introduce products and services that resonate with consumers, adaptquickly enough (and/or in a cost effective manner) to evolving changes in the Internet and related technologies, applications and devices and market ourproducts and services successfully (or in a cost-effective manner), could adversely affect our various brands and brand-building efforts, and in turn, ourbusiness, financial condition and results of operations.Our success depends, in part, on our ability to develop and monetize versions of our products and services for mobile and other digital devices.Our success depends, in part, on our ability to develop and monetize versions of our products and services for mobile and other digital devices. Asconsumers increasingly access our products and services through mobile and other digital devices (including through digital voice assistants), we will needto devote significant time and resources to ensure that our products and services are accessible across these platforms (and multiple platforms generally).Despite these efforts, we may not be able to keep pace with evolving online trends generally and/or trends in the various markets and industries in which weoperate (including changes in the preferences and needs of our users and consumers generally). Even if we do, new and/or enhanced products and services weoffer may not resonate with consumers and, in turn, not generate sufficient traffic to our various brands and businesses. Moreover, we may not be able tomonetize products and services for mobile and other digital devices as effectively as we have been able to monetize our traditional products and services.In addition, the success of our mobile and digital applications is dependent on their interoperability with various third party operating systems,technology, infrastructure and standards over which we have no control and any changes to any of these things that compromise the quality or functionalityof our mobile and digital applications could adversely affect their usage levels, and in turn, our ability to attract consumers and advertisers. Our failure orinability to successfully respond to the general shift of consumers to mobile and other digital devices could adversely affect our business, financial conditionand results of operations.Lastly, as technology continues to evolve, products and services that we develop for mobile and other digital devices could require us to modify ourrelated systems, technology and infrastructure. If these modifications are not done in an efficient and cost-effective manner, our products and services formobile and other digital devices (and related systems, technology and infrastructure) could be rendered obsolete.The distribution and use of our products and services depends, in part, on third parties.We distribute our products and services through a variety of third party publishers and distribution channels. For example, as consumers increasinglyaccess our products and services through mobile applications, we (primarily in the case of our dating business and Apalon, one of the businesses within ourApplications segment) increasingly depend upon the Apple App Store and the Google Play Store to distribute our mobile applications. Both Apple andGoogle have broad discretion to change their respective terms and conditions applicable to the distribution of our mobile applications, including thoserelating to the amount16Table of Contentsof (and requirement to pay) certain fees associated with purchases facilitated by Apple and Google through our mobile applications, and to interpret theirrespective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability to distribute mobile applications through their stores.We cannot assure you that Apple or Google will not limit. eliminate or otherwise interfere with the distribution of our mobile applications. If either or both ofthem did so, our business, financial condition and results of operations could be adversely affected.The use of certain of our products and services also depends, in part, on third parties. For example, many users of Match Group's Tinder and certain otherdating products currently register for (and log in to) these dating products exclusively through their Facebook profiles. While Match Group recentlylaunched an alternate authentication method that allows users to register for (and log into) Tinder using their mobile phone number, no assurances can beprovided that this method will be widely adopted by users. Facebook has broad discretion to change its terms and conditions applicable to the use of itsplatform and to interpret its terms and conditions in ways that could limit, eliminate or otherwise interfere with our ability to use Facebook as anauthentication method and if Facebook did so and the alternate method described above is not widely adopted by users or becomes unavailable for anyreason, Match Group’s, and in turn, our, business, financial condition and results of operations could be adversely affected.Lastly, certain of the businesses within our Applications segment have entered into (and expect to continue to enter into) agreements to distribute searchboxes, browser extensions and other applications to users through third parties. Most of these agreements are either non-exclusive and short-term in nature or,in the case of long‑term or exclusive agreements, are terminable by either party in certain specified circumstances. The inability of these businesses to enterinto new (or renew existing) agreements to distribute search boxes, browser extensions and other applications through third parties for any reason wouldresult in decreases in traffic to our various brands and businesses, queries and advertising revenue, which could have an adverse effect on our business,financial condition and results of operations.General economic events or trends, particularly those that adversely impact advertising spending levels and consumer confidence and spending behavior,could harm our business, financial condition and results of operations.We have historically been, and will continue to be, particularly sensitive to events and trends that adversely impact advertising spending levels andconsumer confidence and spending behavior. A significant portion of our consolidated revenue (and a substantial portion of our net cash from operations thatwe can freely access), is attributable to online advertising, primarily revenue from our Applications and Publishing segments. Accordingly, we areparticularly sensitive to events and trends that could result in decreased advertising expenditures. Advertising expenditures have historically been cyclical innature, reflecting overall economic conditions and budgeting and buying patterns, as well as levels of consumer confidence and discretionary spending.Similarly, some of our businesses (primarily those within our ANGI Homeservices segment) are particularly sensitive to events and trends that adverselyimpact consumer confidence and spending behavior. For example, in the event of a general economic downturn or sudden disruption in business conditions,consumer confidence, spending levels and access to credit could be adversely affected. The occurrence of any of these events or trends could result inconsumers delaying or foregoing home services projects, which could result in decreases in Marketplace service requests and related fees paid byMarketplace service professionals for consumer matches, which could adversely affect our business, financial condition and results of operations.In addition, because a significant number of service professionals across ANGI Homeservices brands are sole proprietorships and small businesses, theymay be particularly impacted by events and trends that adversely impact consumer confidence, spending behavior and access to credit. If so, they may be lesslikely to pay for Marketplace membership and/or advertising, which could result in turnover at the Marketplace and/or any of our directories. Any significantand/or recurring turnover over a prolonged period could adversely impact the number and quality of service professionals in the Marketplace and ourdirectories, as well as the reach of (and breadth of services offered through) the Marketplace and our directories, any or all of which could result in a decreasein traffic to ANGI Homeservices brands and businesses and increased costs, which could adversely affect our business, financial condition and results ofoperations.In the recent past, adverse economic conditions have caused, and if such conditions were to recur in the future they could cause, decreases and/or delaysin advertising expenditures and discretionary spending by consumers and limited access to credit, which would reduce our revenues and adversely affect ourbusiness, financial condition and results of operations.17Table of ContentsCommunicating with users and consumers via e-mail is critical to our success, and any erosion in our ability to communicate in this fashion that is notsufficiently replaced by other means could adversely affect our business, financial condition and results of operations.Historically, one of our primary means of communicating with consumers and keeping our users engaged with our products and services has been via e-mail communication. As consumer habits continue to evolve in the era of mobile and other digital devices and messaging and social media apps, usage of e-mail, particularly among younger consumers, has declined and we expect this trend to continue. In addition, deliverability and other restrictions imposed bythird party e-mail providers and/or applicable law could limit or prevent our ability to send e-mails to consumers and users. A continued and significanterosion in our ability to communicate successfully with consumers and users via e-mail could have an adverse impact on the user experience, userengagement levels and the rate at which non‑paying users become paid subscribers. While we continually work to find new means of communicating andconnecting with consumers and our users (for example, through push notifications), we cannot assure you that such alternative means of communication willbe as effective as e-mail has been historically. Any failure to develop or take advantage of new means of communication and/or limitations on such meansimposed by applicable law, mobile and digital device manufacturers or otherwise could adversely affect our business, financial condition and results ofoperations.Each of our dating products monetizes users at different rates. If a meaningful migration of our user base from our higher monetizing dating products toour lower monetizing dating products were to occur, it could adversely affect our business, financial condition and results of operations.Through Match Group, we own, operate and manage a large and diverse portfolio of dating products. Each dating product has its own mix of free andpaid features designed to optimize the user experience for, and revenue generation from, that product’s user community. In general, the mix of features for thevarious dating products within our more established brands leads to higher monetization rates per user than the mix of features for the various dating productswithin our newer brands. If a significant portion of our user base were to migrate to our less profitable dating brands, our business, financial condition andresults of operations could be adversely affected.As the distribution of our dating products through digital app stores increases, in order to maintain our profit margins, we may need to offset increasingdigital app store fees by decreasing traditional marketing expenditures, increasing user volume or monetization per user or by engaging in other efforts toincrease revenue or decrease costs generally, or our business, financial condition and results of operations could be adversely affected.As users of our dating products continue to shift to mobile and other digital devices, we increasingly rely upon the Apple App Store and the GooglePlay Store to distribute our mobile applications. While our mobile dating applications are generally free to download from these stores, users can purchasesubscriptions and certain à la carte features through these applications. We determine the prices at which these subscriptions and features are sold; however,related purchases must be processed through the in-app payment systems provided by Apple and, to a lesser extent, Google. As a result, we pay Apple andGoogle, as applicable, a share (generally 30%) of the revenue we receive from these transactions. While we are constantly innovating on and creating our ownpayment systems and methods, given the increasing distribution of our dating products through digital app stores and in-app payment system requirements,we may need to offset these increased digital app store fees by decreasing traditional marketing expenditures as a percentage of revenue, increasing uservolume or monetization per user or engaging in other efforts to increase revenue or decrease costs generally, or our business, financial condition and resultsof operations could be adversely affected.Our success depends, in part, of the ability of ANGI Homeservices to establish and maintain relationships with quality service professionals.We will need to continue to attract, retain and grow the number of skilled and reliable service professionals who can provide home services thatconsumers want in a timely manner across ANGI Homeservices platforms. To do so, we must continue to offer products and services that resonate withconsumers and service professionals generally, as well provide service professionals with an attractive return on their marketing and advertising investments.If we fail to provide compelling products and services across ANGI Homeservices brands and businesses, Marketplace service professionals may leave (or failto join) the Marketplace and certified service professionals may leave (of fail to join) the Angie’s List nationwide online directory, one or both of whichwould result in a less attractive overall digital marketplace for consumers seeking quality service professionals. Any decrease in quality service professionals(or the lack of new quality service professionals) would result in a smaller and less diverse Marketplace and smaller and less diverse directories, which couldadversely impact the consumer experience, and in turn, result in decreases in service requests and directory searches, which could adversely impact ourbusiness, financial condition and results of operations.18Table of ContentsWe depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition andresults of operations.A meaningful portion of our consolidated revenue (and a substantial portion of our net cash from operations that we can freely access) is attributable to aservices agreement with Google. Pursuant to this agreement, we display and syndicate paid listings provided by Google in response to search queriesgenerated by users of our Applications and Publishing properties. In exchange for making our search traffic available to Google, we receive a share of therevenue generated by the paid listings supplied to us, as well as certain other search‑related services. Our current agreement with Google expires on March 31,2020 and we may choose to terminate this agreement effective March 31, 2019.The amount of revenue we receive from Google depends on a number of factors outside of our control, including the amount Google charges foradvertisements, the efficiency of Google’s system in attracting advertisers and serving up paid listings in response to search queries and parametersestablished by Google regarding the number and placement of paid listings displayed in response to search queries. In addition, Google makes judgmentsabout the relative attractiveness (to advertisers) of clicks on paid listings from searches performed on our Applications and Publishing properties and thesejudgments factor into the amount of revenue we receive. Google also makes judgments about the relative attractiveness (to users) of paid listings fromsearches and these judgments factor into the amount of advertisements we can purchase. Changes to the amount Google charges advertisers, the efficiency ofGoogle’s paid listings network, Google's judgment about the relative attractiveness to advertisers of clicks on paid listings from our Applications andPublishing properties or to the parameters applicable to the display of paid listings generally could result in a decrease in the amount of revenue we receivefrom Google and could adversely affect our business, financial condition and results of operations. Such changes could come about for a number of reasons,including general market conditions, competition or policy and operating decisions made by Google.Our services agreement with Google also requires that we comply with certain guidelines for the use of Google brands and services, includingguidelines that govern which products and applications may access Google services, and the manner in which Google’s paid listings are displayed withinsearch results across various third party platforms and products (including our Applications and Publishing properties). Our services agreement also requiresthat we establish guidelines to govern certain activities of third parties to whom we syndicate paid listings, including the manner in which these parties drivesearch traffic to their websites and display paid listings. Google may generally unilaterally update its policies and guidelines without advance notice, whichcould in turn require modifications to, or prohibit and/or render obsolete certain of, our products, services and/or business practices, which could be costly toaddress or otherwise adversely affect our business, financial condition and results of operations. Noncompliance with Google’s guidelines by us or the thirdparties to whom we are permitted to syndicate paid listings or through which we secure distribution arrangements for certain of our Applications propertiescould, if not cured, result in the suspension of some or all Google services to our properties (or the websites of our third party partners) and/or the terminationof the services agreement by Google.The termination of the services agreement by Google, the curtailment of our rights under the agreement (whether pursuant to the terms thereof orotherwise) and/or the failure of Google to perform its obligations under the agreement would have an adverse effect on our business, financial condition andresults of operations. If any of these events were to occur, we may not be able to find another suitable alternate paid listings provider (or if an alternateprovider were found, the economic and other terms of the agreement and the quality of paid listings may be inferior relative to our arrangements with, and thepaid listings supplied by, Google) or otherwise replace the lost revenues.Foreign currency exchange rate fluctuations could adversely affect our results of operations.We operate in certain foreign markets, primarily in various jurisdictions within the European Union, and as a result, are exposed to foreign exchangerisk for both the Euro and British Pound ("GBP"). During the fiscal years ended December 31, 2017 and 2016, approximately 30% and 26%, respectively, ofour total revenues were international revenues. We translate international revenues into U.S. Dollar-denominated results. As a result, as foreign currencyexchange rates fluctuate, the translation of the statement of operations of our international businesses into U.S. Dollars affects the period-over-periodcomparability of operating results. The average GBP and Euro versus the U.S. Dollar exchange rate was approximately 5% higher and 2% lower, respectively,in 2017 compared to 2016.We are also exposed to foreign currency exchange gains and losses to the extent we or are subsidiaries conduct transactions in, and/or have assetsand/or liabilities that are denominated in, a currency other than the relevant entity's functional currency. We recorded foreign currency exchange losses of$16.8 million and gains of $34.4 million for the fiscal years ended December 31, 2017 and 2016, respectively. The increase in GBP versus the U.S. Dollarduring 2017 and the decrease in the GBP versus the U.S. Dollar during 2016 following the Brexit vote on June 23, 2016 generated the majority of19Table of Contentsour foreign currency exchange losses and gains during these fiscal years. For additional detail regarding these gains and losses, see "Item 7A—Quantitativeand Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk."Foreign currency exchange gains and losses historically have not been material to the Company. As a result, historically, we have not hedged ourforeign currency exposures. The continued growth and expansion of our international operations into new markets and jurisdictions increases our exposure toforeign exchange rate fluctuations. Significant foreign currency exchange rate fluctuations, in the case of one currency or collectively with other currencies,could adversely affect our future results of operations.We may not be able to protect our systems, technology and infrastructure from cyberattacks. In addition, we may be adversely impacted by cyberattacksexperienced by third parties. Any disruption of our systems, technology and infrastructure or compromise of our user data or other information due tocyberattacks could adversely affect our business, financial condition and results of operations.We are regularly under attack by perpetrators of malicious technology-related events, such as cyberattacks, computer hacking, computer viruses, worms,bot attacks or other destructive or disruptive software, distributed denial of service attacks, attempts to misappropriate user information (including credit cardinformation) or other malicious activities. Events of this nature could compromise the integrity of our systems, technology and infrastructure, as well as ourvarious products and services, which could in turn adversely affect our users. The incidence of events of this nature (or any combination thereof) is on the riseworldwide.While we continuously develop and maintain systems to detect and prevent events of this nature from impacting our various businesses (and theirrespective systems, technology, infrastructure, products, services and users), and have invested (and continue to invest) heavily in these efforts and relatedpersonnel and training, these efforts are costly and require ongoing monitoring and updating as technologies change and efforts to overcome preventativesecurity measures become more sophisticated. Despite our efforts, we cannot assure you that we will not experience significant events of this nature in thefuture and if such an event does occur, that it will not adversely affect our business, financial condition and results of operations.Any cyberattack or security breach we experience could damage our systems, technology and infrastructure and/or those of our users, prevent us fromproviding our products and services, compromise the integrity of our products and services, damage our reputation, erode our brands and/or be costly toremedy, as well as subject us to investigations by regulatory authorities, fines and/or litigation that could result in liability to third parties. Even if we do notexperience such events, the impact of any such events experienced by third parties with whom we do business (or upon whom we otherwise rely inconnection with our operations) could have a similar effect. Moreover, even cyberattacks and security breaches that do not impact us directly may result inconsumers being less likely to use online products and services generally.In addition, we may not have adequate insurance coverage to compensate for losses resulting from any of these events.If the security of personal, confidential or sensitive user information, including credit card information, that we maintain and store is breached orotherwise accessed by unauthorized persons, it may be costly to mitigate the impact of such an event, our reputation could be harmed and our business,financial condition and results of operations could be adversely affected.We receive, process, store and transmit a significant amount of personal, confidential or sensitive user or other information, including credit cardinformation, and in the case of certain of our products and services, enable users to share their personal information with each other. In some cases, we retainthird party vendors to store this information. While we continuously develop and maintain systems to protect the security, integrity and confidentiality ofthis information, we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized accessto this information despite our efforts. If any such event were to occur, we may not be able to remedy the event, and we may have to expend significantcapital and other resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature fromoccurring. If a breach of our security (or the security of third party vendors we have retained) occurs, the perception of the effectiveness of our securitymeasures and our reputation may be harmed, we could lose users and the recognition of our various brands and businesses and their competitive positionscould be diminished, any or all of which could adversely affect our business, financial condition and results of operations.20Table of ContentsWe are subject to a number of risks related to credit card payments, including data security breaches, fraud that we or third parties experience oradditional regulation, any of which could adversely affect our business, financial condition and results of operations.Certain of our businesses accept payment (including recurring payments) from users, primarily through credit card transactions and certain onlinepayment service providers. The ability of these businesses to access payment information on a real time‑basis without having to proactively reach out to usersto process payments for products and services (including auto-renewal payments or payments for premium features on or with certain of our products orservices) is critical to our success.When we or a third party experience(s) a data security breach involving credit card information, affected cardholders will often cancel their cards. In thecase of a breach experienced by a third party, the more sizable the third party’s customer base, the greater the number of accounts impacted and the morelikely it is that our users would be impacted by such a breach. If our users are ever affected by such a breach, we would need to contact affected individuals toobtain new payment information and process any pending transactions. It is likely that we would not be able to reach all affected individuals, and even if wecould, new payment information for some individuals may not be obtained and some pending transactions may not be processed, which could adverselyaffect our business, financial condition and results of operations.Even if our users are not directly impacted by a given data security breach, they may lose confidence in the ability of providers of online products andservices to protect their personal information generally, which could cause them to stop using their credit cards online and choose alternative paymentmethods that are not as convenient for us or restrict our ability to process payments without significant effort.Our ability to access credit card information on a real-time basis without having to proactively reach out to affected individuals could also be adverselyimpacted by increases in various fees charged by credit card companies and processors (such as transaction, interchange, chargeback and/or other fees), themalfunction of credit card billing systems and software and non-compliance with applicable payment card association operating rules, certificationrequirements and rules governing electronic funds transfers, including the Payment Card Industry Data Security Standard ("PCI DSS"), a security standardwith which companies that collect, store or transmit certain data related to credit and debit cards, credit and debit card holders and credit and debit cardtransactions are required to comply.If we fail to adequately prevent fraudulent credit card transactions and/or comply with the PCI DSS, we could face litigation, fines, governmentalenforcement action, civil liability, diminished public perception of our security measures, significantly higher credit card-related costs and substantialremediation costs, any of which could adversely affect our business, financial condition and results of operations.The processing, storage, use and disclosure of personal data could give rise to liabilities and increased costs as a result of governmental regulation,conflicting legal requirements or differing views of personal privacy rights and compliance with laws designed to prevent unauthorized access of personaldata could be costly.We receive, transmit and store a large volume of personal information and other user data (including personal credit card data, as well as private content(such as videos and correspondence)) in connection with the processing of search queries, the provision of online products and services, payment transactionsand advertising on our various properties. The manner in which we share, store, use, disclose and protect this information is determined by the respectiveprivacy and data security policies of our various businesses. These policies are, in turn, subject to federal, state and foreign laws and regulations, as well asevolving industry standards and practices, regarding privacy generally and the sharing, storage, use, disclosure and protection of personal information anduser data. These laws, regulations, standards and practices are changing, inconsistent and conflicting and subject to differing interpretations, and new laws,regulations, standards and practices of this nature are proposed and adopted from time to time.For example, in 2016, the European Commission adopted the General Data Protection Regulation (the "GDPR"), a comprehensive European Unionprivacy and data protection reform that becomes effective in May 2018. The GDPR, which applies to companies that are organized in the European Union (orotherwise provide services to (or monitor) consumers who reside in the European Union), imposes strict standards regarding the sharing, storage, use,disclosure and protection of end user data and significant penalties (monetary and otherwise) for non-compliance. In addition, the European Union isconsidering an update to its Privacy and Electronic Communications Directive to impose stricter rules regarding the use of cookies in connection with theprovision of online products and services to consumers who reside in the European Union. In addition, the potential exit from the European Union by theUnited Kingdom could result in the application of new and21Table of Contentsconflicting data privacy and protection laws and standards to our operations in the United Kingdom and how we handle personal data of consumers whoreside in the United Kingdom. In addition, there are a number of draft privacy laws and regulations under consideration in the U.S. (including in variousstates) and in various foreign jurisdictions in which we do business.While we believe that we comply with applicable privacy policies, laws and regulations, as well as evolving industry standards and practices relating toprivacy and data security in all material respects, there is no assurance that we will not be subject to claims that we have violated applicable laws andregulations, standards and practices, that we will be able to successfully defend against such claims or that we will not be subject to significant fines andpenalties in the event of non-compliance. Moreover, any failure or perceived failure by us (or the third parties with whom we have contracted to handle suchinformation) to comply with applicable privacy policies, laws, regulations or privacy‑related contractual obligations or any compromise of security thatresults in unauthorized access to (or use or transmission of) personal information could result in a variety of claims against us, including governmentalenforcement actions, significant fines, litigation, claims of breach of contract and indemnity by third parties and adverse publicity. In the case of such anevent, our reputation may be harmed, we could lose current and potential users and the competitive positions of our various brands and businesses could bediminished, any or all of which could adversely affect our business, financial condition and results of operations.In addition, compliance with the numerous privacy and data protection laws in the various countries in which our businesses operate (particularly theGDPR) could be costly, as well as result in delays in the development of new products and services if significant resources are allocated to compliance efforts,particularly as these laws become more comprehensive in scope, more commonplace and continue to evolve. If these costs and/or product and service delaysare significant, our business, financial condition and results of operations could be adversely affected.Lastly, evolving privacy and data protection laws in the various countries in which are businesses operate could prevent us from introducing productsand services in jurisdictions in which we wish to do business and/or continuing to offer certain products and services in jurisdictions in which we currentlyoperate. If markets in new jurisdictions in which we cannot do business are large and/or revenue attributable to products and services we can no longer offer issignificant, our business, financial condition and results of operations could be adversely affected.Our success depends, in part, on the integrity and quality of our systems, technology and infrastructure and those of third parties. System interruptions andthe lack of integration and redundancy in our and third party information systems may adversely affect our business.To succeed, our systems, technology and infrastructure must perform well on a consistent basis. From time to time, we may experience occasionalinterruptions that make some or all of our systems, technology, infrastructure or user data unavailable or that prevent us from providing products andservices; any such interruption could arise for any number of reasons. Furthermore, fire, power loss, telecommunications failure, natural disasters, acts of waror terrorism, acts of God and other similar events or disruptions may damage or interrupt computer, data, cloud-based web hosting, broadband, wireless orother storage or communications systems at any time. Any event of this nature could cause system interruptions, delays and loss of critical data, and couldprevent us from providing our products and services to consumers. While we have backup systems in place for certain aspects of our operations, our systems,technology and infrastructure are not fully redundant and disaster recovery planning is not sufficient for all eventualities. In addition, we may not haveadequate insurance coverage to compensate for losses from a major interruption. Any such interruptions or outages, regardless of the cause, could negativelyimpact the consumer experience, tarnish the reputation of our brands and decrease demand for our products and services, any or all of which could adverselyaffect our business, financial condition and results of operations.We also continually work to expand and enhance the efficiency and scalability of our systems, technology and infrastructure to improve the consumerexperience, accommodate substantial increases in traffic volume to our various brands, ensure acceptable page load times and keep up with technology andevolving user and consumer preferences. Any failure to do so in a timely and cost-effective manner could adversely affect the user experience across ourbrands and businesses, which could adversely affect demand for our products and services and/or increase our costs, any of which could adversely affect ourbusiness, financial condition and results of operations.We also rely on third party computer systems, data center service providers, cloud-based web hosting service providers and broadband, wireless and othercommunications systems service providers in connection with the provision of our products and services generally, as well as to facilitate and process certaintransactions with users. We have no control over any of these third parties or their operations.22Table of ContentsAny interruptions, outages or delays in our systems, technology and infrastructure or those of our third party providers, changes in service levels or anydeterioration in performance, could impair our ability to provide our products and services and/or process certain transactions. If any of these events were tooccur, it could damage our reputation and result in the loss of users, which could adversely affect our business, financial condition and results of operationsand otherwise be costly to remedy.Mr. Diller and certain members of his family collectively have sole voting and/or investment power over a significant percentage of the voting power of ourstock. As a result, Mr. Diller and these family members are able to exercise significant influence over the composition of our Board of Directors, matterssubject to stockholder approval and our operations.As of the date of this report, Mr. Diller, his spouse, Diane von Furstenberg, and his stepson, Alexander von Furstenberg, collectively beneficially own5,789,499 shares of IAC Class B common stock by virtue of their respective voting and/or investment power(s) over these securities, 4,530,075 of which areheld in trusts for the benefit of Mr. Diller and certain members of his family and the remainder of which are held by Mr. Diller personally. Shares of IAC ClassB common stock beneficially owned by Mr. Diller, his spouse and his stepson collectively represent 100% of IAC’s outstanding Class B common stock and,together with shares of IAC common stock held as of the date of this report by Mr. von Furstenberg (58,542), a trust for the benefit of certain members of Mr.Diller's family (136,711) and a family foundation (1,711), represent approximately 43.1% of the total outstanding voting power of IAC (based on the numberof shares of IAC common stock outstanding on February 2, 2018). As of the date of this report, Mr. Diller also holds 800,000 vested options and 500,000unvested options to purchase IAC common stock.In addition, pursuant to an amended and restated governance agreement between IAC and Mr. Diller, for so long as Mr. Diller serves as IAC’s Chairmanand Senior Executive and he beneficially owns (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) at least 5,000,000shares of IAC Class B common stock and/or common stock in which he has a pecuniary interest (including IAC securities beneficially owned by him directlyand indirectly through trusts for the benefit of him and certain members of his family), he generally has the right to consent to limited matters in the eventthat IAC’s ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds four to one over a continuous twelve-month period.As a result of IAC securities beneficially owned by Mr. Diller and certain members of his family, Mr. Diller and these family members are, collectively,currently in a position to influence, subject to our organizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcomeof corporate actions requiring shareholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions. Inaddition, this concentration of investment and voting power could discourage others from initiating a potential merger, takeover or other change of controltransaction that may otherwise be beneficial to IAC, which could adversely affect the market price of IAC securities.We depend on our key personnel.Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain highly skilled individuals, with the continuedcontributions of our senior management being especially critical to our success. Competition for well-qualified employees across IAC and its variousbusinesses is intense and our continued ability to compete effectively depends, in part, upon our ability to attract new employees. While we have establishedprograms to attract new employees and provide incentives to retain existing employees, particularly our senior management, we cannot assure you that wewill be able to attract new employees or retain the services of our senior management or any other key employees in the future. Effective succession planningis also important to our future success. If we fail to ensure the effective transfer of senior management knowledge to successors and smooth transitionsinvolving senior management across our various businesses, our ability to execute short and long term strategic, financial and operating goals, as well as ourbusiness, financial condition and results of operations generally, could be adversely affected.Our indebtedness may affect our ability to operate our business, which could have a material adverse effect on our financial condition and results ofoperations. We and our subsidiaries may incur additional indebtedness, including secured indebtedness.As of December 31, 2017, we had total debt outstanding of approximately $2.1 billion, including $1.3 billion and $275 million of total debt outstandingat Match Group and ANGI Homeservices, respectively. As of that date, we had borrowing availability of $300 million, and Match Group had borrowingavailability of $500 million, under our respective revolving credit facilities. Neither Match Group, ANGI Homeservices nor any of their respectivesubsidiaries guarantee any indebtedness of IAC or are currently subject to any of the covenants related to such indebtedness. Similarly, neither IAC nor anyof its subsidiaries (other than Match Group and its subsidiaries in the case of Match Group indebtedness and ANGI Homeservices and its subsidiaries in thecase of ANGI Homeservices indebtedness) guarantee any indebtedness of Match Group or ANGI Homeservices nor are subject to any of the covenants relatedto such indebtedness.23Table of ContentsThe terms of the indebtedness of IAC, Match Group and ANGI Homeservices could:•limit our respective abilities to obtain additional financing to fund working capital needs, acquisitions, capital expenditures or other debt servicerequirements or for other purposes;•limit our respective abilities to use operating cash flow in other areas of our respective businesses because we must dedicate a substantial portion ofthese funds to service indebtedness;•limit our respective abilities to compete with other companies who are not as highly leveraged;•restrict any one or more of us from making strategic acquisitions, developing properties or exploiting business opportunities;•restrict the way in which one or more of us conducts business because of financial and operating covenants in the agreements governing ourindebtedness;•expose one or more of us to potential events of default under financial and operating covenants contained in our respective debt instruments, whichif not cured or waived, could have a material adverse effect on our business, financial condition and operating results;•increase our respective vulnerabilities to a downturn in general economic conditions or in pricing of our various products and services; and•limit our respective abilities to react to changing market conditions in the various industries in which we do business.In addition to our respective debt service obligations, the operations of IAC, Match Group and ANGI Homeservices require substantial investments on acontinuing basis. The ability of any of us to make scheduled debt payments, to refinance indebtedness obligations and to fund capital and non-capitalexpenditures necessary to maintain the condition of our respective operating assets and properties, as well as to provide capacity for the growth of ourrespective businesses, depends on our respective financial and operating performance, which, in turn, is subject to prevailing economic conditions andfinancial, business, competitive, legal and other factors.Subject to certain restrictions in the agreements governing certain indebtedness, we and our subsidiaries may incur significant additional indebtedness,including additional unsecured and secured indebtedness. Although the terms of agreements governing certain indebtedness contain restrictions on theincurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred incompliance with these restrictions could be significant. If we and/or any of our subsidiaries incur additional indebtedness, the risks described above couldincrease.Also, if an event a default has occurred or our leverage ratio exceeds thresholds specified in the agreements governing our indebtedness, our ability topay dividends or to make distributions and repurchase or redeem our stock would be limited and the agreements governing the indebtedness of Match Groupand ANGI Homeservices contain similar restrictions. See "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Position, Liquidity and Capital Resources-Financial Position."We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations underour indebtedness that may not be successful.The ability of IAC, Match Group and ANGI Homeservices to satisfy our respective debt obligations will depend upon, among other things:•our respective future financial and operating performance, which will be affected by prevailing economic conditions and financial, business,regulatory and other factors, many of which are beyond our control; and•the future ability of IAC and Match Group to borrow under our respective revolving credit agreements, as well as the future ability of ANGIHomeservices to add one or more incremental term loans or revolving facilities under its credit agreement, the availability of which will depend on,among other things, compliance with the covenants in the agreements governing such indebtedness.24Table of ContentsWe cannot assure you that we, Match Group of ANGI Homeservices will generate sufficient cash flow from our respective operations, or that we, MatchGroup or ANGI Homeservices will be able to otherwise take the actions described immediately above, in amounts sufficient to fund our respective liquidityneeds. See also "-We may not freely access the cash of Match Group, ANGI Homeservices and their respective subsidiaries" below.If cash flows and capital resources are insufficient to service indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seekadditional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduleddebt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition atsuch time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could furtherrestrict our business operations. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. In theabsence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets oroperations, sell equity, and/or negotiate with our lenders to restructure the applicable debt, in order to meet our debt service and other obligations. We maynot be able to consummate those dispositions for fair market value or at all. The agreements governing the indebtedness of IAC, Match Group and/or ANGIHomeservices may restrict, or market or business conditions may limit, our ability to avail ourselves of some or all of these options. Furthermore, anyproceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due.We may not freely access the cash of Match Group, ANGI Homeservices and their respective subsidiaries.IAC's potential sources of cash include our available cash balances, net cash from the operating activities of certain of our subsidiaries, availability underour revolving credit facility and proceeds from asset sales, including marketable securities. The ability of our operating subsidiaries to pay dividends or tomake other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which theymay be or become subject. The agreements governing the indebtedness of Match Group and ANGI Homeservices limit their ability to pay dividends or makedistributions, loans or advances to stockholders, including IAC. In addition, because Match Group and ANGI Homeservices are separate and distinct legalentities with public shareholders, they have no obligation to provide us with funds, whether by dividends, distributions, loans or other payments.Variable rate indebtedness will subject us to interest rate risk, which could cause our debt service obligations to increase significantly.As of December 31, 2017, Match Group and ANGI Homeservices had $425 million and $275 million, respectively, of indebtedness outstanding undertheir respective term loans. Borrowings under both term loans are, and any borrowings under the revolving credit facilities of IAC or Match Group will be, atvariable interest rates. Indebtedness that bears interest at variable rates exposes us to interest rate risk. Match Group's term loan bears interest at LIBOR plus2.50% and as of December 31, 2017, the rate in effect was 3.85%. If LIBOR were to increase or decrease by 100 basis points, then the annual interest expenseon the Match Group term loan would increase or decrease by $4.3 million. The ANGI Homeservices term loan bears interest at LIBOR plus 2.00% and as ofDecember 31, 2017, the rate in effect was 3.38%. If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the ANGIHomeservices term loan would increase or decrease by $2.8 million. See also "Item 7A-Quantitative and Qualitative Disclosures About Market Risk."You may experience dilution with respect to your investment in IAC, and IAC may experience dilution with respect to its investments in Match Group andANGI Homeservices, as a result of compensatory equity awards.We have issued various compensatory equity awards, including stock options, stock appreciation rights and restricted stock unit awards denominated inshares of our common stock, as well as in equity of our various consolidated subsidiaries, including Match Group and ANGI Homeservices. For moreinformation regarding these awards and their impact on our diluted earnings per share calculation, see "Note 13-Stock-Based Compensation" and "Note 12-Earnings Per Share,” respectively, to the consolidated financial statements included in "Item 8-Consolidated Financial Statements and Supplementary Data."The issuance of shares of IAC common stock in settlement of these equity awards could dilute your ownership interest in IAC. Awards denominated inshares of Match Group or ANGI Homeservices common stock that are settled in shares of those subsidiaries could dilute IAC’s ownership interest in MatchGroup and ANGI Homeservices, respectively. The dilution of our ownership stake(s) in Match Group and/or ANGI Homeservices could impact our ability,among other things, to maintain Match Group and/or ANGI Homeservices as part of our consolidated tax group for U.S. federal income tax purposes, to effecta tax-free distribution of our Match Group and/or ANGI Homeservices stake(s) to our stockholders or to maintain control of Match Group and/or ANGIHomeservices. As we generally have the right to maintain our levels of ownership in Match Group25Table of Contentsand ANGI Homeservices to the extent Match Group or ANGI Homeservices issues additional shares of their respective capital stock in the future pursuant toinvestor rights agreements, we do not intend to allow any of the foregoing to occur.With respect to awards denominated in shares of our non-publicly traded subsidiaries, we estimate the dilutive impact of those awards based on ourestimated fair value of those subsidiaries. Those estimates may change from time to time, and the fair value determined in connection with vesting andliquidity events could lead to more or less dilution than reflected in our diluted earnings per share calculation.We may not be able to identify suitable acquisition candidates and even if we do so, we may experience operational and financial risks in connection withacquisitions and/or not realize anticipated benefits following acquisitions. In addition, some of the businesses we acquire may incur significant losses fromoperations or experience impairment of carrying value.We have made numerous acquisitions in the past and we continue to seek to identify potential acquisition candidates that will allow us to apply ourexpertise to expand their capabilities, as well as maximize our existing assets. As a result, our future growth may depend, in part, on acquisitions. We may notbe able to identify suitable acquisition candidates or complete acquisitions on satisfactory pricing or other terms and we expect to continue to experiencecompetition in connection with our acquisition-related efforts.Even if we identify what we believe to be suitable acquisition candidates and negotiate satisfactory terms, we may experience operational and financialrisks in connection with acquisitions, and to the extent that we continue to grow through acquisitions, we will need to:•properly value prospective acquisitions, especially those with limited operating histories;•successfully integrate the operations, as well as the accounting, financial controls, management information, technology, human resources and otheradministrative systems, of acquired businesses with our existing operations and systems;•successfully identify and realize potential synergies among acquired and existing businesses;•retain or hire senior management and other key personnel at acquired businesses; and•successfully manage acquisition‑related strain on the management, operations and financial resources of IAC and its businesses and/or acquiredbusinesses.We may not be successful in addressing these challenges or any other problems encountered in connection with historical and future acquisitions,including the Combination. In addition, the anticipated benefits of one or more acquisitions, including the anticipated synergies, cost savings and growthopportunities we expect to realize as a result of the Combination, may not be realized. Also, future acquisitions could result in increased operating losses,potentially dilutive issuances of equity securities and the assumption of contingent liabilities. Lastly, the value of goodwill and other intangible assetsacquired could be impacted by one or more continuing unfavorable events and/or trends, which could result in significant impairment charges. Theoccurrence of any of these events could have an adverse effect on our business, financial condition and results of operations.We operate in various international markets, some in which we have limited experience. As a result, we face additional risks in connection with ourinternational operations. Also, we may not be able to successfully expand into new, or further into our existing, international markets.We currently operate in various jurisdictions abroad and may continue to expand our international presence. In order for our products and services inthese jurisdictions to achieve widespread acceptance, commercial use and acceptance of the Internet (particularly via mobile devices) must continue to grow,which growth may occur at slower rates than those experienced in the United States. Moreover, we must continue to successfully tailor our products andservices to the unique customs and cultures of foreign jurisdictions, which can be difficult and costly and the failure to do so could slow our internationalgrowth and adversely impact our business, financial condition and results of operations.Operating abroad, particularly in jurisdictions where we have limited experience, exposes us to additional risks, including among others:•operational and compliance challenges caused by distance, language and cultural differences;26Table of Contents•difficulties in staffing and managing international operations;•differing levels of social and technological acceptance of our products and services or lack of acceptance of them generally;•foreign currency fluctuations;•restrictions on the transfer of funds among countries and back to the United States and costs associated with repatriating funds to the United States;•differing and potentially adverse tax laws;•multiple, conflicting and changing laws, rules and regulations, and difficulties understanding and ensuring compliance with those laws by both ouremployees and our business partners, over whom we exert no control;•competitive environments that favor local businesses;•limitations on the level of intellectual property protection; and•trade sanctions, political unrest, terrorism, war and epidemics or the threat of any of these events.The occurrence of any or all of these events could adversely affect our international operations, which could in turn adversely affect our business,financial condition and results of operations. Our success in international markets will also depend, in part, on our ability to identify potential acquisitioncandidates, joint venture or other partners, and to enter into arrangements with these parties on favorable terms and successfully integrate their businesses andoperations with our own.A variety of new laws, or new interpretations of existing laws, could subject us to claims or otherwise harm our business.We are subject to a variety of laws in the U.S. and abroad that are costly to comply with, can result in negative publicity and diversion of managementtime and effort, can subject us to claims or other remedies and otherwise harm our business. Some of these laws, such as income, sales, use, value‑added andother tax laws and consumer protection laws, are applicable to businesses generally and others are unique to the various types of businesses in which we areengaged. Many of these laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address theunique issues of the Internet and related technologies. Laws that do reference the Internet are being interpreted by the courts, but their applicability and scoperemain uncertain. In addition, evolving Internet business practices may attract increased legal and regulatory attention. For example, the U.S. Federal TradeCommission continues to monitor the use of paid search and online "native" advertising (a form of advertising in which sponsored content is presented in amanner that could be viewed as similar to traditional editorial content) to ensure that it is presented in a manner that is not confusing or deceptive.Any failure on our part to comply with applicable laws may subject us to additional liabilities, which could adversely affect our business, financialcondition and results of operations. In addition, if the laws to which we are currently subject are amended or interpreted adversely to our interests, or if newadverse laws are adopted, our products and services might need to be modified to comply with such laws, which would increase our costs and could result indecreased demand for our products and services to the extent that we pass on such costs to our users. Specifically, in the case of tax laws, positions that wehave taken or will take are subject to interpretation by the relevant taxing authorities. While we believe that the positions we have taken to date comply withapplicable law, there can be no assurances that the relevant taxing authorities will not take a contrary position, and if so, that such positions will notadversely affect us. Any events of this nature could adversely affect our business, financial condition and results of operations.Moreover, laws that adversely impact use (or growth in use) of the Internet or that regulate the practices of third parties upon which we rely to provideour online products and services could decrease user demand for our products and services, increase costs or otherwise harm our business. For example, inDecember 2017, the U.S. Federal Communications Commission (the "FCC") adopted an order reversing its May 2016 Open Internet Order, which codified"network neutrality," the principle that Internet service providers should treat all data traveling through their networks the same, not discriminating orcharging differentially by content, website, platform or application. As a result of this reversal, broadband Internet access providers now have more power toprioritize different types of Internet traffic and set pricing, which means they could discriminate against Internet traffic of our businesses in favor of others (byway of blocking or throttling traffic from our businesses, "paid prioritization" of traffic through their networks generally or other similar actions) and/orcharge us to provide our products and27Table of Contentsservices via their networks. If any of these actions were to occur, our costs could increase and our business, financial condition and results of operationswould be adversely affected.Lastly, the passage or adoption of any new or amended legislation or regulation affecting the ability of our businesses to periodically charge forrecurring membership or subscription payments could harm our business. For example, the European Union Payment Services directive, which becameeffective in January 2018 and regulates payment services and payment service providers, could restrict the ability of certain of our businesses to process auto-renewal payments for, as well offer promotional or differentiated pricing tiers to, users who reside in the European Union.We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties.We rely heavily upon our trademarks and related domain names and logos to market our brands and to build and maintain brand loyalty and recognition,as well as upon trade secrets. We also rely, to a lesser extent, upon patented and patent-pending proprietary technologies with expiration dates ranging from2019 to 2038.We rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protect ourvarious intellectual property rights. For example, we have generally registered and continue to apply to register and renew, or secure by contract whereappropriate, trademarks and service marks as they are developed and used, and reserve, register and renew domain names as we deem appropriate. Effectivetrademark protection may not be available or may not be sought in every country in which products and services are made available and contractual disputesmay affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available.We also generally seek to apply for patents or for other similar statutory protections as and if we deem appropriate, based on then current facts andcircumstances, and will continue to do so in the future. No assurances can be given that any patent application we have filed (or will file) will result in apatent being issued, or that any existing or future patents will afford adequate protection against competitors and similar technologies. In addition, noassurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon patents we own.Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise,third parties could copy or otherwise obtain and use our intellectual property without authorization and/or laws (or interpretations of laws) regarding theenforceability of our existing intellectual property rights can change in an adverse manner. The occurrence of any of these events could result in the erosionof our brands and limitations on our ability to control marketing on or through the Internet using our various domain names, as well as impede our ability toeffectively compete against competitors with similar technologies, any of which could adversely affect our business, financial condition and results ofoperations.From time to time, we have been subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement oftrademarks, copyrights, patents and other intellectual property rights held by third parties. In addition, litigation may be necessary in the future to enforce ourintellectual property rights, protect our trade secrets or to determine the validity and scope of proprietary rights claimed by others. Any litigation of thisnature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adverselyaffect our business, financial condition and results of operations. Patent litigation tends to be particularly protracted and expensive.Item 1B. Unresolved Staff CommentsNot applicable.Item 2. PropertiesIAC believes that the facilities for its management and operations are generally adequate for its current and near-term future needs. IAC's facilities, mostof which are leased by IAC's businesses in various cities and locations in the United States and various jurisdictions abroad, generally consist of executiveand administrative offices, operations centers, data centers and sales offices.28Table of ContentsAll of IAC's leases are at prevailing market rates. IAC believes that the duration of each lease is adequate. IAC believes that its principal properties,whether owned or leased, are currently adequate for the purposes for which they are used and are suitably maintained for these purposes. IAC does notanticipate any future problems renewing or obtaining suitable leases for any of its principal businesses. IAC's approximately 202,500 square foot corporateheadquarters in New York, New York houses offices for IAC corporate and various IAC businesses within the following segments: Match Group, Video,Applications and Publishing.Item 3. Legal ProceedingsIn the ordinary course of business, the Company and its subsidiaries are parties to litigation involving property, personal injury, contract, intellectualproperty and other claims. The amounts that may be recovered in such matters may be subject to insurance coverage.Rules of the Securities and Exchange Commission require the description of material pending legal proceedings (other than ordinary, routine litigationincidental to the registrant's business) to which the registrant or any of its subsidiaries is a party or to which any of their property is subject and advise thatproceedings ordinarily need not be described if they primarily involve claims for damages for amounts (exclusive of interest and costs) not exceeding 10% ofthe current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of Company management, none of the pending litigationmatters that the Company and its subsidiaries are defending, including the litigation matters described below, involves or is likely to involve amounts of thatmagnitude. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether anysuch matters may be material to our financial position or operations based upon the standard set forth in the rules of the Securities and ExchangeCommission.Securities Class Action Litigation against Match GroupAs previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, on February 26, 2016, a putative nationwideclass action was filed in federal court in Texas against Match Group, five of its officers and directors, and twelve underwriters of Match Group's initial publicoffering in November 2015. See David M. Stein v. Match Group, Inc. et al., No. 3:16-cv-549 (U.S. District Court, Northern District of Texas). The complaintalleged that Match Group's registration statement and prospectus issued in connection with its initial public offering were materially false and misleadinggiven their failure to state that: (i) Match Group's Non-dating business would miss its revenue projection for the quarter ended December 31, 2015, and (ii)ARPPU (as defined in "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations-General-Key Terms") would declinesubstantially in the quarter ended December 31, 2015. The complaint asserted that these alleged failures to timely disclose material information causedMatch Group's stock price to drop after the announcement of its earnings for the quarter ended December 31, 2015. The complaint pleaded claims under theSecurities Act of 1933 for untrue statements of material fact in, or omissions of material facts from, the registration statement, the prospectus, and relatedcommunications in violation of Sections 11 and 12 and, as to the officer/director defendants only, control-person liability under Section 15 for MatchGroup’s alleged violations. The complaint sought among other relief class certification and damages in an unspecified amount.On March 9, 2016, a virtually identical class action complaint was filed in the same court against the same defendants by a different named plaintiff. SeeStephany Kam-Wan Chan v. Match Group, Inc. et al., No. 3:16-cv-668 (U.S. District Court, Northern District of Texas). On April 25, 2016, Judge Boyle in theChan case issued an order granting the parties’ joint motion to transfer that case to Judge Lindsay, who is presiding over the earlier-filed Stein case. On April27, 2016, various current or former Match Group shareholders and their respective law firms filed motions seeking appointment as lead plaintiff(s) and lead orliaison counsel for the putative class. On April 28, 2016, the Court issued orders: (i) consolidating the Chan case into the Stein case, (ii) approving theparties’ stipulation to extend the defendants’ time to respond to the complaint until after the Court has appointed a lead plaintiff and lead counsel for theputative class and has set a schedule for the plaintiff’s filing of a consolidated complaint and the defendants’ response to that pleading, and (iii) referring thevarious motions for appointment of lead plaintiff(s) and lead or liaison counsel for the putative class to a United States Magistrate Judge for determination.On June 9, 2016, the Magistrate Judge issued an order appointing two lead plaintiffs, two law firms as co-lead plaintiffs’ counsel, and a third law firm asplaintiffs’ liaison counsel. In accordance with this order, the consolidated case is now captioned Mary McCloskey et ano. v. Match Group, Inc. et al., No.3:16-CV-549-L.On July 27, 2016, the parties submitted to the Court a joint status report proposing a schedule for the plaintiffs’ filing of a consolidated amendedcomplaint and the parties’ briefing of the defendants’ contemplated motion to dismiss the consolidated complaint. On August 17, 2016, the Court issued anorder approving the parties’ proposed schedule. On September 9, 2016, in accordance with the schedule, the plaintiffs filed an amended consolidatedcomplaint. The amended pleading focused solely on allegedly misleading statements or omissions concerning the Match Group’s Non-dating business. Thedefendants filed motions to dismiss the amended consolidated complaint on November 8, 2016. The plaintiffs filed oppositions to the motions on29Table of ContentsDecember 23, 2016, and the defendants filed replies to the oppositions on February 6, 2017. On September 27, 2017, the court issued an opinion and order:(i) denying, without prejudice to renewal, the defendants’ motions and (ii) directing the plaintiffs to file a further amended pleading addressing thedeficiencies in the amended consolidated complaint that were identified in the defendants’ motions. On October 30, 2017, the plaintiffs filed a secondamended consolidated complaint, which among other things, dropped their claim under Section 12 of the Securities Act of 1933. Pursuant to an agreed-uponbriefing schedule approved by the court, the defendants filed motions to dismiss the second amended consolidated complaint on December 15, 2017, theplaintiffs filed an opposition to the motions on January 29, 2018, and the defendants filed replies to the opposition on February 20, 2018. We and MatchGroup believe that the material allegations and claims in this lawsuit are without merit and intend to continue to defend vigorously against it.Consumer Class Action Challenging Tinder’s Age-Tiered PricingOn 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 RightsAct by offering and charging users age 30 and over a higher price than younger users for subscriptions to its premium Tinder Plus service. The complaintsought certification of a class of California Tinder Plus subscribers age 30 and over and damages in an unspecified amount. On September 21, 2015, Tinderfiled a demurrer seeking dismissal of the complaint. On October 26, 2015, the court issued an opinion sustaining Tinder’s demurrer to the complaint withoutleave to amend, ruling that the age-based pricing differential for Tinder Plus subscriptions did not violate California law in essence because offering adiscount 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 thejudgment. On January 29, 2018, the California Court of Appeal (Second Appellate District, Division Three) issued an opinion reversing the judgment ofdismissal, ruling that the lower court had erred in sustaining Tinder’s demurrer because the complaint, as pleaded, stated a cognizable claim for violation ofthe 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, Tinderintends to file a petition with the California Supreme Court seeking interlocutory review of the Court of Appeal’s decision. We and Match Group believe thatthe allegations in this lawsuit are without merit and will continue to defend vigorously against it.Item 4. Mine Safety DisclosuresNot applicable.30Table of ContentsPART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket for Registrant's Common Equity and Related Stockholder MattersIAC common stock is quoted on the Nasdaq Global Select Market ("NASDAQ") under the ticker symbol "IAC." There is no established public tradingmarket for IAC Class B common stock. The table below sets forth, for the calendar periods indicated, the high and low sales prices per share for IAC commonstock as reported on NASDAQ. As February 28, 2018, the closing price of IAC common stock on NASDAQ was $148.91. High LowYear Ended December 31, 2017 Fourth Quarter$137.86 $116.59Third Quarter119.53 98.91Second Quarter107.98 72.84First Quarter77.46 64.69Year Ended December 31, 2016 Fourth Quarter$68.75 $60.39Third Quarter64.00 55.41Second Quarter57.14 45.37First Quarter60.56 38.82As of February 2, 2018, there were approximately 1,300 holders of record of the Company's common stock and five holders of record (all trusts for thebenefit of Mr. Diller and certain members of his family) of the Company's Class B common stock. As of the date of this report, there were six holders of record(Mr. Diller and five trusts for the benefit of Mr. Diller and certain members of his family) of the Company's Class B common stock. Because the substantialmajority of the outstanding shares of IAC common stock are held by brokers and other institutions on behalf of shareholders, IAC is not able to estimate thetotal number of beneficial shareholders represented by these record holders.We did not pay any cash or other dividends to holders of our common and Class B common stock in 2016 and 2017 and do not currently expect thatany cash or other dividends will be paid to holders of our common and Class B common stock in the near future. Any future cash or other dividenddeclarations are subject to the determination of IAC's Board of Directors.During the quarter ended December 31, 2017, the Company did not issue or sell any shares of its common stock or other equity securities pursuant tounregistered transactions.Issuer Purchases of Equity SecuritiesThe Company did not purchase any shares of its common stock during the quarter ended December 31, 2017. As of that date, 8,580,742 shares ofcommon stock remained available for repurchase under the Company's previously announced May 2016 repurchase authorization. IAC may purchase sharespursuant to this repurchase authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on thosefactors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.31Table of ContentsItem 6. Selected Financial DataThe following selected financial data for the five years ended December 31, 2017 should be read in conjunction with the consolidated financialstatements and accompanying notes included herein. Year Ended December 31, 2017 2016 2015 2014 2013 (In thousands, except per share data)Statement of Operations Data:(a) Revenue$3,307,239 $3,139,882 $3,230,933 $3,109,547 $3,022,987Earnings (loss) from continuing operations358,008 (16,151) 113,374 234,557 281,799Earnings from discontinued operations (b)— — — 174,673 1,926Net (earnings) loss attributable to noncontrolling interests(53,084) (25,129) 6,098 5,643 2,059Net earnings (loss) attributable to IAC shareholders304,924 (41,280) 119,472 414,873 285,784Earnings (loss) per share from continuing operations attributable to IAC shareholders: Basic$3.81 $(0.52) $1.44 $2.88 $3.40Diluted$3.18 $(0.52) $1.33 $2.71 $3.27 Dividends declared per share$— $— $1.36 $1.16 $0.96 December 31, 2017 2016 2015 2014 2013 (In thousands)Balance Sheet Data: Total assets$5,867,810 $4,645,873 $5,188,691 $4,241,421 $4,183,810Long-term debt: Current portion of long-term debt13,750 20,000 40,000 — —Long-term debt, net1,979,469 1,582,484 1,726,954 1,064,536 1,062,446_________________________________________________________________________(a)We recognized items that affected the comparability of results for the years 2017, 2016 and 2015, see "Item 7. Management's Discussion and Analysis of Financial Conditionand Results of Operations."(b)There were no discontinued operations for the three years ended December 31, 2017. For the year ended December 31, 2014, earnings from discontinued operations weredue to the release of tax reserves related to the expiration of the statutes of limitations for federal income taxes for the years 2001 through 2009.32Table of ContentsItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsKey Terms:When the following terms appear in this report, they have the meanings indicated below:Reportable Segments:•Match Group - is the world's leading provider of dating products, operating a portfolio of brands, including Tinder, Match, PlentyOfFish andOkCupid.•ANGI Homeservices - is the world's largest digital marketplace for home services, connecting millions of homeowners across the globe with homeservice professionals, and operates leading brands in eight countries, including HomeAdvisor and Angie's List.•Video - consists of Vimeo, Electus, IAC Films and Daily Burn.•Applications - consists of Consumer, which includes our direct-to-consumer downloadable desktop applications, Apalon, which houses our mobileoperations, and SlimWare, which houses our downloadable desktop software and service operations; and Partnerships, which includes our business-to-business partnership operations.•Publishing - consists of Premium Brands, which includes Dotdash, Dictionary.com, Investopedia and The Daily Beast; and Ask & Other, whichprimarily includes Ask Media Group, CityGrid and, for periods prior to its sale on June 30, 2016, ASKfm.•Other - consists of The Princeton Review, ShoeBuy and PriceRunner, for periods prior to their sales on March 31, 2017, December 30, 2016 andMarch 18, 2016, respectively.Operating metrics:In connection with the management of our businesses, we identify, measure and assess a variety of operating metrics. The principal metrics we use inmanaging our businesses are set forth below:Match Group•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 its products and includes both subscription and à la carte revenue.•Subscribers - are users who purchase a subscription to one of Match Group's products. Users who purchase only à la carte features are not included inSubscribers.•Average Subscribers - is the number of Subscribers at the end of each day in the relevant measurement period divided by the number of calendardays in that period.•Average Revenue per Subscriber (or "ARPU") - is Direct Revenue from Subscribers in the relevant measurement period (whether in the form ofsubscription or à la carte) 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.33Table of ContentsANGI Homeservices•Marketplace (formerly HomeAdvisor Domestic) Revenue - reflects revenue from the HomeAdvisor domestic marketplace service, includingconsumer connection revenue for consumer matches and membership subscription revenue from service professionals. It excludes other NorthAmerica operating subsidiaries within the segment.•Marketplace (formerly HomeAdvisor Domestic) Service Requests - are fully completed and submitted domestic customer service requests onHomeAdvisor.•Marketplace (formerly HomeAdvisor Domestic) Paying Service Professionals (or "Marketplace Paying SPs") - are the number of HomeAdvisordomestic service professionals that had an active membership and/or paid for consumer matches in the last month of the period.Video•Vimeo ending subscribers - are the number of subscribers to Vimeo's SaaS video tools at the end of the period.Operating costs and expenses:•Cost of revenue - consists primarily of traffic acquisition costs and includes (i) fees paid to Apple and Google related to the distribution and thefacilitation of in-app purchases of product features and (ii) payments made to partners who distribute our Partnerships customized browser-basedapplications and who integrate our paid listings into their websites. These payments include amounts based on revenue share and otherarrangements. Cost of revenue also includes production costs related to media produced by Electus and other businesses within our Video segment,hosting fees, compensation (including stock-based compensation expense) and other employee-related costs for personnel engaged in data centeroperations and Match Group customer service functions, credit card processing fees, content costs, and expenses associated with the operation of theCompany's data centers. For periods prior to the sale of The Princeton Review and ShoeBuy, cost of revenue also includes rent and cost for teachersand tutors and cost of products sold, including shipping and handling costs, respectively.•Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including fees paid to searchengines, social media sites and third parties that distribute our Consumer downloadable desktop applications, offline marketing, which is primarilytelevision advertising, and partner-related payments to those who direct traffic to the Match Group and ANGI Homeservices brands, andcompensation (including stock-based compensation expense) and other employee-related costs for personnel engaged in selling and marketing andsales support.•General and administrative expense - consists primarily of compensation (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources, and customer service functions (except for MatchGroup which includes customer service costs within cost of revenue), fees for professional services, facilities costs, bad debt expense, softwarelicense and maintenance costs and acquisition-related contingent consideration fair value adjustments (described below).•Product development expense - consists primarily of compensation (including stock-based compensation expense) and other employee-relatedcosts that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and relatedtechnology.•Acquisition-related contingent consideration fair value adjustments - relate to the portion of the purchase price of certain acquisitions that iscontingent upon the future operating performance of the acquired company. The amounts ultimately paid are generally dependent upon earningsperformance and/or operating metrics as stipulated in the relevant purchase agreements. The fair value of the liability is estimated at the date ofacquisition and adjusted each reporting period until the liability is settled. If the payment date of the liability is longer than one year, the amount isinitially recorded net of a discount, which is amortized as an expense each period. In a period where the acquired company is expected to performbetter than the previous estimate, the liability will be increased resulting in additional expense; and in a period when the acquired company isexpected to perform worse than the previous estimate, the liability will be decreased resulting in income. The year-over-year impact can besignificant, for example, if there is income in one period and expense in the other period.34Table of ContentsLong-term debt:•Exchangeable Notes - On October 2, 2017, a finance subsidiary of the Company issued $517.5 million aggregate principal of 0.875% ExchangeableSenior Notes due October 1, 2022, which notes are guaranteed by the Company and are exchangeable into shares of the Company's common stock.A portion of the proceeds were used to repay the outstanding balance of the 4.875% Senior Notes (described below). Interest is payable each April 1and October 1, which commences on April 1, 2018. The outstanding balance of the Exchangeable Notes as of December 31, 2017 is $517.5 million.Each $1,000 of principal of the Exchangeable Notes is exchangeable for 6.5713 shares of the Company's common stock, which is equivalent to anexchange price of approximately $152.18 per share, subject to adjustment upon the occurrence of specified events.•4.75% Senior Notes - IAC's 4.75% Senior Notes due December 15, 2022, with interest payable each June 15 and December 15, a portion of whichwere exchanged for the Match Group 6.75% Senior Notes (described below) on November 16, 2015. The outstanding balance of the 4.75% SeniorNotes as of December 31, 2017 is $34.9 million.•4.875% Senior Notes - The outstanding balance of $361.9 million was redeemed on November 30, 2017, using a portion of the proceeds from theExchangeable Notes.•Match Exchange Offer - Match Group exchanged $445 million of Match Group 6.75% Senior Notes for a substantially like amount of 4.75%Senior Notes on November 16, 2015.•Match Group 6.75% Senior Notes - Match Group's 6.75% Senior Notes due December 15, 2022, with interest payable each June 15 andDecember 15. Match Group's 6.75% Senior Notes were issued in exchange for the 4.75% Senior Notes on November 16, 2015. The outstandingbalance of $445.2 million was redeemed on December 17, 2017 with the proceeds from the Match Group 5.00% Senior Notes (described below) andcash on hand.•Match Group Term Loan - a seven-year term loan entered into by Match Group on November 16, 2015 in the original amount of $800 million.During 2016, Match Group made $450 million of principal payments, $400 million of which was funded from proceeds of the 6.375% Senior Notes(described below). On August 14, 2017, the Match Group Term Loan was increased by $75 million to $425 million, repriced the outstandingbalance at LIBOR plus 2.50% and reduced the LIBOR floor to 0.00%. The outstanding balance of the Match Group Term Loan as of December 31,2017 is $425 million. The interest rate on the Match Group Term Loan at December 31, 2017 is 3.85%.•Match Group 6.375% Senior Notes - Match Group's 6.375% Senior Notes due June 1, 2024, with interest payable each June 1 and December 1. Theoutstanding balance of the Match Group 6.375% Senior Notes as of December 31, 2017 is $400 million.•Match Group 5.00% Senior Notes - Match Group's 5.00% Senior Notes due December 15, 2027, with interest payable each June 15 andDecember 15, which commences on June 15, 2018. The proceeds, along with cash on hand, were used to redeem the outstanding balance of theMatch Group 6.75% Senior Notes. The outstanding balance of the Match Group 5.00% Senior Notes as of December 31, 2017 is $450 million.•ANGI Homeservices Term Loan - a five-year term loan entered into by ANGI Homeservices on November 1, 2017 in the amount of $275 million.The ANGI Homeservices Term Loan currently bears interest at LIBOR plus 2.00%. The outstanding balance of the ANGI Homeservices Term Loan asof December 31, 2017 is $275 million. The interest rate on the ANGI Homeservices Term Loan at December 31, 2017 is 3.38%.See "Note 9—Long-term Debt" to the consolidated financial statements included in "Item 8. Consolidated Financial Statements and SupplementaryData" for further information.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.35Table of ContentsMANAGEMENT OVERVIEWIAC is a leading media and Internet company composed of widely known consumer brands, such as Match, Tinder, PlentyOfFish and OkCupid, whichare part of Match Group's online dating portfolio, HomeAdvisor and Angie's List, which are operated by ANGI Homeservices, as well as Vimeo, Dotdash,Dictionary.com, The Daily Beast and Investopedia.Sources of RevenueMatch Group's revenue is primarily derived directly from users in the form of recurring subscription fees, which typically provide unlimited access to abundle of features for a specific period of time. Revenue is also derived from à la carte features, where users pay a fee for a specific action or event, and fromonline advertisers who pay to reach our large audiences.ANGI Homeservices revenue is primarily derived from consumer connection revenue, which includes fees paid by service professionals for consumermatches (regardless of whether the professional ultimately provides the requested service) and membership subscription fees paid by service professionals.Consumer connection revenue varies based upon certain factors including the service requested, type of match (such as Instant Booking, Instant Connect,same day service or next day service) and geographic location of service. Effective with the Combination (described below), revenue is also derived fromAngie's List sales of time-based advertising to service professionals and membership subscription fees from consumers.A substantial portion of the revenue from our Applications and Publishing segments is derived from online advertising, most of which is attributable toour services agreement with Google Inc. ("Google"). The Company's services agreement became effective on April 1, 2016, following the expiration of theprevious services agreement. The services agreement expires on March 31, 2020; however, the Company may choose to terminate the agreement effectiveMarch 31, 2019. The services agreement requires that we comply with certain guidelines promulgated by Google, and Google may generally unilaterallyupdate its policies and guidelines without advance notice. Any such updates could in turn require modifications to, or prohibit and/or render obsolete certainof our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial conditionand results of operations. For the years ended December 31, 2017, 2016 and 2015, revenue earned from Google was $740.7 million, $824.4 million and $1.3billion, respectively. For the years ended December 31, 2017, 2016 and 2015, revenue earned from Google represents 83%, 87% and 94% of Applicationsrevenue and 71%, 73% and 83% of Publishing revenue, respectively.The revenue earned by our Video segment is derived from subscriptions, media production and distribution, and advertising.The Princeton Review's revenue was primarily earned from fees received directly from students for in-person and online test preparation classes, accessto online test preparation materials and individual tutoring services. ShoeBuy's revenue was derived principally from merchandise sales. PriceRunner'srevenue was derived principally from advertising.Strategic Partnerships, Advertiser Relationships and Online AdvertisingA meaningful portion of the Company's revenue is attributable to the services agreement with Google described above. For the years endedDecember 31, 2017, 2016 and 2015, revenue earned from Google represents 22%, 26% and 40%, respectively, of our consolidated revenue.We pay traffic acquisition costs, which consist of fees paid to Apple and Google related to the distribution and the facilitation of in-app purchases ofproduct features and payments made to partners who distribute our Partnerships customized browser-based applications and who integrate our paid listingsinto their websites. We also pay to market and distribute our services on third-party distribution channels, such as search engines and social media websitessuch as Facebook. In addition, some of our businesses manage affiliate programs, pursuant to which we pay commissions and fees to third parties based onrevenue earned. These distribution channels might also offer their own services and products, as well as those of other third parties, which compete with thosewe offer.We market and offer our services and products to consumers through branded websites, allowing consumers to transact directly with us in a convenientmanner. We have made, and expect to continue to make, substantial investments in online and offline advertising to build our brands and drive traffic to ourwebsites and consumers and advertisers to our businesses.36Table of Contents2017 DevelopmentsCombination and AcquisitionsOn October 18, 2017, Vimeo acquired Livestream, a leading live video solution that powers millions of events a year.On September 29, 2017, the Company's HomeAdvisor segment and Angie's List, Inc. ("Angie's List") combined under a new publicly traded companycalled ANGI Homeservices Inc. (the "Combination"). At December 31, 2017, IAC owned 86.9% and 98.5% of the economic and voting interest, respectively,of ANGI Homeservices. See "Note 4—Business Combination" to the consolidated financial statements included in "Item 8. Consolidated FinancialStatements and Supplementary Data" for additional information related to the Combination. In connection with the Combination, the Company changed thename of its HomeAdvisor segment to ANGI Homeservices and year-over-year comparisons for financial results for this segment are to the historical results ofthe HomeAdvisor segment (adjusted to reflect corporate allocations from IAC). During the year ended December 31, 2017, the Company incurred $44.1million in costs related to this transaction (including severance, retention, transaction and integration related costs) as well as deferred revenue write-offs of$7.8 million. The Company expects the remaining aggregate amount of transaction-related expenses, including deferred revenue write-offs, during 2018 tobe in the range of $10 million to $20 million. The Company also incurred $122.1 million in stock-based compensation expense during 2017 related to themodification of previously issued HomeAdvisor vested and unvested equity awards, which were converted into ANGI Homeservices' equity awards, theexpense related to previously issued Angie's List equity awards and the acceleration of certain Angie's List equity awards resulting from the termination ofemployees in connection with the Combination. Stock-based compensation expense arising from the Combination is expected to be approximately $70million in 2018.HomeAdvisor acquired controlling interests in MyBuilder Limited ("MyBuilder") on March 24, 2017, and HomeStars Inc. ("HomeStars") on February 8,2017, leading home services platforms in the United Kingdom and Canada, respectively.Financing TransactionsOn December 4, 2017, Match Group completed a private offering of $450 million aggregate principal amount of its 5.00% Senior Notes due December15, 2027. The proceeds from these notes, along with cash on hand, were used to redeem the outstanding balance of the Match Group 6.75% Senior Notes of$445.2 million on December 17, 2017.On November 1, 2017, ANGI Homeservices borrowed $275 million under a five-year term loan facility.On October 2, 2017, a finance subsidiary of the Company issued $517.5 million aggregate principal amount of Exchangeable Notes due October 1,2022, which notes are guaranteed by the Company and are exchangeable into shares of the Company's common stock. The proceeds from these notes were, inpart, loaned to IAC, which repaid the outstanding balance of its 4.875% Senior Notes of $361.9 million on November 30, 2017. Each $1,000 of principal ofthe Exchangeable Notes is exchangeable for 6.5713 shares of the Company's common stock, which is equivalent to an exchange price of approximately$152.18 per share, subject to adjustment upon the occurrence of specified events.On August 14, 2017, Match Group increased its Term Loan by $75 million to $425 million, repriced the outstanding balance at LIBOR plus 2.50% andreduced the LIBOR floor to 0.00%. Previously, the interest charged on the Match Group Term Loan was LIBOR plus 3.25%, with a LIBOR floor of 0.75%.Other DevelopmentsDuring 2017, the Company repurchased 0.7 million shares of common stock at an average price of $69.73 per share, or $50.1 million in aggregate.On October 23, 2017, Match Group sold a cost method investment for net proceeds of $60.2 million. The gain on sale of $9.1 million is included in"Other (expense) income, net" in the accompanying consolidated statement of operations.In July 2017, Match Group elected to convert all outstanding equity awards of its wholly-owned subsidiary Tinder, which awards were primarily heldby current and former Tinder employees, to stock options of Match Group (the "Tinder Equity Plan Settlement"). Subsequently, during 2017, Match Groupmade cash payments of approximately $520 million to cover both withholding taxes paid on behalf of employees exercising these converted awards, as theseawards were net settled, and the purchase of certain fully vested awards.37Table of ContentsOn March 31, 2017, Match Group sold its non-dating business, consisting of The Princeton Review. The non-dating business does not meet thethreshold to be reflected as a discontinued operation at the IAC level. The Company moved the non-dating business to its “Other” segment effective March31, 2017 and prior period segment data has been recast to conform to this presentation.2017 Consolidated ResultsIn 2017, the Company's revenue increased $167.4 million, or 5%, operating income increased $221.1 million from a loss of $32.6 million in the prioryear and Adjusted EBITDA grew $74.1 million, or 15%. Revenue increased due primarily to an increase of $237.5 million from ANGI Homeservices due, inpart, to the Combination, growth of $212.6 million from Match Group and $48.3 million from Video, partially offset by a decline of $259.4 million fromOther due to the sales of ShoeBuy, The Princeton Review and PriceRunner on December 30, 2016, March 31, 2017 and March 18, 2016, respectively, and adecline of $45.5 million from Publishing primarily due to the effects of the Google contract. The operating income increase was due primarily to theinclusion in 2016 of a $275.4 million goodwill impairment charge at Publishing, an increase of $74.1 million in Adjusted EBITDA, described below, and adecrease of $37.3 million in amortization of intangibles, partially offset by an increase of $159.8 million in stock-based compensation expense due, in part,to the Combination. The goodwill impairment charge at Publishing in 2016 was driven by the impact from the Google contract, traffic trends andmonetization challenges. The Adjusted EBITDA increase was due primarily to growth of $65.6 million from Match Group, a profit from Publishing of $31.5million in 2017 compared to a loss of $7.6 million in 2016 and growth of $4.5 million from Applications, partially offset by increased losses of $14.5 millionfrom Corporate, $9.2 million from Video and a decline of $8.0 million from ANGI Homeservices due primarily to costs of $44.1 million (including severance,retention, transaction and integration related costs) and deferred revenue write-offs of $7.8 million related to the Combination.Other events affecting year-over-year comparability that occurred prior to 2017 include:(i)the sale of ASKfm on June 30, 2016 (reflected in the Publishing segment)(ii)acquisitions in 2016 and 2015:•MyHammer Holding AG ("MyHammer") on November 3, 2016 (reflected in the ANGI Homeservices segment)•PlentyOfFish on October 28, 2015 (reflected in the Match Group segment); and•Pairs (also known as Eureka) on April 24, 2015 (reflected in the Match Group segment).(iii)costs of $4.9 million and $16.8 million in 2016 and 2015, respectively, related to the consolidation and streamlining of technology systems andEuropean operations at the Match Group segment. This project was complete as of December 31, 2016.(iv)restructuring charges in 2016 of $15.6 million and $2.6 million at the Publishing and Applications segments, respectively, to reduce costs inlight of significant declines in revenue from the new Google contract, which was effective April 1, 2016, as well as declines from certain otherlegacy businesses.38Table of ContentsResults of Operations for the Years Ended December 31, 2017, 2016 and 2015Revenue Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Match Group$1,330,661 $212,551 19 % $1,118,110 $208,405 23 % $909,705ANGI Homeservices736,386 237,496 48 % 498,890 137,689 38 % 361,201Video276,994 48,345 21 % 228,649 15,332 7 % 213,317Applications577,998 (26,142) (4)% 604,140 (156,608) (21)% 760,748Publishing361,837 (45,476) (11)% 407,313 (284,373) (41)% 691,686Other*23,980 (259,385) (92)% 283,365 (11,456) (4)% 294,821Inter-segment elimination(617) (32) (6)% (585) (40) (7)% (545)Total$3,307,239 $167,357 5 % $3,139,882 $(91,051) (3)%$3,230,933________________________* The Other segment consists of the results of PriceRunner, ShoeBuy and The Princeton Review for periods prior to the sales of these businesses, which occurred on March 18, 2016,December 30, 2016 and March 31, 2017, respectively. Beginning in the second quarter of 2017, as a result of the sales of these businesses, the Other segment does not include anyfinancial results.For the year ended December 31, 2017 compared to the year ended December 31, 2016Match Group revenue increased 19% driven by International Direct Revenue growth of $146.3 million, or 38%, and North America Direct Revenuegrowth of $67.6 million, or 10%. Both International and North America Direct Revenue growth were driven by higher Average Subscribers, up 33% and 9%,respectively, due primarily to continued growth in Subscribers at Tinder. Total ARPU increased 1%.ANGI Homeservices revenue increased 48% driven by growth of $152.5 million, or 36%, at Marketplace (formerly HomeAdvisor Domestic) and 55% atthe European business. Marketplace Revenue growth was driven by a 37% increase in Marketplace Service Requests to 18.1 million and a 26% increase inMarketplace Paying SPs to 181,000. Revenue growth at the European business was driven by the acquisitions of controlling interests in MyHammer onNovember 3, 2016 and MyBuilder on March 24, 2017, as well as by organic growth across other regions. Revenue in 2017 includes a contribution of $58.9million from Angie's List since the date of the Combination, which reflects a reduction in revenue of $7.8 million due to the write-off of deferred revenuerelated to the Combination.Video revenue increased 21% driven by the sales of The Meyerowitz Stories (New and Selected) and The Legacy of a Whitetail Deer Hunter and therelease of Lady Bird at IAC Films and strong growth at Vimeo, which had ending subscribers of 873,000, an increase of 14% year-over-year, partially offsetby a decline at Electus.Applications revenue decreased 4% due to a decrease of $37.8 million, or 27%, in Partnerships, partially offset by an increase of $11.7 million, or 3%,in Consumer. Partnerships revenue continued to decline due primarily to the loss of certain partners. The growth in Consumer was due primarily to growth of37% at Apalon, driven by higher advertising and subscription revenue, and growth at SlimWare, driven by higher subscription revenue, partially offset bylower revenue per query at the Consumer desktop applications business. Apalon and SlimWare together comprised 16% of total Applications revenue in2017.Publishing revenue decreased 11% due to $58.8 million, or 20%, lower Ask & Other revenue, partially offset by $13.3 million, or 12%, higher PremiumBrands revenue. Ask & Other revenue decreased due to declines in paid traffic primarily as a result of the Google contract. Premium Brands revenue increasewas due to growth at Investopedia and Dotdash due to an increase in organic traffic and advertising revenue.For the year ended December 31, 2016 compared to the year ended December 31, 2015Match Group revenue increased 23% driven by higher Average Subscribers at both North America and International, up 22% and 46%, respectively,due primarily to growth in Subscribers at Tinder and the contribution from the 2015 acquisition of PlentyOfFish. This revenue growth was partially offset bya 6% decline in ARPU. North America and International ARPU39Table of Contentsdecreased 5% and 7%, respectively, due primarily to the continued mix shift towards lower ARPU brands, including Tinder and PlentyOfFish, which hadlower price points compared to Match Group's more established brands. North America ARPU decline was partially offset by an increase in mix-adjustedrates.ANGI Homeservices revenue increased 38% due primarily to 44% growth at Marketplace and 18% growth at the European business. MarketplaceRevenue growth was driven by a 34% increase in Marketplace Service Requests to 13.2 million and a 41% increase in Marketplace Paying SPs to 143,000.Revenue growth at the European business was driven by organic growth across all regions as well as the acquisition of a controlling interest in MyHammer.Video revenue increased 7% due primarily to growth at Electus, Vimeo and Daily Burn, partially offset by lower revenue from IAC Films as 2015benefited from the release of the movie While We're Young. Vimeo's ending subscribers were 768,000, an increase of 14%, compared to 2015.Applications revenue decreased 21% due to a 39% decline in Partnerships and a 12% decline in Consumer. Partnerships revenue decreased dueprimarily to the loss of certain partners. The Consumer decline was driven by lower search revenue from our downloadable desktop applications dueprimarily to lower monetization, partially offset by strong growth at Apalon and SlimWare, which together comprised 12% of total Applications revenue in2016.Publishing revenue decreased 41% due to 54% lower Ask & Other revenue and 25% lower Premium Brands revenue. Ask & Other revenue decreaseddue to a decline in revenue at Ask Media Group primarily as a result of the new Google contract, which became effective April 1, 2016, as well as declinesfrom certain other legacy businesses. Premium Brands revenue decreased due primarily to declines in monetization, mainly attributable to the new Googlecontract and organic traffic at Dotdash, partially offset by strong growth at Investopedia and The Daily Beast.Other revenue decreased 4% due to the sale of PriceRunner on March 18, 2016 and a 6% decrease in revenue at The Princeton Review, partially offsetby growth at ShoeBuy. The decrease in revenue at The Princeton Review was primarily due to fewer in-person SAT test preparation courses and in-persontutoring sessions, partially offset by an increase in online and self-paced services.Cost of revenue Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Cost of revenue (exclusive ofdepreciation shown separatelybelow)$651,008 $(104,722) (14)% $755,730 $(22,431) (3)% $778,161As a percentage of revenue20% 24% 24%For the year ended December 31, 2017 compared to the year ended December 31, 2016Cost of revenue in 2017 decreased from 2016 due to decreases of $169.4 million from Other, $31.6 million from Publishing and $20.9 million fromApplications, partially offset by increases of $83.9 million from Match Group, $25.9 million from Video and $8.2 million from ANGI Homeservices.•The Other decrease was due to the sales of ShoeBuy and The Princeton Review.•The Publishing decrease was due primarily to reductions of $15.2 million in traffic acquisition costs driven by a decline in revenue at Ask & Other,$8.4 million in rent expense due to vacating a data center in the fourth quarter of 2016 and $6.5 million in content costs due primarily to Dotdashdue, in part, to its vertical brand strategy which launched in the second quarter of 2016.•The Applications decrease was due primarily to a reduction of $16.6 million in traffic acquisition costs driven by a decline in revenue atPartnerships and a decrease of $2.9 million in compensation due, in part, to the reductions in workforce in 2016.•The Match Group increase was due primarily to increases of $75.4 million in in-app purchase fees and $5.9 million in hosting fees. The increaseswere due primarily to the growth at Tinder.40Table of Contents•The Video increase was due primarily to an increase in production costs at IAC Films related to the sales of The Meyerowitz Stories (New andSelected) and The Legacy of a Whitetail Deer Hunter and the release of Lady Bird in the current year period, the contribution from Livestream,which was acquired on October 18, 2017, and an increase of $2.6 million in hosting fees at Vimeo due to subscription growth, partially offset bylower production costs at Electus.•The ANGI Homeservices increase was due primarily to the inclusion of expense of $3.7 million from Angie's List resulting from the Combination, anincrease of $2.8 million in credit card processing fees due to higher revenue and an increase of $1.6 million in hosting fees, partially offset by areduction in traffic acquisition costs of $0.4 million.For the year ended December 31, 2016 compared to the year ended December 31, 2015Cost of revenue in 2016 decreased from 2015 due to decreases of $54.7 million from Applications and $47.0 million from Publishing, partially offset byincreases of $61.3 million from Match Group, $7.7 million from Video, $7.1 million from Other and $2.9 million from ANGI Homeservices.•The Applications decrease was due primarily to a reduction of $52.0 million in traffic acquisition costs driven by a decline in revenue atPartnerships.•The Publishing decrease was due primarily to reductions of $40.0 million in traffic acquisition costs and $4.6 million in content costs driven by adecline in revenue at Ask & Other, partially offset by $9.2 million in restructuring charges in 2016 related to vacating a data center facility andseverance costs in connection with a reduction in workforce.•The Match Group increase was due primarily to a significant increase in in-app purchase fees across multiple brands, including Tinder, and the 2015acquisitions of PlentyOfFish and Pairs.•The Video increase was due primarily to a net increase in production costs at our media and video businesses and an increase in hosting fees relatedto Vimeo's subscription growth, increased video plays and expanded On Demand catalog. These increases were partially offset by a reduction ininvestment in content costs at Vimeo in 2016.•The Other increase was due primarily to an increase in cost of products sold at ShoeBuy due to increased sales, partially offset by a mix shift tohigher margin online products from in-person courses at The Princeton Review and the sale of PriceRunner.•The ANGI Homeservices increase was due primarily to an increase of $1.9 million in credit card processing fees due to higher revenue and anincrease of $0.6 million in traffic acquisition costs.Selling and marketing expense Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Selling and marketing expense$1,381,221 $134,124 11% $1,247,097 $(101,196) (8)% $1,348,293As a percentage of revenue42% 40% 42%For the year ended December 31, 2017 compared to the year ended December 31, 2016Selling and marketing expense in 2017 increased from 2016 due to increases of $157.3 million from ANGI Homeservices, $26.5 million from MatchGroup and $17.5 million from Video, partially offset by decreases of $37.6 million from Publishing and $22.3 million from Other.•The ANGI Homeservices increase was due primarily to higher online and offline marketing of $78.2 million, of which $5.3 million was from theinclusion of Angie's List, an increase of $64.9 million in compensation, of which $24.4 million was from the inclusion of Angie's List, and $9.5million of expense from acquisitions made prior to the Combination. The increase in marketing is due primarily to increased organic investmentincluding television spend. Compensation increased due primarily to an increase of $24.9 million in stock-based compensation expense, of which$9.8 million was from the inclusion of Angie's List, an increase in the sales force and the inclusion of $7.4 million in severance and retention costsrelated to the Combination. The increase in stock-based compensation expense was due41Table of Contentsprimarily to the modification of previously issued HomeAdvisor vested and unvested equity awards, which were converted into ANGI Homeservices'equity awards, the expense related to previously issued Angie's List equity awards and the acceleration of certain Angie's List equity awardsresulting from the termination of employees in connection with the Combination.•The Match Group increase was due primarily to higher offline and online marketing of $15.3 million and an increase in compensation of$9.1 million. The increase in marketing is due primarily to an increase in strategic investments in certain international markets at the Tinder businessand increased marketing related to the launch of a new brand in Europe, partially offset by a reduction in marketing spend at Match Group's affinitybrands. The increase in compensation is primarily related to an increase in headcount at Tinder and the employer portion of payroll taxes paid inconnection with the exercise of Match Group options. As a percentage of revenue, selling and marketing expense decreased due primarily to acontinued shift towards brands with lower marketing spend and reductions in marketing spend at the affinity brands.•The Video increase was due primarily to increases in both online and offline marketing at Vimeo and IAC Films of $10.6 million and $6.5 million,respectively, and compensation at Vimeo and Electus of $2.4 million and $1.7 million, respectively, partially offset by a decrease of $3.5 million inoffline marketing at Daily Burn.•The Publishing decrease was due primarily to a reduction of $26.6 million in online marketing, principally related to lower Ask & Other revenueresulting from changes in the Google contract, and a decrease of $8.0 million in compensation due, in part, to reductions in workforce that occurredin 2016 including $3.1 million in restructuring costs in 2016.•The Other decrease was due to the sales of ShoeBuy and The Princeton Review.For the year ended December 31, 2016 compared to the year ended December 31, 2015Selling and marketing expense in 2016 decreased from 2015 due to decreases of $130.2 million from Publishing, $40.1 million from Applications and$11.1 million from Video, partially offset by an increase of $80.8 million from ANGI Homeservices.•The Publishing decrease was due primarily to a reduction of $132.6 million in online marketing, resulting from a decline in revenue, partially offsetby $3.1 million in restructuring charges in 2016 related to severance costs in connection with a reduction in workforce.•The Applications decrease was due primarily to a decline of $37.5 million in online marketing, principally related to lower anticipated searchrevenue from our downloadable desktop applications at Consumer.•The Video decrease was due primarily to a reduction of $8.9 million in online marketing driven primarily by Vimeo.•The ANGI Homeservices increase was due primarily to higher online and offline marketing of $51.2 million and an increase of $27.8 million incompensation due primarily to an increase in the sales force.General and administrative expense Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)General and administrativeexpense$719,257 $188,811 36% $530,446 $18,391 4% $512,055As a percentage of revenue22% 17% 16%For the year ended December 31, 2017 compared to the year ended December 31, 2016General and administrative expense in 2017 increased from 2016 due to increases of $192.9 million from ANGI Homeservices, $44.8 million fromMatch Group and $20.0 million from Corporate, partially offset by decreases of $58.5 million from Other, $10.2 million from Applications and $9.0 millionfrom Publishing.42Table of Contents•The ANGI Homeservices increase was due primarily to higher compensation of $130.7 million, of which $38.4 million was from the inclusion ofAngie's List, and $24.3 million in costs related to the Combination including transaction related costs of $14.3 million and integration related costsof $10.0 million. The increase in compensation was due primarily to an increase of $100.5 million in stock-based compensation expense, of which$18.0 million was from the inclusion of Angie's List, an increase in headcount from business growth and the inclusion of $11.8 million in severanceand retention costs in 2017 related to the Combination. The increase in stock-based compensation expense was due principally to the modificationof previously issued HomeAdvisor vested and unvested equity awards, which were converted into ANGI Homeservices' equity awards, the expenserelated to previously issued Angie's List equity awards and the acceleration of certain Angie's List equity awards resulting from the termination ofemployees in connection with the Combination as well as a modification charge related to a HomeAdvisor equity award in 2017. General andadministrative expense also includes increases of $9.2 million in bad debt expense due, in part, to higher Marketplace Revenue, $3.9 million inoutsourced customer service expense and $3.2 million in software license and maintenance costs, as well as $9.8 million of expense fromacquisitions made prior to the Combination.•The Match Group increase was due primarily to an increase of $20.6 million in compensation, a change of $14.5 million in acquisition-relatedcontingent consideration fair value adjustments (expense of $5.3 million in 2017 versus income of $9.2 million in 2016) and an increase of$6.8 million in professional fees. The increase in compensation was due to an increase of $9.1 million in stock-based compensation expense dueprimarily to an increase in expense related to a subsidiary denominated equity award held by a non-employee, which award was settled in the thirdquarter of 2017, the employer portion of payroll taxes paid in connection with the exercise of Match Group options and an increase in headcountfrom business growth. The increase in professional fees was due primarily to the Tinder Equity Plan Settlement.•The Corporate increase was due primarily to higher compensation costs in 2017, including an increase in stock-based compensation expense dueprimarily to the issuance of new equity awards since 2016 and higher professional fees.•The Other decrease was due primarily to the sales of The Princeton Review and ShoeBuy.•The Applications decrease was due primarily to the inclusion in 2016 of $12.0 million in expense related to an acquisition-related contingentconsideration fair value adjustment and a $2.9 million favorable legal settlement in 2017.•The Publishing decrease was due primarily to the effect of the reductions in workforce in 2016, $2.3 million in restructuring costs included in 2016and the sale of ASKfm on June 30, 2016.For the year ended December 31, 2016 compared to the year ended December 31, 2015General and administrative expense in 2016 increased from 2015 due to increases of $22.1 million from ANGI Homeservices, $12.6 million from MatchGroup and $10.5 million from Applications, partially offset by decreases of $14.1 million from Publishing, $10.9 million from Other and $3.0 million fromCorporate.•The ANGI Homeservices increase was due primarily to higher compensation of $10.8 million due, in part, to increased headcount, an increase in baddebt expense due to higher Marketplace Revenue, an increase in software license and maintenance costs and $2.1 million in transaction-relatedcosts in 2016.•The Match Group increase was due primarily to an increase of $7.5 million in compensation, an increase of $4.0 million in rent due to growth in thebusiness and a decrease in income of $1.9 million in acquisition-related contingent consideration fair value adjustments. The increase incompensation was due to an increase in headcount from both acquisitions and existing business growth, partially offset by a decrease of $2.1 millionin stock-based compensation expense due primarily to the inclusion in 2015 of a modification charge related to certain equity awards, partiallyoffset by the issuance of new equity awards since 2015.•The Applications increase was due primarily to a change of $13.8 million in acquisition-related contingent consideration fair value adjustments,which was due to expense of $12.0 million in 2016 versus income of $1.8 million in 2015, partially offset by a decrease in compensation due, inpart, to a decrease in headcount related to a reduction in workforce that took place in the first half of 2016.43Table of Contents•The Publishing decrease was due primarily to the sale of ASKfm and a decrease in bad debt expense, partially offset by $2.3 million in restructuringcharges in 2016 primarily related to severance costs in connection with a reduction in workforce.•The Other decrease was due primarily to decreases in consulting expenses and non-income tax related items at The Princeton Review.•The Corporate decrease was due primarily to a decrease in stock-based compensation expense resulting from the inclusion in 2015 of a modificationcharge and a greater number of awards being forfeited in 2016 compared to 2015, partially offset by the issuance of new equity awards in 2016.Product development expense Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Product development expense$250,879 $38,114 18% $212,765 $16,142 8% $196,623As a percentage of revenue8% 7% 6%For the year ended December 31, 2017 compared to the year ended December 31, 2016Product development expense in 2017 increased from 2016 due to increases of $27.3 million from ANGI Homeservices, $23.0 million from MatchGroup and $5.2 million from Video, partially offset by decreases of $6.3 million from Publishing, $4.6 million from Other and $4.4 million fromApplications.•The ANGI Homeservices increase was due primarily to an increase of $23.0 million in compensation, of which $6.8 million was from the inclusion ofAngie's List, and $2.9 million of expense from acquisitions made prior to the Combination. The increase in compensation was due principally to anincrease of $14.5 million in stock-based compensation expense due to the modification of previously issued HomeAdvisor vested and unvestedequity awards, which were converted into ANGI Homeservices' equity awards in connection with the Combination and increased headcount.•The Match Group increase was due primarily to an increase of $20.7 million in compensation driven by an increase of $14.4 million related toincreased headcount and the employer portion of payroll taxes paid in connection with the exercise of Match Group options, and an increase of $6.3million in stock-based compensation expense due primarily to new grants issued since 2016.•The Video increase was due primarily to the acquisition of Livestream.•The Publishing decrease was due primarily to lower compensation and other employee-related costs of $3.8 million due, in part, to reductions inworkforce in 2016 including $1.2 million in restructuring costs in 2016 and the sale of ASKfm.•The Other decrease was due primarily to the sale of The Princeton Review.•The Applications decrease was due primarily to a decrease of $3.6 million in compensation due, in part, to a decrease in headcount related toreductions in workforce in 2016.For the year ended December 31, 2016 compared to the year ended December 31, 2015Product development expense in 2016 increased from 2015 due to increases of $14.1 million from Match Group, $3.8 million from ANGI Homeservices,$3.3 million from Video and $2.3 million from Publishing, partially offset by a decrease of $6.6 million from Applications.•The Match Group increase was primarily related to an increase of $7.4 million in stock-based compensation expense, increased headcount at Tinder,and the 2015 acquisitions of PlentyOfFish and Pairs. The increase in stock-based compensation expense was due primarily to the issuance of newequity awards and a net increase in expense associated with the modification of certain equity awards since 2015.44Table of Contents•The ANGI Homeservices increase was due primarily to an increase of $2.5 million in compensation and other employee-related costs due primarilyto an increase in headcount.•The Video increase was due primarily to an increase in compensation at Vimeo due, in part, to increased headcount.•The Publishing increase was due primarily to $1.2 million in restructuring charges related to severance costs in connection with a reduction inworkforce.•The Applications decrease was due primarily to a decrease of $4.4 million in compensation due, in part, to a decrease in headcount related to areduction in workforce that took place in the first half of 2016.Depreciation Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Depreciation$74,265 $2,589 4% $71,676 $9,471 15% $62,205As a percentage of revenue2% 2% 2%For the year ended December 31, 2017 compared to the year ended December 31, 2016Depreciation in 2017 increased from 2016 due primarily to the increased depreciation at ANGI Homeservices and Match Group related to continuedcorporate growth, partially offset by the sales of The Princeton Review and ShoeBuy.For the year ended December 31, 2016 compared to the year ended December 31, 2015Depreciation in 2016 increased from 2015 due primarily to acquisitions and capital expenditures, partially offset by certain fixed assets becoming fullydepreciated.Operating income (loss) Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Match Group$360,517 $44,968 14 % $315,549 $102,568 48 % $212,981ANGI Homeservices(149,176) (174,539) NM 25,363 26,931 NM (1,568)Video(35,659) (8,003) (29)% (27,656) 11,100 29 % (38,756)Applications130,176 20,513 19 % 109,663 (65,482) (37)% 175,145Publishing15,670 350,087 NM (334,417) (307,725) (1153)% (26,692)Other(5,621) 6,057 52 % (11,678) 16,933 59 % (28,611)Corporate(127,441) (17,992) (16)% (109,449) 3,462 3 % (112,911)Total$188,466 $221,091 NM $(32,625) $(212,213) NM $179,588 As a percentage of revenue6% (1)% 6%________________________NM = Not meaningful.For the year ended December 31, 2017 compared to the year ended December 31, 2016Operating income in 2017 increased from a loss in 2016 due primarily to the inclusion in 2016 of a $275.4 million goodwill impairment charge atPublishing, an increase of $74.1 million in Adjusted EBITDA described below, and a decrease of $37.3 million in amortization of intangibles, partially offsetby an increase of $159.8 million in stock-based compensation expense, a change of $3.2 million in acquisition-related contingent consideration fair valueadjustments and an increase of $2.6 million in depreciation expense. The goodwill impairment charge at Publishing in 2016 was driven by the impact fromthe45Table of ContentsGoogle contract, traffic trends and monetization challenges. The decrease in amortization of intangibles was due primarily to lower expense in 2017 as aresult of a Publishing trade name and certain intangible assets from the PlentyOfFish acquisition now being fully amortized, partially offset by expense in2017 related to the Combination. Amortization of intangibles was further impacted by the inclusion of an impairment charge in 2016 of $11.6 million relatedto certain Publishing indefinite-lived trade names. The increase in stock-based compensation expense was due primarily to an increase of $140.3 million atANGI Homeservices due primarily to the modification and acceleration charges related to the Combination, as well as an increase in expense related to asubsidiary denominated equity award held by a non-employee, which award was settled during the third quarter of 2017, and the issuance of new equityawards since 2016.At December 31, 2017, there was $423.2 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 year ended December 31, 2016 compared to the year ended December 31, 2015Operating income in 2016 decreased to a loss from 2015 despite an increase of $15.4 million in Adjusted EBITDA described below, due primarily toincreases of $261.3 million in goodwill impairment charges, $9.5 million in depreciation and a change of $18.0 million in acquisition-related contingentconsideration fair value adjustments, partially offset by a decrease of $60.5 million in amortization of intangibles. The increase in goodwill impairmentcharges was due to the write-off of goodwill of $275.4 million at Publishing in 2016 compared to the write-off of goodwill of $14.1 million at ShoeBuy in2015. The goodwill impairment charge at Publishing was driven by the impact from the new Google contract, which was effective April 1, 2016, traffic trendsand monetization challenges and the corresponding impact on the then estimated fair value. The Publishing goodwill impairment charge was recorded in thesecond quarter of 2016. The change in acquisition-related contingent consideration fair value adjustments was primarily the result of expense in 2016 of $2.6million versus income of $15.5 million in 2015. The decrease in amortization of intangibles was due primarily to a reduction in impairment charges during2016, partially offset by $23.3 million in amortization related to a change in classification of a Publishing trade name from an indefinite-lived intangibleasset to a definite-lived intangible asset, effective April 1, 2016. The Company recorded an impairment charge in 2016 of $11.6 million compared to animpairment charge in 2015 of $88.0 million all related to certain Publishing indefinite-lived trade names.For a detailed description of the Publishing goodwill and indefinite-lived intangible asset impairments, see "Note 2—Summary of SignificantAccounting Policies" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."Adjusted EBITDA Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Match Group$468,941 $65,561 16 % $403,380 $118,826 42 % $284,554ANGI Homeservices37,858 (7,993) (17)% 45,851 29,138 174 % 16,713Video(30,446) (9,199) (43)% (21,247) 17,137 45 % (38,384)Applications136,757 4,481 3 % 132,276 (51,982) (28)% 184,258Publishing31,470 39,041 NM (7,571) (95,359) NM 87,788Other(1,532) (3,334) NM 1,802 (2,932) (62)% 4,734Corporate(67,755) (14,483) (27)% (53,272) 601 1 % (53,873)Total$575,293 $74,074 15 % $501,219 $15,429 3 % $485,790 As a percentage of revenue17% 16% 15%For a reconciliation of operating income (loss) for the Company's reportable segments and net (loss) earnings attributable to IAC's shareholders toAdjusted EBITDA, see "Note 14—Segment Information" to the consolidated financial statements included in "Item 8—Consolidated Financial Statementsand Supplementary Data."46Table of ContentsFor the year ended December 31, 2017 compared to the year ended December 31, 2016Match Group Adjusted EBITDA increased 16% due primarily to an increase of $212.6 million in revenue and lower selling and marketing expense as apercentage of revenue due to the ongoing product mix towards brands with lower marketing spend and a reduction in marketing spend at Match Group'saffinity brands, partially offset by an increase in cost of revenue, general and administrative expense and product development expense. General andadministrative expense and product development expense increased due, in part, to expense of $12.7 million associated with the employer portion of payrolltaxes and professional fees resulting from the Tinder Equity Plan Settlement.ANGI Homeservices Adjusted EBITDA decreased to $37.9 million, despite an increase of $237.5 million in revenue, due primarily to an increase inselling and marketing expense, higher compensation expense due, in part, to increase headcount, the inclusion in 2017 of $44.1 million in costs related tothe Combination (including severance, retention, transaction and integration related costs) and increases in bad debt expense due, in part, to higherMarketplace Revenue, outsourced customer service expense and software license and maintenance costs. The higher losses at the European businesses weredriven primarily by the European expansion strategy, including increased investment in online and offline marketing and higher compensation costs.Adjusted EBITDA in 2017 was further impacted by write-offs of deferred revenue related to the Combination of $7.8 million and the acquisition ofHomeStars of $0.7 million.Video Adjusted EBITDA loss increased 43%, despite higher revenue, due to declines at Electus and higher losses from Vimeo (including the impact ofdeferred revenue write-offs of $2.1 million related to acquisition of Livestream), partially offset by the contribution from IAC Films and reduced losses atDaily Burn. The increased Adjusted EBITDA loss at Vimeo, despite higher revenue, reflects our investments in marketing and product development to growthe business.Applications Adjusted EBITDA increased 3%, despite a 4% decrease in revenue, due primarily to lower operating costs. Adjusted EBITDA in 2016includes $2.6 million in restructuring costs.Publishing Adjusted EBITDA improved to a profit of $31.5 million in 2017 from a loss of $7.6 million in 2016, despite lower revenue, due primarily tolower operating costs resulting from restructurings in 2016 and the sale of ASKfm. Results in 2016 included $15.6 million in restructuring charges related tovacating a data center and severance costs in an effort to reduce costs in light of significant declines in revenue from the new Google contract.Corporate Adjusted EBITDA loss increased $14.5 million due primarily to higher compensation costs and professional fees.For the year ended December 31, 2016 compared to the year ended December 31, 2015Match Group Adjusted EBITDA increased 42% due primarily to higher revenue and a decrease in selling and marketing expense as a percentage ofrevenue as the product mix continued to shift towards brands with lower marketing spend, partially offset by an increase in cost of revenue driven by asignificant increase in in-app purchase fees. Additionally, there were $11.8 million of lower costs in 2016 related to the consolidation and streamlining oftechnology systems and European operations ($4.9 million in 2016 compared to $16.8 million in 2015).ANGI Homeservices Adjusted EBITDA increased 174% due primarily to higher revenue, partially offset by an increased investment in online andoffline marketing and $2.1 million in transaction-related costs. Adjusted EBITDA was further impacted by higher compensation due primarily to increasedheadcount and an increase in bad debt expense due to higher Marketplace Revenue.Video Adjusted EBITDA loss improved 45% due primarily to reduced losses at Vimeo and Daily Burn and increased profits at Electus.Applications Adjusted EBITDA decreased 28% due primarily to lower revenue, partially offset by decreases in cost of revenue and selling andmarketing expense. Adjusted EBITDA was further impacted by $2.6 million in restructuring charges.Publishing Adjusted EBITDA declined to a loss in 2016 due primarily to lower revenue and $15.6 million in restructuring charges related to vacating adata center and severance costs during 2016 in an effort to reduce costs in light of significant declines in revenue from the new Google contract ($9.2 millionin cost of revenue, $3.1 million in selling and marketing expense, $2.3 million in general and administrative expense and $1.2 million in productdevelopment expense). Adjusted EBITDA was further impacted by decreases in selling and marketing expense, cost of revenue and general andadministrative expense exclusive of the restructuring charges.47Table of ContentsOther Adjusted EBITDA decreased 62% due to the sale of PriceRunner in the first quarter of 2016, partially offset by profits from The Princeton Reviewin 2016 and improved Adjusted EBITDA at ShoeBuy resulting from increased revenue.Corporate Adjusted EBITDA loss was essentially flat compared to 2015.Interest expense Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Interest expense$105,295 $(3,815) (3)% $109,110 $35,474 48% 73,636Interest expense in 2017 decreased from 2016 due primarily to lower interest expense of $16.0 million related to the 2016 prepayment and 2017repricing of the Match Group Term Loan and $6.6 million related to the repayment of the outstanding balances of the 4.875% Senior Notes and Match Group6.75% Senior Notes in the fourth quarter of 2017. Partially offsetting these decreases are increases of $10.9 million of interest expense associated with theMatch Group 6.375% Senior Notes, $5.2 million from the issuance of the Exchangeable Notes, $1.8 million related to the Match Group 5.00% Senior Notesand $1.7 million from the ANGI Homeservices Term Loan.Interest expense in 2016 increased from 2015 due to the $800 million of borrowings under the Match Group Term Loan in November 2015, of which$400 million was refinanced on June 1, 2016 with the Match Group 6.375% Senior Notes, and the 2% higher interest rate associated with the Match Group6.75% Senior Notes which were issued in exchange for a substantially like amount of 4.75% Senior Notes, partially offset by lower interest expense due torepurchases and redemptions of the 4.875% and 4.75% Senior Notes during the year.Other (expense) income, net Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Other (expense) income, net$(16,213) $(76,863) (127)% $60,650 $23,712 64% $36,938Other expense, net in 2017 includes $16.8 million in net foreign currency exchange losses due primarily to the weakening of the dollar relative to theBritish Pound, expense of $15.4 million related to the extinguishment of the Match Group 6.75% Senior Notes and repricing of the Match Group Term Loan,expense of $13.0 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity award held by a non-employee, $12.2 millionin other-than-temporary impairment charges related to certain investments and expense of $1.2 million related to the write-off of deferred financing costsassociated with the repayment of the 4.875% Senior Notes, partially offset by $34.9 million in gains related to the sales of certain investments and interestincome of $11.4 million.Other income, net in 2016 includes gains of $37.5 million and $12.0 million related to the sale of ShoeBuy and PriceRunner, respectively, $34.4million in net foreign currency exchange gains due to strengthening of the dollar relative to the British Pound and Euro, interest income of $5.1 million and a$3.6 million gain related to the sale of marketable equity securities, partially offset by a non-cash charge of $12.1 million related to the write-off of aproportionate share of original issue discount and deferred financing costs associated with the repayment of $440 million of the Match Group Term Loan,$10.7 million in other-than-temporary impairment charges related to certain investments, a loss of $3.8 million related to the sale of ASKfm, a $3.6 millionloss on the 4.75% and 4.875% Senior Note redemptions and repurchases and an expense of $2.5 million related to a mark-to-market adjustment pertaining toa subsidiary denominated equity award held by a non-employee.Other income, net in 2015 included a gain of $34.3 million from a real estate transaction, $5.4 million in net foreign currency exchange gains due to thestrengthening of the dollar relative to the Euro and $4.3 million in interest income, partially offset by $6.7 million in other-than-temporary impairmentcharges related to certain investments and expense of $2.3 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equityaward held by a non-employee.48Table of ContentsIncome tax benefit (provision) Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Income tax benefit (provision)$291,050 NM NM $64,934 NM NM $(29,516)Effective income tax rateNM 80% 21%In 2017, the Company recorded an income tax benefit of $291.1 million, which was due primarily to the effect of adopting the provisions of theFinancial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2016-09, Compensation-Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, on January 1, 2017 and foreign income taxed at lower rates, partially offset by the effect of theTax Cuts and Jobs Act (the “Tax Act”) discussed below. Under ASU No. 2016-09, excess tax benefits generated by the exercise, purchase or settlement ofstock-based awards of $361.8 million in 2017 are recognized as a reduction to the income tax provision rather than as an increase to additional paid-incapital.On December 22, 2017, the U.S. enacted the Tax Act. The Tax Act subjects to U.S. taxation certain previously deferred earnings of foreign subsidiariesas of December 31, 2017 (“Transition Tax”) and implements a number of changes that take effect on January 1, 2018, including but not limited to, areduction of the U.S. federal corporate tax rate from 35% to 21% and a new minimum tax on intangible income earned by foreign subsidiaries. TheCompany’s income tax provision for the year ended December 31, 2017 includes an expense of $63.8 million related to the Tax Act, of which, $62.7 millionrelates to the Transition Tax and $1.1 million relates to the remeasurement of U.S. net deferred tax assets due to the reduction in the corporate income tax rate.The Company has sufficient current year net operating losses to offset the taxable income resulting from the Transition Tax and, therefore, will not berequired to pay the one-time Transition Tax.The Transition Tax on deemed repatriated foreign earnings is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of theCompany's foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, among other factors, the amount of post-1986E&P of its foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company was able to make a reasonable estimateof the Transition Tax and has recorded a provisional transition tax expense of $62.7 million. Any adjustment of the Company's provisional tax expense willbe reflected as a change in estimate in its results in the period in which the change in estimate is made in accordance with Staff Accounting Bulletin No. 118,Income Tax Accounting Implications of the Tax Cuts and Jobs Act. The Company is continuing to gather additional information to more precisely computethe amount of the Transition Tax and expects to finalize its calculation prior to the filing of its U.S. federal tax return, which is due on October 15, 2018. Theadditional information includes, but is not limited to, the allocation and sourcing of income and deductions in 2017 for purposes of calculating theutilization of foreign tax credits. In addition, our estimates may also be impacted and adjusted as the law is clarified and additional guidance is issued at thefederal and state levels.In 2016, the Company recorded an income tax benefit of $64.9 million, which represented an effective income tax rate of 80%. The effective income taxrate was higher than the statutory rate of 35% due primarily to foreign income taxed at lower rates and the non-taxable gain on the sale of ShoeBuy, partiallyoffset by the non-deductible portion of the goodwill impairment charge at the Publishing segment.In 2015, the Company recorded an income tax provision of $29.5 million, which represented an effective income tax rate of 21%. The effective incometax rate was lower than the statutory rate of 35% due primarily to the realization of certain deferred tax assets, foreign income taxed at lower rates, the non-taxable gain on contingent consideration fair value adjustments, and a reduction in tax reserves and related interest due to the expiration of statutes oflimitations, partially offset by a non-deductible goodwill impairment charge and unbenefited losses of unconsolidated subsidiaries.For further details of income tax matters, see "Note 3—Income Taxes" to the consolidated financial statements included in "Item 8—ConsolidatedFinancial Statements and Supplementary Data."Net (earnings) loss attributable to noncontrolling interestsNoncontrolling interests represent the noncontrolling holders’ percentage share of earnings or losses from the subsidiaries in which the Company holdsa majority, but less than 100%, ownership interest and the results of which are included in our consolidated financial statements.49Table of Contents Years Ended December 31, 2017 $ Change % Change 2016 $ Change % Change 2015 (Dollars in thousands)Net (earnings) loss attributable tononcontrolling interests$(53,084) $(27,955) 111% $(25,129) $(31,227) NM $6,098Net earnings attributable to noncontrolling interests in 2017 primarily represents the publicly-held interest in Match Group's earnings, partially offsetby ANGI Homeservices losses.Net earnings attributable to noncontrolling interests in 2016 primarily represented the proportionate share of the noncontrolling holders' ownership inMatch Group.Net loss attributable to noncontrolling interests in 2015 primarily represented the proportionate share of the noncontrolling holders' ownership incertain subsidiaries within the Video, ANGI Homeservices and Publishing segments and Match Group.50Table of ContentsPRINCIPLES OF FINANCIAL REPORTINGIAC reports Adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles ("GAAP"). This measure is one of theprimary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated.We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAPmeasure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAPresults. IAC endeavors to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal orgreater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure. We encourage investors toexamine the reconciling adjustments between the GAAP and non-GAAP measure, which we discuss below.Definition of Non-GAAP Measure Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments ofgoodwill and intangible assets, if applicable, and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. Webelieve this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of ourcompetitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual businesssegments, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. The above itemsare excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, AdjustedEBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced.Adjusted EBITDA has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses.For a reconciliation of operating income (loss) by reportable segment and net (loss) earnings attributable to IAC shareholders to Adjusted EBITDA forthe years ended December 31, 2017, 2016 and 2015 see "Note 14—Segment Information" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."Non-Cash Expenses That Are Excluded From Non-GAAP Measure Stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions(including the Combination), of stock options, restricted stock units ("RSUs"), performance-based RSUs and market-based awards. These expenses are notpaid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method; however, performance-based RSUsand market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reportingperiod is the end of the contingency period). Upon the exercise of stock options and market-based stock options, the awards are gross settled, and the vestingof RSUs, performance-based RSUs and market-based awards RSUs, the awards are settled, on a net basis, with the Company remitting the required tax-withholding amount 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 ofdepreciable 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 (includingthe Combination). At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as contractor and serviceprofessional relationships, technology, customer lists and user base, content, trade names and membership, are valued and amortized over their estimatedlives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject toamortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assetsrepresent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assetsor 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 contingentconsideration liabilities at fair value. These adjustments can be highly variable and are excluded from our assessment of performance because they areconsidered non-operational in nature and, therefore, are not indicative of current or future performance or the ongoing cost of doing business.51Table of ContentsFINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCESFinancial Position December 31, 2017 2016 (In thousands)Cash and cash equivalents: United States(a) $1,178,616 $815,588All other countries(b) 452,193 513,599Total cash and cash equivalents 1,630,809 1,329,187Marketable securities (United States)(c) 4,995 89,342Total cash and cash equivalents and marketable securities(d)(e) $1,635,804 $1,418,529 Match Group Debt: Match Group Term Loan $425,000 $350,000Match Group 6.75% Senior Notes — 445,172Match Group 6.375% Senior Notes 400,000 400,000Match Group 5.00% Senior Notes 450,000 —Total Match Group long-term debt 1,275,000 1,195,172Less: unamortized original issue discount and original issue premium, net 8,668 5,245Less: unamortized debt issuance costs 13,636 13,434Total Match Group debt, net 1,252,696 1,176,493 ANGI Homeservices Debt: ANGI Homeservices Term Loan 275,000 —Less: current portion of ANGI Homeservices long-term debt 13,750 —Less: unamortized debt issuance costs 2,938 —Total ANGI Homeservices debt, net 258,312 — IAC Debt: Exchangeable Notes 517,500 —4.75% Senior Notes 34,859 38,1094.875% Senior Notes — 390,214Total IAC long-term debt 552,359 428,323Less: current portion of IAC long-term debt — 20,000Less: unamortized original issue discount 67,158 —Less: unamortized debt issuance costs 16,740 2,332Total IAC debt, net 468,461 405,991 Total long-term debt, net $1,979,469 $1,582,484_________________________________________________________________________(a)Domestically, cash equivalents primarily consist of AAA rated government money market funds and commercial paper rated A1/P1 or better with maturities less than 91days from the date of purchase, and treasury discount notes.(b)Internationally, cash equivalents primarily consist of AAA rated government money market funds and time deposits with maturities of less than 91 days. Approximately$420 million of the Company’s international cash can be repatriated without any significant tax consequences as it has been substantially subjected to U.S. income taxes dueto the Transition Tax imposed by the Tax Act. If needed for our U.S. operations, the remaining cash and cash equivalents held by the Company's foreign subsidiaries couldbe repatriated, however, under current law, would be subject to foreign, federal and state income taxes of approximately $8 million. We have not provided for any such taxbecause the Company currently does not anticipate a need to repatriate these funds to finance our U.S. operations and it is the Company's intent to indefinitely reinvest thesefunds outside of the U.S.52Table of Contents(c)At December 31, 2017, marketable securities consist of commercial paper rated A1+/P1 with an initial maturity of more than 91 days. At December 31, 2016, marketablesecurities consist of commercial paper rated A1/P1, treasury discount notes, and short-to-medium-term debt securities issued by investment grade corporate issuers. TheCompany invests in marketable debt securities with active secondary or resale markets to ensure portfolio liquidity to fund current operations or satisfy other cashrequirements as needed. The Company also may invest in equity securities as part of its investment strategy.(d) At December 31, 2017 and 2016, cash and cash equivalents include Match Group's domestic and international cash and cash equivalents of $203.5 million and $69.2million; and $114.0 million and $139.6 million, respectively. Match Group is a separate and distinct legal entity with its own public shareholders and board of directors andhas no obligation to provide the Company with funds. As a result, we cannot freely access the cash of Match Group and its subsidiaries. Match Group generated $321.1million and $259.6 million of operating cash flows for the years ended December 31, 2017 and 2016, respectively. In addition, agreements governing Match Group’sindebtedness limit the payment of dividends or distributions, loans or advances to stockholders, including the Company, in the event a default has occurred or Match Group'sleverage ratio (as defined in the indentures) exceeds 5.0 to 1.0.(e) At December 31, 2017, cash and cash equivalents include ANGI Homeservices' domestic and international cash and cash equivalents of $214.8 million and $6.7 million,respectively. At December 31, 2016, all of ANGI Homeservices' cash and cash equivalents of $36.4 million was held internationally. ANGI Homeservices is a separate anddistinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, we cannot freely access thecash of ANGI Homeservices and its subsidiaries. ANGI Homeservices generated $41.8 million and $47.9 million of operating cash flows for the years ended December 31,2017 and 2016, respectively. In addition, the agreement governing ANGI Homeservices’ Term Loan limits the payment of dividends or distributions in the event a defaulthas occurred or ANGI Homeservices’ leverage ratio (as defined in the indentures) exceeds 4.0 to 1.0.IAC, Match Group and ANGI Homeservices Long-term DebtFor a detailed description of IAC, Match Group and ANGI Homeservices long-term debt, see "Note 9—Long-term Debt" to the consolidated financialstatements included in "Item 8. Consolidated Financial Statements and Supplementary Data."Cash Flow InformationIn summary, the Company's cash flows are as follows: Years Ended December 31, 2017 2016 2015 (In thousands)Net cash provided by (used in): Operating activities$416,690 $344,141 $405,671Investing activities39,508 12,862 (582,721)Financing activities(166,124) (502,829) 678,390Net cash provided by operating activities consists of earnings adjusted for non-cash items, the effect of changes in working capital and acquisition-related contingent consideration payments (to the extent greater than the liability initially recognized at the time of acquisition). Non-cash adjustmentsinclude stock-based compensation expense, depreciation, amortization of intangibles, goodwill impairments, deferred income taxes, acquisition-relatedcontingent consideration fair value adjustments, gains from the sale of businesses and investments and a real estate transaction, impairments of long-terminvestments and bad debt expense.2017Adjustments to earnings consist primarily of $264.6 million of stock-based compensation expense, $74.3 million of depreciation, $42.1 million ofamortization of intangibles, $28.9 million of bad debt expense, $12.2 million of impairments on long-term investments, and $43.6 million of otheradjustments, which primarily consist of losses on bond redemptions and net foreign currency exchange losses, partially offset by $285.3 million of deferredincome taxes and $32.7 million of net gains from the sale of businesses and investments. The deferred income tax benefit primarily relates to the netoperating loss created primarily by excess tax benefits of $361.8 million related to stock-based awards and the modification charge for the conversion andacceleration of stock-based awards in connection with the Combination, partially offset by the provisional Transition Tax. The decrease from changes inworking capital consists primarily of an increase in accounts receivable of $115.2 million and a decrease in accounts payable and other current liabilities of$14.1 million, partially offset by an increase in deferred revenue of $39.2 million. The increase in accounts receivable is primarily due to (i) the timing ofcash receipts and revenue increasingly sourced through mobile app stores at Match Group, which are settled more slowly than traditional credit cards; and (ii)revenue growth at ANGI Homeservices. The decrease in accounts payable and other current liabilities is due to: (i) a decrease at Match Group due to the cashsettlement of former subsidiary denominated equity awards held by a non-employee, (ii) a decrease in accrued employee compensation mainly related to thetiming of payments of cash bonuses, partially offset by (iii) an increase53Table of Contentsin accrued advertising at Match Group. The increase in deferred revenue is due mainly to growth in subscription sales at Match Group and Vimeo, as well asgrowth in subscription sales and time-based advertising to service professionals at ANGI Homeservices, partially offset by decreases at Electus and Notionalmainly due to the delivery of programming related to various production deals.Net cash provided by investing activities includes net proceeds from sale of businesses and investments of $185.8 million, which is primarily related tothe sale of The Princeton Review and a Match Group cost method investment, and proceeds (net of purchases) of marketable debt securities of $84.5 million,partially offset by acquisitions and purchases of investments of $158.2 million, which includes Livestream, MyBuilder, Angie's List and HomeStarsacquisitions, and capital expenditures of $75.5 million, primarily related to investments in development of capitalized software at Match Group and ANGIHomeservices to support their products and services, computer hardware and the Company's purchase of a 50% ownership interest in an aircraft as areplacement for an existing 50% interest in a previously owned aircraft, which was sold on February 13, 2018.Net cash used in financing activities includes principal payments made on Match Group and IAC debt of $445.2 million and $393.5 million,respectively, the payment of $272.5 million for the purchase of certain fully vested stock-based awards, the payment of $254.2 million, $93.8 million and$10.1 million for withholding taxes paid on behalf of Match Group, IAC and ANGI Homeservices employees, respectively, on net settled stock-based awards,$74.4 million for the Exchangeable Notes hedge, $56.4 million for the repurchase of 0.8 million shares of IAC common stock at an average price of $69.24per share, $33.7 million of debt issuance costs primarily related to the Exchangeable Notes and the 5.00% Match Group Senior Notes, $27.3 million inacquisition-related contingent consideration payments (included in operating activities is $11.1 million for an acquisition-related contingent considerationpayment made in excess of the amount initially recognized at the time of acquisition) and $15.4 million for the purchase of noncontrolling interests, partiallyoffset by $525.0 million in proceeds from the issuance of Match Group debt, $517.5 million in proceeds from the issuance of the Exchangeable Notes, $275.0million in proceeds from the ANGI Homeservices Term Loan, $82.4 million and $59.4 million in proceeds from the issuance of IAC and Match Groupcommon stock, respectively, pursuant to stock-based awards, $23.7 million in proceeds from the issuance of warrants, a $20.1 million decrease in restrictedcash that relates to settled IAC bond redemptions and $10.6 million of funds returned from escrow for the MyHammer tender offer.2016Adjustments to earnings consist primarily of $275.4 million of goodwill impairment at the Publishing segment, $104.8 million of stock-basedcompensation expense, $79.4 million of amortization of intangibles, $71.7 million of depreciation, $17.7 million of bad debt expense, and $10.7 million ofimpairments on long-term investments, partially offset by $119.2 million of deferred income taxes and $51.0 million of net gains from the sale of businessesand investments. The deferred income tax benefit primarily relates to the Publishing goodwill impairment. The decrease from changes in working capitalconsists primarily of a decrease in accounts payable and other current liabilities of $52.4 million, an increase in other assets of $12.9 million, partially offsetby an increase in deferred revenue of $35.8 million and an increase in income taxes payable and receivable of $9.0 million. The decrease in accounts payableand other current liabilities is due to (i) a decrease in accrued advertising and revenue share expense at Publishing and Applications mainly due to the effectof the new Google contract, which became effective April 1, 2016, (ii) a decrease in VAT payables related mainly to decreases in international revenue atPublishing, and (iii) decreases in payables at Match Group due to the timing of payments. The increase in other assets is primarily related to an increase inproduction costs at IAC Films. The increase in deferred revenue is mainly due to growth in subscription sales at Match Group, ANGI Homeservices andVimeo. The increase in income taxes payable and receivable is primarily due to receipt of 2015 capital loss refund in 2016 and 2016 income tax accruals inexcess of 2016 income tax payments, partially offset by payment of 2015 tax liabilities in 2016.Net cash provided by investing activities includes net proceeds from the sale of businesses, investments and assets of $172.2 million, which mainlyrelate to the sale of PriceRunner and ShoeBuy, partially offset by capital expenditures of $78.0 million, primarily related to investments in development ofcapitalized software at Match Group and ANGI Homeservices to support their products and services, as well as leasehold improvements and computerhardware, purchases (net of sales and maturities) of marketable debt securities of $61.6 million, and cash used in acquisitions and purchases of investments of$31.0 million.Net cash used in financing activities includes $450.0 million in principal payments on Match Group debt, $308.9 million for the repurchase of 6.2million shares of IAC common stock at an average price of $49.74 per share, $126.4 million in principal payments on IAC debt and $29.8 million and $26.7million for the payment of withholding taxes paid on behalf of Match Group and IAC employees, respectively, on net settled stock-based awards, partiallyoffset by $400.0 million in54Table of Contentsproceeds from the issuance of Match Group debt and $39.4 million and $25.8 million in proceeds from the issuance of Match Group and IAC common stock,respectively, pursuant to stock-based awards.2015Adjustments to earnings consist primarily of $140.0 million of amortization of intangibles, $105.5 million of stock-based compensation expense, $62.2million of depreciation, $16.6 million of bad debt expense and $14.1 million of goodwill impairment, partially offset by $59.8 million of deferred incometaxes, $34.3 million of gain on a real estate transaction, and $15.5 million in acquisition-related contingent consideration fair value adjustments. Thedeferred income tax benefit primarily relates to amortization of intangibles and stock-based compensation. The increase from changes in working capitalconsists primarily of an increase in deferred revenue of $66.9 million and an increase in income taxes payable and receivable of $24.2 million, partially offsetby an increase in accounts receivable of $29.7 million and an increase in other assets of $21.2 million. The increase in deferred revenue was due mainly togrowth in subscription sales at Match Group, Vimeo and ANGI Homeservices, increases related to acquisitions, and increases at Electus, CollegeHumor andNotional mainly due to the timing of various production deals. The increase in income taxes payable and receivable was due to 2015 income tax accruals inexcess of 2015 income tax payments. The increase in accounts receivable was primarily due to growth in Match Group's in-app purchases sold through theirmobile products and revenue growth at ANGI Homeservices. The increase in other assets was primarily due to Match Group, relating to an increase in prepaidexpenses, primarily from growth and the signing of longer-term contracts, as well as an increase in VAT refund receivables in the Publishing segment.Net cash used in investing activities includes acquisitions and purchases of investments of $651.9 million, which includes PlentyOfFish, and capitalexpenditures of $62.0 million, primarily related to investments in development of capitalized software to support our products and services, and computerhardware, partially offset by proceeds from sales and maturities (net of purchases) of marketable securities of $125.3 million, and net proceeds from the sale oflong-term investments and an asset of $9.4 million.Net cash provided by financing activities includes $788.0 million in borrowings from the Match Group Term Loan, $428.8 million in net proceedsreceived from Match Group's initial public offering and $27.3 million in proceeds from the issuance of IAC common stock pursuant to stock-based awards,partially offset by $200.0 million used for the repurchase of 3.0 million shares of common stock at an average price of $67.68 per share, $113.2 millionrelated to the payment of cash dividends to IAC shareholders, $80.0 million for the early redemption of the Liberty Bonds, $65.7 million for the payment ofwithholding taxes paid on behalf of IAC employees on net settled stock-based awards, $32.2 million for the purchase of noncontrolling interests, $23.4million for the purchase of certain fully vested stock-based awards and $19.1 million of debt issuance costs primarily associated with the Match Group TermLoan and revolving credit facility.Liquidity and Capital ResourcesThe Company's principal sources of liquidity are its cash and cash equivalents as well as cash flows generated from operations. IAC's consolidated cashand cash equivalents at December 31, 2017 were $1.6 billion, of which $272.6 million was held by Match Group and $221.5 million was held by ANGIHomeservices. The Company generated $416.7 million of operating cash flows for the year ended December 31, 2017, of which $321.1 million was generatedby Match Group and $41.8 million was generated by ANGI Homeservices. Each of Match Group and ANGI Homeservices is a separate and distinct legalentity with its own public shareholders and board of directors and has no obligation to provide the Company with funds. As a result, we cannot freely accessthe cash of Match Group and ANGI Homeservices and their respective subsidiaries. In addition, agreements governing Match Group's indebtedness limit thepayment of dividends or distributions in the event a default has occurred or Match Group's leverage ratio (as defined in the Match Group Indentures) exceeds5.0 to 1.0. In addition, the agreement governing ANGI Homeservices’ Term Loan limits the payment of dividends or distributions in the event a default hasoccurred or ANGI Homeservices’ leverage ratio (as defined in the Term Loan facility) exceeds 4.0 to 1.0. As of December 31, 2017, there are no restrictions onMatch Group's or ANGI Homeservices' ability to pay dividends under these debt agreements.IAC has a $300 million revolving credit facility that expires on October 7, 2020. Match Group has a $500 million revolving credit facility that expireson October 7, 2020. At December 31, 2017, there were no outstanding borrowings under the IAC Credit Facility or the Match Group 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's 2018 capital expenditures are expected to be higher than 2017 by approximately 20% to 25%, driven, in part, by higher capital expendituresfor ANGI Homeservices and Match Group related to the55Table of Contentsdevelopment of capitalized software to support our products and services and for ANGI Homeservices' new corporate headquarters, partially offset by lowercapital expenditures at Corporate.At December 31, 2017, IAC had 8.6 million shares remaining in its share repurchase authorization. IAC may purchase shares over an indefinite period oftime on the open market and in privately negotiated transactions, depending on those factors IAC management deems relevant at any particular time,including, without limitation, market conditions, share price and future outlook.In May 2017, the Board of Directors of Match Group authorized Match Group to repurchase up to 6 million shares of its common stock. Match Grouphas not repurchased any shares related to this repurchase authorization.The Company has granted stock options and stock settled stock appreciation rights denominated in the equity of certain non-publicly tradedsubsidiaries to employees and management of those subsidiaries. These equity awards vest over a period of years or upon the occurrence of certain prescribedevents. The value of the stock options and stock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries. Accordingly,these interests only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price. Theseinterests can have significant value in the event of significant appreciation. The interests are ultimately settled in IAC common stock with fair market valuegenerally determined by negotiation or arbitration. These equity awards are settled on a net basis, with the award holder entitled to receive a payment in IACshares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment. The number of sharesultimately needed to settle these awards may vary significantly as a result of both movements in our stock price and a determination of fair value of therelevant subsidiary that is different than our estimate. The number of IAC common shares that would be required to settle these interests, other than for MatchGroup and ANGI Homeservices subsidiaries, at current estimated fair values, including vested and unvested interests, at December 31, 2017 is 0.1 millionshares. Withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been $15.2 million at December 31,2017, assuming a 50% withholding rate.In July 2017, Tinder, Inc. (“Tinder”) was merged into Match Group and as a result, all Tinder denominated equity awards were converted into MatchGroup tandem stock options ("Tandem Awards"). All of the Tandem Awards exercised during 2017 were exercised on a net basis and settled in IAC commonshares. Assuming all vested and unvested Match Group Tandem Awards outstanding on December 31, 2017 were exercised on a net basis on that date andsettled using IAC stock, 0.8 million IAC common shares would have been issued in settlement. Match Group would have remitted $102.4 million in cash inwithholding taxes (assuming a 50% withholding rate) on behalf of the employees and issued 3.3 million of its common shares to IAC as reimbursement.In connection with the Combination, previously issued stock appreciation rights that related to common stock of HomeAdvisor (US) were convertedinto stock appreciation rights that are settleable in Class A shares of ANGI Homeservices. IAC has the right to settle these awards using shares of IAC commonstock. Assuming all vested and unvested stock appreciation rights outstanding on December 31, 2017 were exercised on a net basis on that date and settledusing IAC stock, 1.4 million IAC common shares would have been issued in settlement. ANGI Homeservices would have remitted $171.3 million in cash inwithholding taxes (assuming a 50% withholding rate) on behalf of the employees and issued 16.4 million of its common shares to IAC as reimbursement.As of December 31, 2017, IAC's economic and voting interest in Match Group is 81.2% and 97.6%, respectively, and in ANGI Homeservices is 86.9%and 98.5%, respectively. Certain Match Group and ANGI Homeservices equity awards can be settled either in IAC common shares or the common shares ofthese subsidiaries at IAC's election. The Company currently expects to settle a sufficient number of awards in IAC shares to maintain an economic interest inboth Match Group and ANGI Homeservices of at least 80%.The Company will not be required to pay the one-time Transition Tax under the Tax Act because of its net operating loss position. The Company doesnot expect to be a full U.S. federal cash income tax payer until 2021, which is in line with previous estimates. We expect the Tax Act to favorably impact ourfuture liquidity, primarily as a result of a reduction in the U.S. corporate income tax rate from 35% to 21%, which will lower our effective tax rate and annualtax liability.The Company believes its existing cash, cash equivalents and expected positive cash flows generated from operations will be sufficient to fund ournormal operating requirements, including capital expenditures, debt service, the payment of withholding taxes paid on behalf of employees for net-settledstock-based awards, and investing and other commitments for the foreseeable future. The Company's liquidity could be negatively affected by a decrease indemand for our products and services. The Company’s indebtedness could limit our ability to: (i) obtain additional financing to fund working capital needs,acquisitions, capital expenditure or debt service or other requirements; and (ii) use operating cash flow to make acquisitions,56Table of Contentscapital expenditures, invest in other areas, such as developing business opportunities. The Company may make additional acquisitions and investments and,as a result, the Company may need to raise additional capital through future debt or equity financing to provide for greater financial flexibility. Additionalfinancing may not be available on terms favorable to us or at all.57Table of ContentsCONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS Payments Due by PeriodContractual Obligations(a)Less Than1 Year 1–3Years 3–5Years More Than5 Years Total (In thousands)Long-term debt(b)$95,023 $190,758 $1,372,671 $1,000,750 $2,659,202Operating leases(c)38,339 67,590 42,941 211,649 360,519Purchase obligations(d)21,994 10,816 — — 32,810Total contractual obligations$155,356 $269,164 $1,415,612 $1,212,399 $3,052,531_______________________________________________________________________________(a) The Company has excluded $37.2 million in unrecognized tax benefits and related interest from the table above as we are unable to make a reasonably reliable estimate ofthe period in which these liabilities might be paid. For additional information on income taxes, see "Note 3—Income Taxes" to the consolidated financial statements includedin "Item 8—Consolidated Financial Statements and Supplementary Data."(b) Represents contractual amounts due including interest on both fixed and variable rate instruments. Long-term debt at December 31, 2017 consists of $1.4 billion, bearinginterest at fixed rates and a $425.0 million Match Group Term Loan and a $275.0 million ANGI Homeservices Term Loan bearing interest at variable rates. The MatchGroup Term Loan bears interest at LIBOR plus 2.50%, or 3.85%, at December 31, 2017. The ANGI Homeservices Term Loan bears interest at LIBOR plus 2.00%, or 3.38%at December 31, 2017. The amount of interest ultimately paid on the Match Group and ANGI Homeservices term loans may differ based on changes in interest rates. Foradditional information on long-term debt arrangements, see "Note 9—Long-term Debt" to the consolidated financial statements included in "Item 8—Consolidated FinancialStatements and Supplementary Data."(c) The Company leases land, office space, data center facilities and equipment used in connection with operations under various operating leases, many of which containescalation clauses. The Company is also committed to pay a portion of the related operating expenses under a data center lease agreement. These operating expenses are notincluded in the table above. For additional information on operating leases, see "Note 15—Commitments and Contingencies" to the consolidated financial statements includedin "Item 8—Consolidated Financial Statements and Supplementary Data."(d) The purchase obligations principally include web hosting commitments. Amount of Commitment Expiration Per PeriodOther Commercial Commitments(e)Less Than1 Year 1–3Years 3–5Years More Than5 Years Total (In thousands)Letters of credit and surety bonds$576 $71 $— $1,939 $2,586_______________________________________________________________________________(e)Commercial commitments are funding commitments that could potentially require registrant performance in the event of demands by third parties or contingent events.Off-Balance Sheet ArrangementsOther than the items described above, the Company does not have any off-balance sheet arrangements as of December 31, 2017.58Table of ContentsCRITICAL ACCOUNTING POLICIES AND ESTIMATESThe following disclosure is provided to supplement the descriptions of IAC's accounting policies contained in "Note 2—Summary of SignificantAccounting Policies" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data" in regard tosignificant areas of judgment. Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of itsconsolidated financial statements in accordance with U.S. generally accepted accounting principles. These estimates, judgments and assumptions impact thereported amount of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ fromthese estimates. Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a moresignificant impact on our consolidated financial statements than others. What follows is a discussion of some of our more significant accounting policies andestimates.Business Combinations and Contingent Consideration ArrangementsAcquisitions are an important part of the Company's growth strategy. The Company invested $912.1 million (including the value of ANGIHomeservices Class A common stock issued in connection with the Combination), $36.1 million and $650.7 million in acquisitions in the years endedDecember 31, 2017, 2016 and 2015, respectively. The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based ontheir fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable fromgoodwill. The fair value of these intangible assets is based on detailed valuations that use information and assumptions provided by management. The excesspurchase price over the net tangible and identifiable intangible assets is recorded as goodwill and is assigned to the reporting unit(s) that is expected tobenefit from the combination as of the acquisition date.In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be partof the purchase price. Each of these arrangements are recorded at its fair value at the time of the acquisition and reflected at current fair value for eachsubsequent reporting period thereafter until settled. The contingent consideration arrangements are generally based upon earnings performance and/oroperating metrics. The Company determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determinethe amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated withthe obligation to determine the net amount reflected in the consolidated financial statements. Significant changes in forecasted earnings or operating metricswould result in a significantly higher or lower fair value measurement. The changes in the estimated fair value of the contingent consideration arrangementsduring each reporting period, including the accretion of the discount, if applicable, are recognized in “General and administrative expense” in theaccompanying consolidated statement of operations.Recoverability of Goodwill and Indefinite-Lived Intangible AssetsGoodwill is the Company's largest asset with a carrying value of $2.6 billion and $1.9 billion at December 31, 2017 and 2016, respectively. Indefinite-lived intangible assets, which consist of the Company's acquired trade names and trademarks, have a carrying value of $459.1 million and $320.6 million atDecember 31, 2017 and 2016, respectively.Goodwill and indefinite-lived intangible assets are assessed annually for impairment as of October 1, or more frequently if an event occurs orcircumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset belowits carrying value. In performing its annual assessment, the Company has the option to qualitatively assess whether it is more likely than not that the fairvalue of a reporting unit is less than its carrying value.For the Company's annual goodwill test at October 1, 2017, a qualitative assessment of the Match Group, ANGI Homeservices, Vimeo and Applicationsreporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excessof their respective carrying values. The primary factors that the Company considered in its qualitative assessment for each of these reporting units aredescribed below:•Match Group's October 1, 2017 market capitalization of $6.3 billion exceeded its carrying value by more than 1100% and Match Group's strongoperating performance.•ANGI Homeservices' October 1, 2017 market capitalization of $5.9 billion exceeded its carrying value by more than 450% and ANGI Homeservices'strong operating performance.•The Company performed valuations of the Vimeo and Applications reporting units during 2017. These valuations were prepared primarily inconnection with the issuance and/or settlement of equity grants that are denominated in the equity of these businesses. The valuations were preparedtime proximate to, however, not as of, October 1, 2017. The fair value of each of these businesses was in excess of its October 1, 2017 carrying value.The Company foregoes a qualitative assessment and tests the goodwill for impairment when it concludes that it is more likely than not that there maybe an impairment. For the Company's annual goodwill test at October 1, 2017, the Company59Table of Contentsquantitatively tested the Daily Burn and Electus reporting units. The Company's quantitative test indicated that the fair value of each of these reporting unitsis in excess of its respective carrying value; therefore, the goodwill of these reporting units is not impaired. The Company's Publishing reporting unit has nogoodwill.The aggregate goodwill balance for the reporting units for which the most recent estimate of fair value is less than 120% of their carrying values isapproximately $450 million.The annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of each of the Company's reportingunits to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is notimpaired. If the carrying value of a reporting unit exceeds its estimated fair value, an impairment loss equal to the excess is recorded.The fair value of the Company's reporting units is determined using both an income approach based on discounted cash flows ("DCF") and a marketapproach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year. The Company uses the same approach indetermining the fair value of its businesses in connection with its subsidiary denominated stock based compensation plans, which can be a significant factorin the decision to apply the qualitative screen. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect toseveral items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCFanalyses are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, onforecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of therespective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on the reporting units' current results andforecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in determining the fair value of the Company'sreporting units ranged from 12.5% to 17.5% in 2017 and 10% to 17.5% in 2016. Determining fair value using a market approach considers multiples offinancial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representativemarket multiple is determined which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies forour respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brandstrength operating in their respective sectors. While a primary driver in the determination of the fair values of the Company's reporting units is the estimate offuture revenue and profitability, the determination of fair value is based, in part, upon the Company's assessment of macroeconomic factors, industry andcompetitive dynamics and the strategies of its businesses in response to these factors.While the Company has the option to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assetsare less than their carrying values, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October1. In 2017, the Company did not quantitatively assess the Angie's List indefinite-lived intangible assets acquired through the Combination given theproximity of the September 29, 2017 transaction date to the October 1, 2017 annual test date. The Company determines the fair value of indefinite-livedintangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriateroyalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses are intended toreflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are basedupon an estimate of the royalty rates that a market participant would pay to license the Company's trade names and trademarks. Assumptions used in theavoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to theasset, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessmentranged from 11% to 16% in both 2017 and 2016, and the royalty rates used ranged from 2% to 7% in both 2017 and 2016.The 2017 annual assessment did not identify any impairments. While the 2016 annual assessment did not identify any material impairments, during thesecond quarter of 2016, the Company recorded impairment charges equal to the entire $275.4 million balance of the Publishing reporting unit goodwill and$11.6 million related to certain Publishing indefinite-lived intangible assets. The 2015 annual assessment identified impairment charges related to certainintangible assets of the Publishing reporting unit and the goodwill on the ShoeBuy reporting unit of $88.0 million and $14.1 million, respectively.Recoverability and Estimated Useful Lives of Long-Lived AssetsWe review the carrying value of all long-lived assets, comprising property and equipment and definite-lived intangible assets, for impairment wheneverevents or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is notrecoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value isdeemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. Inaddition, the Company reviews the useful lives of its long-lived assets whenever events or changes in circumstances indicate60Table of Contentsthat these lives may be changed. The carrying value of property and equipment and definite-lived intangible assets is $519.8 million and $341.1 million atDecember 31, 2017 and 2016, respectively.Income TaxesThe Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases.Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recoveredor settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not berealized. As of December 31, 2017 and 2016, the balance of deferred tax assets (liabilities), net, is $31.3 million and $(226.3) million, respectively.The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Companyconcludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Measurement (step two)determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of allrelevant information. De-recognition of a tax position that was previously recognized would occur when the Company subsequently determines that a taxposition no longer meets the more-likely-than-not threshold of being sustained. This measurement step is inherently difficult and requires subjectiveestimations of such amounts to determine the probability of various possible outcomes. At December 31, 2017 and 2016, the Company has unrecognized taxbenefits of $39.7 million and $41.0 million, including interest and penalties, respectively. We consider many factors when evaluating and estimating our taxpositions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Although managementcurrently believes changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits andamounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters aresubject to inherent uncertainties and management’s view of these matters may change in the future.The ultimate amount of deferred income tax assets realized and the amounts paid for deferred income tax liabilities and uncertain tax positions mayvary from our estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by thevarious tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results.No income taxes have been provided on indefinitely reinvested cash earnings of certain foreign subsidiaries of $101.2 million at December 31, 2017.The estimated amount of the unrecognized deferred income tax liability with respect to such cash earnings would be $7.9 million.Stock-Based CompensationThe Company recorded stock-based compensation expense of $264.6 million, $104.8 million and $105.4 million for the years ended December 31,2017, 2016 and 2015, respectively. Included in stock-based compensation expense in 2017 is $122.1 million related to the modification of previously issuedHomeAdvisor vested and unvested equity awards, which were converted into ANGI Homeservices' equity awards, the expense related to previously issuedAngie's List equity awards and the acceleration of certain Angie's List equity awards resulting from the termination of employees in connection with theCombination. The Company estimated the fair value of stock options issued (including those modified in connection with the Combination) in 2017, 2016and 2015 using a Black-Scholes option pricing model and, for those with a market condition, a lattice model. For stock options, including subsidiarydenominated equity, the value of the stock option is measured at the grant date at fair value and expensed over the vesting term. The impact on stock-basedcompensation expense for the year ended December 31, 2017, assuming a 1% increase in the risk-free interest rate, a 10% increase in the volatility factor anda one-year increase in the weighted average expected term of the outstanding options would be an increase of $5.3 million, $20.3 million and $8.5 million,respectively. The Company also issues RSUs and performance-based RSUs. For RSUs, the value of the instrument is measured at the grant date as the fairvalue of the underlying IAC common stock and expensed as stock-based compensation expense over the vesting term. For performance-based RSUs, thevalue of the instrument is measured at the grant date as the fair value of the underlying IAC common stock and expensed as stock-based compensation overthe vesting term when the performance targets are considered probable of being achieved.Marketable Securities and Long-term InvestmentsAt December 31, 2017, marketable securities of $5.0 million consist of commercial paper rated A1+/P1. Long-term investments at December 31, 2017 of$65.0 million include equity securities accounted for under the cost and equity methods.The Company invests in marketable debt securities with active secondary or resale markets to ensure portfolio liquidity to fund current operations orsatisfy other cash requirements as needed. Marketable securities are adjusted to fair value each61Table of Contentsquarter, and the unrealized gains and losses, net of tax, are included in accumulated other comprehensive income (loss) as a separate component ofshareholders' equity. The specific-identification method is used to determine the cost of securities sold and the amount of unrealized gains and lossesreclassified out of accumulated other comprehensive income (loss) into earnings. The Company recognizes unrealized losses on marketable securities in netearnings when the losses are determined to be other-than-temporary. Additionally, the Company evaluates each cost and equity method investment forindicators of impairment on a quarterly basis, and recognizes an impairment loss if the decline in value is deemed to be other-than-temporary. Future eventsmay result in reconsideration of the nature of losses as other-than-temporary and market and other factors may cause the value of the Company's investmentsto decline.The Company employs a methodology that considers available evidence in evaluating potential other-than-temporary impairments of its investments.Investments are considered to be impaired when a decline in fair value below the amortized cost basis is determined to be other-than-temporary. Suchimpairment evaluations include, but are not limited to: the length of time and extent to which fair value has been less than the cost basis, the current businessenvironment, including competition; going concern considerations such as financial condition, the rate at which the investee utilizes cash and the investee'sability to obtain additional financing to achieve its business plan; the need for changes to the investee's existing business model due to changing businessand regulatory environments and its ability to successfully implement necessary changes; and comparable valuations. During 2017, 2016 and 2015, theCompany recognized other-than-temporary impairments of $12.2 million, $10.7 million and $6.7 million, respectively, related to cost and equity methodinvestments.Recent Accounting PronouncementsFor a discussion of recent accounting pronouncements, see "Note 2—Summary of Significant Accounting Policies" to the consolidated financialstatements included in "Item 8—Consolidated Financial Statements and Supplementary Data."62Table of ContentsItem 7A. Quantitative and Qualitative Disclosures About Market RiskInterest Rate RiskThe Company's exposure to market risk for changes in interest rates relates primarily to the Company's cash equivalents, marketable debt securities andlong-term debt, including current maturities.The Company invests its excess cash in certain cash equivalents and marketable debt securities, which may consist of money market funds, commercialpaper, treasury discount notes and short-to-medium-term debt securities issued by investment grade corporate issuers.Based on the Company's total investment in marketable debt securities at December 31, 2017, a 100 basis point increase or decrease in the level ofinterest rates would, respectively, decrease or increase the fair value of these securities by less than $0.1 million. Such potential increase or decrease in fairvalue is based on certain simplifying assumptions, including a constant level and rate of debt securities and an immediate across-the-board increase ordecrease in the level of interest rates with no other subsequent changes for the remainder of the period. However, since almost all of the Company's cash andcash equivalents balance of $1.6 billion was invested in short-term fixed or variable rate money market instruments, the Company would also earn more (less)interest income due to such an increase (decrease) in interest rates.At December 31, 2017, the Company's outstanding debt was $2.1 billion of which $1.4 billion bears interest at fixed rates. If market rates decline, theCompany runs the risk that the related required payments on the fixed rate debt will exceed those based on market rates. A 100 basis point increase ordecrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by $72.7 million. Such potential increase ordecrease in fair value is based on certain simplifying assumptions, including a constant level and rate of fixed-rate debt for all maturities and an immediateacross-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 MatchGroup Term Loan and the $275 million ANGI Homeservices Term Loan bear interest at variable rates. The Match Group Term Loan bears interest at LIBORplus 2.50%. As of December 31, 2017, the rate in effect was 3.85%. If LIBOR were to increase or decrease by 100 basis points, then the annual interestexpense on the Match Group Term Loan would increase or decrease by $4.3 million. The ANGI Homeservices Term Loan bears interest at LIBOR plus 2.00%.As of December 31, 2017, the rate in effect was 3.38%. If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on theANGI Homeservices Term Loan would increase or decrease by $2.8 million.Foreign Currency Exchange RiskThe Company conducts business in certain foreign markets, primarily in various jurisdictions within the European Union, and, as a result, is exposed toforeign exchange risk for both the Euro and British Pound ("GBP").For the years ended December 31, 2017, 2016 and 2015, international revenue accounted for 30%, 26% and 26%, respectively, of our consolidatedrevenue. The Company's primary exposure to foreign currency exchange risk relates to investments in foreign subsidiaries that transact business in afunctional currency other than the U.S. dollar. As a result, as foreign currency exchange rates fluctuate, the translation of the statement of operations of theCompany's international businesses into U.S. dollars affects year-over-year comparability of operating results. The average GBP and Euro versus the U.S.dollar exchange rate was approximately 5% higher and 2% lower, respectively, in 2017 compared to 2016.The Company is also exposed to foreign currency transaction gains and losses to the extent it or its subsidiaries conduct transactions in and/or haveassets and/or liabilities that are denominated in a currency other than the entity's functional currency. The Company recorded foreign exchange losses of$16.8 million and gains of $34.4 million for the years ended December 31, 2017 and 2016, respectively. The increase in GBP versus the U.S. dollar during2017 and the decrease in the GBP versus the U.S. dollar during 2016, following the Brexit vote on June 23, 2016, generated the majority of the Company'sforeign currency exchange losses and gains in these years. The 2017 losses and 2016 gains are primarily related to (i) U.S. dollar denominated cash, themajority of which is from the proceeds received in the PriceRunner sale in March 2016, held by a foreign subsidiary with a GBP functional currency and (ii) aU.S. dollar denominated intercompany loan related to a 2016 acquisition in which the receivable is held by a foreign subsidiary with a GBP functionalcurrency. Subsequent to December 31, 2017, the Company moved this U.S. dollar denominated cash to a U.S. dollar functional currency entity, which willreduce the impact of foreign currency volatility on the Company's future results of operations.Foreign currency exchange gains or losses historically have not been material to the Company. As a result, historically, the Company has not hedgedforeign currency exposures. The continued growth and expansion of our international operations into new countries increases our exposure to foreignexchange rate fluctuations. Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could have asignificant impact on our future results of operations.63Table of ContentsItem 8. Consolidated Financial Statements and Supplementary DataReport of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of IAC/InterActiveCorpOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheet of IAC/InterActiveCorp and subsidiaries (the Company) as of December 31, 2017 and2016, and the related consolidated statements of operations, comprehensive operations, shareholders' equity and cash flows for each of the three years in theperiod ended December 31, 2017, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of theCompany at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31,2017, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2018 expressed an unqualifiedopinion thereon.As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for stock compensation in 2017 due tothe adoption of ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performingprocedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond tothose risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits alsoincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of thefinancial statements. We believe that our audits provide a reasonable basis for our opinion./s/ ERNST & YOUNG LLPWe have served as the Company’s auditor since 1996. New York, New YorkMarch 1, 201864IAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED BALANCE SHEET December 31, 2017 2016 (In thousands, except par value amounts)ASSETS Cash and cash equivalents$1,630,809 $1,329,187Marketable securities4,995 89,342Accounts receivable, net of allowance of $11,489 and $16,405, respectively304,027 220,138Other current assets185,374 204,068Total current assets2,125,205 1,842,735 Property and equipment, net of accumulated depreciation and amortization315,170 306,248Goodwill2,559,066 1,924,052Intangible assets, net of accumulated amortization663,737 355,451Long-term investments64,977 122,810Deferred income taxes66,321 2,511Other non-current assets73,334 92,066TOTAL ASSETS$5,867,810 $4,645,873LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Current portion of long-term debt$13,750 $20,000Accounts payable, trade76,571 62,863Deferred revenue342,483 285,615Accrued expenses and other current liabilities366,924 344,910Total current liabilities799,728 713,388 Long-term debt, net1,979,469 1,582,484Income taxes payable25,624 33,528Deferred income taxes35,070 228,798Other long-term liabilities38,229 44,178 Redeemable noncontrolling interests42,867 32,827 Commitments and contingencies SHAREHOLDERS' EQUITY: Common stock $.001 par value; authorized 1,600,000 shares; issued 260,624 and 255,672 shares,respectively, and outstanding 76,829 and 72,595 shares, respectively261 256Class B convertible common stock $.001 par value; authorized 400,000 shares; issued 16,157 shares andoutstanding 5,789 shares16 16Additional paid-in capital12,165,002 11,921,559Retained earnings595,038 290,114Accumulated other comprehensive loss(103,568) (166,123)Treasury stock 194,163 and 193,445 shares, respectively(10,226,721) (10,176,600)Total IAC shareholders' equity2,430,028 1,869,222Noncontrolling interests516,795 141,448Total shareholders' equity2,946,823 2,010,670TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$5,867,810 $4,645,873The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.65IAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF OPERATIONS Years Ended December 31, 2017 2016 2015 (In thousands, except per share data)Revenue$3,307,239 $3,139,882 $3,230,933Operating costs and expenses: Cost of revenue (exclusive of depreciation shown separately below)651,008 755,730 778,161Selling and marketing expense1,381,221 1,247,097 1,348,293General and administrative expense719,257 530,446 512,055Product development expense250,879 212,765 196,623Depreciation74,265 71,676 62,205Amortization of intangibles42,143 79,426 139,952Goodwill impairment— 275,367 14,056Total operating costs and expenses3,118,773 3,172,507 3,051,345Operating income (loss)188,466 (32,625) 179,588Interest expense(105,295) (109,110) (73,636)Other (expense) income, net(16,213) 60,650 36,938Earnings (loss) before income taxes66,958 (81,085) 142,890Income tax benefit (provision)291,050 64,934 (29,516)Net earnings (loss)358,008 (16,151) 113,374Net (earnings) loss attributable to noncontrolling interests(53,084) (25,129) 6,098Net earnings (loss) attributable to IAC shareholders$304,924 $(41,280) $119,472 Per share information attributable to IAC shareholders: Basic earnings (loss) per share$3.81 $(0.52) $1.44Diluted earnings (loss) per share$3.18 $(0.52) $1.33 Dividends declared per share$— $— $1.36 Stock-based compensation expense by function: Cost of revenue$1,881 $2,305 $1,210Selling and marketing expense31,318 6,000 10,186General and administrative expense192,957 77,151 82,798Product development expense38,462 19,364 11,256Total stock-based compensation expense$264,618 $104,820 $105,450The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.66IAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS Years Ended December 31, 2017 2016 2015 (In thousands)Net earnings (loss)$358,008 $(16,151) $113,374Other comprehensive income (loss), net of tax: Change in foreign currency translation adjustment80,269 (43,126) (68,844)Change in unrealized gains and losses of available-for-sale securities (net of tax benefitsof $3,846 and $884 in 2017 and 2016, respectively, and tax provision of $576 in 2015)(4,026) 1,484 3,140Total other comprehensive income (loss)76,243 (41,642) (65,704)Comprehensive income (loss), net of tax434,251 (57,793) 47,670Components of comprehensive (income) loss attributable to noncontrolling interests: Net (earnings) loss attributable to noncontrolling interests(53,084) (25,129) 6,098Change in foreign currency translation adjustment attributable to noncontrolling interests(13,797) 6,033 1,047Change in unrealized gain and losses of available-for-sale securities attributable tononcontrolling interests— 458 254Comprehensive (income) loss attributable to noncontrolling interests(66,881) (18,638) 7,399Comprehensive income (loss) attributable to IAC shareholders$367,370 $(76,431) $55,069The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.67IAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITYYears Ended December 31, 2017, 2016 and 2015 IAC Shareholders' Equity CommonStock $.001Par Value Class BConvertibleCommonStock $.001Par Value AdditionalPaid-inCapital AccumulatedOtherComprehensive(Loss) Income TreasuryStock RedeemableNoncontrollingInterests $ Shares $ Shares RetainedEarnings Total IACShareholders'Equity NoncontrollingInterests TotalShareholders'Equity (In thousands)Balance as of December 31, 2014$40,427 $252 252,170 $16 16,157 $11,415,617 $325,118 $(87,700) $(9,661,350) $1,991,953 $1,189 $1,993,142Net (loss) earnings(7,737) — — — — — 119,472 — — 119,472 1,639 121,111Other comprehensive loss, net of tax(1,301) — — — — — — (64,403) — (64,403) — (64,403)Stock-based compensation expense6,725 — — — — 87,685 — — — 87,685 4,808 92,493Issuance of common stock pursuant to stock-based awards,net of withholding taxes— 2 1,845 — — (37,733) — — — (37,731) — (37,731)Income tax benefit related to stock-based awards— — — — — 44,577 — — — 44,577 — 44,577Dividends— — — — — — (113,196) — — (113,196) — (113,196)Purchase of treasury stock— — — — — — — — (200,000) (200,000) — (200,000)Purchase of redeemable noncontrolling interests(32,207) — — — — — — — — — — —Adjustment of redeemable noncontrolling interests to fairvalue23,155 — — — — (23,155) — — — (23,155) — (23,155)Noncontrolling interests related to Match Group IPO, net offees and expenses— — — — — — — — — — 428,283 428,283Purchase of Match Group stock-based awards— — — — — — — — — — (23,431) (23,431)Transfer from noncontrolling interests to redeemablenoncontrolling interests1,189 — — — — — — — — — (1,189) (1,189)Other140 — — — — (676) — — — (676) — (676)Balance as of December 31, 2015$30,391 $254 254,015 $16 16,157 $11,486,315 $331,394 $(152,103) $(9,861,350) $1,804,526 $411,299 $2,215,825Net (loss) earnings(3,849) — — — — — (41,280) — — (41,280) 28,978 (12,302)Other comprehensive income (loss), net of tax385 — — — — — — (35,151) — (35,151) (6,876) (42,027)Stock-based compensation expense1,632 — — — — 50,201 — — — 50,201 44,523 94,724Issuance of common stock pursuant to stock-based awards,net of withholding taxes— 2 1,657 — — (772) — — — (770) — (770)Income tax benefit related to stock-based awards— — — — — 49,406 — — — 49,406 — 49,406Purchase of treasury stock— — — — — — — — (315,250) (315,250) — (315,250)Purchase of redeemable noncontrolling interests(2,529) — — — — — — — — — — —Adjustment of redeemable noncontrolling interests to fairvalue7,921 — — — — (7,560) — — — (7,560) — (7,560)Purchase of noncontrolling interests— — — — — — — — — — (211) (211)Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes— — — — — — — — — — 10,224 10,224Reallocation of shareholders' equity balances related to thenoncontrolling interests created in the Match Group IPO— — — — — 342,507 — 21,131 — 363,638 (363,638) —Changes in noncontrolling interests of Match Group due to theissuance of its common stock— — — — — (7,691) — — — (7,691) 7,691 —68IAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)Years Ended December 31, 2017, 2016 and 2015 IAC Shareholders' Equity CommonStock $.001Par Value Class BConvertibleCommonStock $.001Par Value AdditionalPaid-inCapital AccumulatedOtherComprehensive(Loss) Income TreasuryStock RedeemableNoncontrollingInterests $ Shares $ Shares RetainedEarnings Total IACShareholders'Equity NoncontrollingInterests TotalShareholders'Equity (In thousands)Noncontrolling interests created in an acquisition— — — — — 12,222 — — — 12,222 9,811 22,033Other(1,124) — — — — (3,069) — — — (3,069) (353) (3,422)Balance as of December 31, 2016$32,827 $256 255,672 $16 16,157 $11,921,559 $290,114 $(166,123) $(10,176,600) $1,869,222 $141,448 $2,010,670Net earnings3,620 — — — — — 304,924 — — 304,924 49,464 354,388Other comprehensive income, net of tax1,291 — — — — — — 62,446 — 62,446 12,506 74,952Stock-based compensation expense2,017 — — — — 66,333 — — — 66,333 180,055 246,388Issuance of common stock pursuant to stock-based awards,net of withholding taxes— 5 4,952 — — (10,509) — — — (10,504) — (10,504)Purchase of treasury stock— — — — — — — — (50,121) (50,121) — (50,121)Purchase of redeemable noncontrolling interests(14,641) — — — — — — — — — — —Purchase of noncontrolling interests— — — — — — — — — — (848) (848)Adjustment of redeemable noncontrolling interests to fairvalue6,341 — — — — (6,341) — — — (6,341) — (6,341)Issuance of Match Group common stock pursuant to stock-based awards, net of withholding taxes, and impact tononcontrolling interests in Match Group— — — — — (460,890) — 116 — (460,774) (3,435) (464,209)Acquisition of Angie's List and creation of noncontrollinginterests in ANGI Homeservices— — — — — 645,475 — — — 645,475 133,996 779,471Noncontrolling interests created in acquisitions17,758 — — — — — — — — — — —Issuance of ANGI Homeservices common stock pursuant tostock-based awards, net of withholding taxes, and impact tononcontrolling interests in ANGI Homeservices— — — — — (11,216) — (7) — (11,223) 2,730 (8,493)Purchase of exchangeable note hedge— — — — — (74,365) — — — (74,365) — (74,365)Equity component of Exchangeable Notes, net of deferredfinancing costs and deferred tax asset— — — — — 71,158 — — — 71,158 — 71,158Issuance of warrants— — — — — 23,650 — — — 23,650 — 23,650Other(6,346) — — — — 148 — — — 148 879 1,027Balance at December 31, 2017$42,867 $261 260,624 $16 16,157 $12,165,002 $595,038 $(103,568) $(10,226,721) $2,430,028 $516,795 $2,946,823The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.69IAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS Years Ended December 31, 2017 2016 2015 (In thousands)Cash flows from operating activities: Net earnings (loss)$358,008 $(16,151) $113,374Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Stock-based compensation expense264,618 104,820 105,450Depreciation74,265 71,676 62,205Amortization of intangibles42,143 79,426 139,952Goodwill impairment— 275,367 14,056Deferred income taxes(285,278) (119,181) (59,786) Acquisition-related contingent consideration fair value adjustments5,801 2,555 (15,461) Gain from the sale of businesses and investments, net(32,673) (50,965) (1,005)Impairment of long-term investments12,214 10,680 6,689 Acquisition-related contingent consideration payment(11,140) — — Bad debt expense28,930 17,733 16,648 Gain on real estate transaction— — (34,341) Other adjustments, net43,633 (12,639) 8,907 Changes in assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable(115,169) 1,283 (29,680)Other assets5,671 (12,905) (21,174)Accounts payable and other current liabilities(14,142) (52,359) 8,756Income taxes payable and receivable655 8,998 24,167Deferred revenue39,154 35,803 66,914Net cash provided by operating activities416,690 344,141 405,671Cash flows from investing activities: Acquisitions, net of cash acquired(149,094) (18,403) (617,402)Capital expenditures(75,523) (78,039) (62,049)Investments in time deposits— (87,500) —Proceeds from maturities of time deposits— 87,500 —Proceeds from maturities and sales of marketable debt securities114,350 252,369 218,462Purchases of marketable debt securities(29,891) (313,943) (93,134)Purchases of investments(9,106) (12,565) (34,470)Net proceeds from the sale of businesses and investments185,778 172,228 9,413Other, net2,994 11,215 (3,541)Net cash provided by (used in) investing activities39,508 12,862 (582,721)Cash flows from financing activities: Proceeds from issuance of IAC debt517,500 — —Principal payments on IAC debt(393,464) (126,409) (80,000)Proceeds from issuance of Match Group debt525,000 400,000 788,000Principal payments on Match Group debt(445,172) (450,000) —Borrowing under ANGI Homeservices Term Loan275,000 — —Purchase of exchangeable note hedge(74,365) — —Proceeds from issuance of warrants23,650 — —Debt issuance costs(33,744) (7,811) (19,050)Fees and expenses related to note exchange— — (6,954)Proceeds from Match Group initial public offering, net of fees and expenses— — 428,789Purchase of IAC treasury stock(56,424) (308,948) (200,000)Dividends— — (113,196)Proceeds from the exercise of IAC stock options82,397 25,821 27,325Withholding taxes paid on behalf of IAC employees on net settled stock-based awards(93,832) (26,716) (65,743)Proceeds from the exercise of Match Group stock options59,442 39,378 —Withholding taxes paid on behalf of Match Group employees on net settled stock-based awards(254,210) (29,830) —Proceeds from the exercise of ANGI Homeservices stock options1,653 — —Withholding taxes paid on behalf of ANGI Homeservices employees on net settled stock-based awards(10,113) — —Purchase of Match Group stock-based awards(272,459) — (23,431) Purchase of noncontrolling interests(15,439) (2,740) (32,207)Acquisition-related contingent consideration payments(27,289) (2,180) (5,750) Funds returned from (held in) escrow for MyHammer tender offer10,604 (10,548) — Decrease (increase) in restricted cash related to bond redemptions20,141 (141) (20,000)Other, net(5,000) (2,705) 607Net cash (used in) provided by financing activities(166,124) (502,829) 678,390Total cash provided (used)290,074 (145,826) 501,340Effect of exchange rate changes on cash and cash equivalents11,548 (6,434) (10,298)Net increase (decrease) in cash and cash equivalents301,622 (152,260) 491,042Cash and cash equivalents at beginning of period1,329,187 1,481,447 990,405Cash and cash equivalents at end of period$1,630,809 $1,329,187 $1,481,447The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.70IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE 1—ORGANIZATIONIAC is a leading media and Internet company composed of widely known consumer brands, such as Match, Tinder, PlentyOfFish and OkCupid, whichare part of Match Group's online dating portfolio, HomeAdvisor and Angie's List, which are operated by ANGI Homeservices, as well as Vimeo, Dotdash,Dictionary.com, The Daily Beast and Investopedia.All references to "IAC," the "Company," "we," "our" or "us" in this report are to IAC/InterActiveCorp.The Company has six reportable segments, which are described below.Match GroupOur Match Group segment consists of the businesses and operations of Match Group, Inc. (“Match Group”).Match Group completed its initial public offering ("IPO") on November 24, 2015. As of December 31, 2017, IAC’s economic and voting interest inMatch Group were 81.2% and 97.6%, respectively.Through Match Group, we operate a dating business that consists of a portfolio of brands, available in 42 languages across more than 190 countries,including the following key brands: Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, Pairs as well as a number of other brands.Through the portfolio of brands within Match Group, we are a leading provider of subscription dating products servicing North America, WesternEurope, Asia and many other regions around the world. We provide these services through websites and applications that we own and operate.ANGI HomeservicesOur ANGI Homeservices segment includes the North America and European businesses of ANGI Homeservices Inc. On September 29, 2017, theCompany completed the combination (the "Combination") of the businesses in the Company's HomeAdvisor segment and Angie's List, Inc. ("Angie's List")under a new publicly traded company called ANGI Homeservices. As of December 31, 2017, IAC’s economic and voting interest in ANGI Homeservices were86.9% and 98.5%, respectively. In connection with the transaction, the Company changed the name of the HomeAdvisor segment to ANGI Homeservices andyear-over-year comparisons for financial results for this segment are to the historical results of the HomeAdvisor segment (adjusted to reflect corporateallocations from IAC).ANGI Homeservices is the world's largest digital marketplace for home services, connecting millions of homeowners across the globe with homeservice professionals. ANGI Homeservices operates leading brands in eight countries, including HomeAdvisor® and Angie's List® (UnitedStates), HomeStars (Canada), Travaux.com (France), MyHammer (Germany and Austria), MyBuilder (UK), Werkspot (Netherlands) and Instapro (Italy).HomeAdvisor acquired controlling interests in MyBuilder Limited ("MyBuilder") on March 24, 2017, and HomeStars Inc. ("HomeStars") on February 8,2017, leading home services platforms in the United Kingdom and Canada, respectively.VideoOur Video segment consists of Vimeo, Electus, IAC Films and Daily Burn.Vimeo operates a global video sharing platform for creators and their audiences. We provide creators with professional tools to host, manage, review,distribute and monetize videos online, while offering audiences a high quality, ad-free viewing experience across devices. On October 18, 2017, Vimeoacquired Livestream, a leading live video solution that powers millions of events a year.Electus provides production and producer services for both unscripted and scripted television and digital content, primarily for initial sale anddistribution in the United States and internationally. Our content is distributed on a wide range of platforms, including broadcast television, premium andbasic cable television, subscription-based and ad-supported video-on-71IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)demand services and other outlets. Electus also operates Electus Digital, which consists of the following websites and properties: CollegeHumor.com,Dorkly.com and Drawfee.com; YouTube channels WatchLOUD, Nuevon and Hungry; and Big Breakfast (a production company). Through Electus, we alsooperate Notional.IAC Films provides production and producer services for feature films, primarily for initial sale and distribution in the United States and internationally.Our content is distributed through theatrical releases and video-on-demand services.Daily Burn is a health and fitness property that provides streaming fitness and workout videos across a variety of platforms, including iOS, Android,Roku and other Internet-enabled television platforms.ApplicationsOur Applications segment includes Consumer, which develops and distributes downloadable desktop and mobile applications, including Apalon,which houses our mobile applications operations, and SlimWare, which houses our downloadable desktop software and service operations; and Partnerships,which includes our business-to-business partnership operations.Through our Consumer business, we develop, market and distribute a variety of applications, primarily browser extensions, which consist of a browsertab page and related technology that together enable users to run search queries directly from their web browsers. Apalon is a mobile development companywith one of the largest and most popular portfolios of mobile applications worldwide. SlimWare is a provider of community-powered software and servicesthat clean, repair, update, secure and optimize computers, mobile phones and digital devices.Through our Partnerships business, we work closely with partners in the software, media and other industries to design and develop customized browser-based search applications to be bundled and distributed with these partners’ products and services.PublishingThe Publishing segment includes our Premium Brands business, which is composed of Dotdash, Dictionary.com, Investopedia and The Daily Beast;and our Ask & Other business, which primarily includes Ask Media Group, CityGrid and, for periods prior to its sale on June 30, 2016, ASKfm.Premium BrandsOur Premium Brands business primarily consists of the following destination websites:•Dotdash, a network of digital brands providing reliable information and inspiration in select vertical categories, including The Spruce (home), TheBalance (money), Verywell (health), Lifewire (tech), TripSavvy (travel) and ThoughtCo (lifelong learning);•Dictionary.com, which primarily provides online and mobile dictionary, thesaurus and reference services;•Investopedia, a resource for investment and personal finance education and information, as well as online courses through Investopedia Academy fora fee; and•The Daily Beast, a website dedicated to news, commentary, culture and entertainment that curates and publishes existing and original online contentfrom its own roster of contributors in the United States.Ask & OtherOur Ask & Other business primarily includes:•Ask Media Group, a collection of websites providing general search services and information;•CityGrid, an advertising network that integrates local content and advertising for distribution to affiliated and third party publishers across web andmobile platforms; and72IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)•For periods prior to its sale on June 30, 2016, ASKfm, a questions and answers social network.OtherThe Other segment consists of the results of The Princeton Review, ShoeBuy and PriceRunner for periods prior to the sales of these businesses, whichoccurred on March 31, 2017, December 30, 2016 and March 18, 2016, respectively. The Princeton Review provided a variety of educational test preparation,academic tutoring and college counseling services; ShoeBuy was an Internet retailer of footwear and related apparel and accessories; and PriceRunner was ashopping comparison website.NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").Basis of Consolidation and Accounting for InvestmentsThe consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities inwhich the Company has a controlling financial interest. Intercompany transactions and accounts have been eliminated.Investments in the common stock or in-substance common stock of entities in which the Company has the ability to exercise significant influence overthe operating and financial matters of the investee, but does not have a controlling financial interest, are accounted for using the equity method. Investmentsin the common stock or in-substance common stock of entities in which the Company does not have the ability to exercise significant influence over theoperating and financial matters of the investee are accounted for using the cost method. Investments in companies that IAC does not control, which are not inthe form of common stock or in-substance common stock, are also accounted for using the cost method. The Company evaluates each cost and equity methodinvestment for impairment on a quarterly basis and recognizes an impairment loss if a decline in value is determined to be other-than-temporary. Suchimpairment evaluations include, but are not limited to: the current business environment, including competition; going concern considerations such asfinancial condition, the rate at which the investee utilizes cash and the investee's ability to obtain additional financing to achieve its business plan; the needfor changes to the investee's existing business model due to changing business and regulatory environments and its ability to successfully implementnecessary changes; and comparable valuations. If the Company has not identified events or changes in circumstances that may have a significant adverseeffect on the fair value of a cost method investment, then the fair value of such cost method investment is not estimated, as it is impracticable to do so.Accounting EstimatesManagement of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated financialstatements in accordance with GAAP. These estimates, judgments and assumptions impact the reported amounts of assets, liabilities, revenue and expensesand the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.On an ongoing basis, the Company evaluates its estimates and judgments including those related to: the recoverability of goodwill and indefinite-livedintangible assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the fair values of marketable securitiesand long-term investments; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts; the determinationof revenue reserves; the fair value of acquisition-related contingent consideration arrangements; the liabilities for uncertain tax positions; the valuationallowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates andjudgments on historical experience, its forecasts and budgets and other factors that the Company considers relevant.73IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Revenue RecognitionThe Company recognizes revenue when persuasive evidence of an arrangement exists, services are rendered or merchandise is delivered to customers,the fee or price charged is fixed or determinable and collectability is reasonably assured. Deferred revenue is recorded when payments are received, orcontractually due, in advance of the Company's rendering of services, availability of media content (films, television, or digital content) for broadcast orexhibition or delivery of merchandise.Match GroupMatch Group's revenue is primarily derived directly from users in the form of recurring subscriptions. Subscription revenue is presented net of creditsand credit card chargebacks. Subscribers pay in advance, primarily by using a credit card or through mobile app stores, and, subject to certain conditionsidentified in our terms and conditions, all purchases are final and nonrefundable. Fees collected, or contractually due, in advance for subscriptions aredeferred and recognized using the straight-line method over the terms of the applicable subscription period, which primarily range from one to six months,and corresponding mobile app store fees incurred on such transactions, if any, are deferred and expensed over the same period. Deferred revenue at MatchGroup is $198.3 million and $161.1 million at December 31, 2017 and 2016, respectively. Revenue is also earned from online advertising, the purchase of àla carte features and offline events. Online advertising revenue is recognized every time an advertisement is displayed. Revenue from the purchase of à lacarte features is recognized based on usage. Revenue and the related expenses associated with offline events are recognized when each event occurs.ANGI HomeservicesANGI Homeservices revenue is primarily derived from (i) consumer connection revenue, which comprises fees paid by service professionals forconsumer matches (regardless of whether the professional ultimately provides the requested service), and (ii) membership subscriptions fees paid by serviceprofessionals. Consumer connection revenue varies based upon certain factors including the service requested, type of match (such as Instant Booking,Instant Connect, same day service or next day service) and geographic location of service. Effective with the Combination, revenue is also derived fromAngie's List (i) sales of time-based advertising to service professionals and (ii) membership subscription fees from consumers.ANGI Homeservices consumer connection revenue is generated and recognized when an in‑network service professional is delivered a consumer match.Membership subscription revenue is generated through subscription sales to service professionals and is deferred and recognized over the term of theapplicable membership. Membership agreements can be one month, three months, or one year. Angie's List service professionals generally pay foradvertisements in advance on a monthly or annual basis at the option of the service professional, with the average advertising contract term beingapproximately one year. These contracts include an early termination penalty. Angie's List revenue from the sale of website, mobile and call centeradvertising is recognized ratably over the period during which the advertisements run. Revenue from the sale of advertising in the Angie’s List Magazine isrecognized in the period in which the publication is published and distributed. Angie's List prepaid consumer membership subscription fees are recognized asrevenue ratably over the term of the associated subscription, which is typically one year.Deferred revenue at ANGI Homeservices is $64.1 million and $18.8 million at December 31, 2017 and 2016, respectively. The balance at December 31,2017 includes Angie's List deferred revenue of $37.7 million.VideoRevenue of businesses included in this segment is generated primarily through subscriptions, media production and distribution, and advertising.Production revenue is recognized when the production is available for the customer to broadcast or exhibit, subscription fee revenue is recognized over theterms of the applicable subscriptions, which are one month or one year, and advertising revenue is recognized when an ad is displayed or over the periodearned. Deferred revenue at Vimeo is $49.4 million and $36.7 million at December 31, 2017 and 2016, respectively. Deferred revenue at Electus totals $12.8million and $23.1 million at December 31, 2017 and 2016, respectively.74IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)ApplicationsSubstantially all of Applications' revenue consists of advertising revenue generated principally through the display of paid listings in response to searchqueries. The substantial majority of the paid listings displayed by our Applications businesses are supplied to us by Google Inc. ("Google") pursuant to ourservices agreement with Google.Pursuant to this agreement, those of our Applications businesses that provide search services transmit search queries to Google, which in turn transmits aset of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occurs independently of, butconcurrently with, the generation of algorithmic search results for the same search queries. Google paid listings are displayed separately from algorithmicsearch results and are identified as sponsored listings on search results pages. Paid listings are priced on a price per click basis and when a user submits asearch query through one of our Applications businesses and then clicks on a Google paid listing displayed in response to the query, Google bills theadvertiser that purchased the paid listing directly and shares a portion of the fee charged to the advertiser with us. We recognize paid listing revenue fromGoogle when it delivers the user's click. In cases where the user’s click is generated due to the efforts of a third party distributor, we recognize the amount duefrom Google as revenue and record a revenue share or other payment obligation to the third party distributor as traffic acquisition costs.To a significantly lesser extent, Applications' revenue also consists of fees related to subscription downloadable applications, which are recognized overthe terms of the applicable subscriptions, primarily one to two years, and fees related to paid mobile downloadable applications and display advertisements,which are recognized at the time of the sale and when the ad is displayed, respectively. Deferred revenue at Applications is $23.6 million and $26.1 million atDecember 31, 2017 and 2016, respectively.PublishingPublishing's revenue consists principally of advertising revenue, which is generated primarily through the display of paid listings in response to searchqueries, display advertisements (sold directly and through programmatic ad sales) and fees related to paid mobile downloadable applications. The substantialmajority of the paid listings that our Publishing businesses display are supplied to us by Google in the manner and pursuant to the services agreement withGoogle, which is described above under "Applications."OtherThe Princeton Review's revenue consisted primarily of fees received directly from students for in-person and online test preparation classes, access toonline test preparation materials and individual tutoring services. Fees from classes and access to online materials were recognized over the period of thecourse and the period of the online access, respectively. Tutoring fees were recognized based on usage.ShoeBuy's revenue consisted of merchandise sales, reduced by incentive discounts and sales returns, and was recognized when delivery to the customerhad occurred. Delivery was considered to have occurred when the customer took title and assumed the risks and rewards of ownership, which was on the dateof shipment. Accruals for returned merchandise were based on historical experience. Shipping and handling fees billed to customers was recorded as revenue.The costs associated with shipping goods to customers were recorded as cost of revenue.PriceRunner's revenue consisted principally of advertising revenue that, depending on the terms of the arrangement, was recognized when a user clickedon an ad, or when a user clicked-through on the ad and took a specified action on the destination site.Cash and Cash EquivalentsCash and cash equivalents include cash and short-term investments, with maturities of less than 91 days from the date of purchase. Domestically, cashequivalents primarily consist of AAA rated government money market funds, commercial paper rated A1/P1 or better and treasury discount notes.Internationally, cash equivalents primarily consist of AAA rated government money market funds and time deposits.75IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Marketable SecuritiesAt December 31, 2017, marketable securities consist of commercial paper rated A1+/P1. The Company invests in marketable debt securities with activesecondary or resale markets to ensure portfolio liquidity to fund current operations or satisfy other cash requirements as needed. The Company also invests inmarketable equity securities as part of its investment strategy. All marketable securities are classified as available-for-sale and are reported at fair value. Theunrealized gains and losses on marketable securities, net of tax, are included in accumulated other comprehensive income as a separate component ofshareholders' equity. The specific-identification method is used to determine the cost of securities sold and the amount of unrealized gains and lossesreclassified out of accumulated other comprehensive income into earnings.The Company employs a methodology that considers available evidence in evaluating potential other-than-temporary impairments of its investments.Investments are considered to be impaired when a decline in fair value below the amortized cost basis is determined to be other-than-temporary. Factorsconsidered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the amortizedcost basis, the financial condition and near-term prospects of the issuer, and whether it is not more likely than not that the Company will be required to sellthe security before the recovery of the amortized cost basis, which may be maturity. If a decline in fair value is determined to be other-than-temporary, animpairment charge is recorded in current earnings and a new cost basis in the investment is established.Certain Risks and ConcentrationsA meaningful portion of the Company's revenue is derived from online advertising, the market for which is highly competitive and rapidly changing.Significant changes in this industry or changes in advertising spending behavior or in customer buying behavior could adversely affect our operating results.Most of the Company's online advertising revenue is attributable to a services agreement with Google. For the years ended December 31, 2017, 2016 and2015, revenue from Google represents 22%, 26% and 40% respectively, of the Company's consolidated revenue.The services agreement became effective on April 1, 2016, following the expiration of the previous services agreement, and expires on March 31, 2020;however, the Company may choose to terminate the agreement effective March 31, 2019. The services agreement requires that the Company comply withcertain guidelines promulgated by Google. Google may generally unilaterally update its policies and guidelines without advance notice, which could in turnrequire modifications to, or prohibit and/or render obsolete certain of our products, services and/or business practices, which could be costly to address orotherwise have an adverse effect on our business, financial condition and results of operations.For the years ended December 31, 2017, 2016 and 2015, revenue earned from Google was $740.7 million, $824.4 million and $1.3 billion,respectively. This revenue is earned by the businesses comprising the Applications and Publishing segments. For the years ended December 31, 2017, 2016and 2015, revenue earned from Google represents 83%, 87% and 94% of Applications revenue and 71%, 73% and 83% of Publishing revenue, respectively.Accounts receivable related to revenue earned from Google totaled $72.4 million and $65.8 million at December 31, 2017 and 2016, respectively.The Company's business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risksassociated with online commerce security and credit card fraud.Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents andmarketable securities. Cash and cash equivalents are maintained with financial institutions and are in excess of Federal Deposit Insurance Corporationinsurance limits.Accounts Receivable, net of allowance for doubtful accounts and revenue reservesAccounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts and revenue reserves. Accounts receivableoutstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors,including the length of time accounts receivable are past due, the Company's previous loss history, the specific customer's ability to pay its obligation to theCompany and the condition of the general economy and the customer's industry. The Company writes off accounts receivable when they becomeuncollectible.76IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The Company also maintains allowances to reserve for potential credits issued to customers or other revenue adjustments. The amounts of these reserves arebased, in part, on historical experience.Property and EquipmentProperty and equipment, including significant improvements, are recorded at cost. Repairs and maintenance costs are expensed as incurred.Depreciation is computed using the straight-line method over the estimated useful lives of the assets, or, in the case of leasehold improvements, the leaseterm, if shorter.Asset CategoryEstimatedUseful LivesBuildings and leasehold improvements3 to 39 YearsComputer equipment and capitalized software2 to 3 YearsFurniture and other equipment3 to 12 YearsThe Company capitalizes certain internal use software costs including external direct costs utilized in developing or obtaining the software andcompensation for personnel directly associated with the development of the software. Capitalization of such costs begins when the preliminary project stageis complete and ceases when the project is substantially complete and ready for its intended purpose. The net book value of capitalized internal use softwareis $46.4 million and $46.9 million at December 31, 2017 and 2016, respectively.Business CombinationsThe purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition,including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. The fair value of these intangibleassets is based on detailed valuations that use information and assumptions provided by management. The excess purchase price over the net tangible andidentifiable intangible assets is recorded as goodwill and is assigned to the reporting unit(s) that is expected to benefit from the combination as of theacquisition date.In connection with certain business combinations, the Company has entered into contingent consideration arrangements that are determined to be partof the purchase price. Each of these arrangements are initially recorded at its fair value at the time of the acquisition and reflected at current fair value for eachsubsequent reporting period thereafter until settled. The contingent consideration arrangements are generally based upon earnings performance and/oroperating metrics. The Company determines the fair value of the contingent consideration arrangements using probability-weighted analyses to determinethe amounts of the gross liability, and, if the arrangement is long-term in nature, applying a discount rate that appropriately captures the risk associated withthe obligation to determine the net amount reflected in the consolidated financial statements. Significant changes in forecasted earnings or operating metricswould result in a significantly higher or lower fair value measurement. The changes in the remeasured fair value of the contingent consideration arrangementsduring each reporting period, including the accretion of the discount, if applicable, are recognized in “General and administrative expense” in theaccompanying consolidated statement of operations. See "Note 8—Fair Value Measurements and Financial Instruments" for a discussion of contingentconsideration arrangements.Goodwill and Indefinite-Lived Intangible AssetsThe Company assesses goodwill and indefinite-lived intangible assets for impairment annually as of October 1, or more frequently if an event occurs orcircumstances change that would more likely than not reduce the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset belowits carrying value.When the Company elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value of the reporting unit is lessthan its carrying value, no further assessment of that reporting unit's goodwill is necessary; otherwise, a quantitative assessment is performed and the fairvalue of the reporting unit is determined. If the carrying value of the reporting unit exceeds its fair value, an impairment loss equal to the excess is recorded.77IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Company's annual goodwill test at October 1, 2017, a qualitative assessment of the Match Group, ANGI Homeservices, Vimeo and Applicationsreporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excessof their respective carrying values. The primary factors that the Company considered in its qualitative assessment for each of these reporting units isdescribed below:•Match Group's October 1, 2017 market capitalization of $6.3 billion exceeded its carrying value by more than 1100% and Match Group's strongoperating performance.•ANGI Homeservices' October 1, 2017 market capitalization of $5.9 billion exceeded its carrying value by more than 450% and ANGI Homeservices'strong operating performance.•The Company performed valuations of the Vimeo and Applications reporting units during 2017. These valuations were prepared primarily inconnection with the issuance and/or settlement of equity grants that are denominated in the equity of these businesses. The valuations were preparedtime proximate to, however, not as of October 1, 2017. The fair value of each of these businesses was in excess of its October 1, 2017 carrying value.For the Company's annual goodwill test at October 1, 2017, the Company quantitatively tested the Daily Burn and Electus reporting units. TheCompany's quantitative test indicated that the fair value of each of these reporting units is in excess of its respective carrying value; therefore, the goodwill ofthese reporting units is not impaired. The Company's Publishing reporting unit has no goodwill.The aggregate goodwill balance for the reporting units for which the most recent estimate of fair value is less than 120% of their carrying values isapproximately $450 million.The fair value of the Company's reporting units is determined using both an income approach based on discounted cash flows ("DCF") and a marketapproach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year. The Company uses the same approach indetermining the fair value of its businesses in connection with its subsidiary denominated stock based compensation plans, which can be a significant factorin the decision to apply the qualitative screen. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect toseveral items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCFanalyses are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company's estimates, which are based, in part, onforecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of therespective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on each reporting unit's current results andforecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in determining the fair value of the Company'sreporting units ranged from 12.5% to 17.5% in 2017 and 10% to 17.5% in 2016. Determining fair value using a market approach considers multiples offinancial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representativemarket multiple is determined which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies forour respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brandstrength operating in their respective sectors. While a primary driver in the determination of the fair values of the Company's reporting units is the estimate offuture revenue and profitability, the determination of fair value is based, in part, upon the Company's assessment of macroeconomic factors, industry andcompetitive dynamics and the strategies of its businesses in response to these factors.While the Company has the option to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assetsare less than their carrying values, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October1. In 2017, the Company did not quantitatively assess the Angie's List indefinite-lived intangible assets acquired through the Combination given theproximity of the September 29, 2017 transaction date to the October 1, 2017 annual test date. The Company determines the fair values of its indefinite-livedintangible assets using avoided royalty DCF analyses. Significant judgments inherent in these analyses include the selection of appropriate royalty anddiscount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses reflect the risks inherent inthe expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of theroyalty rates that a market participant would pay to license the Company's trade names and trademarks. Assumptions used in the avoided royalty DCFanalyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the78IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company's annual indefinite-lived impairment assessmentranged from 11% to 16% in both 2017 and 2016, and the royalty rates used ranged from 2% and 7% in both 2017 and 2016.The 2017 annual assessment of goodwill and indefinite-lived intangible assets did not identify any impairments.While the 2016 annual assessment did not identify any material impairments, during the second quarter of 2016 the Company recorded impairmentcharges related to the entire $275.4 million balance of the Publishing reporting unit goodwill and $11.6 million related to certain Publishing indefinite-livedintangible assets. The goodwill impairment charge at Publishing was driven by the impact from the new Google contract, traffic trends and monetizationchallenges and the corresponding impact on the then estimate of fair value. The expected cash flows used in the Publishing DCF analysis were based on theCompany's most recent forecast for the second half of 2016 and each of the years in the forecast period, which were updated to include the effects of theGoogle contract, traffic trends and monetization challenges and the cost savings from our restructuring efforts. For years beyond the forecast period, theCompany's estimated cash flows were based on forecasted growth rates. The discount rate used in the DCF analysis reflected the risks inherent in the expectedfuture cash flows of the Publishing reporting unit. Determining fair value using a market approach considers multiples of financial metrics based on bothacquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple was determinedwhich was applied to financial metrics to estimate the fair value of the Publishing reporting unit. To determine a peer group of companies for Publishing, weconsidered companies relevant in terms of business model, revenue profile, margin and growth characteristics and brand strength. The indefinite-livedintangible asset impairment charge related to certain trade names and trademarks and were due to reduced level of revenue and profits, which, in turn, also ledto a reduction in the assumed royalty rates for these assets. The royalty rates used to value the trade names that were impaired ranged from 2% to 6% and thediscount rate that was used reflected the risks inherent in the expected future cash flows of the trade names and trademarks. The impairment charge isincluded in "Amortization of intangibles" in the accompanying consolidated statement of operations.In 2015, the Company identified and recorded impairment charges of $88.0 million related to certain indefinite-lived intangible assets at the Publishingsegment and $14.1 million at the Other segment related to goodwill at ShoeBuy. The indefinite-lived intangible asset impairment charge at Publishingrelated to certain trade names of certain Ask & Other direct marketing brands, including Ask Media Group. The impairment charge reflected the impact ofGoogle ecosystem changes that impacted our ability to market, the effect of the reduced revenue share on mobile under the terms of the services agreementwith Google, and the shift in focus to higher margin businesses in Publishing's Premium Brands. The combined impact of these factors reduced the forecastedrevenue and profits for these brands and the impairment charge reflected the resultant reduction in fair value. The goodwill impairment charge at ShoeBuywas due to increased investment and the seasonal effect of high inventory levels as of October 1, 2015.The Company's reporting units are consistent with its determination of its operating segments. Goodwill is tested for impairment at the reporting unitlevel. See "Note 14—Segment Information" for additional information regarding the Company's method of determining operating and reportable segments.Long-Lived Assets and Intangible Assets with Definite LivesLong-lived assets, which consist of property and equipment and intangible assets with definite lives, are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if itexceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to berecoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. Amortization ofdefinite-lived intangible assets is computed either on a straight-line basis or based on the pattern in which the economic benefits of the asset will be realized.Fair Value MeasurementsThe Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the assetor liability. The three levels of the fair value hierarchy are:79IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)•Level 1: Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.•Level 2: Other inputs, which are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quotedprices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated byobservable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identicalunderlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources,in which case an average market price is used.•Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the bestinformation available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. See "Note 8—Fair Value Measurements and Financial Instruments" for a discussion of fair value measurements made using Level 3 inputs.The Company's non-financial assets, such as goodwill, intangible assets and property and equipment, as well as cost and equity method investments,are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.Traffic Acquisition CostsTraffic acquisition costs consist of (i) payments made to partners who distribute our Partnerships customized browser-based applications and whointegrate our paid listings into their websites and (ii) fees related to the distribution and facilitation of in-app purchase of product features. These paymentsinclude amounts based on revenue share and other arrangements. The Company expenses these payments in the period incurred as a component of cost ofrevenue.Advertising CostsAdvertising costs are expensed in the period incurred (when the advertisement first runs for production costs that are initially capitalized) and representonline marketing, including fees paid to search engines, social media sites and third parties that distribute our Consumer downloadable applications, offlinemarketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the Match Group brands. Advertising expenseis $1.1 billion, $1.0 billion and $1.2 billion for the years ended December 31, 2017, 2016 and 2015, respectively.The Company capitalizes and amortizes the costs associated with certain distribution arrangements that require it to pay a fee per access pointdelivered. These access points are generally in the form of downloadable applications associated with our Consumer operations. These fees are amortizedover the estimated useful lives of the access points to the extent the Company can reasonably estimate a probable future economic benefit and the periodover which such benefit will be realized (generally 18 months). Otherwise, the fees are charged to expense as incurred.Legal CostsLegal costs are expensed as incurred.Income TaxesThe Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future taxconsequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases.Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recoveredor settled. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not berealized. The Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of incometax expense.The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Companyconcludes that a tax position, based solely on its technical merits, is more-likely-than-not to be80IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)sustainable upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimatesettlement with a taxing authority that has full knowledge of all relevant information. De-recognition of a tax position that was previously recognized wouldoccur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act imposes a new minimum tax on global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries beginning in 2018. The Financial Accounting Standards Board ("FASB") Staff Q&A, Topic 740 No. 5,Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes fortemporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. TheCompany intends to elect to recognize the tax on GILTI as a period expense in the period the tax is incurred.Earnings Per ShareBasic earnings per share is computed by dividing net earnings attributable to IAC shareholders by the weighted average number of common sharesoutstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issuecommon stock were exercised or equity awards vested resulting in the issuance of common stock that could share in the earnings of the Company.Foreign Currency Translation and Transaction Gains and LossesThe financial position and operating results of foreign entities whose primary economic environment is based on their local currency are consolidatedusing the local currency as the functional currency. These local currency assets and liabilities are translated at the rates of exchange as of the balance sheetdate, and local currency revenue and expenses of these operations are translated at average rates of exchange during the period. Translation gains and lossesare included in accumulated other comprehensive income as a component of shareholders' equity. Transaction gains and losses resulting from assets andliabilities denominated in a currency other than the functional currency are included in the consolidated statement of operations as a component of other(expense) income, net. See "Note 19—Consolidated Financial Statement Details" for additional information regarding foreign currency exchange gains andlosses.Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated othercomprehensive income (loss) into earnings. Such gains totaled $0.7 million, $9.9 million and $2.2 million, respectively, during the years endedDecember 31, 2017, 2016 and 2015, and was included in "Other (expense) income, net" in the accompanying consolidated statement of operations.Stock-Based CompensationStock-based compensation is measured at the grant date based on the fair value of the award and is generally expensed over the requisite service period.See "Note 13—Stock-based Compensation" for a discussion of the Company's stock-based compensation plans.Redeemable Noncontrolling InterestsNoncontrolling interests in the consolidated subsidiaries of the Company are ordinarily reported on the consolidated balance sheet within shareholders'equity, separately from the Company's equity. However, securities that are redeemable at the option of the holder and not solely within the control of theissuer must be classified outside of shareholders' equity. Accordingly, all noncontrolling interests that are redeemable at the option of the holder arepresented outside of shareholders' equity in the accompanying consolidated balance sheet.In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The Company is party tofair value put and call arrangements with respect to these interests. These put and call arrangements allow management of these businesses to require theCompany to purchase their interests or allow the Company to acquire such interests at fair value, respectively. The put arrangements do not meet thedefinition of a derivative instrument as the put agreements do not provide for net settlement. These put and call arrangements become exercisable by theCompany and the counter-party at various dates in the future. During the years ended December 31, 2017, 2016 and 2015, two, one and81IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)two of these arrangements, respectively, were exercised. These put arrangements are exercisable by the counter-party outside the control of the Company.Accordingly, to the extent that the fair value of these interests exceeds the value determined by normal noncontrolling interest accounting, the value of suchinterests is adjusted to fair value with a corresponding adjustment to additional paid-in capital. During the years ended December 31, 2017, 2016 and 2015,the Company recorded adjustments of $6.3 million, $7.9 million and $23.2 million, respectively, to increase these interests to fair value. Fair valuedeterminations require high levels of judgment and are based on various valuation techniques, including market comparables and discounted cash flowprojections.Recent Accounting PronouncementsAccounting Pronouncements not yet adopted by the CompanyIn May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which clarifies theprinciples for recognizing revenue and develops a common standard for all industries. ASU No. 2014-09 was subsequently amended during 2015, 2016 and2017; these amendments provide further revenue recognition guidance related to principal versus agent considerations, performance obligations andlicensing, narrow-scope improvements and practical expedients.ASU No. 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP.The new standard provides a single principles-based, five-step model to be applied to all contracts with customers. This five-step model includes (1)identifying the contract(s) with the customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocatingthe transaction price to the performance obligations in the contract and (5) recognizing revenue when each performance obligation is satisfied. Morespecifically, revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expectedin exchange for those goods or services. ASU No. 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017, with earlyadoption permitted for interim and annual reporting periods beginning after December 15, 2016. Upon adoption, ASU No. 2014-09 may either be appliedretrospectively to each prior period presented or using the modified retrospective approach with the cumulative effect recognized as of the date of initialapplication.The Company’s evaluation of the impact of the adoption of ASU No. 2014-09 on its consolidated financial statements is substantially complete. Theprincipal remaining work is a confirmation of the calculation of the cumulative effect of ASU No. 2014-09 as of January 1, 2018, which will be completedduring the financial close process for the first quarter of 2018. The adoption of ASU No. 2014-09 is not expected to have a material effect on the Company'sconsolidated financial statements.The Company has reached the following determinations.•The Company has adopted ASU No. 2014-09 using the modified retrospective approach effective January 1, 2018. Therefore, the cumulative effectof adoption will be reflected as an adjustment to beginning retained earnings in the Form 10-Q for the period ending March 31, 2018.•Within ANGI Homeservices, the effect of the adoption of ASU No. 2014-09 on HomeAdvisor will be that sales commissions, which represent theincremental direct costs of obtaining a service professional contract, will be capitalized and amortized over the average life of a service professional.These costs were expensed as incurred prior to January 1, 2018. Prior to the Combination, Angie's List capitalized sales commissions and amortizedthe cost over the term of the applicable advertising contract. Following the Combination, Angie's List accounting policies were conformed to theHomeAdvisor's accounting policies and these costs are expensed as incurred. Following the adoption of ASU No. 2014-09, these costs will becapitalized and amortized over the average life of a service professional.•Within Applications, the primary effect of the adoption of ASU No. 2014-09 will be to accelerate the recognition of the portion of the revenue ofcertain desktop applications sold by SlimWare that qualify as functional intellectual property under ASU No. 2014-09. This revenue is currentlydeferred and recognized over the applicable subscription term.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments, which updates certain aspects of recognition, measurement, presentation,and disclosure of financial instruments. Under ASU No. 2016-01, certain equity investments will82IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)be measured at fair value with changes recognized in net income. ASU No. 2016-01 is effective for reporting periods beginning after December 15, 2017. TheCompany will adopt ASU No. 2016-01 effective January 1, 2018 and its adoption will not have a material effect on the consolidated financial statementsupon adoption. The adoption of ASU No. 2016-01 may increase the volatility of our results of operations as a result of the remeasurement of our cost methodinvestments.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases(Topic 840)" and generally requires all leases to be recognized in the statement of financial position. The provisions of ASU No. 2016-02 are effective forreporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU No. 2016-02 are to be applied using a modifiedretrospective approach. The Company will adopt ASU No. 2016-02 effective January 1, 2019.The Company is not a lessor and has no capitalized leases and does not expect to enter into any capitalized leases prior to the adoption of ASU No.2016-02. Accordingly, the Company does not expect the amount or classification of rent expense in its statement of operations to be affected by ASU No.2016-02. The primary effect of the adoption of ASU No. 2016-02 will be the recognition of a right of use asset and related liability to reflect the Company'srights and obligations under its operating leases. The Company will also be required to provide the additional disclosures stipulated in ASU No. 2016-02.The adoption of ASU No. 2016-02 will not have an impact on the leverage calculation set forth in any of the Company's outstanding debt, or the debt ofour Match Group and ANGI Homeservices subsidiaries, or our credit agreement or the credit agreement of Match Group because, in each circumstance, theleverage calculations are not affected by the liability that will be recorded upon adoption of the new standard.While the Company's evaluation of the impact of the adoption of ASU No. 2016-02 on its consolidated financial statements continues, outlined belowis a summary of the status of the Company's progress:•the Company has selected a software package to assist in the determination of the right of use asset and related liability as of January 1, 2019 and toprovide the required information following the adoption;•the Company has prepared summaries of its leases for input into the software package;•the Company is assessing the other inputs required in connection with the adoption of ASU No. 2016-02; and•the Company is developing its accounting policy, procedures and controls related to the new standard.The Company does not expect to have a preliminary estimate of the right of use asset and related liability as of the adoption date until the third quarterof 2018.Accounting Pronouncements adopted by the CompanyIn May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, whichprovides guidance about the changes to the terms and conditions of a share-based payment award that require an entity to apply modification accounting in"Stock Compensation (Topic 718)." The provisions of ASU No. 2017-09 are effective for reporting periods beginning after December 15, 2017; earlyadoption is permitted. The provisions of ASU No. 2017-09 are to be applied prospectively to an award modified on or after the adoption date. The Companyearly adopted the provisions of ASU No. 2017-09 during the third quarter of 2017 and the adoption of this standard update did not have a material impact onits consolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments, which clarifies how cash receipts and cash payments in certain transactions are presented and classified on the statement of cash flows. Theprovisions of ASU No. 2016-15 are effective for reporting periods beginning after December 15, 2017, including interim periods, and will require adoptionon a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest datepracticable; early adoption is permitted. Upon adoption, cash payments made soon after the acquisition date of a business to settle a contingent considerationliability are classified as cash outflows for investing activities. Cash payments which are not made soon after the acquisition date of a business to settle acontingent consideration liability are separated and classified as cash outflows for financing activities up to the amount of the contingent considerationliability recognized at the acquisition date and as cash83IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)outflows from operating activities for any excess. The Company early adopted the provisions of ASU No. 2016-15 on January 1, 2017. As a result, $11.1million of an acquisition-related contingent consideration payment of $15.0 million, which was in excess of the liability initially recognized at theacquisition date, has been classified as a cash outflow within net cash provided by operating activities in the accompanying consolidated statement of cashflows for the year ended December 31, 2017.In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting. The Company adopted the provisions of ASU No. 2016-09 on January 1, 2017. Excess tax benefits or deficiencies related to equity awards toemployees upon the exercise of stock options and the vesting of restricted stock units after January 1, 2017 are (i) reflected in the consolidated statement ofoperations as a component of the provision for income taxes, rather than recognized in equity (adopted on a prospective basis), and (ii) reflected as operating,rather than financing, cash flows in our consolidated statement of cash flows (adopted on a retrospective basis). Upon adoption, the calculation of fullydiluted shares excludes excess tax benefits from the assumed proceeds in applying the treasury stock method; previously such benefits were included in thecalculation. This change increased fully diluted shares by approximately 2.4 million shares for the year ended December 31, 2017. The Company continuesto account for forfeitures using an estimated forfeiture rate.In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,which is intended to simplify the accounting for goodwill impairment. The guidance eliminates the requirement to calculate the implied fair value ofgoodwill under the two-step impairment test to measure a goodwill impairment charge. The Company early adopted the provisions of ASU No. 2017-04 onJanuary 1, 2017 and the adoption of this standard update did not have a material impact on its consolidated financial statements.ReclassificationsCertain prior year amounts have been reclassified to conform to the current year presentation.84IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 3—INCOME TAXESU.S. and foreign earnings (loss) before income taxes and noncontrolling interests are as follows: Years Ended December 31, 2017 2016 2015 (In thousands)U.S. $(52,606) $(248,433) $79,656Foreign119,564 167,348 63,234 Total$66,958 $(81,085) $142,890The components of the (benefit) provision for income taxes are as follows: Years Ended December 31, 2017 2016 2015 (In thousands)Current income tax (benefit) provision: Federal$(31,844) $23,343 $67,505State1,964 3,662 7,785Foreign24,108 27,242 14,012 Current income tax (benefit) provision(5,772) 54,247 89,302Deferred income tax (benefit) provision: Federal(255,477) (100,798) (50,254)State(28,364) (9,518) (3,727)Foreign(1,437) (8,865) (5,805) Deferred income tax (benefit) provision(285,278) (119,181) (59,786) Income tax (benefit) provision$(291,050) $(64,934) $29,516The deferred tax asset for net operating losses ("NOLs") was increased by $361.8 million for the year ended December 31, 2017 for excess taxdeductions attributable to stock-based compensation. The related income tax benefit was recorded as a component of the deferred income tax benefit. Thecurrent income tax payable was reduced by $51.8 million and $56.4 million for the years ended December 31, 2016 and 2015, respectively, for excess taxdeductions attributable to stock-based compensation. For the years ended December 31, 2016 and 2015, the related income tax benefits were recorded asincreases to additional paid-in capital.85IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Income taxes receivable (payable) and deferred tax assets (liabilities) are included in the following captions in the accompanying consolidated balancesheet at December 31, 2017 and 2016: December 31, 2017 2016 (In thousands)Income taxes receivable (payable): Other current assets$33,239 $41,352Other non-current assets1,949 1,615Accrued expenses and other current liabilities(11,798) (5,788)Income taxes payable(25,624) (33,528) Net income taxes (payable) receivable$(2,234) $3,651 Deferred tax assets (liabilities): Other non-current assets$66,321 $2,511Deferred income taxes(35,070) (228,798) Net deferred tax assets (liabilities)$31,251 $(226,287)The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. Thevaluation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized. December 31, 2017 2016 (In thousands)Deferred tax assets: Accrued expenses$22,234 $40,273NOL carryforwards292,812 63,948Tax credit carryforwards78,715 11,570Stock-based compensation77,976 87,914Equity method investments12,066 17,455Intangible and other assets— 13,708Other30,265 30,044 Total deferred tax assets514,068 264,912Less valuation allowance(132,598) (88,170) Net deferred tax assets381,470 176,742Deferred tax liabilities: Investment in subsidiaries(247,167) (385,474)Intangible and other assets(87,811) —Other(15,241) (17,555) Total deferred tax liabilities(350,219) (403,029) Net deferred tax assets (liabilities)$31,251 $(226,287)At December 31, 2017, the Company has federal and state NOLs of $850.2 million and $859.4 million, respectively. The federal NOLs, if not utilized,will expire at various times between 2023 and 2037, and the state NOLs, if not utilized, will expire at various times between 2018 and 2037. Federal and stateNOLs of $586.8 million and $496.0 million, respectively, can86IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal RevenueCode, separate return limitations, and applicable state law. At December 31, 2017, the Company has foreign NOLs of $378.2 million available to offset futureincome. Of these foreign NOLs, $355.4 million can be carried forward indefinitely and $22.8 million will expire at various times between 2018 and 2037.During 2017, the Company recognized tax benefits related to NOLs of $257.7 million. Included in this amount is $79.2 million of tax benefits of acquiredattributes which was recorded as a reduction in goodwill. At December 31, 2017, the Company has federal and state capital losses of $11.3 million and $30.9million, respectively. If not utilized, the capital losses will expire between 2020 and 2021. Utilization of capital losses will be limited to the Company'sability to generate future capital gains.At December 31, 2017, the Company has tax credit carryforwards of $87.6 million. Of this amount, $49.3 million relates to credits for foreign taxes, ofwhich $41.8 million was generated from the provisional Transition Tax calculation (described below), $31.1 million relates to credits for research activitiesand $7.2 million relates to various other credits. Of these credit carryforwards, $15.2 million can be carried forward indefinitely and $72.4 million will expirebetween 2018 and 2037.The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature,frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, availabletax planning and historical experience. As of December 31, 2017, the Company has a gross deferred tax asset of $130.0 million that the Company expects tofully utilize on a more likely than not basis.During 2017, the Company's valuation allowance increased by $44.4 million primarily due to the establishment of foreign NOLs related to a recentacquisition. At December 31, 2017, the Company has a valuation allowance of $132.6 million related to the portion of tax loss carryforwards, foreign taxcredits and other items for which it is more likely than not that the tax benefit will not be realized.A reconciliation of the income tax (benefit) provision to the amounts computed by applying the statutory federal income tax rate to earnings beforeincome taxes is shown as follows: Years Ended December 31, 2017 2016 2015 (In thousands)Income tax (benefit) provision at the federal statutory rate of 35%$23,435 $(28,446) $50,006Transition tax62,667 — —Stock-based compensation(358,901) 3,998 1,787Foreign income taxed at a different statutory tax rate(14,725) (27,115) (10,382)State income taxes, net of effect of federal tax benefit86 (3,880) 2,208Realization of certain deferred tax assets(3,133) — (22,440)Non-taxable sale and non-deductible goodwill associated with ShoeBuy— (13,142) 4,920Goodwill impairment of Publishing— 10,649 —Research credit(5,304) (2,231) (2,354)Non-deductible impairments for certain cost method investments2,669 3,489 2,341Deferred tax adjustment for enacted changes in tax laws and rates705 (4,594) —Other, net1,451 (3,662) 3,430 Income tax (benefit) provision$(291,050) $(64,934) $29,51687IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows: December 31, 2017 2016 2015 (In thousands)Balance at January 1$38,372 $40,808 $30,386Additions based on tax positions related to the current year2,050 2,033 4,227Additions for tax positions of prior years1,994 2,676 14,467Reductions for tax positions of prior years(3,761) (743) (1,556)Settlements— (5,107) —Expiration of applicable statutes of limitations(1,923) (1,295) (6,716)Balance at December 31$36,732 $38,372 $40,808The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Included in the incometax provision for the years ended December 31, 2017, 2016 and 2015 is a $0.1 million benefit, $0.4 million expense and $0.1 million expense, respectively,net of related deferred taxes of less than $0.1 million, $0.2 million and less than $0.1 million, respectively, for interest on unrecognized tax benefits. AtDecember 31, 2017 and 2016, the Company has accrued $3.0 million and $2.6 million, respectively, for the payment of interest. At both December 31, 2017and 2016, the Company has accrued $1.7 million for penalties.The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include questioning thetiming and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Serviceis currently auditing the Company’s federal income tax returns for the years ended December 31, 2010 through 2012. The statute of limitations for the years2010 through 2012 has been extended to June 30, 2019, and the statute of limitations for the year 2013 has been extended to June 30, 2018. Various otherjurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include reserves considered sufficient to pay assessments thatmay result from examination of prior year tax returns. We consider many factors when evaluating and estimating our tax positions and tax benefits, whichmay require periodic adjustments and which may not accurately anticipate actual outcomes. Although management currently believes changes to reservesfrom period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not havea material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties andmanagement’s view of these matters may change in the future.At December 31, 2017 and 2016, unrecognized tax benefits, including interest and penalties, were $39.7 million and $41.0 million, respectively. Ifunrecognized tax benefits at December 31, 2017 are subsequently recognized, $37.2 million, net of related deferred tax assets and interest, would reduceincome tax expense. The comparable amount as of December 31, 2016 was $37.7 million. The Company believes that it is reasonably possible that itsunrecognized tax benefits could decrease by $13.2 million by December 31, 2018, due to expirations of statutes of limitations; $12.9 million of which wouldreduce the income tax provision.On December 22, 2017, the U.S. enacted the Tax Act. The Tax Act subjects to U.S. taxation certain previously deferred earnings of foreign subsidiariesas of December 31, 2017 (“Transition Tax”) and implements a number of changes that take effect on January 1, 2018, including but not limited to, areduction of the U.S. federal corporate tax rate from 35% to 21% and a new minimum tax on GILTI earned by foreign subsidiaries. The Company’s incometax provision for the year ended December 31, 2017 includes an expense of $63.8 million related to the Tax Act, of which, $62.7 million relates to theTransition Tax and $1.1 million relates to the remeasurement of U.S. net deferred tax assets due to the reduction in the corporate income tax rate. TheCompany has sufficient current year NOLs to offset the taxable income resulting from the Transition Tax and, therefore, will not be required to pay the one-time Transition Tax.The Transition Tax on deemed repatriated foreign earnings is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of theCompany's foreign subsidiaries. To determine the amount of the Transition Tax, the88IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Company must determine, among other factors, the amount of post-1986 E&P of its foreign subsidiaries, as well as the amount of non-U.S. income taxes paidon such earnings. The Company was able to make a reasonable estimate of the Transition Tax and has recorded a provisional Transition Tax expense of $62.7million. Any adjustment of the Company's provisional tax expense will be reflected as a change in estimate in its results in the period in which the change inestimate is made in accordance with Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act. The Company iscontinuing to gather additional information to more precisely compute the amount of the Transition Tax and expects to finalize its calculation prior to thefiling of its U.S. federal tax return, which is due on October 15, 2018. The additional information includes, but is not limited to, the allocation and sourcingof income and deductions in 2017 for purposes of calculating the utilization of foreign tax credits. In addition, our estimates may also be impacted andadjusted as the law is clarified and additional guidance is issued at the federal and state levels.As of December 31, 2017, the Company has $452.2 million in foreign cash of which approximately $420.2 million can be repatriated without anysignificant tax consequences as it has been substantially subjected to U.S. income tax under the Transition Tax imposed by the Tax Act. The Company hasnot provided for approximately $7.9 million of deferred taxes for the $101.2 million of the foreign cash earnings that is indefinitely reinvested outside theU.S. The Company reassess its intention to remit or permanently reinvest these cash earnings each reporting period; any required adjustment to the incometax provision would be reflected in the period that the Company changes this judgment.NOTE 4—BUSINESS COMBINATIONOn September 29, 2017, the Company completed the combination of the businesses in the Company's HomeAdvisor segment and Angie's List under anew publicly traded company called ANGI Homeservices. Through the Combination, ANGI Homeservices acquired 100% of the common stock of Angie'sList on September 29, 2017 for a total purchase price valued at $781.4 million. Angie’s List is a nationwide marketplace for local services where consumerscan research, hire, rate and review the providers of these services. Ratings and reviews assist members in identifying and hiring a provider for their localservice needs. Angie’s List's services are provided in markets located across the continental United States.The purchase price of $781.4 million was determined based on the sum of (i) the fair value of the 61.3 million shares of Angie's List common stockoutstanding immediately prior to the Combination based on the closing stock price of Angie's List common stock on the NASDAQ on September 29, 2017 of$12.46 per share; (ii) the cash consideration of $1.9 million paid to holders of Angie's List common stock who elected to receive $8.50 in cash per share; and(iii) the fair value of vested equity awards (including the pro rata portion of unvested awards attributable to pre-combination services) outstanding underAngie's List stock plans on September 29, 2017. Each stock option to purchase shares of Angie's List common stock that was outstanding immediately priorto the effective time of the Combination was, as of the effective time of the Combination, converted into an option to purchase (i) that number of Class Ashares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List option immediately prior to theeffective time of the Combination, (ii) at a per-share exercise price equal to the exercise price per share of Angie's List common stock at which such Angie'sList option was exercisable immediately prior to the effective time of the Combination. Each award of Angie's List restricted stock units that was outstandingimmediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an ANGI Homeservices restrictedstock unit award with respect to a number of Class A shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subjectto such Angie's List restricted stock unit award immediately prior to the effective time of the Combination.The table below summarizes the purchase price:89IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Angie's List (In thousands)Class A common stock$763,684Cash consideration for holders who elected to receive $8.50 in cash per share of Angie's List common stock1,913Fair value of vested and pro rata portion of unvested stock options attributable to pre-combination services11,749Fair value of the pro rata portion of unvested restricted stock units attributable to pre-combination services4,038Total purchase price$781,384The financial results of Angie's List are included in the Company's consolidated financial statements, within the ANGI Homeservices segment,beginning September 29, 2017. For the year ended December 31, 2017, the Company included $58.9 million of revenue and $21.8 million of net loss in itsconsolidated statement of operations related to Angie's List. The net loss of Angie's List reflects $28.7 million in stock-based compensation expense relatedto (i) the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination and (ii) the expenserelated to previously issued Angie's List equity awards, severance and retention costs of $19.8 million related to the Combination and a reduction in revenueof $7.8 million due to the write-off of deferred revenue related to the Combination.The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of combination: Angie's List (In thousands)Cash and cash equivalents$44,270Other current assets11,280Property and equipment16,341Goodwill543,674Intangible assets317,300Total assets932,865Deferred revenue(32,595)Other current liabilities(46,150)Long-term debt—related party(61,498)Deferred income taxes(9,833)Other long-term liabilities(1,405)Net assets acquired$781,384The purchase price was based on the expected financial performance of Angie's List, not on the value of the net identifiable assets at the time ofcombination. This resulted in a significant portion of the purchase price being attributed to goodwill because Angie's List is complementary and synergisticto the other North America businesses of ANGI Homeservices.The fair values of the identifiable intangible assets acquired at the date of combination are as follows:90IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Angie's List (In thousands) Weighted-averageuseful life(years)Indefinite-lived trade name and trademarks$137,000 IndefiniteService professionals90,500 3Developed technology63,900 6Memberships15,900 3User base10,000 1Total identifiable intangible assets acquired$317,300 Other current assets, current liabilities and other long-term liabilities of Angie's List were reviewed and adjusted to their fair values at the date ofcombination, as necessary. The fair value of deferred revenue was determined using an income approach that utilized a cost to fulfill analysis. The fair valueof the trade name and trademarks was determined using an income approach that utilized the relief from royalty methodology. The fair values of developedtechnology and user base were determined using a cost approach that utilized the cost to replace methodology. The fair values of the service professionalsand memberships were determined using an income approach that utilized the excess earnings methodology. The valuations of deferred revenue andintangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cashflows, cost and profit margins related to deferred revenue and the determination of royalty and discount rates. The amount attributed to goodwill is not taxdeductible.Pro forma financial informationThe unaudited pro forma financial information in the table below presents the combined results of the Company and Angie's List as if the Combinationhad occurred on January 1, 2016. The unaudited pro forma financial information includes adjustments required under the acquisition method of accountingand is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the Combination actuallyoccurred on January 1, 2016. For the year ended December 31, 2017, pro forma adjustments include (i) reductions in stock-based compensation expense of$78.0 million and transaction related costs of $34.1 million because they are one-time in nature and will not have a continuing impact on operations; and (ii)an increase in amortization of intangibles of $31.9 million. The stock-based compensation expense is related to the modification of previously issuedHomeAdvisor vested equity awards, which were converted into ANGI Homeservices' equity awards, and the acceleration of previously issued Angie's Listequity awards held by employees terminated in connection with the Combination. The transaction related costs include severance and retention costs of$19.8 million related to the Combination. For the year ended December 31, 2016, pro forma adjustments include a reduction in revenue of $34.1 million dueto the write-off of deferred revenue at the assumed date of acquisition as well as increases in stock-based compensation expense of $81.4 million andamortization of intangibles of $56.1 million. December 31, 2017 2016 (In thousands)Revenue$3,529,600 $3,429,105Net earnings (loss) attributable to IAC shareholders$364,496 $(143,133)Basic earnings (loss) per share attributable to IAC shareholders$4.55 $(1.79)Diluted earnings (loss) per share attributable to IAC shareholders$4.27 $(1.79)NOTE 5—GOODWILL AND INTANGIBLE ASSETSGoodwill and intangible assets, net are as follows:91IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2017 2016 (In thousands)Goodwill$2,559,066 $1,924,052Intangible assets with indefinite lives459,143 320,645Intangible assets with definite lives, net of accumulated amortization204,594 34,806Total goodwill and intangible assets, net$3,222,803 $2,279,503The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year endedDecember 31, 2017: Balance atDecember 31,2016 Additions (Deductions) ForeignExchangeTranslation Balance atDecember 31,2017 (In thousands)Match Group$1,206,538 $255 $— $41,106 $1,247,899ANGI Homeservices170,611 590,772 — 6,934 768,317Video25,239 70,369 — — 95,608Applications447,242 — — — 447,242Other74,422 — (74,430) 8 —Total$1,924,052 $661,396 $(74,430) $48,048 $2,559,066The additions primarily relate to the acquisitions of Angie's List, MyBuilder and HomeStars (included in the ANGI Homeservices segment), andLivestream (included in the Video segment). The deductions relate to the sale of The Princeton Review (included in the Other segment).The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year endedDecember 31, 2016: Balance atDecember 31,2015 Additions Deductions Impairment ForeignExchangeTranslation Balance atDecember 31,2016 (In thousands)Match Group$1,218,607 $603 $(2,983) $— $(9,689) $1,206,538ANGI Homeservices150,251 21,985 — — (1,625) 170,611Video15,590 9,649 — — — 25,239Applications447,242 — — — — 447,242Publishing277,192 — (1,968) (275,367) 143 —Other136,482 — (62,860) — 800 74,422Total$2,245,364 $32,237 $(67,811) $(275,367) $(10,371) $1,924,052The additions primarily relate to the acquisitions of MyHammer Holding AG (included in the ANGI Homeservices segment) and VHX (included in theVideo segment). The deductions primarily relate to the sales of PriceRunner and ShoeBuy (both included in the Other segment). During the second quarter of2016, the Company recorded impairment charges related to the entire $275.4 million balance of the Publishing reporting unit goodwill. The goodwillimpairment charge at Publishing was driven by the impact from the new Google contract, traffic trends and monetization challenges and the correspondingimpact on the then estimated fair value.92IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The December 31, 2017 and 2016 goodwill balance reflects accumulated impairment losses of $598.0 million, $529.1 million and $11.6 million atPublishing, Applications and Electus (included in the Video segment), respectively.Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. During the second quarter of 2016, the Companychanged the classification of certain intangibles from indefinite-lived to definite-lived at Publishing. At December 31, 2017 and 2016, intangible assets withdefinite lives are as follows: December 31, 2017 GrossCarryingAmount AccumulatedAmortization Net Weighted-AverageUseful Life(Years) (In thousands) Contractor and service professional relationships and other$102,997 $(13,252) $89,745 3.0Technology115,200 (37,357) 77,843 4.8Customer lists and user base23,468 (5,401) 18,067 2.2Content5,000 (3,973) 1,027 5.0Trade names16,986 (13,634) 3,352 2.6Memberships15,900 (1,340) 14,560 3.0Total$279,551 $(74,957) $204,594 3.7 December 31, 2016 GrossCarryingAmount AccumulatedAmortization Net Weighted-AverageUseful Life(Years) (In thousands) Contractor relationships and other$7,230 $(2,612) $4,618 4.5Technology38,602 (27,667) 10,935 3.4Customer lists and user base12,485 (9,997) 2,488 3.7Content14,802 (8,965) 5,837 4.3Trade names63,855 (52,927) 10,928 1.8Total$136,974 $(102,168) $34,806 2.8At December 31, 2017, amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:Years Ending December 31,(In thousands)2018$72,395201956,624202044,438202112,529202210,650Thereafter7,958Total$204,594NOTE 6—MARKETABLE SECURITIESAt December 31, 2017, current available-for-sale marketable securities are as follows:93IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value (In thousands)Commercial paper$4,995 $— $— $4,995Total marketable securities$4,995 $— $— $4,995The contractual maturities of debt securities classified as current available-for-sale at December 31, 2017 are due within one year. There are noinvestments in available-for-sale marketable debt securities that are in an unrealized loss position as of December 31, 2017.At December 31, 2016, current available-for-sale marketable securities are as follows: AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value (In thousands)Commercial paper$49,797 $— $— $49,797Treasury discount notes34,978 — (4) 34,974Corporate debt securities4,575 2 (6) 4,571Total marketable securities$89,350 $2 $(10) $89,342The aggregate fair value of available-for-sale marketable debt securities with unrealized losses is $37.0 million as of December 31, 2016. There are noinvestments in available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as ofDecember 31, 2016.The unrealized gains and losses in the above table at December 31, 2016 are included in "Accumulated other comprehensive loss" in the accompanyingconsolidated balance sheet.The following table presents the proceeds from maturities and sales of available-for-sale marketable securities and the related gross realized gains: December 31, 2017 2016 2015 (In thousands)Proceeds from maturities and sales of available-for-sale marketable securities$114,350 $279,485 $218,976Gross realized gains— 3,556 443Gross realized gains from the maturities and sales of available-for-sale marketable securities are included in "Other (expense) income, net" in theaccompanying consolidated statement of operations. There were no gross realized losses from the maturities and sales of available-for-sale marketablesecurities for the years ended December 31, 2017, 2016 and 2015. However, during the second quarter of 2015, the Company recognized $0.3 million inlosses that were deemed to be other-than-temporary related to various corporate debt securities that were expected to be sold by the Company, in part, to fundits cash needs related to Match Group's acquisition of PlentyOfFish for $575 million.NOTE 7—LONG-TERM INVESTMENTSLong-term investments consist of:94IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2017 2016 (In thousands)Cost method investments$63,418 $116,133Equity method investments1,559 6,677Total long-term investments$64,977 $122,810Cost method investmentsIn 2017, 2016 and 2015, the Company recorded $9.5 million, $10.0 million and $4.5 million, respectively, of other-than-temporary impairment chargesfor certain cost method investments as a result of our assessment of the near-term prospects and financial condition of the investees. These charges areincluded in "Other (expense) income, net" in the accompanying consolidated statement of operations.On October 23, 2017, Match Group sold a cost method investment for net proceeds of $60.2 million. The gain on sale of $9.1 million is included in"Other (expense) income, net" in the accompanying consolidated statement of operations.Equity method investmentsIn 2017 and 2016, the Company recorded other-than-temporary impairment charges on certain of its investments of $2.7 million and $0.6 million,respectively. These charges are included in "Other (expense) income, net" in the accompanying consolidated statement of operations.NOTE 8—FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTSThe following tables present the Company's financial instruments that are measured at fair value on a recurring basis: December 31, 2017 Quoted MarketPrices in ActiveMarkets forIdentical Assets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) TotalFair ValueMeasurements (In thousands)Assets: Cash equivalents: Money market funds$780,425 $— $— $780,425Time deposits— 60,000 — 60,000Treasury discount notes100,457 — — 100,457Commercial paper— 215,325 — 215,325Certificates of deposit— 6,195 — 6,195Marketable securities: Commercial paper— 4,995 — 4,995Total$880,882 $286,515 $— $1,167,397 Liabilities: Contingent consideration arrangements$— $— $(2,647) $(2,647)95IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2016 Quoted MarketPrices in ActiveMarkets forIdentical Assets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) TotalFair ValueMeasurements (In thousands)Assets: Cash equivalents: Money market funds$667,662 $— $— $667,662Time deposits— 79,000 — 79,000Treasury discount notes24,991 — — 24,991Commercial paper— 123,640 123,640Marketable securities: Commercial paper— 49,797 49,797Treasury discount notes34,974 — — 34,974Corporate debt securities— 4,571 — 4,571Total$727,627 $257,008 $— $984,635 Liabilities: Contingent consideration arrangements$— $— $(33,871) $(33,871)The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significantunobservable inputs (Level 3): For the Year Ended December 31, 2017 2016 ContingentConsiderationArrangements Auction RateSecurity ContingentConsiderationArrangements (In thousands)Balance at January 1$(33,871) $4,050 $(33,873)Total net (losses) gains: Included in earnings: Fair value adjustments(5,801) — (2,555)Included in other comprehensive (loss) income(1,404) 5,950 (1,571)Fair value at date of acquisition— — (185)Settlements38,429 — 2,180Proceeds from sale— (10,000) —Other— — 2,133Balance at December 31$(2,647) $— $(33,871)Contingent consideration arrangementsAs of December 31, 2017, there are three contingent consideration arrangements related to business acquisitions. Two of the contingent considerationarrangements have limits as to the maximum amount that can be paid. The maximum contingent payments related to these arrangements is $33.0 million andthe gross fair value of these arrangements, before the unamortized discount, at December 31, 2017 is $3.0 million. No payment is expected for the onecontingent consideration arrangement without a limit on the maximum earnout.96IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The contingent consideration arrangements are based upon earnings performance and/or operating metrics. The Company generally determined the fairvalue of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, because thearrangements were initially long-term in nature, applying a discount rate that appropriately captures the risks associated with the obligation to determine thenet amount reflected in the consolidated financial statements. The fair values of the contingent consideration arrangements at both December 31, 2017 and2016 reflect discount rates of 12%.The fair value of the contingent consideration arrangements is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics andchanges in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, including theaccretion of the discount, if applicable, and changes are recognized in “General and administrative expense” in the accompanying consolidated statement ofoperations. The contingent consideration arrangement liability at December 31, 2017 and 2016 includes a current portion of $0.6 million and $33.4 million,respectively, and non-current portion of $2.0 million and $0.4 million, respectively, which are included in “Accrued expenses and other current liabilities”and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet.Financial instruments measured at fair value only for disclosure purposesThe following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes: December 31, 2017 December 31, 2016 CarryingValue FairValue CarryingValue FairValue (In thousands)Current portion of long-term debt$(13,750) $(13,802) $(20,000) $(20,311)Long-term debt, net(1,979,469) (2,168,108) (1,582,484) (1,657,861)The fair value of long-term debt, including the current portion, is estimated using market prices or indices for similar liabilities and takes intoconsideration other factors such as credit quality and maturity, which are Level 3 inputs.NOTE 9—LONG-TERM DEBTLong-term debt consists of:97IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2017 2016 (In thousands)Match Group Debt: Match Group Term Loan due November 16, 2022$425,000 $350,0006.75% Senior Notes due December 15, 2022 (the "Match Group 6.75% Senior Notes"); interest payable eachJune 15 and December 15— 445,1726.375% Senior Notes due June 1, 2024 (the "Match Group 6.375% Senior Notes"); interest payable eachJune 1 and December 1400,000 400,0005.00% Senior Notes due December 15, 2027 (the "Match Group 5.00% Senior Notes"); interest payable eachJune 15 and December 15, which commences on June 15, 2018450,000 —Total Match Group long-term debt1,275,000 1,195,172Less: unamortized original issue discount and original issue premium, net8,668 5,245Less: unamortized debt issuance costs13,636 13,434Total Match Group debt, net1,252,696 1,176,493 ANGI Homeservices Debt: ANGI Homeservices Term Loan due November 1, 2022275,000 — Less: current portion of ANGI Homeservices long-term debt13,750 —Less: unamortized debt issuance costs2,938 —Total ANGI Homeservices debt258,312 — IAC Debt: 0.875% Exchangeable Senior Notes due October 1, 2022 (the "Exchangeable Notes"); interest payable eachApril 1 and October 1, which commences on April 1, 2018517,500 —4.75% Senior Notes due December 15, 2022 (the "4.75% Senior Notes"); interest payable each June 15 andDecember 1534,859 38,1094.875% Senior Notes due November 30, 2018 (the "4.875% Senior Notes"); interest payable each May 30 andNovember 30— 390,214Total IAC long-term debt552,359 428,323Less: current portion of IAC long-term debt— 20,000Less: unamortized original issue discount67,158 —Less: unamortized debt issuance costs16,740 2,332Total IAC debt, net468,461 405,991 Total long-term debt, net$1,979,469 $1,582,484Match Group Senior Notes:The outstanding balance of the Match Group 6.75% Senior Notes of $445.2 million was redeemed on December 17, 2017 with the proceeds from theissuance of the Match Group 5.00% Senior Notes and cash on hand.The Match Group 6.375% Senior Notes were issued on June 1, 2016. The proceeds of $400 million were used to prepay a portion of indebtednessoutstanding under the Match Group Term Loan. At any time prior to June 1, 2019, these notes may be redeemed at a redemption price equal to the sum of theprincipal amount thereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, these notes may be redeemed at the redemption prices setforth below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning onJune 1 of the years indicated below:98IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)YearPercentage2019104.781%2020103.188%2021101.594%2022 and thereafter100.000%On December 4, 2017, Match Group completed a private offering of $450 million aggregate principal amount of its 5.00% Senior Notes due December15, 2027. The proceeds from these notes, along with cash on hand, were used to redeem the outstanding balance of the Match Group 6.75% Senior Notes. Atany time prior to December 15, 2022, the Match Group 5.00% Senior Notes may be redeemed at a redemption price equal to the sum of the principal amountthereof, plus accrued and unpaid interest and a make-whole premium. Thereafter, these notes may be redeemed at the redemption prices set forth below,together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15of the years indicated below:YearPercentage2022102.500%2023101.667%2024100.833%2025 and thereafter100.000%The indentures governing the Match Group 6.375% and 5.00% Senior Notes (i) contain covenants that would limit Match Group's ability to paydividends or to make distributions and repurchase or redeem Match Group stock in the event a default has occurred or Match Group's leverage ratio (asdefined in the indentures) exceeds 5.0 to 1.0 and (ii) are ranked equally with each other. At December 31, 2017, there were no limitations pursuant thereto.There are additional covenants that limit Match Group's ability and the ability of its subsidiaries to, among other things, (i) incur indebtedness, makeinvestments, or sell assets in the event Match Group is not in compliance with certain ratios set forth in the indenture, and (ii) incur liens, enter intoagreements restricting Match Group subsidiaries' ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell substantiallyall of their assets.Match Group Term Loan and Match Group Credit Facility:On November 16, 2015, under a credit agreement (the "Match Group Credit Agreement"), Match Group borrowed $800 million in the form of a termloan (the "Match Group Term Loan"). During 2016, Match Group made $450 million of principal payments, $400 million of which was funded from proceedsof the 6.375% Senior Notes (described above). On August 14, 2017, Match Group increased its Term Loan by $75 million to $425 million, repriced theoutstanding balance at LIBOR plus 2.50% and reduced the LIBOR floor to 0.00%. The Match Group Term Loan provides for additional annual principalpayments 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 MatchGroup Credit Agreement. The interest rate on the Match Group Term Loan at December 31, 2017 is 3.85%. Interest payments are due at least quarterlythrough the term of the loan.Match Group has a $500 million revolving credit facility (the "Match Group Credit Facility") that expires on October 7, 2020. At December 31, 2017and 2016, there were no outstanding borrowings under the Match Group Credit Facility. The annual commitment fee on undrawn funds based on the currentleverage ratio is 30 basis points. Borrowings under the Match Group Credit Facility bear interest, at Match Group's option, at a base rate or LIBOR, in eachcase plus an applicable margin, which is determined by reference to a pricing grid based on Match Group's consolidated net leverage ratio. The terms of theMatch Group Credit Facility require Match Group to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0 and a minimum interest coverageratio of not less than 2.5 to 1.0 (in each case as defined in the agreement).There are additional covenants under the Match Group Credit Facility and the Match Group Term Loan that limit the ability of Match Group and itssubsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. While the Match Group Term Loan remains outstanding, thesesame covenants under the Match Group Credit Agreement are99IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)more restrictive than the covenants that are applicable to the Match Group Credit Facility. Obligations under the Match Group Credit Facility and MatchGroup Term Loan are unconditionally guaranteed by certain Match Group wholly-owned domestic subsidiaries, and are also secured by the stock of certainMatch Group domestic and foreign subsidiaries. The Match Group Term Loan and outstanding borrowings, if any, under the Match Group Credit Facilityrank equally with each other, and have priority over the Match Group 6.375% and 5.00% Senior Notes to the extent of the value of the assets securing theborrowings under the Match Group Credit Agreement.ANGI Homeservices Term Loan:On November 1, 2017, ANGI Homeservices borrowed $275 million under a five-year term loan facility ("ANGI Homeservices Term Loan"). The ANGIHomeservices Term Loan is guaranteed by ANGI Homeservices' wholly-owned material domestic subsidiaries and is secured by substantially all assets ofANGI Homeservices and the guarantors, subject to certain exceptions. The ANGI Homeservices Term Loan currently bears interest at LIBOR plus 2.00%, or3.38% at December 31, 2017, which is subject to change based on ANGI Homeservices' consolidated net leverage ratio. Interest payments are due at leastquarterly through the term of the loan and quarterly principal payments of 1.25% of the original principal amount in the first three years, 2.5% in the fourthyear and 3.75% in the fifth year are required. A portion of the proceeds of the loan were used to repay two intercompany notes outstanding to IAC and itssubsidiaries and the remaining proceeds will be used for general corporate purposes. See "Note 17—Related Party Transactions" for further information on theintercompany notes.There are additional covenants under the ANGI Homeservices Term Loan that limit the ability of ANGI Homeservices and its subsidiaries to, amongother things, incur indebtedness, pay dividends or make distributions. Obligations under the ANGI Homeservices Term Loan are unconditionally guaranteedby certain ANGI Homeservices wholly-owned domestic subsidiaries, and are also secured by the stock of certain ANGI Homeservices domestic and foreignsubsidiaries.IAC Exchangeable Notes:On October 2, 2017, IAC FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company, completed a private offering of $517.5 million aggregateprincipal amount of its 0.875% Exchangeable Senior Notes due October 1, 2022 (the “Exchangeable Notes”). The Exchangeable Notes are guaranteed by theCompany. Each $1,000 of principal of the Exchangeable Notes is exchangeable for 6.5713 shares of the Company's common stock, which is equivalent to anexchange price of approximately $152.18 per share, subject to adjustment upon the occurrence of specified events. Upon conversion, the Company has theright to settle the conversion of each $1,000 principal amount of Exchangeable Notes with any of the three following alternatives: (1) shares of our commonstock, (2) cash or (3) a combination of cash and shares of our common stock.The Exchangeable Notes are exchangeable at any time prior to the close of business on the business day immediately preceding July 1, 2022 onlyunder the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only duringsuch calendar quarter), if the last reported sale price of our common stock for at least 20 trading days during the period of 30 consecutive trading days duringthe immediately preceding calendar quarter is greater than or equal to 130% of the exchange price on each applicable trading day; (2) during the fivebusiness day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of themeasurement period was less than 98% of the product of the last reported sale price of our common stock and the exchange rate on each such trading day; (3)if the issuer calls the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemptiondate; or (4) upon the occurrence of specified corporate events as further described under the Indenture.The net proceeds from the sale of the Exchangeable Notes were approximately $499.5 million, after deducting fees and expenses. The net proceeds fromthe offering were:•used to pay the net premium of $50.7 million on the Exchangeable Note Hedge and Warrant (defined below); and•loaned to IAC, which repaid the outstanding balance of the 4.875% Senior Notes of $361.9 million, plus accrued interest of $8.8 million. The4.875% Senior Notes were redeemed on November 30, 2017.100IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)We separately account for the debt and the equity components of the Exchangeable Notes. Accordingly, the Company recorded a debt discount andcorresponding increase to additional paid-in capital of $70.4 million, which is the fair value attributed to the exchange feature or equity component of thedebt, on the date of issuance. The Company is amortizing the debt discount utilizing the effective interest method over the life of the Exchangeable Noteswhich increases the effective interest rate from its coupon rate of 0.875% to 3.88%. Transaction costs of $18.0 million were allocated between the liabilityand equity components.In connection with the debt offering, the Company purchased call options allowing the Company to purchase initially (subject to adjustment upon theoccurrence of specified events) the entire 3.4 million shares that would be issuable upon the exchange of the Exchangeable Notes at approximately $152.18per share (the "Exchangeable Note Hedge"), and sold warrants allowing the holder to purchase initially (subject to adjustment upon the occurrence ofspecified events) 3.4 million shares at $229.70 per share (the "Warrant"). The Exchangeable Note Hedge is expected to reduce the potential dilutive effect ofthe Company's common stock upon any exchange of notes and/or offset any cash payment IAC FinanceCo, Inc. is required to make in excess of the principalamount of the exchanged notes. The Warrants would separately have a dilutive effect on the Company's common stock to the extent that the market price pershare of the Company common stock exceeds the applicable strike price of the Warrants. The cost of the Exchangeable Note Hedge was $74.4 million, whichwas recorded as a reduction to additional paid-in capital. The aggregate proceeds from the issuance of the Warrant were $23.6 million, which was recorded asan increase to additional paid-in capital.The Company incurred cash and non-cash interest expense of $4.3 million in 2017 for the Exchangeable Notes. As of December 31, 2017, theunamortized discount amount totaled $67.2 million resulting in a net carrying value of the liability component of $450.3 million.IAC Senior Notes:The 4.75% Senior Notes were issued by IAC on December 21, 2012. These Notes are unconditionally guaranteed by certain wholly-owned domesticsubsidiaries, which are designated as guarantor subsidiaries. See "Note 21—Guarantor and Non-Guarantor Financial Information" for financial informationrelating to guarantors and non-guarantors.The indenture governing the 4.75% Senior Notes was amended to eliminate substantially all of the restrictive covenants contained therein inconnection with the Match Exchange Offer.We may redeem the 4.75% Senior Notes at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicableredemption date, if redeemed twelve-month period beginning on December 15 of the years indicated below:YearPercentage2018101.583%2019100.792%2020 and thereafter100.000%IAC Credit Facility:IAC has a $300 million revolving credit facility (the "IAC Credit Facility") that expires October 7, 2020. At December 31, 2017 and 2016, there were nooutstanding borrowings under the IAC Credit Facility. The annual commitment fee on undrawn funds is currently 25 basis points, and is based on theleverage ratio (as defined in the agreement) most recently reported. Borrowings under the IAC Credit Facility bear interest, at the Company's option, at a baserate or LIBOR, in each case, plus an applicable margin, which is determined by reference to a pricing grid based on the Company's leverage ratio. The termsof the IAC Credit Facility require that the Company maintains a leverage ratio of not more than 3.25 to 1.0 and restrict our ability to incur additionalindebtedness. Borrowings under the IAC Credit Facility are unconditionally guaranteed by the same domestic subsidiaries that guarantee the 4.75% SeniorNotes and are also secured by the stock of certain of our domestic and foreign subsidiaries. The 4.75% Senior Notes are subordinate to the outstandingborrowings under the IAC Credit Facility to extent of the value of the assets securing such borrowings.101IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)On October 2, 2017, IAC Group, LLC ("IAC Group"), a wholly-owned subsidiary of the Company, entered into a joinder agreement by and among IACGroup, the Company, and each of the other loan parties party to the IAC Credit Facility. Pursuant to the joinder agreement, IAC Group became the successorborrower under the IAC Credit Facility and IAC's obligations under the credit agreement were terminated. Borrowings under the IAC Credit Facility are stillunconditionally guaranteed by the same domestic subsidiaries that guarantee the 4.75% Senior Notes and is still secured by the stock of certain of ourdomestic and foreign subsidiaries.Long-term debt maturities:Years Ending December 31,(In thousands)2018$13,750201913,750202013,750202127,50020221,183,6092024400,0002027450,000Total2,102,359Less: current portion of long-term debt13,750Less: unamortized original issue discount75,826Less: unamortized debt issuance costs33,314Total long-term debt, net$1,979,469NOTE 10—SHAREHOLDERS' EQUITYDescription of Common Stock and Class B Convertible Common StockEach holder of shares of IAC common stock and IAC Class B common stock vote together as a single class with respect to matters that may besubmitted to a vote or for the consent of IAC's shareholders generally, including the election of directors. In connection with any such vote, each holder ofIAC common stock is entitled to one vote for each share of IAC common stock held and each holder of IAC Class B common stock is entitled to ten votes foreach share of IAC Class B common stock held. Notwithstanding the foregoing, the holders of shares of IAC common stock, acting as a single class, areentitled to elect 25% of the total number of IAC's directors, and, in the event that 25% of the total number of directors shall result in a fraction of a director,then the holders of shares of IAC common stock, acting as a single class, are entitled to elect the next higher whole number of IAC's directors. In addition,Delaware law requires that certain matters be approved by the holders of shares of IAC common stock or holders of IAC Class B common stock voting as aseparate class.Shares of IAC Class B common stock are convertible into shares of IAC common stock at the option of the holder thereof, at any time, on a share-for-share basis. Such conversion ratio will in all events be equitably preserved in the event of any recapitalization of IAC by means of a stock dividend on, or astock split or combination of, outstanding shares of IAC common stock or IAC Class B common stock, or in the event of any merger, consolidation or otherreorganization of IAC with another corporation. Upon the conversion of shares of IAC Class B common stock into shares of IAC common stock, those sharesof IAC Class B common stock will be retired and will not be subject to reissue. Shares of IAC common stock are not convertible into shares of IAC Class Bcommon stock.Except as described herein, shares of IAC common stock and IAC Class B common stock are identical. The holders of shares of IAC common stock andthe holders of shares of IAC Class B common stock are entitled to receive, share for share, such dividends as may be declared by IAC's Board of Directors outof funds legally available therefore. In the event of a liquidation, dissolution, distribution of assets or winding-up of IAC, the holders of shares of IACcommon stock and the holders102IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)of shares of IAC Class B common stock are entitled to receive, share for share, all the assets of IAC available for distribution to its stockholders, after therights of the holders of any IAC preferred stock have been satisfied.Reserved Common SharesIn connection with equity compensation plans, the Exchangeable Notes and warrants, 19.1 million shares of IAC common stock are reserved atDecember 31, 2017.WarrantsAt December 31, 2017, warrants to acquire initially (subject to adjustment upon the occurrence of specified events) 3.4 million shares of IAC commonstock at $229.70 per share were outstanding. The warrants were issued in connection with the issuance of the Exchangeable Notes. During the year endedDecember 31, 2017 there were no warrants exercised. No warrants were outstanding at December 31, 2016 and 2015. See "Note 9—Long-term Debt" foradditional information on the Company's Exchangeable Notes.Common Stock RepurchasesDuring 2017, 2016 and 2015, the Company repurchased 0.7 million, 6.3 million and 3.0 million shares of IAC common stock for aggregateconsideration, on a trade date basis, of $50.1 million, $315.3 million and $200.0 million, respectively.On May 3, 2016, IAC's Board of Directors authorized the repurchase of an additional 10.0 million shares of IAC common stock. At December 31, 2017,the Company has approximately 8.6 million shares remaining in its share repurchase authorization.NOTE 11—ACCUMULATED OTHER COMPREHENSIVE LOSSThe following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated othercomprehensive loss into earnings: Year Ended December 31, 2017 Foreign CurrencyTranslationAdjustment Unrealized GainsOn Available-For-Sale Securities Accumulated OtherComprehensive(Loss) Income (In thousands)Balance at January 1$(170,149) $4,026 $(166,123)Other comprehensive income before reclassifications65,908 7 65,915Amounts reclassified to earnings673 (4,033)(a) (3,360)Net current period other comprehensive income (loss)66,581 (4,026) 62,555Balance at December 31$(103,568) $— $(103,568)_________________________(a)Amount includes a tax benefit of $3.8 million.At December 31, 2017, there was no tax benefit or provision on the accumulated other comprehensive loss.103IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2016 Foreign CurrencyTranslationAdjustment Unrealized GainsOn Available-For-Sale Securities Accumulated OtherComprehensive(Loss) Income (In thousands)Balance at January 1$(154,645) $2,542 $(152,103)Other comprehensive (loss) income before reclassifications, net of tax benefit of $0.7million related to unrealized losses on available-for-sale securities(46,943) 4,855 (42,088)Amounts reclassified to earnings9,850 (2,913)(b) 6,937Net current period other comprehensive (loss) income(37,093) 1,942 (35,151)Reallocation of accumulated other comprehensive loss (income) related to thenoncontrolling interests created in the Match Group IPO21,589 (458) 21,131Balance at December 31$(170,149) $4,026 $(166,123)_________________________(b) Amount is net of a tax provision of $0.2 million. Year Ended December 31, 2015 Foreign CurrencyTranslationAdjustment Unrealized (Losses)Gain On Available-For-Sale Securities Accumulated OtherComprehensive Loss (In thousands)Balance at January 1$(86,848) $(852) $(87,700)Other comprehensive (loss) income before reclassifications, net of tax provision of $0.6million related to unrealized gains on available-for-sale securities(65,606) 3,537 (62,069)Amounts reclassified to earnings(2,191) (143)(c) (2,334)Net current period other comprehensive (loss) income(67,797) 3,394 (64,403)Balance at December 31$(154,645) $2,542 $(152,103)_________________________(c) Amount is net of a tax provision of $0.1 million.NOTE 12—EARNINGS (LOSS) PER SHAREThe following table sets forth the computation of basic and diluted earnings (loss) per share attributable to IAC shareholders:104IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2017 2016 2015 Basic Diluted Basic Diluted Basic Diluted (In thousands, except per share data)Numerator: Net earnings (loss)$358,008 $358,008 $(16,151) $(16,151) $113,374 $113,374Net (earnings) loss attributable to noncontrolling interests(53,084) (53,084) (25,129) (25,129) 6,098 6,098Impact from public subsidiaries' dilutive securities (a)— (33,531) — — — (1,799)Net earnings (loss) attributable to IAC shareholders$304,924 $271,393 $(41,280) $(41,280) $119,472 $117,673 Denominator: Weighted average basic shares outstanding80,089 80,089 80,045 80,045 82,944 82,944Dilutive securities (b) (c) (d) (e) (f) (g)— 5,221 — — — 5,323Denominator for earnings per share—weighted average shares(b)(c) (d) (e) (f) (g)80,089 85,310 80,045 80,045 82,944 88,267 Earnings (loss) per share attributable to IAC shareholders:Earnings (loss) per share$3.81 $3.18 $(0.52) $(0.52) $1.44 $1.33__________________________________________________________________(a)The amount for the years ended December 31, 2017 and 2015 reflects the reduction in Match Group's earnings (after its IPO on November 24, 2015) attributable to IACfrom the assumed exercise of Match Group dilutive securities under the if-converted method. For the year ended December 31, 2016, the impact on earnings related toMatch Group's dilutive securities under the if-converted method is excluded because it would have been anti-dilutive due to the Company's net loss.(b)Dilutive securities for the year ended December 31, 2017, include the impact from the assumed exercise of ANGI Homeservices dilutive securities under the if-convertedmethod, as it is more dilutive for IAC to settle certain ANGI Homeservices equity awards. The impact on earnings of ANGI Homeservices dilutive securities is not applicablefor periods prior to the Combination.(c)If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options,warrants and subsidiary denominated equity, conversion of the Company's Exchangeable Notes and vesting of restricted stock units ("RSUs"). For the years endedDecember 31, 2017 and 2015, 6.9 million and 1.2 million potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share becausetheir inclusion would have been anti-dilutive.(d)For the year ended December 31, 2016, the Company had a loss from operations; therefore, approximately 11.3 million potentially dilutive securities were excluded fromcomputing dilutive earnings per share because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to computeall earnings per share amounts.(e)Market-based awards and performance-based stock units (“PSUs”) are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-basedawards 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 themarket-based awards and PSUs is dilutive for the respective reporting periods. For the years ended December 31, 2017 and 2015, 0.1 million and 0.6 million shares,respectively, underlying market-based awards and PSUs were excluded from the calculation of diluted earnings per share because the market or performance conditions hadnot been met.(f)It is the Company's intention to settle the Exchangeable Notes through a combination of cash, equal to the face amount of the notes, and shares; the Exchangeable Notes willonly become dilutive once the price of IAC common stock exceeds the approximate $152.18 per share exchange price of the Exchangeable Notes.(g)See "Note 13—Stock-based Compensation" for additional information on equity instruments denominated in the shares of certain subsidiaries.NOTE 13—STOCK-BASED COMPENSATIONIAC currently has two active plans under which awards have been granted. These plans cover stock options to acquire shares of IAC common stock,RSUs, PSUs and restricted stock, as well as provide for the future grant of these and other equity awards. These plans authorize the Company to grant awardsto its employees, officers, directors and consultants. At December 31, 2017, there are 2.5 million shares available for grant under the plans.105IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The plans were adopted in 2008 and 2013, have a stated term of ten years, and provide that the exercise price of stock options granted will not be lessthan the market price of the Company's common stock on the grant date. The plans do not specify grant dates or vesting schedules of awards as thosedeterminations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee"). Each grantagreement reflects the vesting schedule for that particular grant as determined by the Committee. Broad-based stock option awards issued to date havegenerally vested in equal annual installments over a four-year period and RSU awards currently outstanding generally vest in three 33% installments over athree-year period, in each case, from the grant date. PSU awards currently outstanding cliff-vest after a three-year period from the date of grant.The amount of stock-based compensation expense recognized in the consolidated statement of operations is net of estimated forfeitures, as the expenserecorded is based on awards that are ultimately expected to vest. The forfeiture rate is estimated at the grant date based on historical experience and revised, ifnecessary, in subsequent periods if actual forfeitures differ from the estimated rate. At December 31, 2017, there is $423.2 million of unrecognizedcompensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period ofapproximately 2.5 years.The total income tax benefit recognized in the accompanying consolidated statement of operations for the years ended December 31, 2017, 2016 and2015 related to stock-based compensation is $423.0 million, $34.8 million and $36.6 million, respectively. The increase in total income tax benefitrecognized during 2017 is due to the adoption of ASU 2019-06 and the recognition of excess tax benefits attributable to stock-based compensation includedas a component of the current year provision for income taxes rather than recognized in equity.The Company will recognize a corporate income tax deduction based on the intrinsic value of the stock options exercised in 2017, however, there willbe some delay in the timing of the realization of the cash benefit of the income tax deduction because it will be dependent upon the amount and timing offuture taxable income and the timing of estimated income tax payments. The income tax benefit to be realized on stock option deductions, including thosenet settled, for the year ended December 31, 2017, is $411.6 million. The income tax benefit realized on stock option deductions, including those net settled,for the years ended December 31, 2016 and 2015 are $63.4 million and $69.3 million, respectively.IAC Stock OptionsStock options outstanding at December 31, 2017 and changes during the year ended December 31, 2017 are as follows: December 31, 2017 Shares WeightedAverageExercisePrice WeightedAverageRemainingContractualTerm (In Years) AggregateIntrinsicValue (Shares and intrinsic value in thousands)Options outstanding at January 1, 20178,058 $52.41 Granted1,153 76.62 Exercised(2,443) 41.30 Forfeited(179) 59.34 Expired(3) 56.31 Options outstanding at December 31, 20176,586 $60.57 7.0 $406,527Options exercisable2,920 $55.28 5.6 $195,677The aggregate intrinsic value in the table above represents the difference between IAC's closing stock price on the last trading day of 2017 and theexercise price, multiplied by the number of in-the-money options that would have been exercised had all option holders exercised their options onDecember 31, 2017. The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 is $164.6 million, $17.1million and $53.0 million, respectively.106IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The following table summarizes the information about stock options outstanding and exercisable at December 31, 2017: Options Outstanding Options ExercisableRange of Exercise PricesOutstanding atDecember 31,2017 Weighted-AverageRemainingContractualLife in Years Weighted-AverageExercisePrice Exercisable atDecember 31,2017 Weighted-AverageRemainingContractualLife in Years Weighted-AverageExercisePrice (Shares in thousands)$10.01 to $20.0038 0.9 $16.67 38 0.9 $16.67$20.01 to $30.0066 1.5 21.15 66 1.5 21.15$30.01 to $40.00415 3.3 32.31 415 3.3 32.31$40.01 to $50.001,862 6.8 43.42 870 5.3 44.86$50.01 to $60.00263 4.0 59.47 259 4.0 59.48$60.01 to $70.001,474 7.2 65.00 615 6.9 65.49$70.01 to $80.001,952 8.4 75.30 407 7.3 74.16$80.01 to $90.00500 7.3 84.31 250 7.3 84.31Greater than $90.0116 9.9 125.06 — — — 6,586 7.0 $60.57 2,920 5.6 $55.28The fair value of stock option awards, with the exception of market-based awards, is estimated on the grant date using the Black-Scholes option pricingmodel. The Black-Scholes option pricing model incorporates various assumptions, including expected volatility and expected term. During 2017, 2016 and2015, expected stock price volatilities were estimated based on the Company's historical volatility. The risk-free interest rates are based on U.S. Treasurieswith comparable terms as the awards, in effect at the grant date. Expected term is based upon the historical exercise behavior of our employees and thedividend yields are based on IAC's historical dividend payments. The following are the weighted average assumptions used in the Black-Scholes optionpricing model: Years Ended December 31, 2017 2016 2015Expected volatility29% 29% 28%Risk-free interest rate2.0% 1.2% 1.6%Expected term5.2 years 4.8 years 5.3 yearsDividend yield—% —% 2.0%During 2015, the Company granted market-based stock options to certain employees. These awards only vest if the price of IAC common stock exceedsthe relevant price threshold for a twenty-day consecutive period and the service requirement is met. The market-based vesting condition was achieved in2017. The service requirement provides that these awards vest in four equal annual installments beginning on the first anniversary of the grant date. The grantdate fair value of each market-based award was estimated using a lattice model that incorporates a Monte Carlo simulation of IAC's stock price. The inputsused to fair value these awards included a weighted average expected volatility of 27%, risk-free interest rate of 2.3% and a 1.8% dividend yield. Theexpected term of these awards was derived from the output of the option valuation model. Expense is recognized over the longer of the vesting period of eachof the four installments or the expected term. The weighted average expected term of these awards is 4 years.Approximately 1.2 million, 1.7 million and 2.5 million stock options were granted by the Company during the years ended December 31, 2017, 2016and 2015, respectively. The weighted average fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 with exerciseprices equal to the market prices of IAC's common stock on the date of grant are $22.94, $12.34 and $15.24, respectively. During the year endedDecember 31, 2015, the weighted average exercise price and weighted average fair value of stock options granted with exercise prices greater than the marketvalue of IAC's common stock on the date of grant are $84.31 and $12.00, respectively.107IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Cash received from stock option exercises for the years ended December 31, 2017, 2016 and 2015 are $82.4 million, $25.8 million and $27.3 million,respectively.IAC Restricted Stock Units and Performance-based Stock UnitsRSUs and PSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of IAC common stock andwith the value of each RSU and PSU equal to the fair value of IAC common stock at the date of grant. Each RSU and PSU grant is subject to service-basedvesting, where a specific period of continued employment must pass before an award vests. PSUs also include performance-based vesting, where certainperformance targets set at the time of grant must be achieved before an award vests. For RSU grants, the expense is measured at the grant date as the fair valueof IAC common stock and expensed as stock-based compensation over the vesting term. For PSU grants, the expense is measured at the grant date as the fairvalue of IAC common stock and expensed as stock-based compensation over the vesting term if the performance targets are considered probable of beingachieved.Unvested RSUs and PSUs outstanding at December 31, 2017 and changes during the year ended December 31, 2017 are as follows: RSUs PSUs Numberof shares WeightedAverageGrant DateFair Value Numberof shares WeightedAverageGrant DateFair Value (Shares in thousands)Unvested at January 1, 2017526 $57.41 — $—Granted174 100.54 130 76.00Vested(340) 54.66 — —Forfeited— — — —Unvested at December 31, 2017360 $80.81 130 $76.00The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2017, 2016 and 2015 based on market prices of IAC'scommon stock on the grant date was $90.04, $46.92 and $67.71, respectively. The total fair value of RSUs and PSUs that vested during the years endedDecember 31, 2017, 2016 and 2015 was $32.5 million, $13.5 million and $16.8 million, respectively.Equity Instruments Denominated in the Shares of Certain SubsidiariesNon-publicly-traded SubsidiariesThe following description excludes awards denominated in the shares of the Company's publicly-traded subsidiaries, Match Group and ANGIHomeservices. Match Group and ANGI Homeservices stock-based awards are issued pursuant to their respective stock incentive plans.IAC has granted stock options and stock settled stock appreciation rights denominated in the equity of certain non-publicly traded subsidiaries toemployees and management of those subsidiaries. These equity awards vest over a period of years or upon the occurrence of certain prescribed events. Thevalue of the stock options and stock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries. Accordingly, theseinterests only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price. Theseinterests can have significant value in the event of significant appreciation. The interests are ultimately settled in IAC common stock with fair market valuegenerally determined by negotiation or arbitration, at various dates through 2027. These equity awards are settled on a net basis, with the award holderentitled to receive a payment in shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholdingpayment. The number of shares ultimately needed to settle these awards may vary significantly from the estimated numbers below as a result of bothmovements in our stock price and a determination of fair value of the relevant subsidiary that is different than our estimate. The expense associated with theseequity awards is initially measured at fair value at the grant date and is expensed as stock-based compensation over the vesting108IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)term. The number of IAC common shares that would be required to settle these interests at current estimated fair values, including vested and unvestedinterests, at December 31, 2017 is 0.1 million shares. Withholding taxes, which will be paid by the Company on behalf of the employees upon exercise,would have been $15.2 million at December 31, 2017, assuming a 50% withholding rate.Match GroupFollowing the completion of the Match Group IPO, equity awards that related to certain subsidiaries (principally Tinder, Inc.) of Match Group weresettleable, at IAC's election, in shares of IAC common stock or Match Group common stock. Pursuant to the Employee Matters Agreement between IAC andMatch Group, to the extent shares of IAC common stock are issued in settlement of these awards, Match Group reimburses IAC for the cost of those shares incash or by issuing IAC shares of Match Group common stock. In July 2017, Tinder was merged into Match Group and as a result, all Tinder denominatedequity awards were converted into Match Group tandem stock options ("Tandem Awards"). All of the Match Group Tandem Awards exercised during 2017were exercised on a net basis and were settled in IAC common shares; the Company issued 2.0 million shares of its common stock to settle these awards andMatch Group issued 11.3 million shares of its common stock to IAC as reimbursement. During 2017, Match Group also purchased certain fully vestedTandem Awards. During 2017, Match Group made cash payments of approximately $520 million to cover both the withholding taxes paid on behalf ofemployees exercising these converted awards and the purchase of certain fully vested awards. Assuming all vested and unvested Match Group TandemAwards outstanding on December 31, 2017 were exercised on a net basis on that date and settled with IAC stock, 0.8 million IAC common shares would havebeen issued in settlement. Match Group would have remitted $102.4 million in cash in withholding taxes (assuming a 50% withholding rate) on behalf of theemployees and issued 3.3 million of its common shares to IAC as reimbursement.During 2016 and 2015, the Company granted a nominal amount of IAC denominated market-based awards to certain Match Group employees. Thenumber of awards that ultimately vest is dependent upon Match Group's stock price. The grant date fair value of each market-based award is estimated using alattice model that incorporates a Monte Carlo simulation of Match Group's stock price. Each market-based award is subject to service-based vesting, where aspecific period of continued employment must pass before an award vests. Some of the market-based awards contain performance targets set at the time ofgrant that must be achieved before an award vests.ANGI HomeservicesIn connection with the Combination, previously issued stock appreciation rights that related to the common stock of HomeAdvisor (US) wereconverted into stock appreciation rights that are exercisable for Class A shares of ANGI Homeservices. IAC has the right to settle these awards using shares ofIAC common stock. To the extent shares of IAC common stock are issued in settlement of these awards, ANGI Homeservices will reimburse IAC by issuing toIAC additional Class A shares of ANGI Homeservices common stock pursuant to the Employee Matters Agreement between IAC and ANGI Homeservices.These equity awards are settled on a net basis, with the award holder entitled to receive a payment in shares equal to the intrinsic value of the award atexercise less an amount equal to the required cash tax withholding payment. Assuming all vested and unvested stock appreciation rights outstanding onDecember 31, 2017 were exercised on a net basis and settled using IAC stock, 1.4 million IAC common shares would have been issued in settlement. ANGIHomeservices would have remitted $171.3 million in cash in withholding taxes (assuming a 50% withholding rate) on behalf of the employees and issued16.4 million of its common shares to IAC as reimbursement.Modification of awardsIn connection with the Combination, the previously issued HomeAdvisor (US) stock appreciation rights were converted into ANGI Homeservices'equity awards resulting in a modification charge of $217.7 million of which $93.4 million was recognized as stock-based compensation expense in the yearended December 31, 2017 and the remaining charge will be recognized over the vesting period of the modified awards.During the second quarter of 2017, the Company modified certain subsidiary denominated equity awards and recognized a modification charge of $6.6million.109IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)During 2016, the Company modified certain subsidiary denominated equity awards resulting in a modification charge of $7.3 million (subsequentlyreduced to $7.1 million due to forfeitures) of which $0.7 million and $6.3 million were recognized as stock-based compensation in the years endedDecember 31, 2017 and 2016, respectively, and $0.1 million will be recognized over the remaining vesting period of the modified awards.During the first quarter of 2015, the Company modified certain subsidiary denominated equity awards resulting in a modification charge of $5.8 millionof which $0.2 million, $0.6 million and $3.5 million was recognized in 2017, 2016 and 2015, respectively, and the remaining charge will be recognized overthe remaining vesting period of the modified awards. During the third quarter of 2015, the Company modified certain subsidiary denominated vested equityawards and recognized a modification charge of $6.8 million. During the fourth quarter of 2015, the Company repurchased certain subsidiary denominatedvested equity awards in exchange for $23.4 million in cash and fully vested modified equity awards and recognized a modification charge of $7.7 million.These modification charges are included in stock-based compensation in the year ended December 31, 2015.During 2014, the Company granted an equity award denominated in shares of a subsidiary of the Company to a non-employee, which was marked tomarket each reporting period. In the third quarter of 2016, Match Group settled the vested portion of the award for cash of $13.4 million. In the third quarterof 2017, the award was modified and Match Group settled the remaining portion of the award for cash of $33.9 million.NOTE 14—SEGMENT INFORMATION.The overall concept that IAC employs in determining its operating segments is to present the financial information in a manner consistent with: how thechief operating decision maker views the businesses; how the businesses are organized as to segment management; and the focus of the businesses withregards to the types of services or products offered or the target market. Operating segments are combined for reporting purposes if they meet certainaggregation criteria, which principally relate to the similarity of their economic characteristics or, in the case of the Other reportable segment, do not meet thequantitative thresholds that require presentation as separate reportable segments. Years Ended December 31, 2017 2016 2015 (In thousands)Revenue: Match Group$1,330,661 $1,118,110 $909,705ANGI Homeservices736,386 498,890 361,201Video276,994 228,649 213,317Applications577,998 604,140 760,748Publishing361,837 407,313 691,686Other(a)23,980 283,365 294,821Inter-segment elimination(617) (585) (545)Total$3,307,239 $3,139,882 $3,230,933___________________(a)The Other segment consists of the results of PriceRunner, ShoeBuy and The Princeton Review for periods prior to the sales of these businesses, which occurred on March 18,2016, December 30, 2016 and March 31, 2017, respectively. Beginning in the second quarter of 2017, as a result of the sales of these businesses, the Other segment does notinclude any financial results.110IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2017 2016 2015 (In thousands)Operating Income (Loss): Match Group$360,517 $315,549 $212,981ANGI Homeservices(149,176) 25,363 (1,568)Video(35,659) (27,656) (38,756)Applications130,176 109,663 175,145Publishing15,670 (334,417) (26,692)Other(5,621) (11,678) (28,611)Corporate(127,441) (109,449) (112,911)Total$188,466 $(32,625) $179,588 Years Ended December 31, 2017 2016 2015 (In thousands)Adjusted EBITDA:(b) Match Group$468,941 $403,380 $284,554ANGI Homeservices37,858 45,851 16,713Video(30,446) (21,247) (38,384)Applications136,757 132,276 184,258Publishing31,470 (7,571) 87,788Other(1,532) 1,802 4,734Corporate(67,755) (53,272) (53,873)Total$575,293 $501,219 $485,790 December 31, 2017 2016 (In thousands)Segment Assets:(c) Match Group$467,338 $422,509ANGI Homeservices264,450 74,106Video129,855 225,519Applications345,532 98,460Publishing182,949 398,958Other— 15,372Corporate873,392 822,687Total$2,263,516 $2,057,611111IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2017 2016 2015 (In thousands)Capital expenditures: Match Group$28,833 $46,098 $25,246ANGI Homeservices26,837 16,660 10,170Video400 2,508 2,466Applications227 1,196 4,681Publishing850 2,093 6,283Other536 5,712 7,085Corporate17,840 3,772 6,118Total$75,523 $78,039 $62,049_______________________________________________________________________________(b)The Company's primary financial measure is Adjusted EBITDA, which 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 lossesrecognized on changes in the fair value of contingent consideration arrangements. The Company believes this measure is useful for analysts and investors as this measureallows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate theperformance of our business as a whole and our individual business segments, and this measure is one of the primary metrics by which our internal budgets are based and bywhich management is compensated. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that byexcluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made anddebt is serviced. Adjusted EBITDA has certain limitations in that it does not take into account the impact to IAC's statement of operations of certain expenses.(c)Consistent with the Company's primary metric (described in (a) above), the Company excludes, if applicable, property and equipment, goodwill and intangible assets fromthe measure of segment assets presented above.The following table presents the revenue of the Company's principal segments disaggregated by type of service:112IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2017 2016 2015 (In thousands)Match Group Direct revenue$1,281,249 $1,067,364 $866,583 Indirect revenue (principally advertising revenue)49,412 50,746 43,122 Total Match Group revenue$1,330,661 $1,118,110 $909,705 ANGI Homeservices Marketplace: Consumer connection revenue (d)$521,481 $382,466 $269,309Membership subscription revenue56,135 43,573 24,164Other revenue3,798 2,827 3,423Marketplace revenue581,414 428,866 296,896Advertising & Other revenue (e)97,483 32,981 32,971North America678,897 461,847 329,867Consumer connection revenue (d)40,009 28,124 23,298Membership subscription revenue16,596 7,936 6,921Advertising and other revenue884 983 1,115Europe57,489 37,043 31,334 Total ANGI Homeservices revenue$736,386 $498,890 $361,201 Applications Advertising$515,405 $552,410 $728,501 Subscription (including downloadable app fees) and Other62,593 51,730 32,247 Total Applications revenue$577,998 $604,140 $760,748 Publishing Advertising$358,472 $405,031 $685,440 Other3,365 2,282 6,246 Total Publishing revenue$361,837 $407,313 $691,686_______________________________________________________________________________(d)Fees paid by service professionals for consumer matches.(e)Includes Angie's List revenue from service professionals under contract for advertising and Angie's List membership subscription fees from consumers, as well as revenuefrom mHelpDesk, HomeStars and Felix.Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below:113IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2017 2016 2015 (In thousands)Revenue United States$2,323,050 $2,318,976 $2,376,035All other countries984,189 820,906 854,898Total$3,307,239 $3,139,882 $3,230,933 December 31, 2017 2016 (In thousands)Long-lived assets (excluding goodwill and intangible assets) United States$286,541 $281,725All other countries28,629 24,523Total$315,170 $306,248The following tables reconcile operating income (loss) for the Company's reportable segments and net earnings (loss) attributable to IAC shareholdersto Adjusted EBITDA: Year Ended December 31, 2017 OperatingIncome(Loss) Stock-BasedCompensationExpense Depreciation Amortizationof Intangibles Acquisition-relatedContingentConsideration FairValue Adjustments Adjusted EBITDA (In thousands) Match Group$360,517 $69,090 $32,613 $1,468 $5,253 $468,941ANGI Homeservices(149,176) 149,230 14,543 23,261 — 37,858Video(35,659) 401 2,167 2,645 — (30,446)Applications130,176 — 3,863 2,170 548 136,757Publishing15,670 — 4,725 11,075 — 31,470Other(5,621) 1,729 836 1,524 — (1,532)Corporate(127,441) 44,168 15,518 — — (67,755)Total$188,466 $264,618 $74,265 $42,143 $5,801 $575,293Interest expense(105,295) Other expense, net(16,213) Earnings before incometaxes66,958 Income tax benefit291,050 Net earnings358,008 Net earnings attributableto noncontrollinginterests(53,084) Net earnings attributableto IAC shareholders$304,924 114IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2016 OperatingIncome(Loss) Stock-BasedCompensationExpense Depreciation Amortizationof Intangibles Acquisition-relatedContingentConsideration FairValue Adjustments GoodwillImpairment Adjusted EBITDA (In thousands)Match Group$315,549 $52,370 $27,726 $16,932 $(9,197) $— $403,380ANGI Homeservices25,363 8,916 8,419 3,153 — — 45,851Video(27,656) 640 1,785 4,176 (192) — (21,247)Applications109,663 — 5,095 5,483 12,035 — 132,276Publishing(334,417) — 8,531 42,948 — 275,367 (7,571)Other(11,678) 618 6,219 6,734 (91) — 1,802Corporate(109,449) 42,276 13,901 — — — (53,272)Total(32,625) $104,820 $71,676 $79,426 $2,555 $275,367 $501,219Interest expense(109,110) Other income, net60,650 Loss before income taxes(81,085) Income tax benefit64,934 Net loss(16,151) Net earnings attributableto noncontrollinginterests(25,129) Net loss attributable toIAC shareholders$(41,280) 115IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2015 OperatingIncome(Loss) Stock-BasedCompensationExpense Depreciation Amortizationof Intangibles Acquisition-related ContingentConsiderationFair ValueAdjustments GoodwillImpairment Adjusted EBITDA (In thousands)Match Group$212,981 $49,401 $19,791 $13,437 $(11,056) $— $284,554ANGI Homeservices(1,568) 7,853 6,593 3,835 — — 16,713Video(38,756) 360 1,091 1,558 (2,637) — (38,384)Applications175,145 — 4,617 6,264 (1,768) — 184,258Publishing(26,692) — 9,577 104,903 — — 87,788Other(28,611) 682 8,652 9,955 — 14,056 4,734Corporate(112,911) 47,154 11,884 — — — (53,873)Total179,588 $105,450 $62,205 $139,952 $(15,461) $14,056 $485,790Interest expense(73,636) Other income, net36,938 Earnings before incometaxes142,890 Income tax provision(29,516) Net earnings113,374 Net loss attributable tononcontrolling interests6,098 Net earnings attributableto IAC shareholders$119,472 The following tables reconcile segment assets to total assets: December 31, 2017 Segment Assets Property andEquipment, Net Goodwill Indefinite-LivedIntangibleAssets Definite-LivedIntangibleAssets, Net Total Assets (In thousands)Match Group$467,338 $61,620 $1,247,899 $228,296 $2,049 $2,007,202ANGI Homeservices264,450 53,292 768,317 153,447 175,124 1,414,630Video129,855 3,076 95,608 1,800 23,322 253,661Applications345,532 7,004 447,242 60,600 847 861,225Publishing182,949 5,350 — 15,000 3,252 206,551Other— — — — — —Corporate (f)873,392 184,828 — — — 1,058,220Total$2,263,516 $315,170 $2,559,066 $459,143 $204,594 5,801,489Add: Deferred tax assets (g) 66,321Total Assets $5,867,810116IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2016 Segment Assets Property andEquipment, Net Goodwill Indefinite-LivedIntangibleAssets Definite-LivedIntangibleAssets, Net Total Assets (In thousands)Match Group$422,509 $62,954 $1,206,538 $214,461 $3,221 $1,909,683ANGI Homeservices74,106 23,645 170,611 4,884 5,908 279,154Video225,519 4,750 25,239 1,800 4,167 261,475Applications98,460 10,559 447,242 60,600 2,481 619,342Publishing398,958 10,696 — 15,000 11,441 436,095Other15,372 6,774 74,422 23,900 7,588 128,056Corporate (f)822,687 186,870 — — — 1,009,557Total$2,057,611 $306,248 $1,924,052 $320,645 $34,806 4,643,362Add: Deferred tax assets (g) 2,511Total Assets $4,645,873_____________________________________(f)Corporate assets consist primarily of cash and cash equivalents, marketable securities and IAC's headquarters building.(g)Total segment assets differ from total assets on a consolidated basis as a result of unallocated deferred tax assets.NOTE 15—COMMITMENTS AND CONTINGENCIESCommitmentsThe Company leases land, 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 a data center leaseagreement. These operating expenses are not included in the table below.Future minimum payments under operating lease agreements are as follows:Years Ending December 31,(In thousands)2018$38,339201936,996202030,594202123,253202219,688Thereafter211,649Total$360,519Expenses charged to operations under these agreements are $37.9 million, $50.8 million and $39.4 million for the years ended December 31, 2017,2016 and 2015, respectively.The Company's most significant operating lease is a seventy-seven-year land lease for IAC's headquarters building in New York City and approximates48% of the future minimum payments due under all operating lease agreements in the table above.The Company also has funding commitments that could potentially require its performance in the event of demands by third parties or contingentevents as follows:117IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Amount of Commitment Expiration Per Period Less Than1 Year 1-3Years 3-5Years More Than5 Years TotalAmountsCommitted (In thousands)Purchase obligations$21,994 $10,816 $— $— $32,810Letters of credit and surety bonds576 71 — 1,939 2,586Total commercial commitments$22,570 $10,887 $— $1,939 $35,396The purchase obligations principally include web hosting commitments. The letters of credit support the Company's casualty insurance program.ContingenciesIn the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reserves for specific legal matters when itdetermines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legalmatters where we believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes thatresolving claims against us, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results ofoperations, or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change inthe future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of anunfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingenciescould have a material impact on the liquidity, results of operations, or financial condition of the Company. See "Note 3—Income Taxes" for additionalinformation related to income tax contingencies.NOTE 16—SUPPLEMENTAL CASH FLOW INFORMATIONSupplemental Disclosure of Non-Cash Transactions:The Company recorded acquisition-related contingent consideration liabilities of $0.2 million and $27.4 million during the years ended December 31,2016 and 2015, respectively, in connection with various acquisitions. There were no acquisition-related contingent consideration liabilities recorded for theyear ended December 31, 2017. See "Note 8—Fair Value Measurements and Financial Instruments" for additional information on contingent considerationarrangements.On September 29, 2017, ANGI Homeservices issued 61.3 million shares of Class A common stock valued at $763.7 million in connection with theCombination.On November 16, 2015, Match Group exchanged $445.3 million of 4.75% Senior Notes for $445.2 million of Match Group 6.75% Senior Notes.Supplemental Disclosure of Cash Flow Information: Years Ended December 31, 2017 2016 2015 (In thousands)Cash paid (received) during the year for: Interest$92,461 $107,360 $51,666Income tax payments35,598 69,103 70,762Income tax refunds(42,025) (23,877) (5,619)118IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 17—RELATED PARTY TRANSACTIONSIAC and Match Group:IAC and Match Group, in connection with Match Group's IPO, entered into the following agreements:•A Master Transaction Agreement, under which Match Group agrees to assume all of the assets and liabilities related to its business and agrees toindemnify IAC against any losses arising out of any breach by Match Group of the Master Transaction Agreement or other IPO related agreements;•An Investor Rights Agreement that provides IAC with (i) specified registration and other rights relating to shares of Match Group's common stockand (ii) anti-dilution rights with respect to Match Group's common stock;•An Employee Matters Agreement, which governs the respective rights, responsibilities and obligations of IAC and Match Group after the IPO withrespect to a range of compensation and benefit issues;•A Tax Sharing Agreement, which governs the respective rights, responsibilities and obligations of IAC and Match Group with respect to taxliabilities and benefits, entitlement to refunds, preparation of tax returns, tax contests and other tax matters regarding U.S. federal, state, local andforeign income taxes; and•A Services Agreement, under which IAC has agreed to provide a range of services to Match Group, including, among others, (i) assistance withcertain legal, finance, internal audit, treasury, information technology support, insurance and tax affairs, including assistance with certain publiccompany reporting obligations; (ii) payroll processing services; (iii) tax compliance services; and (iv) such other services as to which IAC andMatch Group may agree, and Match Group agrees to provide IAC informational technology services and such other services as to which IAC andMatch Group may agree.During the years ended December 31, 2017 and 2016, 11.9 million and 1.0 million shares, respectively, of Match Group common stock were issued toIAC pursuant to the employee matters agreement; 11.3 million and 0.5 million, respectively, of which were issued as reimbursement for shares of IACcommon stock issued in connection with the exercise and settlement of Match Group tandem stock options and equity awards denominated in shares of asubsidiary of Match Group, respectively; and 0.6 million and 0.4 million, respectively, of which were issued as reimbursement for shares of IAC commonstock issued in connection with the exercise and vesting of IAC equity awards held by Match Group employees.For the years ended December 31, 2017 and 2016, and for the period from the date of the IPO through December 31, 2015, Match Group was charged$9.9 million, $11.8 million and $0.7 million, respectively, by the Company for services rendered pursuant to a services agreement. Included in these amountsare $5.1 million, $4.3 million and $0.3 million, respectively, for leasing of office space for certain of Match Group's businesses at properties owned by IAC.These amounts were paid in full by Match Group at December 31, 2017 and 2016, respectively.At December 31, 2017 and 2016, Match Group had a tax receivable of $7.3 million and $9.0 million, respectively, due from the Company pursuant tothe tax sharing agreement. Refunds made by the Company during 2017 pursuant to this agreement were $10.9 million and payments made to the Companyduring 2016 were $19.9 million.In December 2017, international subsidiaries of Match Group agreed to sell NOLs that were not expected to be utilized to an IAC subsidiary for $0.9million.IAC and ANGI Homeservices:IAC and ANGI Homeservices, in connection with the Combination, entered into the following agreements:•A Contribution Agreement under which the Company separated its HomeAdvisor business from its other businesses and caused the HomeAdvisorbusiness to be transferred to ANGI Homeservices prior to the Combination. Under the Contribution Agreement, ANGI Homeservices agrees toindemnify IAC against any losses arising out of any breach by ANGI Homeservices of the Contribution Agreement;119IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)•An Investor Rights Agreement that provides IAC with (i) specified registration and other rights relating to shares of ANGI Homeservices' commonstock owned by IAC; (ii) anti-dilution rights with respect to ANGI Homeservices' common stock; and (iii) specified board matters with respect todesignation of ANGI Homeservices directors;•A Services Agreement, under which IAC has agreed to provide a range of services to ANGI Homeservices, including, among others, (i) assistancewith certain legal, M&A, human resources, finance, risk management, internal audit and treasury functions, health and wellness, informationsecurity services and insurance and tax affairs, including assistance with certain public company and unclaimed property reporting obligations; (ii)accounting, controllership and payroll processing services; (iii) investor relations services; (iv) tax compliance services; and (iv) such other servicesas to which IAC and ANGI Homeservices may agree.•A Tax Sharing Agreement, which governs the respective rights, responsibilities and obligations of IAC and ANGI Homeservices with respect to taxmatters, including taxes attributable to ANGI Homeservices, entitlement to refunds, allocation of tax attributes, preparation of tax returns, certaintax elections, control of tax contests and other tax matters regarding U.S. federal, state, local and foreign income taxes; and•An Employee Matters Agreement, which governs the respective rights, responsibilities and obligations of IAC and ANGI Homeservices after theclosing of the Combination with respect to a range of compensation and benefit issues.Additionally, on September 29, 2017, the Company and ANGI Homeservices entered into two intercompany notes (collectively referred to as"Intercompany Notes") to ANGI Homeservices as follows: (i) a Payoff Intercompany Note, which provided the funds necessary to repay the outstandingbalance under Angie's List's previously existing credit agreement, totaling $61.5 million; and (ii) a Working Capital Intercompany Note, which providedANGI Homeservices with $15 million for working capital purposes. These Intercompany Notes were repaid on November 1, 2017, with a portion of theproceeds from the ANGI Homeservices Term Loan that were received on the same date. See "Note 9—Long-term Debt" for further information.For the period subsequent to the Combination through December 31, 2017, 0.4 million shares of ANGI Homeservices common stock were issued to IACpursuant to the employee matters agreement as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IACequity awards held by ANGI Homeservices employees.For the period subsequent to the Combination through December 31, 2017, ANGI Homeservices was charged $1.7 million by the Company for servicesrendered pursuant to the services agreement. The amount outstanding at December 31, 2017 to IAC pursuant to the services agreement is $0.4 million. Inaddition, the Company has an outstanding payable due to IAC of $2.0 million at December 31, 2017 related primarily to transaction related costs incurred inconnection with the Combination.IAC and Expedia:Each of IAC and Expedia has a 50% ownership interest in three aircrafts that may be used by both companies. The Company and Expedia purchased thethird of these three aircrafts during the second quarter of 2017 to replace the older of the existing aircrafts, which was sold on February 13, 2018. TheCompany paid $17.4 million (50% of the total purchase price and refurbish costs) for its interest. Members of the aircrafts' flight crews are employed by anentity in which each of the Company and Expedia has a 50% ownership interest. The Company and Expedia have agreed to share costs relating to flight crewcompensation and benefits pro-rata according to each company's respective usage of the aircraft, for which they are separately billed by the entity describedabove. The Company and Expedia are related parties since they are under common control, given that Mr. Diller serves as Chairman and Senior Executive ofboth IAC and Expedia. For the years ended December 31, 2017, 2016 and 2015, total payments made to this entity by the Company were not material.NOTE 18—BENEFIT PLANSIAC has a retirement savings plan in the United States that qualifies under Section 401(k) of the Internal Revenue Code. Under theIAC/InterActiveCorp Retirement Savings Plan ("the Plan"), participating employees may contribute up to 50% of their pre-tax earnings, but not more thanstatutory limits. IAC contributes fifty cents for each dollar a participant contributes in this plan, with a maximum contribution of 3% of a participant's eligibleearnings. Matching contributions for the Plan for the years ended December 31, 2017, 2016 and 2015 are $11.1 million, $10.0 million and $9.1 million,respectively. Matching120IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)contributions are invested in the same manner as each participant's voluntary contributions in the investment options provided under the Plan. An investmentoption in the Plan is IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock. The increase inmatching contributions in 2017 and 2016 are due primarily to an increase in participation in the Plan due to an increase in headcount at Match Group andANGI Homeservices as a result of continued business growth.IAC also has or participates in various benefit plans, principally defined contribution plans, for its international employees. IAC's contributions forthese plans for the years ended December 31, 2017, 2016 and 2015 are $2.5 million, $2.1 million and $2.5 million, respectively. The increase incontributions in 2017 was due, in part, to an increase in participation in the international plans due to an increase in headcount at Match Group and ANGIHomeservices as a result of business growth and acquisitions. The decrease in contributions in 2016 was due, in part, to the sale of PriceRunner.NOTE 19—CONSOLIDATED FINANCIAL STATEMENT DETAILS December 31, 2017 2016 (In thousands)Other current assets: Prepaid expenses$49,350 $37,665Income taxes receivable33,239 41,352Capitalized downloadable search toolbar costs, net31,588 28,737Production costs18,570 39,763Other52,627 56,551Other current assets$185,374 $204,068 December 31, 2017 2016 (In thousands)Property and equipment, net of accumulated depreciation and amortization: Buildings and leasehold improvements$252,511 $247,563Computer equipment and capitalized software218,529 275,455Furniture and other equipment88,930 94,555Projects in progress19,094 13,048Land7,917 5,117 586,981 635,738Accumulated depreciation and amortization(271,811) (329,490)Property and equipment, net of accumulated depreciation and amortization$315,170 $306,248 December 31, 2017 2016 (In thousands)Accrued expenses and other current liabilities: Accrued employee compensation and benefits$108,431 $106,301Accrued advertising expense96,445 68,916Other162,048 169,693Accrued expenses and other current liabilities$366,924 $344,910121IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2017 2016 2015 (In thousands)Revenue: Service revenue$3,302,937 $2,967,474 $3,077,080Product revenue4,302 172,408 153,853Revenue$3,307,239 $3,139,882 $3,230,933 Years Ended December 31, 2017 2016 2015 (In thousands)Cost of revenue: Cost of service revenue$647,226 $617,058 $652,137Cost of product revenue3,782 138,672 126,024Cost of revenue$651,008 $755,730 $778,161 Years Ended December 31, 2017 2016 2015 (In thousands)Other (expense) income, net$(16,213) $60,650 $36,938Other expense, net in 2017 includes $16.8 million in net foreign currency exchange losses due primarily to the weakening of the dollar relative to theBritish Pound, expense of $15.4 million related to the extinguishment of the Match Group 6.75% Senior Notes and repricing of the Match Group Term Loan,expense of $13.0 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equity award held by a non-employee, $12.2 millionin other-than-temporary impairment charges related to certain investments and expense of $1.2 million related to the write-off of deferred financing costsassociated with the repayment of the 4.875% Senior Notes, partially offset by $34.9 million in gains related to the sales of certain investments and interestincome of $11.4 million.Other income, net in 2016 includes gains of $37.5 million and $12.0 million related to the sale of ShoeBuy and PriceRunner, respectively, $34.4million in net foreign currency exchange gains due to strengthening of the dollar relative to the British Pound and Euro, interest income of $5.1 million and a$3.6 million gain related to the sale of marketable equity securities, partially offset by a non-cash charge of $12.1 million related to the write-off of aproportionate share of original issue discount and deferred financing costs associated with the repayment of $440 million of the Match Group Term Loan,$10.7 million in other-than-temporary impairment charges related to certain investments, a loss of $3.8 million related to the sale of ASKfm, a $3.6 millionloss on the 4.75% and 4.875% Senior Note redemptions and repurchases and an expense of $2.5 million related to a mark-to-market adjustment pertaining toa subsidiary denominated equity award held by a non-employee.Other income, net in 2015 included a gain of $34.3 million from a real estate transaction, $5.4 million in net foreign currency exchange gains due to thestrengthening of the dollar relative to the Euro and $4.3 million in interest income, partially offset by $6.7 million in other-than-temporary impairmentcharges related to certain investments and an expense of $2.3 million related to a mark-to-market adjustment pertaining to a subsidiary denominated equityaward held by a non-employee.122IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 20—TRANSACTION AND INTEGRATION RELATED COSTS IN CONNECTION WITH THE COMBINATIONANGI Homeservices segmentDuring the year ended December 31, 2017, the Company incurred $44.1 million in costs related to the Combination (including severance, retention,transaction and integration related costs) as well as deferred revenue write-offs of $7.8 million. The Company also incurred $122.1 million in stock-basedcompensation expense during 2017 related to the modification of previously issued HomeAdvisor vested and unvested equity awards, which were convertedinto ANGI Homeservices' equity awards, the expense related to previously issued Angie's List equity awards and the acceleration of certain Angie's Listequity awards resulting from the termination of employees in connection with the Combination.See "Note 4—Business Combination" for additional information on the Combination.A summary of the costs incurred, payments made and the related accrual for ANGI Homeservices at December 31, 2017 is presented below. Year Ended December 31, 2017 (In thousands)Transaction and integration related costs$44,101Stock-based compensation expense122,066Total$166,167 December 31, 2017 (In thousands)Charges incurred$44,101Payments made(35,621)Accrual as of December 31$8,480The costs are allocated as follows in the accompanying consolidated statement of operations: Year Ended December 31, 2017 Transaction andIntegration RelatedCosts Stock-basedCompensationExpense Total (In thousands)Cost of revenue$— $— $—Selling and marketing expense7,430 24,416 31,846General and administrative expense36,120 83,420 119,540Product development expense551 14,230 14,781Total$44,101 $122,066 $166,167NOTE 21—GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATIONThe 4.75% Senior Notes are unconditionally guaranteed, jointly and severally, by certain domestic subsidiaries which are 100% owned by theCompany. The following tables present condensed consolidating financial information at December 31, 2017 and 2016 and for the years ended December 31,2017, 2016 and 2015 for: IAC, on a stand-alone basis; the combined guarantor subsidiaries of IAC; the combined non-guarantor subsidiaries of IAC; and IACon a consolidated basis.123IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Balance sheet at December 31, 2017: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Cash and cash equivalents$585,639 $— $1,045,170 $— $1,630,809Marketable securities4,995 — — — 4,995Accounts receivable, net of allowance31 109,289 194,707 — 304,027Other current assets49,159 33,387 102,828 — 185,374Intercompany receivables— 668,703 — (668,703) —Property and equipment, net of accumulateddepreciation and amortization2,811 174,323 138,036 — 315,170Goodwill— 412,010 2,147,056 — 2,559,066Intangible assets, net of accumulated amortization— 74,852 588,885 — 663,737Investment in subsidiaries2,076,004 554,998 — (2,631,002) —Other non-current assets170,073 87,306 79,688 (132,435) 204,632Total assets$2,888,712 $2,114,868 $4,296,370 $(3,432,140) $5,867,810 Current portion of long-term debt$— $— $13,750 $— $13,750Accounts payable, trade5,163 30,469 40,939 — 76,571Other current liabilities29,489 88,050 591,868 — 709,407Long-term debt, net34,572 — 1,944,897 — 1,979,469Income taxes payable16 1,605 24,003 — 25,624Intercompany liabilities388,933 — 279,770 (668,703) —Other long-term liabilities511 18,613 186,610 (132,435) 73,299Redeemable noncontrolling interests— — 42,867 — 42,867IAC shareholders' equity2,430,028 1,976,131 654,871 (2,631,002) 2,430,028Noncontrolling interests— — 516,795 — 516,795Total liabilities and shareholders' equity$2,888,712 $2,114,868 $4,296,370 $(3,432,140) $5,867,810124IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Balance sheet at December 31, 2016: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Cash and cash equivalents$553,643 $— $775,544 $— $1,329,187Marketable securities89,342 — — — 89,342Accounts receivable, net of allowance— 77,335 142,803 — 220,138Other current assets71,152 48,349 84,567 — 204,068Intercompany receivables— 565,013 1,209,788 (1,774,801) —Property and equipment, net of accumulateddepreciation and amortization4,350 199,343 102,555 — 306,248Goodwill— 412,010 1,512,042 — 1,924,052Intangible assets, net of accumulated amortization— 83,179 272,272 — 355,451Investment in subsidiaries3,659,570 498,054 — (4,157,624) —Other non-current assets52,228 118,624 162,008 (115,473) 217,387Total assets$4,430,285 $2,001,907 $4,261,579 $(6,047,898) $4,645,873 Current portion of long-term debt$20,000 $— $— $— $20,000Accounts payable, trade2,697 29,867 30,299 — 62,863Other current liabilities42,160 84,827 503,538 — 630,525Long-term debt, net405,991 — 1,176,493 — 1,582,484Income taxes payable— 3,470 30,274 (216) 33,528Intercompany liabilities1,774,801 — — (1,774,801) —Other long-term liabilities315,414 21,002 51,817 (115,257) 272,976Redeemable noncontrolling interests— — 32,827 — 32,827IAC shareholders' equity1,869,222 1,862,741 2,294,883 (4,157,624) 1,869,222Noncontrolling interests— — 141,448 — 141,448Total liabilities and shareholders' equity$4,430,285 $2,001,907 $4,261,579 $(6,047,898) $4,645,873125IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of operations for the year ended December 31, 2017: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Revenue$— $753,858 $2,553,998 $(617) $3,307,239Operating costs and expenses: Cost of revenue (exclusive of depreciationshown separately below)160 159,488 491,865 (505) 651,008Selling and marketing expense1,250 353,186 1,027,304 (519) 1,381,221General and administrative expense100,237 62,340 556,273 407 719,257Product development expense2,421 55,232 193,226 — 250,879Depreciation1,564 20,668 52,033 — 74,265Amortization of intangibles— 11,213 30,930 — 42,143Total operating costs and expenses105,632 662,127 2,351,631 (617) 3,118,773Operating (loss) income(105,632) 91,731 202,367 — 188,466Equity in earnings of unconsolidated affiliates425,675 20,755 — (446,430) —Interest expense(20,339) — (84,956) — (105,295)Other (expense) income, net(39,207) 28,434 (5,440) — (16,213)Earnings before income taxes260,497 140,920 111,971 (446,430) 66,958Income tax benefit (provision)44,427 (119,957) 366,580 — 291,050Net earnings304,924 20,963 478,551 (446,430) 358,008Net earnings attributable to noncontrollinginterests— — (53,084) — (53,084)Net earnings attributable to IAC shareholders$304,924 $20,963 $425,467 $(446,430) $304,924Comprehensive income attributable to IACshareholders$367,370 $7,629 $504,558 $(512,187) $367,370126IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of operations for the year ended December 31, 2016: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Revenue$— $960,000 $2,180,487 $(605) $3,139,882Operating costs and expenses: Cost of revenue (exclusive of depreciationshown separately below)859 297,712 457,571 (412) 755,730Selling and marketing expense2,353 417,051 828,016 (323) 1,247,097General and administrative expense89,583 83,636 357,097 130 530,446Product development expense4,807 69,778 138,180 — 212,765Depreciation1,610 26,514 43,552 — 71,676Amortization of intangibles— 41,157 38,269 — 79,426Goodwill impairment— 253,245 22,122 — 275,367Total operating costs and expenses99,212 1,189,093 1,884,807 (605) 3,172,507Operating (loss) income(99,212) (229,093) 295,680 — (32,625)Equity in earnings of unconsolidated affiliates49,545 6,774 — (56,319) —Interest expense(26,876) — (82,234) — (109,110)Other (expense) income, net(1,879) 10,209 52,320 — 60,650(Loss) earnings before income taxes(78,422) (212,110) 265,766 (56,319) (81,085)Income tax benefit (provision)37,142 77,851 (50,059) — 64,934Net (loss) earnings(41,280) (134,259) 215,707 (56,319) (16,151)Net earnings attributable to noncontrollinginterests— — (25,129) — (25,129)Net (loss) earnings attributable to IACshareholders$(41,280) $(134,259) $190,578 $(56,319) $(41,280)Comprehensive (loss) income attributable toIAC shareholders$(76,431) $(142,494) $145,039 $(2,545) $(76,431)127IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of operations for the year ended December 31, 2015: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Revenue$— $1,355,222 $1,876,305 $(594) $3,230,933Operating costs and expenses: Cost of revenue (exclusive of depreciationshown separately below)720 341,351 436,649 (559) 778,161Selling and marketing expense3,210 624,979 720,172 (68) 1,348,293General and administrative expense93,090 94,896 324,036 33 512,055Product development expense4,311 73,500 118,812 — 196,623Depreciation1,918 23,912 36,375 — 62,205Amortization of intangibles— 102,622 37,330 — 139,952Goodwill impairment— 14,056 — — 14,056Total operating costs and expenses103,249 1,275,316 1,673,374 (594) 3,051,345Operating (loss) income(103,249) 79,906 202,931 — 179,588Equity in earnings of unconsolidated affiliates215,080 17,353 — (232,433) —Interest expense(49,405) (6,130) (18,101) — (73,636)Other (expense) income, net(3,172) 27,810 12,300 — 36,938Earnings before income taxes59,254 118,939 197,130 (232,433) 142,890Income tax benefit (provision)60,218 (42,072) (47,662) — (29,516)Net earnings119,472 76,867 149,468 (232,433) 113,374Net loss attributable to noncontrolling interests— — 6,098 — 6,098Net earnings attributable to IAC shareholders$119,472 $76,867 $155,566 $(232,433) $119,472Comprehensive income attributable to IACshareholders$55,069 $73,970 $89,158 $(163,128) $55,069128IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of cash flows for the year ended December 31, 2017: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries IAC Consolidated (In thousands)Net cash (used in) provided by operating activities$(61,002) $131,581 $346,111 $416,690Cash flows from investing activities: Acquisitions, net of cash acquired— (2,550) (146,544) (149,094)Capital expenditures(337) (1,050) (74,136) (75,523)Proceeds from maturities and sales of marketable debt securities114,350 — — 114,350Purchases of marketable debt securities(29,891) — — (29,891)Purchases of investments— — (9,106) (9,106)Net proceeds from the sale of businesses and investments1,266 — 184,512 185,778Other, net— 1,944 1,050 2,994Net cash provided by (used in) investing activities85,388 (1,656) (44,224) 39,508Cash flows from financing activities: Proceeds from issuance of IAC debt— — 517,500 517,500Principal payments on IAC debt(393,464) — — (393,464)Proceeds from issuance of Match Group debt— — 525,000 525,000Principal payments on Match Group debt— — (445,172) (445,172)Borrowing under ANGI Homeservices Term Loan— — 275,000 275,000Purchase of exchangeable note hedge— — (74,365) (74,365)Proceeds from issuance of warrants23,650 — — 23,650Debt issuance costs— — (33,744) (33,744)Purchase of IAC treasury stock(56,424) — — (56,424)Proceeds from the exercise of IAC stock options82,397 — — 82,397Withholding taxes paid on behalf of IAC employees on net settledstock-based awards(93,832) — — (93,832)Proceeds from the exercise of Match Group stock options— — 59,442 59,442Withholding taxes paid on behalf of Match Group employees onnet settled stock-based awards— — (254,210) (254,210)Proceeds from the exercise of ANGI Homeservices stock options— — 1,653 1,653Withholding taxes paid on behalf of ANGI employees on netsettled stock-based awards— — (10,113) (10,113)Purchase of Match Group stock-based awards— — (272,459) (272,459)Purchase of noncontrolling interests— — (15,439) (15,439)Acquisition-related contingent consideration payments— — (27,289) (27,289)Funds returned from escrow for MyHammer tender offer— — 10,604 10,604Decrease in restricted cash related to bond redemptions20,141 — — 20,141Intercompany424,816 (129,925) (294,891) — Other, net251 — (5,251) (5,000)Net cash provided by (used in) financing activities7,535 (129,925) (43,734) (166,124)Total cash provided31,921 — 258,153 290,074Effect of exchange rate changes on cash and cash equivalents75 — 11,473 11,548Net increase in cash and cash equivalents31,996 — 269,626 301,622Cash and cash equivalents at beginning of period553,643 — 775,544 1,329,187Cash and cash equivalents at end of period$585,639 $— $1,045,170 $1,630,809129IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of cash flows for the year ended December 31, 2016: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Net cash (used in) provided by operating activities$(62,686) $128,473 $278,354 $— $344,141Cash flows from investing activities: Acquisitions, net of cash acquired— — (18,403) — (18,403)Capital expenditures(479) (5,762) (71,798) — (78,039)Investments in time deposits— — (87,500) — (87,500)Proceeds from maturities of time deposits— — 87,500 — 87,500Proceeds from maturities and sales of marketabledebt securities252,369 — — — 252,369Purchases of marketable debt securities(313,943) — — — (313,943)Purchases of investments— — (12,565) — (12,565)Net proceeds from the sale of businesses andinvestments73,843 1,779 96,606 — 172,228Intercompany(155,104) — — 155,104 —Other, net126 910 10,179 — 11,215Net cash (used in) provided by investing activities(143,188) (3,073) 4,019 155,104 12,862Cash flows from financing activities: Principal payments on IAC debt(126,409) — — — (126,409)Proceeds from issuance of Match Group debt— — 400,000 — 400,000Principal payments on Match Group debt— — (450,000) — (450,000)Debt issuance costs— — (7,811) — (7,811)Purchase of IAC treasury stock(308,948) — — — (308,948)Proceeds from the exercise of IAC stock options25,821 — — — 25,821Withholding taxes paid on behalf of IAC employeeson net settled stock-based awards(26,716) — — — (26,716)Proceeds from the exercise of Match Group stockoptions— — 39,378 — 39,378Withholding taxes paid on behalf of Match Groupemployees on net settled stock-based awards— — (29,830) — (29,830)Purchase of noncontrolling interests(1,400) — (1,340) — (2,740)Acquisition-related contingent considerationpayments— (351) (1,829) — (2,180)Funds held in escrow for MyHammer tender offer— — (10,548) — (10,548)Intercompany122,965 (122,965) 155,104 (155,104) —Increase in restricted cash related to bondredemptions(141) — — — (141) Other, net(313) (2,084) (308) — (2,705)Net cash (used in) provided by financing activities(315,141) (125,400) 92,816 (155,104) (502,829)Total cash (used) provided(521,015) — 375,189 — (145,826)Effect of exchange rate changes on cash and cashequivalents— — (6,434) — (6,434)Net (decrease) increase in cash and cash equivalents(521,015) — 368,755 — (152,260)Cash and cash equivalents at beginning of period1,074,658 — 406,789 — 1,481,447Cash and cash equivalents at end of period$553,643 $— $775,544 $— $1,329,187130IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of cash flows for the year ended December 31, 2015: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries IAC Consolidated (In thousands)Net cash (used in) provided by operating activities$(121,331) $242,554 $284,448 $405,671Cash flows from investing activities: Acquisitions, net of cash acquired— (6,078) (611,324) (617,402)Capital expenditures(1,332) (13,198) (47,519) (62,049)Proceeds from maturities and sales of marketable debt securities218,462 — — 218,462Purchases of marketable debt securities(93,134) — — (93,134)Purchases of investments(6,978) — (27,492) (34,470)Net proceeds from the sale of businesses and investments1,277 — 8,136 9,413Other, net3,613 385 (7,539) (3,541)Net cash provided by (used in) investing activities121,908 (18,891) (685,738) (582,721)Cash flows from financing activities: Principal payment on IAC debt— (80,000) — (80,000)Proceeds from issuance of Match Group debt— — 788,000 788,000Debt issuance costs(1,876) — (17,174) (19,050)Fees and expenses related to note exchange— — (6,954) (6,954)Proceeds from Match Group initial public offering, net of fees and expenses— — 428,789 428,789Purchase of IAC treasury stock(200,000) — — (200,000)Dividends(113,196) — — (113,196)Proceeds from the exercise of IAC stock options27,325 — — 27,325Withholding taxes paid on behalf of IAC employees on net settled stock-basedawards(65,743) — — (65,743)Purchase of Match Group stock-based awards— — (23,431) (23,431)Purchase of noncontrolling interests— — (32,207) (32,207)Acquisition-related contingent consideration payments— (240) (5,510) (5,750)Increase in restricted cash related to bond redemptions(20,000) — — (20,000)Intercompany684,716 (143,423) (541,293) —Other, net166 — 441 607Net cash provided by (used in) financing activities311,392 (223,663) 590,661 678,390Total cash provided311,969 — 189,371 501,340Effect of exchange rate changes on cash and cash equivalents— — (10,298) (10,298)Net increase in cash and cash equivalents311,969 — 179,073 491,042Cash and cash equivalents at beginning of period762,689 — 227,716 990,405Cash and cash equivalents at end of period$1,074,658 $— $406,789 $1,481,447131IAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 22—QUARTERLY RESULTS (UNAUDITED) Quarter EndedMarch 31 Quarter EndedJune 30 Quarter EndedSeptember 30(a) (c) Quarter EndedDecember 31(b) (In thousands, except per share data)Year Ended December 31, 2017 Revenue$760,833 $767,387 $828,434 $950,585Cost of revenue145,958 139,033 166,290 199,727Operating income (loss)37,060 75,635 (18,589) 94,360Net earnings28,463 80,557 225,639 23,349Net earnings attributable to IAC shareholders26,209 66,268 179,643 32,804Per share information attributable to IAC shareholders:Basic earnings per share(e)$0.34 $0.84 $2.22 $0.40Diluted earnings per share(e)$0.29 $0.70 $1.79 $0.37 Quarter EndedMarch 31(d) Quarter EndedJune 30(e) Quarter EndedSeptember 30 Quarter EndedDecember 31(d) (In thousands, except per share data)Year Ended December 31, 2016 Revenue$819,179 $745,439 $764,102 $811,162Cost of revenue193,734 170,397 179,131 212,468Operating income (loss)21,417 (252,446) 85,584 112,820Net earnings (loss)7,934 (190,542) 52,340 114,117Net earnings (loss) attributable to IAC shareholders8,282 (194,775) 43,162 102,051Per share information attributable to IAC shareholders:Basic earnings (loss) per share(e)$0.10 $(2.45) $0.54 $1.29Diluted earnings (loss) per share(e)$0.09 $(2.45) $0.49 $1.18_______________________________________________________________________________(a)The third quarter of 2017 includes after-tax stock-based compensation expense of $60.9 million related primarily to the modification of previously issued HomeAdvisorvested awards, which were converted into ANGI Homeservices equity awards, and the acceleration of certain Angie’s List equity awards in connection with the Combination,as well as after-tax costs of $17.4 million related to the Combination.(b)The fourth quarter of 2017 includes after-tax stock-based compensation expense of $15.8 million related primarily to the modification of previously issued HomeAdvisorunvested awards, which were converted into ANGI Homeservices equity awards, the expense related to previously issued Angie's List equity awards and the acceleration ofcertain Angie's List equity awards resulting from the termination of employees in connection with the Combination, as well as after-tax costs of $13.9 million related to theCombination (including $7.6 million of deferred revenue write-offs).(c)The third quarter of 2017 includes a reduction to the income tax provision of $257.0 million related to excess tax benefits generated by the exercise, purchase and settlementof stock-based awards.(d)The first quarter and fourth quarter of 2016 include after-tax gains of $11.9 million and $37.5 million related to the sale of PriceRunner and ShoeBuy, respectively.(e)The second quarter of 2016 includes after-tax impairment charges related to goodwill and indefinite-lived intangible assets of $183.5 million and $7.2 million, respectively.(f)Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.132Table of ContentsItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNot applicable.Item 9A. Controls and ProceduresConclusion Regarding the Effectiveness of the Company's Disclosure Controls and ProceduresThe Company monitors and evaluates on an ongoing basis its disclosure controls and procedures in order to improve their overall effectiveness. In thecourse of these evaluations, the Company modifies and refines its internal processes as conditions warrant.As required by Rule 13a-15(b) of the Exchange Act, IAC management, including the Chairman and Senior Executive, the Chief Executive Officer andthe Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of the Company's disclosurecontrols and procedures as defined in Exchange Act Rule 13a-15(e). Based on this evaluation, the Chairman and Senior Executive, the Chief ExecutiveOfficer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered bythis report.Management's Report on Internal Control Over Financial ReportingManagement of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined inRule 13a-15(f) under the Exchange Act) for the Company. The Company's internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withaccounting principles generally accepted in the United States. Management assessed the effectiveness of the Company's internal control over financialreporting as of December 31, 2017. In making this assessment, our management used the criteria for effective internal control over financial reportingdescribed in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Basedon this assessment, management has determined that, as of December 31, 2017, the Company's internal control over financial reporting is effective. Theeffectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by Ernst & Young LLP, an independent registeredpublic accounting firm, as stated in their attestation report, included herein.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Changes in Internal Control Over Financial ReportingThe Company monitors and evaluates on an ongoing basis its internal control over financial reporting in order to improve its overall effectiveness. Inthe course of these evaluations, the Company modifies and refines its internal processes as conditions warrant. As required by Rule 13a-15(d), IACmanagement, including the Chairman and Senior Executive, the Chief Executive Officer and the Chief Financial Officer, also conducted an evaluation of theCompany's internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2017 that havematerially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Based on that evaluation, there hasbeen no such change during the quarter ended December 31, 2017.133Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of IAC/InterActiveCorpOpinion on Internal Control over Financial ReportingWe have audited IAC/InterActiveCorp and subsidiaries’ internal control over financial reporting as of December 31, 2017, based on criteria establishedin Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSOcriteria). In our opinion, IAC/InterActiveCorp and subsidiaries (the Company) maintained, in all material respects, effective internal control over financialreporting as of December 31, 2017, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheet of the Company as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive operations,shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and the financial statementschedule listed in the Index at Item 15(a), and our report dated March 1, 2018 expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectivenessof internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate./s/ ERNST & YOUNG LLPNew York, New YorkMarch 1, 2018134Table of ContentsItem 9B. Other InformationNot applicable.PART IIIThe information required by Part III (Items 10, 11, 12, 13 and 14) has been incorporated herein by reference to IAC's definitive Proxy Statement to beused in connection with its 2018 Annual Meeting of Stockholders (the "2018 Proxy Statement"), as set forth below in accordance with GeneralInstruction G(3) of Form 10-K.Item 10. Directors, Executive Officers and Corporate GovernanceThe information required by Items 401 and 405 of Regulation S-K relating to directors and executive officers of IAC and their compliance withSection 16(a) of the Exchange Act is set forth in the sections entitled "Information Concerning Director Nominees" and "Information Concerning IACExecutive Officers Who Are Not Directors," and "Section 16(a) Beneficial Ownership Reporting Compliance," respectively, in the 2018 Proxy Statement andis incorporated herein by reference. The information required by Item 406 of Regulation S-K relating to IAC's Code of Ethics is set forth under the caption"Part I-Item 1-Business-Description of IAC Businesses-Additional Information-Code of Ethics" of this annual report and is incorporated herein by reference.The information required by subsections (c)(3), (d)(4) and (d)(5) of Item 407 of Regulation S-K is set forth in the sections entitled "Corporate Governance"and "The Board and Board Committees" in the 2018 Proxy Statement and is incorporated herein by reference.Item 11. Executive CompensationThe information required by Item 402 of Regulation S-K relating to executive and director compensation and pay ratio disclosure is set forth in thesections entitled "Executive Compensation," "Director Compensation" and "Pay Ratio Disclosure" in the 2018 Proxy Statement and is incorporated herein byreference. The information required by subsections (e)(4) and (e)(5) of Item 407 of Regulation S-K relating to certain compensation committee matters is setforth in the sections entitled "The Board and Board Committees," "Compensation Committee Report" and "Compensation Committee Interlocks and InsiderParticipation" in the 2018 Proxy Statement and is incorporated herein by reference; provided, that the information set forth in the section entitled"Compensation Committee Report" shall be deemed furnished herein and shall not be deemed incorporated by reference into any filing under the SecuritiesAct or the Exchange Act.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information regarding ownership of IAC common stock and Class B common stock required by Item 403 of Regulation S-K and securitiesauthorized for issuance under IAC's various equity compensation plans required by Item 201(d) of Regulation S-K is set forth in the sections entitled"Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information," respectively, in the 2018 ProxyStatement and is incorporated herein by reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation regarding certain relationships and related transactions involving IAC required by Item 404 of Regulation S-K and director independencedeterminations required by Item 407(a) of Regulation S-K is set forth in the sections entitled "Certain Relationships and Related Person Transactions" and"Corporate Governance," respectively, in the 2018 Proxy Statement and is incorporated herein by reference.Item 14. Principal Accounting Fees and ServicesInformation required by Item 9(e) of Schedule 14A regarding the fees and services of IAC's independent registered public accounting firm and the pre-approval policies and procedures applicable to services provided to IAC by such firm is set forth in the sections entitled "Fees Paid to Our IndependentRegistered Public Accounting Firm" and "Audit and Non-Audit Services Pre-Approval Policy," respectively, in the 2018 Proxy Statement and is incorporatedherein by reference.135Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(a) List of documents filed as part of this Report:(1) Consolidated Financial Statements of IACReport of Independent Registered Public Accounting Firm: Ernst & Young LLP.Consolidated Balance Sheet as of December 31, 2017 and 2016.Consolidated Statement of Operations for the Years Ended December 31, 2017, 2016 and 2015.Consolidated Statement of Comprehensive Operations for the Years Ended December 31, 2017, 2016 and 2015.Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 2017, 2016 and 2015.Consolidated Statement of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015.Notes to Consolidated Financial Statements.(2) Consolidated Financial Statement Schedule of IACScheduleNumber II Valuation and Qualifying Accounts.All other financial statements and schedules not listed have been omitted since the required information is either included in the ConsolidatedFinancial Statements or the notes thereto, is not applicable or is not required.136Table of Contents(3) ExhibitsThe documents set forth below, numbered in accordance with Item 601 of Regulation S-K, are filed herewith, incorporated herein by reference to thelocation indicated or furnished herewith.ExhibitNo. Description Location2.1 Agreement and Plan of Merger, dated as of May 1, 2017, as amendedby Amendment No. 1 to the Agreement and Plan of Merger, dated as ofAugust 26, 2017, by and among Angie’sList, Inc., IAC/InterActiveCorp, ANGI Homeservices Inc. and CasaMerger Sub, Inc. Annex B to the Proxy Statement/Prospectus filed on August30, 2017 by ANGI Homeservices Inc. pursuant to Rule424(b)(3) of the Securities Act of 1933, as amended.2.2 Stock Purchase Agreement, dated as of July 13, 2015, by and amongMatch.com Inc., Plentyoffish Media Inc., Markus Frind, Markus FrindFamily Trust No. 2 and Frind Enterprises Ltd. Exhibit 2.1 to the Registrant's Current Report on Form 8-K,filed on July 17, 2015.3.1 Restated Certificate of Incorporation ofIAC/InterActiveCorp. Exhibit 3.1 to the Registrant's Registration Statement onForm 8-A/A, filed on August 12, 2005.3.2 Certificate of Amendment of the Restated Certificate of Incorporationof IAC/InterActiveCorp (dated as of August 20, 2008). Exhibit 3.1 to the Registrant's Current Report on Form 8-K,filed on August 22, 2008.3.3 Amended and Restated By-laws of IAC/InterActiveCorp (amended andrestated as of December 1, 2010). Exhibit 3.1(II) to the Registrant's Current Report on Form 8-K, filed on December 6, 2010.3.4 Certificate of Designations of Series C Cumulative Preferred Stock. Exhibit 3.1 to the Registrant's Current Report on Form 8-K,filed on October 2, 2017.4.1 Indenture for 4.75% Senior Notes due 2022, dated as of December 21,2012, among IAC/InterActiveCorp, the Guarantors named therein andComputershare Trust Company, N.A., as Trustee. Exhibit 4.1 to the Registrant's Annual Report on Form 10-Kfor the fiscal year ended December 31, 2012.4.2 Supplemental Indenture for 4.75% Senior Notes due 2022, dated as ofMay 30, 2013, among IAC/InterActiveCorp, the Guarantors namedtherein and Computershare Trust Company, N.A., as Trustee, with aschedule of subsequent Guarantors.(1) 4.3 Indenture for 0.875% Senior Exchangeable Notes due 2022, dated asof October 2, 2017, among IAC FinanceCo, Inc., IAC/InterActiveCorpand Computershare Trust Company, N.A., as Trustee. Exhibit 4.1 to the Registrant's Current Report on Form 8-K,filed on October 6, 2017.4.4 Indenture, dated June 1, 2016, between Match Group, Inc. andComputershare Trust Company, N.A., as Trustee. Exhibit 4.1 to Match Group, Inc.’s Current Report on Form8-K, filed on June 2, 2016.4.5 Indenture, dated as of December 4, 2017, between Match Group, Inc.and Computershare Trust Company, N.A., as Trustee. Exhibit 4.1 to the Registrant's Current Report on Form 8-K,filed on December 4, 2017.10.1 Amended and Restated Governance Agreement, dated as of August 9,2005, among the Registrant, Liberty Media Corporation and BarryDiller. Exhibit 10.1 to the Registrant's Quarterly Report onForm 10-Q for the fiscal quarter ended September 30, 2005.10.2 Letter Agreement, dated as of December 1, 2010, by and among theRegistrant, Liberty Media Corporation, Liberty USA Holdings, LLCand Barry Diller. Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on December 6, 2010.10.3 Letter Agreement, dated as of December 1, 2010, by and between theRegistrant and Barry Diller. Exhibit 10.2 to the Registrant's Current Report on Form 8-K,filed on December 6, 2010.10.4 IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2) Exhibit 10.1 to the Registrant's Quarterly Report on Form10-Q for the fiscal quarter ended June 30, 2013.10.5 Form of Terms and Conditions for Stock Options granted under theIAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2) Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.137Table of Contents10.6 Form of Terms and Conditions for Restricted Stock Units grantedunder the IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(2) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.10.7 IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2) Annex F to the Registrant's Definitive Proxy Statement, filedon July 10, 2008.10.8 Form of Terms and Conditions for Stock Options granted under theIAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.10.9 Form of Terms and Conditions for Restricted Stock Units grantedunder the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(2) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.10.10 IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(2) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.10.11 Form of Terms and Conditions for Stock Options granted under theIAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(2) Exhibit 10.1 to the Registrant's Quarterly Report onForm 10-Q for the fiscal quarter ended March 31, 2008.10.12 Summary of Non-Employee Director Compensation Arrangements.(2) Exhibit 10.2 to the Registrant's Quarterly Report onForm 10-Q for the fiscal quarter ended March 31, 2009.10.13 2011 IAC/InterActiveCorp Deferred Compensation Plan for Non-Employee Directors.(2) Exhibit 10.1 to the Registrant's Quarterly Report onForm 10-Q for the fiscal quarter ended March 31, 2011.10.14 Employment Agreement between Joseph Levin and the Registrant,dated as of November 21, 2017.(2) Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on November 22, 2017.10.15 Second Amended and Restated Employment Agreement betweenVictor A. Kaufman and the Registrant, dated as of March 15, 2012.(2) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012.10.16 Employment Agreement between Glenn H. Schiffman and theRegistrant, dated as of April 7, 2016.(2) Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2016.10.17 Employment Agreement between Gregg Winiarski and the Registrant,dated as of February 26, 2010.(2) Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.10.18 Google Services Agreement, dated as of October 26, 2015, between theRegistrant and Google Inc.(3) Exhibit 10.18 to the Registrant's Annual Report on Form 10-Kfor the fiscal year ended December 31, 2015.10.19 Amended and Restated Credit Agreement, dated as of October 7, 2015,among IAC/InterActiveCorp, as Borrower, the Lenders party thereto,JPMorgan Chase Bank, N.A., as Administrative Agent, and the otherparties thereto. Exhibit 10.19 to the Registrant's Annual Report on Form 10-Kfor the fiscal year ended December 31, 2015.10.20 Amendment No. 2, dated as of September 25, 2017, to the CreditAgreement dated as of December 21, 2012, as amended and restated asof October 7, 2015, among IAC/InterActiveCorp, as Borrower, theLenders party thereto, JPMorgan Chase Bank, N.A., as AdministrativeAgent and Collateral Agent, and the other parties thereto. Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on September 25, 2017.10.21 Joinder and Reaffirmation Agreement, dated as of October 2, 2107,among IAC/InterActiveCorp, IAC Group, LLC, each of the partieslisted on Schedule 1 thereto and JPMorgan Chase Bank, N.A., asAdministrative Agent. Exhibit 10.2 to the Registrant's Current Report on Form 8-K,filed on October 6, 2017.10.22 Amended and Restated Credit Agreement, dated as of November 16,2015, among Match Group, Inc., as Borrower, the Lenders partythereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and theother parties thereto. Exhibit 10.11 to Match Group, Inc.'s Annual Report on Form10-K for the fiscal year ended December 31, 2015.138Table of Contents10.23 Amendment No. 3, dated as of December 8, 2016, to the CreditAgreement dated as of October 7, 2015, as amended and restated as ofNovember 16, 2015, as further amended as of December 16, 2015,among Match Group, Inc., as Borrower, the Lenders party thereto,JPMorgan Chase Bank, N.A., as Administrative Agent, and the otherparties thereto. Exhibit 10.1 to Match Group, Inc.'s Current Report on Form 8-K, filed on December 8, 2016.10.24 Amendment No. 4, dated as of August 14, 2017, to the CreditAgreement dated as of October 7, 2015, as amended and restated as ofNovember 16, 2015, as further amended as of December 16, 2015, asfurther amended December 8, 2016, among Match Group, Inc., asBorrower, the Lenders party thereto, JPMorgan Chase Bank, N.A., asAdministrative Agent, and the other parties thereto. Exhibit 10.1 to Match Group, Inc.'s Current Report on Form 8-K, filed on August 17, 2017.10.25 Credit Agreement, dated as of November 1, 2017, among ANGIHomeservices Inc., as Borrower, the Lenders party thereto, andJPMorgan Chase Bank, N.A., as Administrative Agent. Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on November 2, 2017.10.26 Registration Rights Agreement, dated as of October 2, 2017, amongIAC/InterActiveCorp, IAC FinanceCo, Inc., J.P. Morgan Securities LLCand Goldman Sachs & Co. LLC Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on October 6, 2017.10.27 Master Transaction Agreement, dated as of November 24, 2015, by andbetween IAC/InterActiveCorp and Match Group, Inc.. Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on November 24, 2015.10.28 Employee Matters Agreement, dated as of November 24, 2015, by andbetween IAC/InterActiveCorp and Match Group, Inc. Exhibit 10.2 to the Registrant's Current Report on Form 8-K,filed on November 24, 2015.10.29 Amendment No.1 to Employee Matters Agreement, dated as of April13, 2016, by and between IAC/InterActiveCorp and Match Group, Inc. Exhibit 99.2 to the Schedule 13D related to Match Group, Inc.filed by the Registrant on April 14, 2016.10.30 Investor Rights Agreement, dated as of November 24, 2015, by andbetween IAC/InterActiveCorp and Match Group, Inc. Exhibit 10.3 to the Registrant's Current Report on Form 8-K,filed on November 24, 2015.10.31 Tax Sharing Agreement, dated as of November 24, 2015, by andbetween IAC/InterActiveCorp and Match Group, Inc. Exhibit 10.4 to the Registrant's Current Report on Form 8-K,filed on November 24, 2015.10.32 Services Agreement, dated as of November 24, 2015, by and betweenIAC/InterActiveCorp and Match Group, Inc. Exhibit 10.5 to the Registrant's Current Report on Form 8-K,filed on November 24, 2015.10.33 Contribution Agreement, dated as of September 29, 2017, by andbetween IAC/InterActiveCorp and ANGI Homeservices Inc. Exhibit 2.1 to the Registrant's Current Report on Form 8-K,filed on October 2, 2017.10.34 Employee Matters Agreement, dated as of September 29, 2017, by andbetween IAC/InterActiveCorp and ANGI Homeservices Inc. Exhibit 2.5 to the Registrant's Current Report on Form 8-K,filed on October 2, 2017.10.35 Investor Rights Agreement, dated as of September 29, 2017, by andbetween IAC/InterActiveCorp and ANGI Homeservices Inc. Exhibit 2.2 to the Registrant's Current Report on Form 8-K,filed on October 2, 2017.10.36 Tax Sharing Agreement, dated as of September 29, 2017, by andbetween IAC/InterActiveCorp and ANGI Homeservices Inc. Exhibit 2.4 to the Registrant's Current Report on Form 8-K,filed on October 2, 2017.10.37 Services Agreement, dated as of September 29, 2017, by and betweenIAC/InterActiveCorp and ANGI Homeservices Inc. Exhibit 2.3 to the Registrant's Current Report on Form 8-K,filed on October 2, 2017.21.1 Subsidiaries of the Registrant as of December 31, 2017.(1) 23.1 Consent of Ernst & Young LLP.(1) 139Table of Contents31.1 Certification of the Chairman and Senior Executive pursuant toRule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1) 31.2 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)or 15d-14(a) of the Securities Exchange Act of 1934, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1) 31.3 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)or 15d-14(a) of the Securities Exchange Act of 1934, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1) 32.1 Certification of the Chairman and Senior Executive pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002.(4) 32.2 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.(4) 32.3 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.(4) 101.INS XBRL Instance (1) 101.SCH XBRL Taxonomy Extension Schema (1) 101.CAL XBRL Taxonomy Extension Calculation (1) 101.DEF XBRL Taxonomy Extension Definition (1) 101.LAB XBRL Taxonomy Extension Labels (1) 101.PRE XBRL Taxonomy Extension Presentation (1) _______________________________________________________________________________(1)Filed herewith.(2)Reflects management contracts and management and director compensatory plans.(3)Certain portions of this document have been omitted pursuant to a confidential treatment request.(4)Furnished herewith.140Table of ContentsSIGNATURESPursuant 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 onits behalf by the undersigned, thereunto duly authorized.March 1, 2018 IAC/INTERACTIVECORP By: /s/ GLENN H. SCHIFFMAN Glenn H. Schiffman Executive Vice President and Chief Financial OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities indicated on March 1, 2018:Signature Title /s/ BARRY DILLER Chairman of the Board, Senior Executive and DirectorBarry Diller /s/ JOSEPH LEVIN Chief Executive Officer and DirectorJoseph Levin /s/ VICTOR A. KAUFMAN Vice Chairman and DirectorVictor A. Kaufman /s/ GLENN H. SCHIFFMAN Executive Vice President and Chief Financial OfficerGlenn H. Schiffman /s/ MICHAEL H. SCHWERDTMAN Senior Vice President and Controller (Chief Accounting Officer)Michael H. Schwerdtman /s/ EDGAR BRONFMAN, JR. DirectorEdgar Bronfman, Jr. /s/ CHELSEA CLINTON DirectorChelsea Clinton /s/ MICHAEL D. EISNER DirectorMichael D. Eisner /s/ BONNIE S. HAMMER DirectorBonnie S. Hammer /s/ BRYAN LOURD DirectorBryan Lourd /s/ DAVID S. ROSENBLATT DirectorDavid S. Rosenblatt /s/ ALAN G. SPOON DirectorAlan G. Spoon /s/ ALEXANDER VON FURSTENBERG DirectorAlexander von Furstenberg /s/ RICHARD F. ZANNINO DirectorRichard F. Zannino 141Table of ContentsSchedule IIIAC/INTERACTIVECORP AND SUBSIDIARIESVALUATION AND QUALIFYING ACCOUNTSDescriptionBalance atBeginningof Period Charges toEarnings Charges toOther Accounts Deductions Balance atEnd of Period (In thousands)2017 Allowance for doubtful accounts and revenue reserves$16,405 $28,930(a) $(1,006) $(32,840)(d) $11,489Sales returns accrual80 — (80) — —Deferred tax valuation allowance88,170 38,144(b) 6,284(c) — 132,598Other reserves2,822 2,5442016 Allowance for doubtful accounts and revenue reserves$16,528 $17,733(a) $(695) $(17,161)(d) $16,405Sales returns accrual828 14,998 (962) (14,784) 80Deferred tax valuation allowance90,482 (837)(e) (1,475)(f) — 88,170Other reserves2,801 2,8222015 Allowance for doubtful accounts and revenue reserves$12,437 $16,648(a) $(536) $(12,021)(d) $16,528Sales returns accrual1,119 17,569 — (17,860) 828Deferred tax valuation allowance98,350 (6,072)(g) (1,796)(h) — 90,482Other reserves2,204 2,801_________________________________________________________(a)Additions to the allowance for doubtful accounts are charged to expense. Additions to the revenue reserves are charged against revenue.(b)Amount is due primarily to the establishment of foreign NOLs related to a recent acquisition.(c)Amount is primarily related to acquired state NOLs, acquired foreign tax credits and currency translation adjustments on foreign NOLs.(d)Write-off of fully reserved accounts receivable.(e)Amount is primarily related to other-than-temporary impairment charges for certain cost method investments and an increase in federal capital and NOLs, partially offset bya decrease in state NOLs, foreign tax credits, and foreign NOLs.(f)Amount is primarily related to the realization of previously unbenefited unrealized losses on available-for-sale marketable equity securities included in accumulated othercomprehensive income and currency translation adjustments on foreign NOLs.(g)Amount is primarily related to the release of a valuation allowance on the other-than-temporary impairment charges for certain cost method investments, partially offset byan increase in federal, foreign and state net operating and capital losses.(h)Amount is primarily related to a net reduction in unbenefited unrealized losses on available-for-sale marketable equity securities included in accumulated othercomprehensive income and currency translation adjustments on foreign NOLs.142Exhibit 4.2SUPPLEMENTAL INDENTUREThis SUPPLEMENTAL INDENTURE, dated as of May 30, 2013 (this “Supplemental Indenture”), is entered into byand among IAC/InterActiveCorp (the “Issuer”), the guarantors identified herein as parties, and Computershare Trust Company, N.A.,as Trustee (the “Trustee”).W I T N E S S E T H :WHEREAS the Issuer and the existing Guarantors have heretofore executed and delivered to the Trustee an Indenture,dated as of December 21, 2012 (as amended, supplemented or otherwise modified in accordance with its terms, the “Indenture”),providing for the issuance on December 21, 2012 of 4.75% Senior Notes due 2022, in aggregate principal amount of $500,000,000(the “Notes”);WHEREAS Section 4.11 of the Indenture provides, in relevant part, that if any Restricted Subsidiary guarantees theCredit Agreement, then the Issuer shall cause such Restricted Subsidiary to execute and deliver to the Trustee a supplemental indenturein form and substance satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of theIssuer’s obligations under the Notes and the Indenture;WHEREAS Section 8.01 of the Indenture provides that without the consent of any Holder of Notes, the Issuer, theGuarantors and the Trustee may amend or supplement the Indenture, the Notes or the Note Guarantees to allow any Guarantor toexecute a supplemental indenture and/or Note Guarantee with respect to the Notes;NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt ofwhich is hereby acknowledged, the New Guarantor, the Issuer and the Trustee mutually covenant and agree for the equal and ratablebenefit of the Holders of the Securities as follows:1.Defined Terms. Capitalized terms used but not defined herein shall have the meanings assigned thereto in theIndenture.2. Agreement to Guarantee. The New Guarantor hereby agrees, jointly and severally with all existing Guarantors, tounconditionally guarantee the Issuer’s obligations under the Notes and the Indenture on the terms and subject to the conditions set forthin Article Ten of the Indenture and to be bound by all other applicable provisions of the Indenture and the Notes and to perform all ofthe obligations and agreements of a Guarantor under the Indenture.3. Notices. All notices or other communications to the New Guarantor shall be given as provided in Section 11.02 ofthe Indenture.4. Ratification of Indenture; Supplemental Indenture Part of Indenture. Except as expressly amended hereby, theIndenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force andeffect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafterauthenticated and delivered shall be bound hereby.5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, ANDCONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.6. Trustee Makes No Representation. The Trustee makes no representation as to the validity or sufficiency of thisSupplemental Indenture or as to the recitals contained herein.7. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall bean original, but all of them together represent the same agreement.8. Effect of Headings. The Section headings herein are for convenience only and shall not effect the constructionthereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, as of theday and year first written above. IAC/INTERACTIVECORPBy: /s/ JOANNE HAWKINSName: Joanne HawkinsTitle: Sr. VP, Deputy General Counsel and Assistant SecretaryTHE NEW GUARANTOR*:IAC FALCON HOLDINGS, LLCBy: /s/ JOANNE HAWKINSName: Joanne Hawkins Title: Vice President and Assistant Secretary* Guarantors at 12/31/17 that subsequently executed the same form of supplemental indenture are listed on Schedule A hereto.COMPUTERSHARE TRUST COMPANY, N.A.,As TrusteeBy: /s/ AUTHORIZED REPRESENTATIVEName: Authorized RepresentativeTitle: Authorized RepresentativeSchedule A1.IAC Falcon Holdings, LLC executed this Supplemental Indenture on 5/30/132.Consumersearch, Inc. executed this Supplemental Indenture on 3/12/143.Daily Burn Holdings, Inc. executed this Supplemental Indenture on 5/1/144.IAC Search & Media Brands, Inc. executed this Supplemental Indenture on 5/15/145.Investopedia LLC executed this Supplemental Indenture on 5/15/146.IAC Publishing, LLC executed this Supplemental Indenture on 5/11/167.InterActiveCorp Films, LLC executed this Supplemental Indenture on 9/21/17Exhibit 21.1IAC/InterActiveCorp SubsidiariesAs of December 31, 2017Entity Jurisdiction of Formation 15Films, LLC Delaware8831-8833 Sunset, LLC DelawareAbout Information Technology (Beijing) Co., Ltd. People’s Republic of ChinaAbout International Cayman IslandsAbout, Inc. DelawareAffinity Apps LLC DelawareAL Real Estate Holdings, LLC IndianaAmsel, LLC DelawareANGI Homeservices Inc. DelawareAngie’s List, Inc. DelawareApalon Apps LLC Republic of BelarusAPN, LLC DelawareApplications Partner, LLC DelawareAsk Applications, Inc. DelawareBig Breakfast, LLC DelawareBuzz Technologies, Inc. WashingtonCH Pacific, LLC DelawareCityGrid Media, LLC DelawareCollegeHumor Press LLC MarylandComedy News Ventures, Inc. DelawareConnect, LLC DelawareConnected Ventures, LLC DelawareConsumerSearch, Inc. DelawareCraftJack Inc. IllinoisCV Acquisition Corp. DelawareDaily Burn Holdings, LLC DelawareDaily Burn, Inc. DelawareDatingDirect.com Limited England and WalesDelightful.com, LLC DelawareDiamant Production Services, LLC DelawareDiamond Dogs, LLC DelawareDictionary.com, LLC CaliforniaECS Sports Fulfillment LLC DelawareElectus Productions, LLC California1Exhibit 21.1Entity Jurisdiction of FormationElectus, LLC DelawareES1 Productions, LLC DelawareES2 Productions, LLC DelawareEureka SG Pte. Ltd. SingaporeEureka Taiwan TaiwanEureka, Inc. JapanFailure to Appear Productions, LLC DelawareFalcon Holdings II, LLC DelawareFelix Calls, LLC DelawareFive Star Matchmaking Information Technology (Beijing) Co., Ltd. People’s Republic of ChinaFlaked Productions, LLC DelawareFriendScout24 GmbH GermanyGood Hang, LLC DelawareHLVP Follow On Fund GP, LLC DelawareHLVP Follow On Fund, L.P. DelawareHLVP I GP, LLC DelawareHLVP I, L.P. DelawareHLVP II GP, LLC DelawareHLVP II Token, LLC DelawareHLVP II, L.P. DelawareHLVP III GP, LLC DelawareHLVP III, L.P. DelawareHome Advisor Limited England and WalesHome Industry Leadership Board ColoradoHomeAdvisor Finance Co. Cayman IslandsHomeAdvisor GmbH GermanyHomeAdvisor International, LLC DelawareHomeAdvisor, Inc. DelawareHomeStars, Inc. CanadaHowAboutWe, LLC DelawareHSN Capital LLC DelawareHSN, LLC DelawareHTRF Ventures, LLC DelawareHumor Rainbow, Inc. New YorkIAC 19th St. Holdings, LLC DelawareIAC Applications Holding Limited Partnership IrelandIAC Applications, LLC DelawareIAC Falcon Holdings, LLC DelawareIAC Family Foundation, Inc. Delaware2Exhibit 21.1Entity Jurisdiction of FormationIAC FinanceCo, Inc. DelawareIAC Group, LLC DelawareIAC Publishing Holding Limited Partnership IrelandIAC Publishing, LLC DelawareIAC Search & Media (Canada) Inc. CanadaIAC Search & Media B.V. NetherlandsIAC Search & Media Brands, Inc. CaliforniaIAC Search & Media Europe Limited IrelandIAC Search & Media Finance Co. Cayman IslandsIAC Search & Media Hong Kong, Limited Hong KongIAC Search & Media International, Inc. DelawareIAC Search & Media Massachusetts, Inc. MassachusettsIAC Search & Media Technologies FinanceCo II Cayman IslandsIAC Search & Media Technologies Limited IrelandIAC Search & Media UK Limited United KingdomIAC Search & Media Washington, LLC WashingtonIAC Search & Media, Inc. DelawareIAC Search, LLC DelawareIAC Shopping International, Inc. DelawareIAC/Expedia Global, LLC DelawareIACF Developments LLC DelawareImproveNet, Inc. DelawareIndigo Intermediate, LLC DelawareINKD LLC DelawareInsider Pages, Inc. DelawareInstantAction, LLC DelawareInterActiveCorp Films, Inc. DelawareInterActiveCorp Films, LLC DelawareInterCaptiveCorp, Ltd. BermudaInternet Shopping Network LLC DelawareInvestopedia Canada, Inc. CanadaInvestopedia LLC DelawareKonnett KK JapanLife123, Inc. DelawareLivestream Inc. DelawareLivestream Limited England and WalesLivestream LLC New YorkLivestream Technologies Private Limited IndiaLucky Morning Productions, LLC Delaware3Exhibit 21.1Entity Jurisdiction of FormationM8 Singlesnet LLC DelawareMaker Shack, LLC CaliforniaMash Dating, LLC DelawareMassive Media Europe NV BelgiumMassive Media Limited England and WalesMassive Media Match NV BelgiumMatch Group Europe Limited England and WalesMatch Group, Inc. DelawareMatch Group, LLC DelawareMatch Internet Financial Services Designated Activity Company IrelandMatch ProfilePro, LLC DelawareMatch.com Europe Limited England and WalesMatch.com Events LLC DelawareMatch.com Foreign Holdings II Limited England and WalesMatch.com Foreign Holdings III Limited England and WalesMatch.com Foreign Holdings Limited England and WalesMatch.com Global Investments S.à r.l. LuxembourgMatch.com Global Services Limited England and WalesMatch.com HK Limited Hong KongMatch.com International Holdings, Inc. DelawareMatch.com International II Limited England and WalesMatch.com International Limited England and WalesMatch.com Investments, Inc. Cayman IslandMatch.com Japan KK JapanMatch.com Japan Networks GK JapanMatch.com LatAm Limited England and WalesMatch.com Luxembourg S.à r.l. LuxembourgMatch.com Nordic AB SwedenMatch.com Offshore Holdings, Ltd MauritiusMatch.com Pegasus Limited England and WalesMatchcom Mexico, S. de R.L., de C.V. MexicoMeetic Espana, SLU SpainMeetic Italia SRL ItalyMeetic Netherlands BV NetherlandsMeetic SAS FranceMG France Services SAS FranceMG Korea Services Limited South KoreaMG Services Alpha, LLC DelawareMG Services Beta, LLC Delaware4Exhibit 21.1Entity Jurisdiction of FormationMhelpdesk, Inc. DelawareMile High Insights, LLC DelawareMindspark Interactive Network, Inc. DelawareMM LatAm, LLC DelawareMojo Acquisition Corp. DelawareMojo Finance Co. Cayman IslandsMTCH Technology Services Ltd. IrelandMyBuilder Limited England and WalesMyHammer AG GermanyMyHammer Holding AG GermanyNeu.de GmbH GermanyNewsweek Philippines Inc. PhilippinesNexus Limited England and WalesNice Little Day, LLC DelawareNotional, LLC DelawareNRelate LLC DelawareOut to Lunch Productions, LLC DelawareParperfeito Comunicacao SA BrazilPeople Media, Inc. DelawarePeople Media, LLC ArizonaPlentyoffish Media ULC British ColumbiaPlentyoffish Media, LLC DelawarePretty Fun Therapy SAS FrancePrincipato-Young Management, Inc. CaliforniaPrize Matters, LLC DelawarePronto, LLC DelawarePublishing Partner, LLC DelawareRebel Entertainment, Inc. DelawareRio Bravo Productions, LLC DelawareRiviere Productions CaliforniaSearch Floor, Inc. CaliforniaServiceMagic Canada Inc. CanadaServiceMagic Europe S.à r.l. LuxembourgServiceMagic GmbH GermanyServiceMagic International S.à r.l. LuxembourgServiceMagic IP Ireland Limited IrelandShanghai Huike Network Technology Co., Ltd. People’s Republic of ChinaShoptouch, Inc. DelawareSlimware Utilities Holdings, Inc. Delaware5Exhibit 21.1Entity Jurisdiction of FormationSpeedDate.com, LLC DelawareSpotlight Studios, LLC DelawareStage Four, LLC DelawareStarnet Interactive Ltd. IsraelStarnet Interactive, Inc. DelawareStream Team, LLC DelawareStyleclick Chicago, Inc. DelawareStyleclick, Inc. DelawareStyleclick.com Enterprises Inc. CaliforniaTargeted Media Solutions LLC DelawareTDB Holdings, Inc. DelawareThe Daily Beast Company LLC DelawareThe IAC Foundation, Inc. DelawareTinder Development, LLC DelawareTinder, LLC DelawareTMC Realty, L.L.C. DelawareTPR/Tutor Holdings, LLC DelawareTravaux.com FranceUSA Electronic Commerce Solutions LLC DelawareUSA Video Distribution LLC DelawareUSANi LLC DelawareUSANi Sub LLC DelawareVHX Corporation DelawareVimeo FinanceCo, LLC DelawareVimeo, Inc. DelawareWanderspot LLC WashingtonWerkspot BV Netherlands6Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following registration statements (and any amendments thereto):(1) Form S-8, No. 333-127410(2) Form S-8, No. 333-127411(3) Form S-4, No. 333-124303(4) Form S-8, No. 333-146940(5) Form S-8, No. 333-154875(6) Form S-8, No. 333-174538(7) Form S-8, No. 333-192186(8) Form S-3, No. 333-222643of our reports dated March 1, 2018, with respect to the consolidated financial statements and schedule of IAC/InterActiveCorp, and the effectiveness ofinternal control over financial reporting of IAC/InterActiveCorp, included in this Annual Report (Form 10-K) of IAC/InterActiveCorp for the year endedDecember 31, 2017./s/ ERNST & YOUNG LLPNew York, New YorkMarch 1, 2018Exhibit 31.1CertificationI, Barry Diller, certify that:1.I have reviewed this report on Form 10-K for the fiscal year ended December 31, 2017 of IAC/InterActiveCorp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: March 1, 2018 /s/ BARRY DILLER Barry DillerChairman and Senior ExecutiveExhibit 31.2CertificationI, Joseph Levin, certify that:1.I have reviewed this report on Form 10-K for the fiscal year ended December 31, 2017 of IAC/InterActiveCorp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting.Dated: March 1, 2018 /s/ JOSEPH LEVIN Joseph LevinChief Executive OfficerExhibit 31.3CertificationI, Glenn H. Schiffman, certify that:1.I have reviewed this report on Form 10-K for the fiscal year ended December 31, 2017 of IAC/InterActiveCorp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controlover financial reporting.Dated: March 1, 2018 /s/ GLENN H. SCHIFFMAN Glenn H. SchiffmanExecutive Vice President and Chief Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Barry Diller, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:(1)the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of IAC/InterActiveCorp (the "Report") which this statementaccompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofIAC/InterActiveCorp.Dated: March 1, 2018 /s/ BARRY DILLER Barry DillerChairman and Senior ExecutiveExhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Joseph Levin, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:(1)the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of IAC/InterActiveCorp (the "Report") which this statementaccompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofIAC/InterActiveCorp.Dated: March 1, 2018 /s/ JOSEPH LEVIN Joseph LevinChief Executive OfficerExhibit 32.3CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Glenn H. Schiffman, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:(1)the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of IAC/InterActiveCorp (the "Report") which this statementaccompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofIAC/InterActiveCorp.Dated: March 1, 2018 /s/ GLENN H. SCHIFFMAN Glenn H. SchiffmanExecutive Vice President and Chief Financial Officer

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