IAC
Annual Report 2018

Plain-text annual report

Table of ContentsAs filed with the Securities and Exchange Commission on March 1, 2019UNITED 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, 2018 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T duringthe preceding 12 months (or for such shorter period that the Registrant was required to submit such files). 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. x Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging 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 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 1, 2019, the following shares of the Registrant's Common Stock were outstanding:Common Stock 77,986,305Class B Common Stock 5,789,499Total 83,775,804The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2018 was $11,833,394,558. 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 2019 Annual Meeting of Stockholders are incorporated by reference into Part III herein.TABLE OF CONTENTS PageNumberPART IItem 1.Business2Item 1A.Risk Factors15Item 1B.Unresolved Staff Comments28Item 2.Properties28Item 3.Legal Proceedings28Item 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 Risk66Item 8.Consolidated Financial Statements and Supplementary Data67 Note 1—Organization74 Note 2—Summary of Significant Accounting Policies76 Note 3—Income Taxes91 Note 4—Business Combination95 Note 5—Goodwill and Intangible Assets97 Note 6—Financial Instruments100 Note 7—Long-Term Debt105 Note 8—Shareholders' Equity110 Note 9—Accumulated Other Comprehensive Loss111 Note 10—Earnings (Loss) Per Share112 Note 11—Stock-Based Compensation112 Note 12—Segment Information117 Note 13—Commitments and Contingencies124 Note 14—Supplemental Cash Flow Information126 Note 15—Related Party Transactions126 Note 16—Benefit Plans128 Note 17—Consolidated Financial Statement Details129 Note 18—Transaction and Integration Related Costs in Connection with the Combination130 Note 19—Guarantor and Non-Guarantor Financial Information132 Note 20—Quarterly Results (Unaudited)140 Note 21—Subsequent Events (Unaudited)141Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure142Item 9A.Controls and Procedures142Item 9B.Other Information144PART IIIItem 10.Directors, Executive Officers and Corporate Governance145Item 11.Executive Compensation145Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters145Item 13.Certain Relationships and Related Transactions, and Director Independence145Item 14.Principal Accounting Fees and Services145PART IVItem 15.Exhibits and Financial Statement Schedules1461PART IItem 1. BusinessOVERVIEWWho We AreIAC has majority ownership of both Match Group, which includes Tinder, Match, PlentyOfFish and OkCupid, and ANGI Homeservices, whichincludes HomeAdvisor, Angie’s List and Handy, and also operates Vimeo, Dotdash and The Daily Beast, among many other online businesses.As used herein, "IAC," the "Company," "we," "our," "us" and similar terms refer to IAC/InterActiveCorp and its subsidiaries (unless the contextrequires otherwise).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 aleading media and Internet company.From 1997 to 2005, we acquired a number of e-commerce companies, including Ticketmaster Group, Hotel Reservations Network (later renamedHotels.com), Expedia.com, Match.com, LendingTree, Hotwire, TripAdvisor and AskJeeves.In 2005, we completed the separation of our travel and travel‑related businesses and investments into an independent public company calledExpedia, Inc. (now known as Expedia Group, Inc.). In 2008, we separated into five independent, publicly traded companies: IAC, HSN, Inc. (nowpart of Qurate Retail, Inc.), Interval Leisure Group, Inc. (now part of Marriott Vacations Worldwide Corporation), Ticketmaster (now part of LiveNation, Inc.) and Tree.com, Inc.From 2008 to 2014, we continued to invest in and acquire e-commerce companies, including Meetic, About.com (now known as Dotdash),Dictionary.com and Investopedia. In 2015, we acquired Plentyoffish Media Inc. and completed the initial public offering of Match Group, Inc.In 2016 and 2017, we completed the combination of the businesses in our former HomeAdvisor segment with those of Angie’s List, Inc. under anew publicly traded holding company that we control, ANGI Homeservices Inc. ("ANGI Homeservices"), as well as acquired controlling interests inMyHammer Holding AG, HomeStars Inc. and MyBuilder Limited, leading home services platforms in Germany, the United Kingdom and Canada,respectively. Through Vimeo, we acquired VHX, a platform for premium over-the-top (OTT) subscription video channels, and Livestream Inc., aleading live video solution.In 2018, through ANGI Homeservices, we acquired Handy Technologies, Inc., a leading platform in the United States for connecting consumerslooking for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals. Wealso acquired a controlling interest in BlueCrew, an on-demand staffing platform that connects temporary workers with traditional blue-collar jobs inareas like warehouse, delivery and moving, data entry and customer service. Lastly, we sold our Dictionary.com business, the television business ofElectus (including Notional) and our Felix and CityGrid businesses.2EQUITY 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 whichare convertible into common stock on a share for share basis. As of the date of this report, Barry Diller, IAC’s Chairman and Senior Executive, hisspouse (Diane von Furstenberg) and his stepson (Alexander von Furstenberg), collectively beneficially own 5,789,499 shares of Class B commonstock representing 100% of the outstanding shares of Class B common stock. Together with shares of common stock held as of the date of this reportby Mr. von Furstenberg (61,685), a trust for the benefit of certain members of Mr. Diller’s family (136,711) and a family foundation (1,711), theseholdings represent approximately 42.8% of the total outstanding voting power of IAC (based on the number of shares of common and Class Bcommon stock outstanding on February 1, 2019). As of the date of this report, Mr. Diller also holds 1,050,000 vested options and 250,000 unvestedoptions to purchase shares of 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’sChairman and Senior Executive and he beneficially owns (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) atleast 5,000,000 shares of Class B common stock and/or common stock in which he has a pecuniary interest (including IAC securities beneficiallyowned by him directly and indirectly through trusts for the benefit of certain members of his family), he generally has the right to consent to limitedmatters in the event that IAC’s ratio of total debt to EBITDA (as defined in the governance agreement) equals or exceeds four to one over acontinuous 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 ofDirectors and the outcome of corporate actions requiring shareholder approval, such as mergers, business combinations and dispositions of assets,among other corporate transactions.3DESCRIPTION OF IAC BUSINESSESMatch GroupOverviewOur Match Group segment consists of the businesses and operations of Match Group, Inc. ("Match Group"). Through Match Group, we operate aportfolio of dating brands, including Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, Pairs and Hinge, as well as a number of other brands,each designed to increase user likelihood of finding a meaningful connection. As of December 31, 2018, IAC’s ownership and voting interests inMatch Group were 81.1% and 97.6%, respectively.ServicesThrough Match Group, we are a leading provider of dating products all over the world through applications and websites that we own andoperate. As of December 31, 2018, there were approximately 7.9 million Average Subscribers to our dating products (calculated by summing thetotal number of users who purchased one of our subscription-based dating products at the end of each day in the year ended December 31, 2018,divided by the number of calendar days in such year).Dating is a highly personal endeavor and consumers have a wide variety of preferences that determine what type of dating product they choose.As a result, our strategy focuses on a portfolio approach of various brands in order to reach a broad range of users. Our brands are collectivelyavailable in 40 languages to users all over the world. The following is a list of our key brands: Tinder. Tinder was launched in 2012, and has since risen to scale and popularity faster than any other product in the online dating categorywith limited marketing spend, growing to over 4.3 million subscribers today. Tinder’s distinctive "right swipe" feature has led to significantadoption among the millennial generation, previously underserved by the online dating category. Tinder employs a freemium model, through whichusers can enjoy many of the core features of Tinder for free, including limited use of the "swipe right" feature with unlimited communication withother users. However, to enjoy premium features, such as unlimited use of the "swipe right" feature, a Tinder user must subscribe to either TinderPlus, launched in early 2015, or Tinder Gold, which was launched in late summer 2017. Tinder users and subscribers may also pay for certainpremium features, such as Super Likes and Boosts, on a pay-per-use basis.Match. Match was launched in 1995 and helped create the online dating category. Among its distinguishing features are the ability to searchprofiles, receive algorithmic matches and attend live events (promoted by Match) with other subscribers. Additionally, new features, such as MissedConnections, which uses location-based technology to enable users to connect with other users with whom they have crossed paths in the past,engage users into more meaningful connections. Match is a brand that focuses on users with a high level of intent to enter into a relationship and itsproduct and marketing are designed to reinforce that approach. Match relies heavily on word-of-mouth traffic, repeat usage and paid marketing.PlentyOfFish. PlentyOfFish was launched in 2003 and acquired in October 2015. Similar to Match, among its distinguishing features is theability to both search profiles and receive algorithmic matches. Similar to Tinder, PlentyOfFish has grown to popularity over the years with verylimited marketing spend and also relies on a freemium model. PlentyOfFish has broad appeal in the central United States, Canada, the UnitedKingdom and a number of other international markets.Meetic. Meetic, a leading European online dating brand based in France, was launched in 2001. Similar to Match, among its distinguishingfeatures are the ability to search profiles, receive algorithmic matches and attend live events (promoted by Meetic) with other subscribers and non-subscribers from time to time. Also, similar to Match, Meetic is a brand that focuses on users with a high level of intent to enter into a relationshipand its product and marketing are designed to reinforce that approach. Meetic relies heavily on word-of-mouth traffic, repeat usage and paidmarketing.4OkCupid. OkCupid was launched in 2004, and has attracted users through a mathematical and Q&A approach to the online dating category.Similar to Tinder and PlentyOfFish, OkCupid has grown in popularity over the years without significant marketing spend and also relies on afreemium model. OkCupid has a loyal and highly educated user base predominately located in major cities in the United States and the UnitedKingdom.OurTime. OurTime is the largest brand within our affinity-oriented brands. OurTime is the largest community of singles over age 50 of anydating product.Pairs. Pairs was launched in 2012 and acquired in May 2015. Pairs is a leading provider of dating products in Japan, with a strong presence inTaiwan and a growing presence in certain other Asian countries. Pairs is a dating app that was specifically designed to address social barriersgenerally associated with the use of dating products in Asian countries, particularly Japan.Hinge. Hinge was launched in 2012 and, following a series of investments, Match took a controlling stake in Hinge in June 2018 andpurchased all of the remaining outstanding equity in December 2018. Hinge is a mobile-only experience and employs a freemium model. Hingefocuses on users with a high level of intent to enter into a relationship and its product is designed to reinforce that approach.All of our dating products enable users to establish a profile and review the profiles of other users without charge. Each product also offersadditional features, some of which are free and some of which are paid, depending on the particular product. In general, access to premium featuresrequires a subscription, which is typically offered in packages (primarily ranging from one month to six months), depending on the product andcircumstance. Prices differ meaningfully within a given brand by the duration of subscription purchased, the bundle of paid features that a userchooses to access and whether or not a subscriber is taking advantage of any special offers. In addition to subscriptions, many of our dating productsoffer users certain features, such as the ability to promote themselves for a given period of time or to review certain profiles without any signaling toother users, and these features are offered on a pay‑per‑use basis. The precise mix of paid and premium features is established over time on abrand‑by‑brand basis and is constantly subject to iteration and evolution.RevenueMatch Group revenue is primarily derived directly from users in the form of recurring subscriptions. Revenue is also earned from onlineadvertising, the purchase of à la carte features and offline events.MarketingCertain of our brands attract the majority of their users through word-of-mouth and other free channels. Our other brands rely on paid useracquisition efforts for a significant percentage of their users. Our online marketing activities generally consist of 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 relationsefforts, as well as events.CompetitionThe dating industry is competitive and has no single, dominant brand globally. We compete with a number of other companies that providesimilar dating and matchmaking products.In addition to other online dating brands, we compete with social media platforms and offline dating services, such as in‑person matchmakers.Arguably, our biggest competition comes from the traditional ways that people meet each other and the choices some people make to not utilizedating 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, particularly in emerging markets and otherparts of the world where the stigma is only beginning to erode;5•continued growth in Internet access and smart phone adoption in certain regions of the world, particularly emerging markets;•the continued strength of Match Group brands;•the breadth and depth of Match Group 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, the ever-evolvingtechnological landscape and the ever-changing regulatory landscape (in particular, as it relates to the regulation of online platforms);•our ability to efficiently acquire new users for our dating products;•our ability to continue to optimize our monetization strategies; and•the design and functionality of our dating products.Lastly, since a large portion of online dating customers use multiple dating products over a given period of time, either concurrently orsequentially, we believe our broad portfolio of dating brands is a competitive advantage.ANGI HomeservicesOverviewThrough the ANGI Homeservices portfolio of digital home services brands, including HomeAdvisor®, Angie’s List® and Handy, we connectmillions of homeowners to home service professionals, collect reviews and allow homeowners to research, match and connect on-demand to thelargest network of service professionals online, through our mobile apps or by voice assistants. In addition to its market-leading U.S. operations, ANGI owns leading home services online marketplaces in France (Travaux), Germany(MyHammer), Netherlands (Werkspot), United Kingdom (MyBuilder), Canada (HomeStars) and Italy (Instapro), as well as operations in Austria(MyHammer). As of December 31, 2018, IAC’s economic and voting interests in ANGI Homeservices were 83.9% and 98.1%, respectively.Our ANGI Homeservices segment consists of the North American (United States and Canada) and European businesses and operations ofANGI Homeservices, a publicly traded holding company that was formed to facilitate the combination of the businesses within our formerHomeAdvisor segment with Angie’s List, Inc. ("Angie's List"), which transaction was completed on September 29, 2017 (the "Combination"). ANGIHomeservices acquired Handy Technologies, Inc. ("Handy"), a leading platform in the United States for connecting individuals looking forhousehold services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals, in October 2018.ServicesOverview. The HomeAdvisor digital marketplace service (formerly known as our HomeAdvisor domestic business ("HomeAdvisor")) connectsconsumers with service professionals nationwide for home repair, maintenance and improvement projects. HomeAdvisor provides consumers withtools and resources to help them find local, pre-screened and customer-rated service professionals, as well as instantly book appointments online.HomeAdvisor also connects consumers with service professionals instantly by telephone, as well as offers several home services-related resources,such as cost guides for different types of home services projects. Handy connects consumers looking for household services (primarily cleaning andhandyman services) with top-quality, pre-screened independent service professionals.6Together, we refer to the HomeAdvisor and Handy businesses in the United States as the "Marketplace." We provide all Marketplace matchingservices, related tools and directories to consumers free of charge.As of December 31, 2018, the Marketplace had a network of approximately 214,000 service professionals, each of whom had an active networkmembership and/or paid for consumer matches (in the case of HomeAdvisor service professionals) or completed a job sourced through the Handyplatform (in the case of Handy service professionals) in December 2018. Collectively, these service professionals provided services in more than 500categories and 400 discrete markets in the United States, ranging from cleaning and installation services to simple home repairs and larger homeremodeling projects. The Marketplace generated approximately 23.5 million service requests from over 13 million households during the yearended December 31, 2018. Service requests consisted of fully completed customer service requests submitted to HomeAdvisor and completed jobssourced through the Handy platform.Angie’s List connects consumers with service professionals for local services through a nationwide online directory of service professionals inover 700 service categories, as well as provides consumers with valuable tools, services and content (including verified reviews), to help themresearch, shop and hire for local services. We provide consumers with access to the Angie's List nationwide directory and related basic tools andservices free of charge.Marketplace Consumer Services. Consumers can submit a service request for a service professional directly through HomeAdvisor platforms, aswell as indirectly through certain paths on some of our other branded platforms and various third-party affiliate platforms. In the case of servicerequests submitted through HomeAdvisor and third-party affiliate platforms, consumers are generally matched (through our proprietary algorithms)with up to four service professionals from the HomeAdvisor network of service professionals based on several factors, including the type of servicesdesired, location and the number of service professionals available to fulfill the request. In the case of service requests submitted through our otherbranded platforms, consumers are generally matched (through our proprietary algorithms) with a combination of HomeAdvisor service professionalsand service professionals from the relevant branded platform (as and if available for the given service request).Service professionals may contact consumers with whom they have been matched directly and consumers can review profiles, ratings andreviews of presented service professionals and select the service professional whom they believe best meets their specific needs. Consumers areunder no obligation to work with any service professional(s) referred by or found through any of our branded platforms or third-party affiliateplatforms.HomeAdvisor also provides several on-demand services, including Instant Booking and Instant Connect (patent-pending). Through InstantBooking, consumers can schedule appointments for select home services with a HomeAdvisor service professional instantly across certainHomeAdvisor platforms. Through Instant Connect, consumers can connect with a HomeAdvisor service professional instantly by phone, as well asthrough digital voice assistant platforms. In certain markets, HomeAdvisor also provides Same Day 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 projectcost information for more than 400 project types nationwide, as well as a library of home services-related content.Through the Handy platform, consumers can select the service they need and specify when (date and time) they want the service to be provided;this information is then used to match consumers with Handy service professionals. In certain markets, consumers can also submit a request to book aspecific Handy service professional for a given job. In both cases, the service is then scheduled and paid for directly through the Handy platform. Inaddition, consumers who purchase furniture, electronics, appliances and other home-related items from select third-party retail partners online (andin certain markets, in store) can simultaneously purchase assembly, installation and other related services to be fulfilled by Handy serviceprofessionals. The service is then paid for directly through the applicable third-party retail partner platform and scheduled through the Handyplatform. Consumers can also search for service professionals by zip code on the Handy platform and contact them through the Handy platform.Marketplace Service Professional Services. We primarily offer and sell HomeAdvisor memberships and related products and services to serviceprofessionals through our sales force (described below). The basic HomeAdvisor annual membership package includes membership in theHomeAdvisor network of service professionals, as well as access to consumer matches through HomeAdvisor platforms and a listing in theHomeAdvisor online directory and certain other affiliate directories, among other benefits. In addition to the membership subscription fee,HomeAdvisor service professionals pay fees for consumer matches. In the case of Handy, we provide service professionals who self-register on theHandy platform with access to a pool of consumers seeking service professionals. When a service is scheduled through the Handy platform, therelated payment is processed and we charge the service professional a7booking fee. We also offer certain other subscription products, primarily to HomeAdvisor service professionals, through mHelpDesk, a provider ofcloud-based field service software for small to mid-size businesses, as well as custom website development and hosting services.Angie's List Consumer Services. Through most Angie’s List platforms, consumers can currently register and search for a service professional inthe Angie’s List nationwide online directory and/or be matched with a service professional. Consumers who register can access ratings and reviewsand search for service professionals, as well as access certain promotions. For a fee, we offer two premium membership packages, which includevarying degrees of online and phone support, access to exclusive promotions and features and the award-winning Angie’s List print magazine.Angie's List Service Professional Services. Angie’s List provides service professionals with a variety of services and tools, includingcertification. Generally, service professionals with an overall member grade below a "B" are not eligible for certification. Service professionals mustsatisfy certain criteria for certification, including retaining the requisite member grade, passing certain criminal background checks and attesting toproper licensure requirements. Once eligibility criteria are satisfied, service professionals must purchase term-based advertising from us to obtaincertification. As of December 31, 2018, we had approximately 36,000 certified service professionals under contract for advertising.Certified service professionals rotate among the first service professionals listed in directory search results for an applicable category, with non-certified service professionals appearing below certified service professionals in directory search results. Certified service professionals can alsoprovide exclusive promotions to members. When consumers choose to be matched with a service professional, our proprietary algorithms willdetermine where a given service professional appears within related results.RevenueANGI Homeservices revenue is primarily derived from: (i) consumer connection revenue, which consists of fees paid by HomeAdvisor serviceprofessionals for consumer matches (regardless of whether the service professional ultimately provides the requested service) and booking fees fromcompleted jobs sourced through the Handy platform, and (ii) membership subscription fees paid by HomeAdvisor service professionals. Consumerconnection revenue varies based upon several factors, including the service requested, product experience offered and geographic location ofservice.Revenue is also derived from: (i) sales of time-based website, mobile and call center advertising to service professionals and (ii) membershipsubscription fees from consumers.MarketingANGI Homeservices products and services are marketed to consumers primarily through digital marketing (primarily paid search enginemarketing, display advertising and third-party affiliate agreements) and traditional offline marketing (national television and radio campaigns), aswell as through e-mail. Pursuant to third-party affiliate agreements, third parties agree to advertise and promote HomeAdvisor products and services(and those of HomeAdvisor service professionals) on their platforms. In exchange for these efforts, these third parties are paid a fixed fee whenvisitors from their platforms click through and submit a valid service request through HomeAdvisor, or when visitors submit a valid service requeston the affiliate platform and the affiliate transmits the service request to HomeAdvisor. ANGI Homeservices products and services are also marketedto consumers through relationships with select third-party retail partners and, to a lesser extent, through partnerships with other contextually relatedwebsites and direct mail.We market subscription packages and related products and services to service professionals primarily through our Golden, Colorado based salesforce, as well as through sales forces in Denver and Colorado Springs, Colorado, Lenexa, Kansas, New York, New York, Indianapolis, Indiana andChicago, Illinois. We also market these products and services, together with our various directories, through paid search engine marketing, digitalmedia advertising and direct relationships with trade associations and manufacturers. We market term-based advertising and related products toservice professionals primarily through our Indianapolis based sales force.8CompetitionThe home services industry is highly competitive and fragmented, and in many important respects, local in nature. ANGI Homeservicescompetes with, among others: (i) search engines and online directories, (ii) home and/or local services-related platforms, (iii) providers of consumerratings, reviews and referrals and (iv) various forms of traditional offline advertising (primarily local in nature), including radio, direct marketingcampaigns, yellow pages, newspapers and other offline directories. We also compete with local and national retailers of home improvement productsthat offer or promote installation services. We believe our biggest competition comes from the traditional methods most people currently use to findservice 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 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 consumersand service professionals generally;•our ability to continue to build and maintain awareness of, and trust in and loyalty to, our various brands, particularly our Angie’s List,HomeAdvisor and Handy brands;•our ability to consistently generate service requests and jobs through the Marketplace and leads through our online directories that convertinto revenue for our 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,depth and timeliness of customer ratings and reviews.VimeoOverviewVimeo operates a global video platform for creative professionals, marketers and enterprises to connect with their audiences, customers andemployees. Vimeo provides cloud-based software products to stream, host, distribute and monetize videos online and across devices, as well aspremium video tools on a subscription basis. Vimeo also sells live streaming accessories.PlatformThrough Vimeo’s Platform business, we provide basic video hosting and sharing capabilities free of charge. We also provide various packagesof premium video tools via a Software-as-a-Service ("SaaS") model on a subscription basis (monthly or annual). Package capabilities may includeadditional video storage and high quality live streaming capabilities, robust video privacy controls, video player customization options, teamcollaboration and management tools, review and workflow tools, detailed analytics, lead generation and marketing tools, priority support and theability to sell videos directly to consumers in a customized viewing experience, with the precise mix of capabilities dependent upon the tier ofpackage purchased. As of December 31, 2018, there were approximately 952,000 subscribers to Vimeo’s SaaS offering.Vimeo also operates two marketplaces for buying and selling videos, the Vimeo on Demand store and the Vimeo Stock store. Through theVimeo on Demand store, subscribers may offer their videos for sale to their audiences. Through the Vimeo Stock store, Vimeo offers stock videofootage from certain licensors. In both cases, Vimeo earns fees from the sale of video content.HardwareThrough Livestream, we sell a number of live streaming accessories, including hardware devices for capturing, broadcasting and editing livevideo and the Mevo® camera, a pocket-sized device that allows broadcasters to professionally stream and edit live video. We also sell hardwareequipment for customers with more sophisticated live9streaming needs, such as 4K encoding, multi-camera switching and on-screen graphics. Our hardware devices enable customers to stream video oftheir events through Vimeo software, as well as to multiple third-party platforms simultaneously. Subscribers to our SaaS offering can host, distributeand monetize live video edited with these hardware devices through Vimeo platforms.Marketing and SalesWe market Vimeo services primarily through online marketing efforts, including paid search engine marketing, social media, e-mail campaigns,display advertising and affiliate marketing. We also market these products and services through offline marketing efforts, including outdooradvertising, offline events and product integrations, as well as directly through our self-serve websites and apps. Vimeo services and products can bepurchased directly through our self-serve websites and apps, the Apple App Store and Google Play Store and our sales force, and in the case oflivestreaming accessories only, through a network of retailers and distributors.RevenueVimeo revenue is derived primarily from annual and monthly SaaS subscription fees paid by creators for premium capabilities and, to a lesserextent, sales of live streaming hardware, software and professional services.CompetitionVimeo competes with a variety of online video platforms, from free, ad-based video sharing services directed at consumers to niche workflowand distribution solutions directed at professionals and enterprises. We believe that Vimeo differentiates itself from its competitors by providing anad-free, high quality user experience and one-stop professional solution that is easy to use and affordable.We believe that our ability to compete successfully will depend primarily upon the following factors:•the quality of our technology platform, video tools and user experience;•whether our SaaS subscription offering and live streaming accessories resonate with consumers;•the continued ability of users to distribute Vimeo-hosted content across third-party platforms and the prominence and visibility of suchcontent within search engine results and social media platforms;•the recognition and strength of the Vimeo brand relative to competitor brands;•our ability to host and stream high-bandwidth video on a scalable platform;•our ability to retain existing subscribers by continuing to provide a compelling value proposition and convert non-paying users intosubscribers; and•our ability to drive visitors to our platform through various forms of direct marketing. DotdashOverviewBuilt upon more than 20 years of data and expert-written content, Dotdash is a portfolio of digital brands providing expert information andinspiration in select vertical content categories to over 90 million users each month.ContentAs of the date of this report, our Dotdash business consist of the following brands:•the Verywell family of brands, a leading online health publisher and resource where users can explore a full spectrum of health and wellnesstopics, from comprehensive information on medical conditions to advice on fitness, nutrition, mental health, pregnancy and more;10•the Spruce family of brands, a leading online lifestyle property covering home decor, home repair, recipes, cooking techniques, pets andcrafts where users can find practical, real-life tips and inspiration to help them create their best home;•the Balance family of brands, a leading online property covering personal finance, career and small business topics that makes personalfinance easy to understand and where users can find clear, practical and straightforward personal financial advice;•Investopedia, an online resource for investment and personal finance education and information;•Lifewire, a leading online technology information property that provides expert-created, real-world technology content with informativevisuals and straightforward instruction that helps users fix tech gadgets, learn how to perform specific tech tasks and find the best techproducts;•TripSavvy, a travel website written by real experts (not anonymous reviewers) where users can find useful travel advice and inspiration fromdestinations around the world;•ThoughtCo, a leading online information and reference site with a focus on expert-created education content where users can find answersto questions and information regarding a broad range of disciplines, including science, technology and math, the humanities and the arts,music and recreation; and•two recently acquired websites, Byrdie, a leading beauty website covering beauty tips, style, product reviews and makeup trends, andMyDomaine, a lifestyle website where users can find fresh recipes, smart career tips and insider travel guides that awaken a life well lived.Through these brands, we provide original and engaging digital content in a variety of formats, including articles, illustrations, videos andimages. We work with hundreds of experts in their respective fields to create the content that we publish, including doctors, chefs, certified financialadvisors and others.RevenueDotdash revenue consists principally of digital advertising revenue and affiliate commerce commission revenue. Digital advertising revenue isgenerated primarily through digital display advertisements sold directly and through programmatic advertising networks. Affiliate commercecommission revenue is generated when Dotdash refers users to commerce partner websites resulting in a purchase or transaction.MarketingWe market our content through a variety of digital distribution channels, including search engines, social media platforms and direct navigationprograms. Users who engage with Dotdash brands are invited to share Dotdash content and sign up for our e-mail newsletters.CompetitionDotdash competes with a wide variety of parties in connection with our efforts to attract and retain users and advertisers. Competitors primarilyinclude other online publishers and destination websites with brands in similar vertical content categories and social channels.Some of our current competitors have longer operating histories, greater brand recognition, larger user bases and/or greater financial, technicalor marketing resources than we do. As a result, they have the ability to devote comparatively greater resources to the development and promotion oftheir content, which could result in greater market acceptance of their content relative to our content.We believe that the ability of Dotdash to compete successfully will depend primarily upon the following factors:•the quality of the content and features on our websites, relative to those of our competitors;•our ability to successfully create or acquire content (or the rights thereto) in a cost-effective manner;11•the relevance and authority of the content featured on our websites; and•our ability to successfully drive visitors to our portfolio of digital brands in a cost-effective manner.Applications OverviewOur Applications segment consists of our Desktop business and Mosaic Group, our mobile business. Through these businesses, we are a leadingprovider of global, advertising-driven desktop and subscription-based mobile applications.DesktopThrough our Desktop business, we own and operate a portfolio of desktop browser applications that provide users with access to a wide varietyof online content, tools and services. Aligned around the common theme of making the lives of our users easier in just a few clicks, these productsspan a myriad of categories, including: FromDocToPDF, through which users can convert documents from one format into various others;MapsGalaxy, through which users can access accurate street maps, local traffic conditions and aerial and satellite street views; and GetFormsOnline,through which users can access essential forms (tax, healthcare, travel and more) online. We provide users who download our desktop browserapplications with new tab search services, as well as the option of default browser search services. We distribute our desktop browser applications toconsumers free of charge on an opt-in basis directly through direct to consumer (primarily the Chrome Web Store) and partnership distributionchannels.We also develop, distribute and provide a suite of Slimware-branded desktop-support software and services, including: DriverUpdate®, whichscans, identifies and completes required updates to device-to-PC communicating drivers; SlimCleaner® software, which cleans, updates, secures andoptimizes computer operating systems; and Slimware® Premium Support, a subscription service that provides subscribers with 24/7 access to remotetech support for their computers, mobile phones and other digital devices.Mosaic GroupThrough Mosaic Group, we are a leading provider of global subscription mobile applications. Mosaic Group consists of the followingbusinesses that we own and operate: Apalon, iTranslate (acquired in March 2018), TelTech (acquired in October 2018) and Daily Burn.Apalon is a leading mobile development company with one of the largest and most popular application portfolios worldwide. iTranslatedevelops and distributes applications that enable users to read, write, speak and learn foreign languages anywhere in the world. TelTech developsand distributes unique and innovative mobile communications applications that help protect consumer privacy. Daily Burn is a health and fitnessproperty that provides streaming fitness and workout videos across a variety of platforms (including iOS, Android, Roku and other Internet-enabledtelevision platforms). Through Mosaic Group, collectively, we operated 39 branded mobile applications in 28 languages across 173 countries as of the date of thisreport. Our branded mobile applications consist of applications spanning a variety of categories, each designed to meet the varying and uniqueneeds of our subscribers and enhance their daily lives, including: iTranslate, through which subscribers can connect and communicate across over100 languages; Robokiller, which thwarts telemarketing spam phones calls; and NOAA Radar, which provides up-to-date weather information andstorm tracking worldwide. We distribute our branded mobile applications to our subscribers primarily through the Apple App and Google Playstores.RevenueDesktop revenue largely consists of advertising revenue generated principally through the display of paid listings in response to search queries.Paid listings are advertisements displayed on search results pages that generally contain a link to advertiser websites. The substantial majority of thepaid listings displayed by our Desktop business is supplied to us by Google Inc. ("Google") pursuant to our services agreement with Google.12Pursuant to this agreement, those of our Desktop businesses that provide search services transmit search queries to Google, which in turntransmits a set of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occursindependently of, but concurrently with, the generation of algorithmic search results for the same search queries. Google paid listings are displayedseparately from algorithmic search results and are identified as sponsored listings on search results pages. Paid listings are priced on a price per clickbasis and when a user submits a search query through one of our Desktop businesses and then clicks on a Google paid listing displayed in responseto the query, Google bills the advertiser that purchased the paid listing and shares a portion of the fee charged to the advertiser with us. See "Item1A-Risk Factors-We depend upon arrangements with Google."To a lesser extent, Desktop revenue also includes fees related to subscription downloadable desktop applications, as well as displayadvertisements.Mosaic Group revenue consists primarily of fees related to subscription downloadable mobile applications distributed through the Apple Appand Google Play stores, as well as display advertisements.MarketingWe market our Desktop applications to users primarily through digital display advertisements and paid search engine marketing efforts, as wellas through a number of affiliate advertisers who engage in these efforts on our behalf. We market our mobile applications to users primarily throughdigital storefronts (primarily Apple App and Google Play stores) and digital display advertisements on social media, messaging and media platforms,as well as in-app and cross-app advertising.CompetitionThe Applications industry is competitive and has no single, dominant desktop or mobile application brand globally. In the case of our Desktopbusiness, we compete with a number of other companies that develop and market similar desktop browser application products and distribute themthrough direct to consumer and third-party agreements. We also compete with search engines to provide users with new tab, homepage and/ordefault search services. We believe that the ability of our Desktop business to compete successfully will depend primarily upon the followingfactors:•our ability to maintain industry-leading monetization solutions for our desktop browser applications in response to technological changesand platform demands;•the size and stability of our global base of installed desktop application products and our ability to grow this base;•the continued creation of desktop browser applications that resonate with consumers, which depends upon our continued ability to bundleattractive features, content and services (some of which may be owned by third parties);•our ability to differentiate our desktop browser applications from those of our competitors; and•our ability to market and distribute our desktop browser applications through direct to consumer (primarily the Chrome Web Store) andthird-party channels in a cost-effective manner.In the case of Mosaic Group, we compete with many mobile application companies that provide similar free and paid mobile applicationproducts. Our competition also comes from services provided by non-mobile, analog and disparate sources, along with certain digital companieswhose competitive products are ancillary or immaterial to their primary sources of revenue. We believe that the ability of Mosaic Group to competesuccessfully will depend primarily upon the following factors:•the continued growth of consumer adoption of free and paid mobile applications generally and related engagement levels;•our ability to operate our mobile applications as a scalable platform;13•our ability to retain existing subscribers and acquire new subscribers in a cost-effective manner;•our ability to continue to optimize our marketing and monetization strategies;•the continued growth of smartphone adoption in certain regions of the world, particularly emerging markets;•the continued strength of Mosaic Group brands; and •our ability to introduce new and enhanced mobile applications in response to competitor offerings, consumer preferences, platformdemands, social trends and evolving technological landscape.Emerging & OtherOverviewOur Emerging & Other segment primarily includes:•Ask Media Group, a collection of websites providing general search services and information;•BlueCrew, an on-demand staffing platform that connects temporary workers with traditional blue-collar jobs in areas like warehouse,delivery and moving, data entry and customer service; •The Daily Beast, a website dedicated to news, commentary, culture and entertainment that publishes original reporting and opinion from itsroster of full-time journalists and contributors;•College Humor Media, a provider of digital content, including its recently launched subscription only property, Dropout.tv; and•IAC Films, a provider of production and producer services for feature films, primarily for initial sale and distribution through theatricalreleases and video-on-demand services in the United States and internationally.For information regarding businesses that were included in this segment prior to their respective sales, see "Item 8-Consolidated FinancialStatements and Supplementary Data-Note 1-Organization."RevenueRevenue of Ask Media Group consists principally of advertising revenue, which is generated primarily through the display of paid listings inresponse to search queries and display advertisements (sold directly and through programmatic ad sales). The majority of the paid listings displayedare supplied to us by Google in the manner, and pursuant to the services agreement with Google, described above under "-Applications-Revenue."The Daily Beast revenue consists of advertising revenue, which is generated primarily through display advertisements (sold directly andthrough programmatic ad sales).BlueCrew revenue consists of service revenue, which is generated through staffing temporary workers.Revenue of College Humor Media and IAC Films is generated primarily through media production and distribution and advertising.EmployeesAs of December 31, 2018, IAC had approximately 7,800 employees worldwide, the substantial majority of which provided services to our brands andbusiness located in the United States. We believe that we generally have good relationships with our employees.14Additional InformationCompany Website and Public FilingsThe Company maintains a website at www.iac.com. Neither the information on the Company’s website, nor the information on the website ofany IAC business, is incorporated by reference into this annual report, or into any other filings with, or into any other information furnished orsubmitted 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 andCurrent Reports on Form 8-K (including related amendments) as soon as reasonably practicable after they have been electronically filed with (orfurnished to) the SEC.Code of EthicsThe Company’s code of ethics applies to all employees (including IAC’s principal executive officers, principal financial officer and principalaccounting 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. Anychanges to the code of ethics that affect the provisions required by Item 406 of Regulation S-K (and any waivers of such provisions of the code ofethics for IAC’s executive officers, senior financial officers or directors) will also be disclosed on IAC’s website.Item 1A. Risk FactorsCautionary 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 searchengines, 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 andotherwise satisfactory 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 andconditions of use at any time (and without notice), favor their own products and services over ours and/or significantly increase their fees. While weexpect to maintain cost-effective and otherwise satisfactory relationships with these platforms, no assurances can be provided that we will be able todo so and our inability to do so in the case of one or more of these platforms could have a material adverse effect on our business, financial conditionand results of operations.15In particular, as consumers increasingly access our products and services through mobile applications, we (primarily in the case of our datingand Mosaic Group businesses) increasingly depend upon the Apple App Store and the Google Play Store to distribute our mobile applications. BothApple and Google have broad discretion to change their respective terms and conditions applicable to the distribution of our mobile applications,including those relating to the amount of (and requirement to pay) certain fees associated with purchases facilitated by Apple and Google throughour mobile applications, to interpret their respective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability todistribute mobile applications through their stores, the features we provide and the manner in which we market in-app products. We cannot assureyou that Apple or Google will not limit, eliminate or otherwise interfere with the distribution of our mobile applications, the features we provide andthe manner in which we market our in-app products. To the extent either or both of them do so, our business, financial condition and results ofoperations could be adversely affected.In addition, the use of certain of our products and services also depends, in part, on social media platforms. For example, many users of MatchGroup’s Tinder, Hinge and certain other dating products historically registered for (and logged into) these dating products exclusively through theirFacebook profiles. While Match Group launched an alternate authentication method that allows users to register for (and log into) Tinder, Hinge andother affected products using their mobile phone number, no assurances can be provided that users will no longer register for (and log into) Tinder,Hinge and other affected products through their Facebook profiles. Facebook has broad discretion to change its terms and conditions applicable tothe data collected by its platform (and the use of such data) and to interpret its terms and conditions in ways that could limit, eliminate or otherwiseinterfere with our ability to use Facebook as an authentication method or to allow Facebook to use such data to gain a competitive advantage. If anysuch event were to occur, our, business, financial condition and results of operations could be adversely affected.Our success depends, in part, upon the continued migration of certain markets and industries online and the continued growth and acceptance ofonline products 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 offlinecounterparts. We believe that the continued growth and acceptance of online products and services generally will depend, to a large extent, on thecontinued growth in commercial use of the Internet (particularly abroad) and the continued migration of traditional offline markets and industriesonline.For example, the success of the businesses within our Match Group segment depends, in substantial part, on the continued migration of thedating market online, our ability to continue to provide dating products that users find more efficient, effective, comfortable and convenient relativeto traditional means of meeting people and the continued erosion of stigma surrounding online dating (particularly in emerging markets and otherparts of the world). If for any reason the dating market does not continue to migrate online as quickly as (or at lower levels than) we expect and/or ameaningful number of users do not embrace our dating products (and/or return to offline dating products and services), our business, financialcondition and results of operations could be adversely affected.Similarly, the success of the businesses within our ANGI Homeservices segment depends, in substantial part, on the continued migration of thehome services market online. If for any reason the home services market does not migrate online as quickly as (or at lower levels than) we expect andconsumers and service professionals continue, in large part, to rely on traditional offline efforts to connect with one another, our business, financialcondition and results of operations could be adversely affected.Lastly, as it relates to our advertising-supported businesses, our success also depends, in part, on our ability to compete for a share of availableadvertising expenditures as more traditional offline and emerging media companies continue to enter the online advertising market, as well as on thecontinued growth and acceptance of online advertising generally. If for any reason online advertising is not perceived as effective (relative totraditional advertising) and related mobile and other advertising models are not accepted, web browsers, software programs and/or other applicationsthat limit or prevent advertising from being displayed become commonplace and/or the industry fails to effectively manage click fraud, the marketfor online advertising will be negatively impacted. Any lack of growth in the market for online advertising (particularly for paid listings) couldadversely affect our business, financial condition and results of operations.16Marketing efforts designed to drive visitors 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,and expect to continue to make, significant expenditures for search engine marketing (primarily in the form of the purchase of keywords, which wepurchase primarily through Google and, to a lesser extent, Microsoft and Yahoo!), online display advertising and traditional offline advertising(including television and radio campaigns) in connection with these initiatives, which may not be successful or cost-effective. Historically, we havehad to increase advertising and marketing expenditures over time in order to attract and convert consumers, retain users and sustain our growth.Our ability to market our brands on any given property or channel is subject to the policies of the relevant third-party seller, publisher ofadvertising (including search engines and social media platforms with extraordinarily high levels of traffic and numbers of users) or marketingaffiliate. As a result, we cannot assure you that these parties will not limit or prohibit us from purchasing certain types of advertising, advertisingcertain of our products and services and/or using one or more current or prospective marketing channels in the future. If a significant marketingchannel took such an action generally, for a significant period of time and/or on a recurring basis, our business, financial condition and results ofoperations could be adversely affected. In addition, if we fail to comply with the policies of third-party sellers, publishers of advertising and/ormarketing affiliates, our advertisements could be removed without notice and/or our accounts could be suspended or terminated, any of which couldadversely affect our business, financial condition and results of operations.In addition, our failure to respond successfully to rapid and frequent changes in the pricing and operating dynamics of search engines, as well aschanging policies and guidelines applicable to keyword advertising (which may be unilaterally updated by search engines without advance notice),could adversely affect both our paid search engine marketing efforts and free search engine traffic. Such changes could 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 of which could increase ourcosts (particularly if free traffic is replaced with paid traffic) and adversely affect the effectiveness of our marketing efforts overall. Certain of ourbusinesses engage in efforts similar to search engine optimization through Facebook and other social media platforms (for example, developingcontent designed to appear higher in a given Facebook News Feed and generate "likes") that involve challenges and risks similar to those we face inconnection with our search engine marketing efforts.Evolving consumer behavior (specifically, increased consumption of media through digital means) can also affect the availability of cost-effective marketing opportunities. 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 digitalplatforms), as well as target consumers and users via these channels. Since newer advertising channels are undeveloped and unproven relative totraditional channels (such as television), it could be difficult to assess returns on our related marketing investments, which could adversely affect ourbusiness, financial condition and results of operations.Lastly, we also enter into various arrangements with third parties to drive visitors 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 and marketing costs as a percentage of revenue would increase over the long-term, which could adversely affect our business, financialcondition and results of operations. In addition, the quality and convertibility of leads generated through third-party arrangements are dependent onmany factors, most of which are outside our control. If the quality and/or convertibility of leads do not meet the expectations of the users of ourvarious products and services, our business, financial condition and results of operations could be adversely affected.Our brands and businesses operate in especially competitive industries.The industries in which our brands and businesses operate are competitive, with a consistent and growing stream of new products and entrants.Some of our competitors may enjoy better competitive positions in certain geographical areas, user demographics and/or other key areas that wecurrently serve or may serve in the future. Generally (and particularly in the case of our dating business), we compete with social media platformswith access to large existing pools of potential users and their personal information, which means these platforms can drive visitors to their productsand services, as well as use better tailor products and service to individual users, at little to no cost relative to our efforts. For example, our datingbusiness competes with Facebook, which introduced a dating feature on its17platform that it is testing in certain markets and intends to roll out globally in the near future. We also compete generally with search engineproviders and online marketplaces that can market their products and services online in a more prominent and cost-effective manner than we can.Any of these advantages could enable our competitors to offer products and services that are more appealing to consumers than our products andservices, respond more quickly and/or cost effectively than we do to evolving market opportunities and trends and/or display their own integrated orrelated products and services in a more prominent manner than our products and services in search results, which could adversely affect our business,financial condition and results of operations.In addition, costs to switch among products and services are low or non-existent and consumers generally have a propensity to try new productsand services (and use multiple products and services simultaneously). As a result, we expect the continued emergence of new products and services,entrants and business models in the various industries in which our brands and businesses operate. Our inability to compete effectively against newproducts, services and competitors could result in decreases in the size and levels of engagement of our various user, subscriber and membershipbases, which could adversely affect our business, 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 and recognitionwithin their respective markets and industries, as well as a number of emerging brands that we are in the process of building. We believe that oursuccess depends, in large part, on our continued ability to maintain and enhance our established brands, as well as build awareness of (and loyaltyto) our emerging brands. Events that could adversely impact our brands and brand-building efforts include (among others): product and servicequality concerns, consumer complaints, actions brought by consumers, ineffective advertising, inappropriate and/or unlawful actions taken by users,actions taken by governmental or regulatory authorities, data protection and security breaches and related bad publicity. The occurrence or any ofthese events could, in turn, adversely affect our business, 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.As consumers increasingly access our products and services through mobile and other digital devices (including through digital voiceassistants), we will need to devote significant time and resources to ensure that our products and services are accessible across these platforms (andmultiple platforms generally). If we do not keep pace with evolving online, market and industry trends (including changes in the preferences andneeds of our users and consumers generally), offer new and/or enhanced products and services in response to such trends that resonate withconsumers, monetize products and services for mobile and other digital devices as effectively as our traditional products and services and/ormaintain related systems, technology and infrastructure in an efficient and cost-effective manner, our business, financial condition and results ofoperations could be adversely affected.In addition, the success of our mobile and other digital products and services depends on their interoperability with various third-partyoperating systems, technology, infrastructure and standards, over which we have no control. Any changes to any of these things that compromise thequality or functionality of our mobile and digital products and services could adversely affect their usage levels and/or our ability to attractconsumers and advertisers, which could adversely affect our business, financial condition and results of operations.Our brands and businesses are sensitive to general economic events or trends, particularly those that adversely impact advertising spending levelsand consumer confidence and spending behavior.A significant portion of our consolidated revenue (and a substantial portion of our net cash from operations that we can freely access), isattributable to online advertising, primarily revenue from our Dotdash and Applications segments and our Ask Media Group business. Accordingly,events and trends that result in decreased advertising expenditures and/or levels of consumer confidence and discretionary spending could adverselyaffect our business, financial condition and results of operations.Similarly, the businesses within our ANGI Homeservices segment are particularly sensitive to events and trends that could result in consumersdelaying or foregoing home services projects and/or service professionals being less likely to pay for Marketplace subscriptions and consumermatches. could result in decreases in Marketplace service requests and directory searches. Any such decreases could result in turnover at theMarketplace and/or any of our directories, adversely impact the number and quality of service professionals at the Marketplace and our directories18and/or adversely impact the reach of (and breath of services offered through) the Marketplace and our directories, any or all of which could adverselyaffect our business, financial condition and results of operationsLastly, we have historically been, and will continue to be, sensitive to events and trends that could result in decreased marketing andadvertising expenditures by service professionals. Adverse economic conditions and trends could result in service professionals decreasing and/ordelaying membership subscriptions, fees paid for consumer matches and/or time-based advertising spend, any or all of which would result indecreased revenue and could adversely affect our business, financial condition and results of operations.Our ability to communicate with our users and consumers via e-mail (or other sufficient means) is critical to our success.As consumers increasingly communicate via 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 couldlimit or prevent our ability to send e-mails to users and consumers. A continued and significant erosion in our ability to communicate withconsumers and users via e-mail could adversely impact the user experience, engagement levels and conversion rates, which could adversely affectour business, financial condition and results of operations. We cannot assure you that any means of communication (for example, push notifications)will be as effective as e-mail has been historically.We may need to offset increasing digital app store fees by decreasing traditional marketing expenditures, increasing user volume or monetizationper user or by engaging in other efforts to increase revenue or decrease costs generally.We increasingly rely upon the Apple App Store and the Google Play Store to distribute the mobile applications of our various businesses. Whilesome of our mobile applications are generally free to download from these stores, many of our mobile applications (primarily our dating and MosaicGroup applications) are subscription-based and/or offer in-app à la carte features for a fee. We determine the prices at which these subscriptions and àla carte features are sold; however, related purchases must be processed through the in-app payment systems provided by Apple and, to a lesserextent, Google. As a result, we pay Apple and Google, as applicable, a meaningful share (generally 30%) of the revenue we receive from thesetransactions. While we are constantly innovating on and creating our own payment systems and methods, given the increasing distribution of ourmobile applications through digital app stores and strict in-app payment system requirements, we may need to offset these increased digital appstore fees by decreasing traditional marketing expenditures as a percentage of revenue, increasing user volume or monetization per user or engagingin other efforts to increase revenue or decrease costs generally, or our business, financial condition and results of operations could be adverselyaffected. Additionally, to the extent Google changes its terms and conditions or practices to require us to process purchases of subscriptions and à lacarte features through its in-app payment system, our business, financial condition and results of 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 servicesacross ANGI Homeservices platforms. If we do not offer innovative products and services that resonate with consumers and service professionalsgenerally, as well provide service professionals with an attractive return on their marketing and advertising investments (quality matches and leadsthat convert into jobs), the number of service professionals affiliated with ANGI Homeservices platforms would decrease. Any such decrease wouldresult in smaller and less diverse networks and directories of service professionals, and in turn, decreases in service requests and directory searches,which could adversely impact our business, financial condition and results of operations.We depend upon arrangements with Google.A meaningful portion of our consolidated revenue (and a substantial portion of our net cash from operations that we can freely access) isattributable to a services agreement with Google. Pursuant to this agreement, we display and syndicate paid listings provided by Google in responseto search queries generated by users of our Applications and certain Emerging & Other properties. In exchange for making our search trafficavailable to Google, we receive a share of the revenue 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. In February 2019, we amended this agreement, effective as19of April 1, 2020, to extend the expiration date of our agreement to March 31, 2023; provided, however, that beginning September 2020 and eachSeptember thereafter, we or Google may, after discussion with the other party, terminate the services agreement, effective on September 30 of theyear following the year such notice is given. We believe that the amended agreement, taken as a whole, is comparable to our current agreement withGoogle.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 makesjudgments about the relative attractiveness (to advertisers) of clicks on paid listings from searches performed on our properties and these judgmentsfactor into the amount of revenue we receive. Google also makes judgments about the relative attractiveness (to users) of paid listings from searchesperformed on our properties and these judgments factor into the number of advertisements we can purchase. Changes to the amount Google chargesadvertisers, the efficiency of Google’s paid listings network, Google's judgment about the relative attractiveness to advertisers of clicks on paidlistings from our properties or to the parameters applicable to the display of paid listings generally could result in a decrease in the amount ofrevenue we receive from Google and could adversely affect our business, financial condition and results of operations. Such changes could comeabout 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, includingthe Chrome browser and Chrome Web Store. These guidelines govern which of our products and applications may access Google services or bedistributed through its Chrome Web Store, and the manner in which Google’s paid listings are displayed within search results across various third-party platforms and products (including our properties). Our services agreement also requires that we establish guidelines to govern certain activitiesof third parties to whom we syndicate paid listings, including the manner in which these parties drive search traffic to their websites and display paidlistings. Google may generally unilaterally update its policies and guidelines without advance notice, which could in turn require modifications to,or prohibit and/or render obsolete certain of, our products, services and/or business practices, which could be costly to address or otherwiseadversely affect our business, financial condition and results of operations. Noncompliance with Google’s guidelines by us or the third parties towhom 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 thetermination of 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, financialcondition and results of operations. If any of these events were to occur, we may not be able to find another suitable alternate provider of paidlistings (or if an alternate provider were found, the economic and other terms of the agreement and the quality of paid listings may be inferiorrelative to our arrangements with, and the paid listings supplied by, Google) or otherwise replace the lost revenues.Foreign currency exchange rate fluctuations could adversely affect us.We operate in various foreign markets, primarily in various jurisdictions within the European Union, and as a result, are exposed to foreignexchange risk for both the Euro and British Pound ("GBP"). During the fiscal years ended December 31, 2018 and 2017, approximately 34% and30% of our total revenues, respectively, were international revenues. We translate international revenues into U.S. Dollar-denominated results. As aresult, as foreign currency exchange rates fluctuate, the translation of the statement of operations of our international businesses into U.S. Dollarsaffects the period-over-period comparability of operating results. We are also exposed to foreign currency exchange gains and losses to the extent weor our subsidiaries conduct transactions in, and/or have assets and/or liabilities that are denominated in, a currency other than the relevant entity'sfunctional currency. For details regarding exchange rates and foreign currency exchange gains and losses for the fiscal years ended December 31,2018 and 2017, see "Item 7A-Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Exchange Risk."Brexit may continue to cause disruptions to capital and currency markets worldwide, and the full impact of the Brexit decision remainsuncertain. Ongoing negotiations between the United Kingdom and the European Union will determine the terms of their relationship followingBrexit. During this period of negotiation and following the completion of Brexit, our operating results could be adversely affected by exchange rateand other market and economic volatility.20We have not hedged foreign currency exposures historically given that related gains or losses were not material to the Company. As wecontinue to grow and expand our international operations, our exposure to foreign exchange rate fluctuations will increase and if significant, couldadversely affect our business, financial condition and results of operations.We may not be able to protect our systems, technology and infrastructure from cyberattacks and cyberattacks experienced by third parties mayadversely affect us.We are regularly under attack by perpetrators of malicious technology-related events, such as the use of botnets, malware or other destructive ordisruptive software, distributed denial of service attacks, phishing, attempts to misappropriate user information and account login credentials andother similar malicious activities. The incidence of events of this nature (or any combination thereof) is on the rise worldwide. While wecontinuously develop and maintain systems designed to detect and prevent events of this nature from impacting our systems, technology,infrastructure, products, services and users, have invested (and continue to invest) heavily in these efforts and related personnel and training anddeploy data minimization strategies (where appropriate), these efforts are costly and require ongoing monitoring and updating as technologieschange and efforts to overcome preventative security measures become more sophisticated. Despite these efforts, some of our systems haveexperienced past security incidents, none of which had a material adverse effect on our business, financial condition and results of operations, andwe could experience significant events of this nature in the future.Any event of this nature that 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 becostly to remedy, 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 not experience such events firsthand, the impact of any such events experienced by third parties could have a similar effect. We maynot have adequate insurance coverage to compensate for losses resulting from any of these events. If we (or any third-party with whom we dobusiness or otherwise rely upon) experience(s) an event of this nature, our business, financial condition and results of operations could be adverselyaffected.If personal, confidential or sensitive user information that we maintain and store is breached or otherwise accessed by unauthorized persons, itmay be costly to mitigate and our reputation could be harmed.We receive, process, store and transmit a significant amount of personal, confidential or sensitive user information and, in the case of certain ofour products and services, enable users to share their personal information with each other. While we continuously develop and maintain systemsdesigned to protect the security, integrity and confidentiality of this information, we cannot guarantee that inadvertent or unauthorized use ordisclosure will not occur or that third parties will not gain unauthorized access to this information. When such events occur, we may not be able toremedy them and it may be costly to mitigate and to develop and implement protections to prevent future events of this nature from occurring. Whenbreaches of security (ours or that of any third-party we engage to store information) occurs, the reputation of our brands and business could beharmed, which could adversely affect our business, financial condition and results of operations.Credit card data security breaches or fraud that we or third parties experience could adversely affect us.Certain of our businesses accept payment (including recurring payments) via credit and debit cards and certain online payment serviceproviders. The ability of these businesses to access payment information on a real time‑basis without having to proactively reach out to users toprocess payments 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 theircards. In the case of a breach experienced by a third-party, the more sizable the third-party’s customer base, the greater the number of accountsimpacted and the more likely it is that our users would be impacted by such a breach. If our users were affected, we would need to contact affectedusers to obtain new payment information. It is likely that we would not be able to reach all affected users, and even if we could, new paymentinformation for some individuals may not be obtained and pending transactions may not be processed, which could adversely affect our business,financial condition and results of operations.21Even if our users are not directly impacted by a given data security breach, they may lose confidence in the ability of providers of onlineproducts and services to protect their personal information generally, which could cause them to stop using their credit cards online and choosealternative payment methods that are not as convenient for us or restrict our ability to process payments without significant effort.If we fail to prevent credit card data security breaches and fraudulent credit card transactions, we could face litigation, governmentalenforcement action, fines, civil liability, diminished public perception of our security measures, higher credit card-related costs and substantialremediation costs, or credit card processors could cease doing business with us, any of which could adversely affect our business, financial conditionand results of operationsThe processing, storage, use and disclosure of personal data could give rise to liabilities and increased costs.We receive, transmit and store a large volume of personal information and other user data (including personal credit card data, as well as privatecontent (such as videos and correspondence)) in connection with the processing of search queries, the provision of online products and services,payment transactions and advertising on our various properties. The manner in which we share, store, use, disclose and protect this information isdetermined by the respective privacy and data security policies of our various businesses, as well as federal, state and foreign laws and regulationsand evolving industry standards and practices, which are changing, and in some cases, inconsistent and conflicting and subject to differinginterpretations. In addition, new laws, regulations, standards and practices of this nature are proposed and adopted from time to time.For example, a comprehensive European Union privacy and data protection reform, the General Data Protection Regulation (the "GDPR"),became effective in May 2018. The GDPR, which applies to companies that are organized in the European Union or otherwise provide services to (ormonitor) consumers who reside in the European Union, imposes significant penalties (monetary and otherwise) for non-compliance. The GDPR willcontinue to be interpreted by European Union data protection regulators, which may require that we make changes to our business practices, andcould generate additional risks and liabilities. The European Union is also considering an update to its Privacy and Electronic CommunicationsDirective to impose stricter rules regarding the use of cookies. In addition, the potential exit from the European Union by the United Kingdom couldresult in the application of new and conflicting data privacy and protection laws and standards to our operations in the United Kingdom and ourhandling of personal data of users located in the United Kingdom. In addition, there are a number of privacy and data protection laws andregulations recently passed or under consideration by the U.S. Congress, as well as in various U.S. states and foreign jurisdictions in which we dobusiness, including the California Consumer Privacy Act of 2018, which becomes effective January 1, 2020.While we believe that we comply with applicable privacy and data protection policies, laws and regulations and industry standards andpractices in all material respects, we could still be subject to claims of non-compliance that we may not be able to successfully defend and/orsignificant fines and penalties. Moreover, any non-compliance or perceived non-compliance by us (or any third-party we engage to store or processinformation) or any compromise of security that results in unauthorized access to (or use or transmission of) personal information could result in avariety of claims against us, including governmental enforcement actions, significant fines, litigation, claims of breach of contract and indemnity bythird parties and adverse publicity. When such events occur, our reputation could be harmed and the competitive positions of our various brands andbusinesses could be diminished, which could adversely affect our business, financial condition and results of operations.Lastly, ongoing compliance with existing (and compliance with future) privacy and data protection laws worldwide could be costly. Thedevotion of significant costs to compliance (versus to product development) could result in delays in the development of new products and services,us ceasing to provide problematic products and services in existing jurisdictions and us being prevented from introducing products and services innew and existing jurisdictions, which could adversely affect our business, financial condition and results of operations.Our success depends, in part, on the integrity, quality, efficiency and scalability of our systems, technology and infrastructure, and those of thirdparties.We rely on our systems, technology and infrastructure to perform well on a consistent basis. From time to time in the past we have experienced(and in the future we may experience) occasional interruptions that make some or all of this framework and related information unavailable or thatprevent us from providing products and services; any such interruption could arise for any number of reasons. We also rely on third-party data centerservice providers and cloud-based, hosted web service providers, as well as third-party computer systems and a variety of communications systems22and service providers in connection with the provision of our products and services generally, as well as to facilitate and process certain paymentand other transactions with users. We have no control over any of these third parties or their operations.The framework described could be damaged or interrupted at any time due to fire, power loss, telecommunications failure, natural disasters, actsof war or terrorism, acts of God and other similar events or disruptions. Any event of this nature could prevent us from providing our products andservices at all (or result in the provision of our products on a delayed or interrupted basis) and/or result in the loss of critical data. While we and thethird parties upon whom we rely have certain backup systems in place for certain aspects of our respective frameworks, none of our frameworks arefully redundant and disaster recovery planning is not sufficient for all eventualities. In addition, we may not have adequate insurance coverage tocompensate for losses from a major interruption. When such damages, interruptions or outages occur, our reputation could be harmed and thecompetitive positions of our various brands and businesses could be diminished, any or all of which could adversely affect our business, financialcondition and results of operations.We also continually work to expand and enhance the efficiency and scalability of our framework to improve the consumer experience,accommodate substantial increases in the number of visitors to our various platforms, ensure acceptable load times for our various products andservices and keep up with changes in technology user preferences. If we do not do so in a timely and cost-effective manner, the user experience anddemand across our brands and businesses could be adversely affected, which could adversely affect our business, financial condition and results ofoperations.Mr. Diller and certain members of his family 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 beneficiallyowned shares of Class B common stock and common stock that represented approximately 42.8% of the total outstanding voting power of IAC(based on the number of shares of IAC common stock outstanding on February 1, 2019). For details regarding the IAC securities beneficially ownedby Mr. Diller, Ms. Von Furstenberg and Mr. Von Furstenberg, see "Item 1-Business-Equity Ownership and Vote."As a result of IAC securities beneficially owned by these individuals, they are, collectively, currently in a position to influence, subject to ourorganizational documents and Delaware law, the composition of IAC’s Board of Directors and the outcome of corporate actions requiringshareholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions. In addition, thisconcentration 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, particularlyin the case of senior management. Competition for well-qualified employees across IAC and its various businesses is intense and we must attract new(and retain existing) employees to compete effectively. While we have established programs to attract new (and retain existing) employees, we maynot be able to attract new (or retain existing) key and other employees in the future. In addition, if we do not ensure the effective transfer ofknowledge to successors and smooth transitions (particularly in the case of senior management) across our various businesses, our business, financialcondition and results of operations generally, could be adversely affected.Our current and future indebtedness could affect our ability to operate our business, which could have a material adverse effect on our financialcondition and results of operations.As of December 31, 2018, we had total debt outstanding of approximately $2.3 billion, of which $552 million, $1.5 billion and $261.3 millionwas owed by IAC, Match Group and ANGI Homeservices, respectively. As of that date, we, Match Group and ANGI Homeservices had borrowingavailability of $250 million, $240 million and $250 million, respectively, under our revolving credit facilities. Neither Match Group, ANGIHomeservices nor any of their respective subsidiaries guarantee any indebtedness of IAC or are currently subject to any of the covenants related tosuch indebtedness. Similarly, neither IAC nor any of its subsidiaries (other than Match Group and its subsidiaries in the case of Match Groupindebtedness and ANGI Homeservices and its subsidiaries in the case of ANGI Homeservices23indebtedness) guarantee any indebtedness of Match Group or ANGI Homeservices nor are subject to any of the covenants related to suchindebtedness.The 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 debtservice requirements 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 substantialportion of these 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;•expose one or more of us to potential events of default, which if 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.Subject to certain restrictions, we and our subsidiaries may incur additional unsecured and secured indebtedness. If additional indebtednessincurred in compliance with these restrictions is significant, the risks described above could increase.Lastly, if an event a default has occurred or our leverage ratio exceeds specified thresholds, our ability to pay dividends, make distributions andrepurchase or redeem our capital stock would be limited. Match Group and ANGI Homeservices are subject to similar restrictions. See "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Position, Liquidity and Capital Resources andFinancial Position."We may not be able to generate sufficient cash to service all of our indebtedness.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, Match Group and ANGI Homeservices to borrow under our respective revolving credit facilities, which willdepend on, among other things, compliance with the covenants governing our indebtedness.Neither we, nor Match Group nor ANGI Homeservices may be able to generate sufficient cash flow from our respective operations and/or borrowunder our respective revolving credit facilities in amounts sufficient to meet our scheduled debt obligations. See also "-We may not freely access thecash of Match Group, ANGI Homeservices and their respective subsidiaries" below. If so, we could be forced to reduce or delay capital expenditures,sell assets or seek additional capital in a manner that complies with the terms (including certain restrictions and limitations) of our currentindebtedness. If these efforts do not generate sufficient funds to meet our scheduled debt obligations, we would need to seek additional financingand/or negotiate with our lenders to restructure or refinance our indebtedness. Our ability to do so would depend on the condition of the capitalmarkets and our financial condition at such time. Any such financing, restructuring or refinancing could be on less favorable terms than thosegoverning our current indebtedness and would need to comply with the terms (including certain restrictions and limitations) of our existingindebtedness.24We may not freely access the cash of Match Group, ANGI Homeservices and their respective subsidiaries.Potential sources of cash for IAC include our available cash balances, net cash from the operating activities of certain of our subsidiaries,availability under our revolving credit facility and proceeds from asset sales, including marketable securities. While the ability of our operatingsubsidiaries to pay dividends or make other payments or advances to us depends on their individual operating results and applicable statutory,regulatory or contractual restrictions generally, in the case of Match Group and ANGI Homeservices, the terms of their indebtedness limit theirability to pay dividends or make distributions, loans or advances to stockholders, including IAC. In addition, because Match Group and ANGIHomeservices are separate and distinct legal entities with public shareholders, they have no obligation to provide us with funds.Our variable rate indebtedness subjects us to interest rate risk.As of December 31, 2018, Match Group had $260 million and $425 million outstanding under its revolving credit facility and term loan,respectively, and ANGI Homeservices has $263.1 million outstanding under its term loan. Borrowings under these loans are, and any borrowingsunder the revolving credit facilities of IAC or ANGI Homeservices will be, at variable interest rates, which exposes us to interest rate risk. For detailsregarding interest rates applicable to the variable rate indebtedness of Match Group and ANGI Homeservices described above as of December 31,2018 and how certain increases and decreases in LIBOR rate would affect related interest expense, see "Item 7A-Quantitative and QualitativeDisclosures 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 MatchGroup and ANGI 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 awardsdenominated in shares of our common stock, as well as in equity of our various consolidated subsidiaries, including Match Group and ANGIHomeservices. For more information regarding these awards and their impact on our diluted earnings per share calculation, see "Note 11-Stock-Based Compensation" and "Note 10-Earnings Per Share," respectively, to the consolidated financial statements included in "Item 8-ConsolidatedFinancial 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. Awardsdenominated in shares of Match Group or ANGI Homeservices common stock that are settled in shares of those subsidiaries could dilute IAC’sownership interest in Match Group and ANGI Homeservices, respectively. The dilution of our ownership stake(s) in Match Group and/or ANGIHomeservices could impact our ability, among other things, to maintain Match Group and/or ANGI Homeservices as part of our consolidated taxgroup for U.S. federal income tax purposes, to effect a tax-free distribution of our Match Group and/or ANGI Homeservices stake(s) to ourstockholders or to maintain control of Match Group and/or ANGI Homeservices. As we generally have the right to maintain our levels of ownershipin Match Group and ANGI Homeservices to the extent Match Group or ANGI Homeservices issues additional shares of their respective capital stockin the future pursuant to investor 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 onour estimated fair value of those subsidiaries. Those estimates may change from time to time, and the fair value determined in connection withvesting and liquidity events could lead to more or less dilution than reflected in our diluted earnings per share calculation.We may experience risks related to acquisitions.We have made numerous acquisitions in the past and we continue to seek to identify potential acquisition candidates that will allow us to applyour expertise to expand their capabilities, as well as maximize our existing assets. If we do not identify suitable acquisition candidates or completeacquisitions on satisfactory pricing or other terms, our growth could be adversely affected.Even if we complete what we believe to be suitable acquisitions, we may experience related operational and financial risks. So, to the extentthat we continue to grow through acquisitions, we will need to:•properly value prospective acquisitions, especially those with limited operating histories;25•successfully integrate the operations, as well as the various functions and systems, of acquired businesses with our existing operations,functions 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 management, operations and financial resources.We may not be successful in addressing these or any other acquisition-related challenges. In addition, acquisition-related cost savings, growthopportunities, synergies or other benefits may not be realized. Also, future acquisitions could result in increased operating losses, dilutive issuancesof equity securities and the assumption of contingent liabilities. Lastly, the value of goodwill and other intangible assets acquired could beimpacted by unfavorable events and/or trends, which could result in significant impairment charges. The occurrence of any of these events couldadversely affect our business, financial condition and results of operations.We face additional risks in connection with our international operations.We currently operate in various jurisdictions abroad and may continue to expand our international presence. Operating abroad, particularly injurisdictions where we have limited experience, exposes us to additional risks, including:•operational and compliance challenges caused by distance, language barriers and cultural differences;•difficulties in staffing and managing international operations;•differing levels (or lack) of social and technological acceptance of our products and services;•slow or lagging growth in the commercial use and acceptance of the Internet (particularly via mobile devices);•foreign currency fluctuations;•restrictions on the transfer of funds among countries and back to the United States and related repatriation costs;•differing and potentially adverse tax laws;•compliance challenges;•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, and in turn, our business, financial conditionand results of operations. Our success in international markets will also depend, in large part, on our ability to successfully complete internationalacquisitions, joint ventures or other transactions and integrate these businesses and operations 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 and regulations in the U.S. and abroad that involve matters that are important to or may otherwise impact ourbusiness, including, among others, broadband internet access, online commerce, advertising, privacy and data protection, intermediary liability,consumer protection, protection of minors, taxation and securities compliance. These domestic and foreign laws, which in some cases can beenforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the26application, interpretation and enforcement of these laws and regulations are often uncertain, particularly in the Internet industry, and may beinterpreted and applied inconsistently from jurisdiction to jurisdiction, as well as in a manner that could conflict with our current policies andpractices. We face the same issues in the case of amended, proposed or new laws and regulations.Compliance with applicable laws and regulations, as well as responding to any related inquiries, investigations or other government action,could be costly, delay or impede the development of new products and services, require modifications to existing products and services and/orrequire significant management time and attention. Non-compliance could subject us to remedies that could harm our business, such as fines,demands or orders that require us to modify or cease then current products and services, as well as result in negative publicity. Consequences ofcompliance and non-compliance with applicable laws and regulations, if significant, could adversely affect our business, financial condition andresults of operations.We are particularly sensitive to laws and regulations that adversely impact the popularity or growth in use of the Internet and/or online productsand services generally, restrict or otherwise unfavorably impact the ability or manner in which we provide our products and services, regulate thepractices of third parties upon which we rely to provide our products and services and undermine open and neutrally administered Internet access.For example, in February 2019, the Secretary of State for Digital, Culture, Media and Sport of the United Kingdom, indicated in public commentsthat his office intends to inquire as to the measures utilized by online dating platforms (including Tinder) to prevent access by underage users. Tothe extent our dating business is required to implement new measures to prevent such access, our business, financial condition and results ofoperations could be adversely affected. In addition, in December 2017, the U.S. Federal Communications Commission (the "FCC") adopted an orderreversing net neutrality protections in the United States, including the repeal of specific rules against blocking, throttling or "paid prioritization" ofcontent or services by Internet service providers. To the extent Internet service providers take such actions, our business, financial condition andresults of operations could be adversely affected.We are also sensitive to the adoption of any law or regulation affecting the ability of our businesses to periodically charge for recurringmembership or subscription payments, which could adversely affect our business, financial condition and results of operations. For example, theEuropean Union Payment Services directive, which became effective in 2018, could impact the ability of our businesses to process auto-renewalpayments for, as well offer promotional or differentiated pricing to, users who reside in the European Union. Similar new legislation or regulations,or changes to existing legislation or regulations governing subscription payments, are being considered in many U.S. states.We are also sensitive to the adoption of new tax laws. The European Commission and several European countries have issued proposals thatwould change various aspects of the current tax framework under which we are taxed, including proposals to change or impose new types of non-income taxes (including taxes based on a percentage of revenue). For example, the United Kingdom has proposed a Digital Services Tax applicableto revenues of social media platforms, online marketplaces and search engines linked to users residing in the United Kingdom, which would likelyapply to certain of our business. If enacted, one or more of these or similar proposed tax laws could adversely affect our business, financial conditionand results of operations.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 andrecognition, as well as upon trade secrets. We also rely, to a lesser extent, upon patented and patent-pending proprietary technologies withexpiration dates ranging from 2019 to 2037.We rely on a combination of laws and contractual restrictions with employees, customers, suppliers, affiliates and others to establish and protectour various intellectual property rights. For example, we have generally registered and continue to apply to register and renew, or secure by contractwhere appropriate, trademarks and service marks as they are developed and used, and reserve, register and renew domain names as we deemappropriate. We also generally seek to apply for patents or for other similar statutory protections as and if we deem appropriate, based on thencurrent facts and circumstances, and will continue to do so in the future. No assurances can be given that these efforts will result in adequatetrademark and service mark protection, adequate domain name rights and protections, the issuance of a patent or adequate patent protection againstcompetitors and similar technologies. Third parties could also create new products or methods that achieve similar results without infringing uponpatents we own.27Despite these measures, challenges to our intellectual property rights could still arise, third parties could copy or otherwise obtain and use ourintellectual property without authorization and/or laws regarding the enforceability of existing intellectual property rights could change in anadverse manner. The occurrence of any of these events could result in the erosion of our brands and limitations on our ability to control marketingonline using our various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any ofwhich could adversely affect our business, financial condition and results of operations.From time to time, we have been subject to legal proceedings and claims in the ordinary course of business related to alleged claims ofinfringement of the intellectual property of others and may need to institute legal proceedings in the future to enforce, protect or refine the scope ofour intellectual property rights. For example, on March 17, 2018, our Match Group business filed a lawsuit against Bumble Trading Inc., whichoperates and markets the online dating application Bumble in the United States, for patent and trademark infringement, as well as trade secretmisappropriation. Bumble’s counterclaims request that our trademark registration for Tinder’s SWIPE trademark be canceled and that a number ofour pending applications for trademark registration be denied. This case is currently pending in Federal Court in the Western District of Texas. Anylegal proceedings related to intellectual property, regardless of outcome or merit, could be costly and result in diversion of and technical resources,which could adversely affect our business, financial condition and results of operations.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'sfacilities, most of which are leased by IAC's businesses in various cities and locations in the United States and various jurisdictions abroad, generallyconsist of executive and administrative offices, operations centers, data centers and sales offices.IAC believes that its principal properties, whether owned or leased, are currently adequate for the purposes for which they are used and aresuitably maintained for these purposes. IAC does not anticipate any future problems renewing or obtaining suitable leases on commerciallyreasonable terms for any of its principal businesses. IAC's approximately 202,500 square foot corporate headquarters in New York, New York housesoffices for IAC corporate and various IAC businesses within the following segments: Match Group, Vimeo, Applications and Emerging & Other.Item 3. Legal ProceedingsIn the ordinary course of business, the Company and its subsidiaries are (or may become) parties to litigation involving property, personalinjury, contract, intellectual property and other claims, as well as stockholder derivative actions, class action lawsuits and other matters. Theamounts that may be recovered in such matters may be subject to insurance coverage. The litigation matters described below involve issues orclaims that may be of particular interest to our stockholders, regardless of whether any of these matters may be material to our financial position oroperations based upon the standard set forth in the rules of the Securities and Exchange Commission.Consumer Class Action Challenging Tinder’s Age‑Tiered PricingOn May 28, 2015, a putative state‑wide class action was filed against Tinder, Inc. ("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 violatedCalifornia’s Unruh Civil Rights Act (the "Unruh Act") by offering and charging users age 30 and over a higher price than younger users forsubscriptions to its premium Tinder Plus service. The complaint sought certification of a class of California Tinder Plus subscribers age 30 and overand28damages in an unspecified amount. On September 21, 2015, Tinder filed a demurrer seeking dismissal of the complaint. On October 26, 2015, thecourt issued an opinion sustaining Tinder’s demurrer to the complaint without leave to amend, ruling that the age‑based pricing differential forTinder Plus subscriptions did not violate California law in essence because offering a discount to users under age 30 was neither invidious norunreasonable in light of that age group’s generally more limited financial means. On December 29, 2015, in accordance with its ruling, the courtentered judgment dismissing the action. On February 1, 2016, the plaintiff filed a notice of appeal from the judgment, and the parties thereafterbriefed the appeal. On January 29, 2018, the California Court of Appeal (Second Appellate District, Division Three) issued an opinion reversing thejudgment of dismissal, ruling that the lower court had erred in sustaining Tinder’s demurrer because the complaint, as pleaded, stated a cognizableclaim for violation of the Unruh Act. Because we believe that the appellate court’s reasoning was flawed as a matter of law and runs afoul of bindingCalifornia precedent, on March 12, 2018, Tinder filed a petition with the California Supreme Court seeking interlocutory review of the Court ofAppeal’s decision. On May 9, 2018, the California Supreme Court denied the petition. The case has been returned to the trial court for furtherproceedings and is currently in discovery. We and Match Group believe that the allegations in this lawsuit are without merit and will continue todefend vigorously against it.Bumble Claims against Match Group, LLCOn March 28, 2018, Bumble and its parent company filed a lawsuit against Match Group, LLC ("Match") in state court in Texas. See BumbleTrading, Inc. and Bumble Holding, Ltd. v. Match Group, LLC, No. DC‑18‑04140 (160th Judicial District Court, County of Dallas). The petitionalleged that Match wrongfully obtained confidential information from the plaintiffs in connection with a potential Bumble sale process and filed anintellectual property lawsuit against Bumble in bad faith to undermine that process. The petition asserts claims for tortious interference withbusiness relationships, fraud, misappropriation of trade secrets, unfair competition, promissory estoppel and disparagement. The petition seeksdamages in excess of $400 million and an injunction against interference with the plaintiffs’ prospective business relationships or use of theirconfidential information. On September 26, 2018, Match filed its answer and counterclaims, a notice of removal of the case to the U.S. District Courtfor the Northern District of Texas, and a motion to transfer the case to the U.S. District Court for the Western District of Texas, where Match’sintellectual property lawsuit against Bumble is pending. See Bumble Trading, Inc. and Bumble Trading, Ltd. v. Match Group, LLC, No. 3:18-cv-2578 (U.S. District Court, Northern District of Texas). On October 18, 2018, Bumble filed a motion to dismiss its own petition without prejudice. OnNovember 1, 2018, Match opposed the motion as an attempt to circumvent the federal court’s jurisdiction and also amended its counterclaims toseek declaratory judgments of non-liability on the claims asserted in Bumble’s petition. On November 15, 2018, Bumble filed a motion to dismissthose counterclaims, which motion Match has opposed. On November 29, 2018, the court granted Match’s motion to transfer the case to the WesternDistrict of Texas. See Bumble Trading, Inc. and Bumble Trading, Ltd. v. Match Group, LLC, No. 6:18-cv-350 (U.S. District Court, Western District ofTexas). On January 15, 2019, Bumble filed a motion for leave to file another petition, this one against Match and IAC, in state court in DallasCounty. Bumble’s proposed claims are for fraud, negligent misrepresentation, unfair competition, promissory estoppel and interference withprospective business relations and are based upon the allegation that Match and IAC misled Bumble in its sale process by falsely representing theywould make a higher offer to purchase Bumble. On January 22, 2019, Match filed its opposition to Bumble’s motion for leave. We and Match Groupbelieve that the plaintiffs’ allegations in both the pending and the proposed lawsuits are without merit and will continue to defend vigorouslyagainst them.Tinder Optionholder Litigation against IAC and Match GroupOn August 14, 2018, ten then-current and former employees of Match or Tinder, an operating business of Match Group, filed a lawsuit in NewYork state court against IAC and Match Group. See Sean Rad et al. v. IAC/InterActiveCorp and Match Group, Inc., No. 654038/2018 (SupremeCourt, New York County). The complaint alleges that in 2017, the defendants: (i) wrongfully interfered with a contractually established process forthe independent valuation of Tinder by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequentunderpayment to the plaintiffs upon exercise of their Tinder stock options, and (ii) then wrongfully merged Tinder into Match Group, therebydepriving one of the plaintiffs (Mr. Rad) of his contractual right to later valuations of Tinder on a stand‑alone basis. The complaint asserts claims forbreach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations (asagainst Match Group only), and interference with prospective economic advantage, and seeks compensatory damages in the amount of at least$2 billion, as well as punitive damages. On August 31, 2018, four plaintiffs who were still employed by Match Group filed a notice ofdiscontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs. On October 9, 2018, the defendantsfiled a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks was an expertdetermination any challenge to which is both29time‑barred under applicable law and available only on narrow substantive grounds that the plaintiffs have not pleaded in their complaint. OnDecember 17, 2018, plaintiffs filed their opposition to the motion to dismiss. On January 15, 2019, the defendants filed their reply brief. A hearingon the motion is scheduled for March 6, 2019, and discovery in the case is proceeding. IAC and Match Group believe that the allegations in thislawsuit are without merit and will continue to defend vigorously against it.FTC Investigation of Certain Match.com Business PracticesIn March 2017, the Federal Trade Commission (the "FTC") requested information and documents in connection with a civil investigationregarding certain business practices of Match.com. In November 2018, the FTC offered to resolve its potential claims relating to Match.com’smarketing, chargeback and online cancellation practices via a consent judgment mandating certain changes in Match.com’s business practices, aswell as a payment in the amount of $60 million. We and Match Group believe that the FTC’s legal challenges to Match.com’s practices, policies andprocedures are without merit and are prepared to defend vigorously against them.Item 4. Mine Safety DisclosuresNot applicable.30PART 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.As of February 1, 2019, there were approximately 1,200 holders of record of the Company's common stock and six holders of record (Mr. Diller and fivetrusts, all for the benefit of Mr. Diller and/or certain members of his family) of the Company's Class B common stock. As of the date of this report, there werefour holders of record (Mr. Diller and three trusts for the benefit of certain members of Mr. Diller's family) of the Company's Class B common stock. Becausethe substantial majority of the outstanding shares of IAC common stock are held by brokers and other institutions on behalf of shareholders, IAC is not ableto estimate the total number of beneficial holders represented by these record holders.DividendsWe do not currently expect that any cash or other dividends will be paid to holders of our common or Class B common stock in the near future. Anyfuture cash dividend or other dividend declarations are subject to the determination of IAC's Board of Directors.Unregistered Sales of Equity SecuritiesDuring the quarter ended December 31, 2018, 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, 2018. As of that date, 8,036,226 shares of IACcommon stock remained available for repurchase under the Company's previously announced May 2016 repurchase authorization. On IAC may purchaseshares pursuant to this repurchase authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending onthose factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.31Item 6. Selected Financial DataThe following selected financial data for the five years ended December 31, 2018 should be read in conjunction with the consolidated financialstatements and accompanying notes included herein. Year Ended December 31, 2018 2017 2016 2015 2014 (In thousands, except per share data)Statement of Operations Data:(a) Revenue$4,262,892 $3,307,239 $3,139,882 $3,230,933 $3,109,547Earnings (loss) from continuing operations757,747 358,008 (16,151) 113,374 234,557Earnings from discontinued operations (b)— — — — 174,673Net (earnings) loss attributable to noncontrolling interests(130,786) (53,084) (25,129) 6,098 5,643Net earnings (loss) attributable to IAC shareholders626,961 304,924 (41,280) 119,472 414,873 Earnings (loss) per share from continuing operations attributable to IAC shareholders: Basic$7.52 $3.81 $(0.52) $1.44 $2.88Diluted$6.59 $3.18 $(0.52) $1.33 $2.71 Dividends declared per share$— $— $— $1.36 $1.16 December 31, 2018 2017 2016 2015 2014 (In thousands)Balance Sheet Data: Total assets$6,874,585 $5,867,810 $4,645,873 $5,188,691 $4,241,421Long-term debt: Current portion of long-term debt13,750 13,750 20,000 40,000 —Long-term debt, net2,245,548 1,979,469 1,582,484 1,726,954 1,064,536_________________________________________________________________________(a)We recognized items that affected the comparability of results for the years 2018, 2017 and 2016, see "Item 7. Management's Discussion and Analysis of Financial Conditionand Results of Operations."(b)There were no discontinued operations for the four years ended December 31, 2018. 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 2009.32Item 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 (for additional information see "Note 12—Segment Information" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data":•Match Group ("MTCH") - is a leading provider of subscription dating products, operating a portfolio of dating brands, including Tinder, Match,PlentyOfFish and OkCupid. At December 31, 2018, IAC’s economic and voting interest in MTCH were 81.1% and 97.6%, respectively.•ANGI Homeservices ("ANGI") - connects millions of homeowners to home service professionals through its portfolio of digital home servicebrands, including HomeAdvisor, Angie's List and Handy. At December 31, 2018, IAC’s economic and voting interest in ANGI were 83.9% and98.1%, respectively.•Vimeo - operates a global video platform for creative professionals, marketers and enterprises to connect with their audiences, customers andemployees.•Dotdash - is a portfolio of digital brands providing expert information and inspiration in select vertical content categories.•Applications - consists of Desktop, which includes our direct-to-consumer downloadable desktop applications and the business-to-businesspartnership operations, and Mosaic Group (previously referred to as Mobile), which is a leading provider of global subscription mobile applicationscomprised of the following businesses that we own and operate: Apalon, iTranslate, TelTech and Daily Burn, transferred from the Emerging & Othersegment effective April 1, 2018.•Emerging & Other - consists of Ask Media Group, BlueCrew, The Daily Beast, College Humor Media, IAC Films and, for periods prior to itstransfer to the Applications segment effective April 1, 2018, Daily Burn. It also includes CityGrid, Dictionary.com, Electus, The Princeton Review,ShoeBuy, ASKfm and PriceRunner for periods prior to the sales of these businesses (described below).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 MTCH'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 ("ARPU") - is Direct Revenue from Subscribers in the relevant measurement period (whether in the form ofsubscription or à la carte revenue from Subscribers) divided by the Average Subscribers in such period and further divided by the number of calendardays in such period. Direct Revenue from users who are not Subscribers and have purchased only à la carte features is not included in ARPU.33ANGI Homeservices•Marketplace Revenue - includes revenue from the HomeAdvisor and Handy domestic marketplace services, including consumer connectionrevenue for consumer matches, membership subscription revenue from HomeAdvisor service professionals and revenue from completed jobs sourcedthrough the Handy platform. It excludes revenue from Angie's List, mHelpDesk, HomeStars and Felix.•Marketplace Service Requests - are fully completed and submitted domestic customer service requests to HomeAdvisor and completed jobs sourcedthrough the Handy platform.•Marketplace Paying Service Professionals ("Marketplace Paying SPs") - are the number of HomeAdvisor and Handy domestic serviceprofessionals that had an active subscription and/or paid for consumer matches or completed a job sourced through the Handy platform in the lastmonth of the period. An active HomeAdvisor subscription is a subscription for which HomeAdvisor was recognizing revenue on the last day of therelevant period.Vimeo•Platform Revenue - primarily includes revenue from Software-as-a-Service ("SaaS") subscription fees and other related revenue from Vimeosubscribers.•Hardware Revenue - includes sales of our live streaming accessories.•Vimeo Ending Subscribers - is 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) the amortization of fees paid to Apple and Google related to thedistribution and the facilitation of in-app purchases and (ii) payments made to partners who distribute our business-to-business customized browser-based applications and who integrate our paid listings into their websites. These payments include amounts based on revenue share and otherarrangements. Cost of revenue also includes hosting fees, compensation expense (including stock-based compensation expense) and otheremployee-related costs for personnel engaged in data center operations and MTCH customer service functions, credit card processing fees,production costs related to IAC Films, College Humor Media and, prior to its sale, Electus, content costs, expenses associated with the operation ofthe Company's data centers and costs associated with publishing and distributing the Angie's List Magazine. For periods prior to the sale of ThePrinceton Review, cost of revenue also includes rent and cost for teachers and tutors.•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 direct-to-consumer downloadable desktop applications, offline marketing, which isprimarily television advertising, and partner-related payments to those who direct traffic to the brands within our MTCH and ANGI segments, andcompensation expense (including stock-based compensation expense) and other employee-related costs for ANGI's sales force and marketingpersonnel.•General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and otheremployee-related costs for personnel engaged in executive management, finance, legal, tax, human resources and customer service functions (exceptfor MTCH which includes customer service costs within cost of revenue), fees for professional services (including transaction-related costs related toacquisitions and the Combination), facilities costs, bad debt expense, software license and maintenance costs and acquisition-related contingentconsideration fair value adjustments (described below). The customer service function at ANGI includes personnel who provide support to its serviceprofessionals and consumers.•Product development expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and relatedtechnology and software license and maintenance costs.•Acquisition-related contingent consideration fair value adjustments - relate to the portion of the purchase price of certain acquisitions that iscontingent upon the future earnings performance and/or operating metrics of the acquired company. The fair value of the liability is estimated at thedate of acquisition and adjusted each reporting period until34the liability is settled. Significant changes in forecasted earnings and/or operating metrics will result in a significantly higher or lower fair valuemeasurement. The changes in the estimated fair value of the contingent consideration arrangements during each reporting period, including theaccretion of the discount if the arrangement is longer than one year, are recognized in "General and administrative expense" in the accompanyingconsolidated statement of operations.Long-term debt (for additional information see "Note 7—Long-term Debt" to the consolidated financial statements included in "Item 8—ConsolidatedFinancial Statements and Supplementary Data":•MTCH Term Loan - due November 16, 2022. The outstanding balance of the MTCH Term Loan as of December 31, 2018 is $425.0 million. TheMTCH Term Loan bears interest at LIBOR plus 2.50% and was 5.09% and 3.85% at December 31, 2018 and 2017, respectively.•MTCH Credit Facility - On December 7, 2018, the MTCH $500 million revolving credit facility was amended and restated, and is due on December7, 2023. The outstanding borrowings under the MTCH Credit Facility as of December 31, 2018 are $260.0 million and bear interest at LIBOR plus1.50%, or approximately 4.00%. At December 31, 2017, there were no outstanding borrowings under the MTCH Credit Facility.•6.375% MTCH Senior Notes - MTCH's 6.375% Senior Notes due June 1, 2024, with interest payable each June 1 and December 1. The outstandingbalance of the 6.375% MTCH Senior Notes as of December 31, 2018 is $400.0 million.•5.00% MTCH Senior Notes - MTCH's 5.00% Senior Notes due December 15, 2027, with interest payable each June 15 and December 15. Theproceeds, along with cash on hand, were used to redeem the outstanding balance of the 6.75% MTCH Senior Notes. The outstanding balance of the5.00% MTCH Senior Notes as of December 31, 2018 is $450.0 million.•5.625% MTCH Senior Notes - On February 15, 2019, MTCH completed a private offering of $350 million aggregate principal amount of its5.625% Senior Notes due 2029. The proceeds were used to repay outstanding borrowings under the MTCH Credit Facility, to pay expensesassociated with the offering, and for general corporate purposes.•6.75% MTCH Senior Notes - MTCH's 6.75% Senior Notes with an outstanding balance of $445.2 million were redeemed on December 17, 2017with the proceeds from the 5.00% MTCH Senior Notes and cash on hand.•ANGI Term Loan - On November 5, 2018, the ANGI Term Loan was amended and restated, and is now due on November 5, 2023. The outstandingbalance of the ANGI Term Loan as of December 31, 2018 is $261.3 million. The ANGI Term Loan bears interest, payable quarterly, at LIBOR plus1.50%, or approximately 4.00% at December 31, 2018, and has quarterly principal payments. The ANGI Term Loan bore interest at LIBOR plus2.00%, or 3.38%, at December 31, 2017.•ANGI Credit Facility - On November 5, 2018, ANGI entered into a five-year $250 million revolving credit facility. At December 31, 2018, therewere no outstanding borrowings under the ANGI Credit Facility.•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.Interest is payable each April 1 and October 1. The outstanding balance of the Exchangeable Notes as of December 31, 2018 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. A portion of the proceeds wereused to repay the outstanding balance of the 4.875% Senior Notes (described below).•4.75% Senior Notes - IAC's 4.75% Senior Notes due December 15, 2022, with interest payable each June 15 and December 15. The outstandingbalance of the 4.75% Senior Notes as of December 31, 2018 is $34.5 million.•4.875% Senior Notes - IAC's 4.875% Senior Notes with an outstanding balance of $361.9 million were redeemed on November 30, 2017 with aportion of the proceeds from the Exchangeable Notes.•IAC Credit Facility - On November 5, 2018, the IAC Credit Facility, under which IAC Group, LLC, a subsidiary of the Company is the borrower,was amended and restated, reducing the facility size from $300 million to $250 million,35and now expires on November 5, 2023. At December 31, 2018 and 2017, there were no outstanding borrowings under the IAC Credit Facility.Non-GAAP financial measure:•Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") - is a non-GAAP financial measure. See "Principles of Financial Reporting" for the definition of Adjusted EBITDA and a reconciliation of net earnings (loss) attributable to IAC shareholdersto operating income (loss) to consolidated Adjusted EBITDA for the years ended December 31, 2018, 2017, and 2016.MANAGEMENT OVERVIEWIAC has majority ownership of both Match Group, which includes Tinder, Match, PlentyOfFish and OkCupid, and ANGI Homeservices, which includesHomeAdvisor, Angie’s List and Handy, and also operates Vimeo, Dotdash and The Daily Beast, among many other online businesses.Sources of RevenueMTCH's revenue is primarily derived directly from users in the form of recurring subscription fees, which typically provide unlimited access to a bundleof features for a specific period of time. Revenue is also derived from à la carte features, where users pay a non-recurring fee for a specific action or event, andfrom online advertisers who pay to reach our large audiences.ANGI revenue is primarily derived from (i) consumer connection revenue, which comprises fees paid by HomeAdvisor service professionals forconsumer matches (regardless of whether the service professional ultimately provides the requested service) and booking fees from completed jobs sourcedthrough the Handy platform, and (ii) membership subscription fees paid by HomeAdvisor service professionals. Consumer connection revenue varies basedupon several factors, including the service requested, product experience offered and geographic location of service. Effective with the Combination(described below), revenue is also derived from Angie's List (i) sales of time-based website, mobile and call center advertising to service professionals and (ii)membership subscription fees from consumers.Vimeo revenue is derived primarily from annual and monthly Software-as-a-Service ("SaaS") subscription fees paid by creators for premium capabilitiesand, to a lesser extent, sales of live streaming hardware, software and professional services.Dotdash revenue consists principally of digital advertising revenue and affiliate commerce commission revenue. Digital advertising revenue isgenerated primarily through digital display advertisements sold directly and through programmatic advertising networks. Affiliate commerce commissionrevenue is generated when Dotdash refers users to commerce partner websites resulting in a purchase or transaction.A meaningful portion of the revenue of the Desktop business within the Applications segment and the Ask Media Group within the Emerging & Othersegment is attributable to a services agreement with Google Inc. ("Google"). The services agreement became effective on April 1, 2016, following theexpiration of the previous services agreement, and expires on March 31, 2020. On February 11, 2019, the Company and Google amended the servicesagreement, effective as of April 1, 2020. The amendment extends the expiration date of the agreement to March 31, 2023; provided that beginning September2020 and each September thereafter, either party may, after discussion with the other party, terminate the services agreement, effective on September 30 of theyear following the year such notice is given. The services agreement requires that the Company comply with certain guidelines promulgated by Google.Google may generally unilaterally update its policies and guidelines without advance notice, which could in turn require modifications to, or prohibit and/orrender obsolete certain of our products, services and/or business practices, which could be costly to address or otherwise have an adverse effect on ourbusiness, financial condition and results of operations. Google’s policy changes related to its Chrome browser became effective on September 12, 2018 andnegatively impacted the distribution of our business-to-consumer ("B2C") desktop products. The impact of these changes on revenue and profits in 2018were modest as the Company optimized marketing spend in anticipation of the changes. However, we expect these changes to reduce revenue and profits ofthe Desktop business in the future, which among other reasons led to a $27.7 million impairment of the related indefinite-lived intangible asset in the fourthquarter of 2018. For the years ended December 31, 2018, 2017 and 2016, consolidated revenue earned from Google was $825.2 million, $740.7 million and$824.4 million, respectively. For the years ended December 31, 2018, 2017 and 2016, revenue earned from Google represents 73%, 83% and 87% ofApplications revenue and 94%, 96% and 96% of Ask Media Group revenue (and 68%, 48% and 35% of Emerging & Other revenue), respectively.36Revenue for the other businesses within the Emerging & Other segment is generated primarily through media production and distribution, advertisingand subscriptions. For periods prior to their sales: Dictionary.com and PriceRunner's revenue was derived principally from advertising. Electus revenue wasprimarily generated through media production and distribution. The Princeton Review's revenue was primarily earned from fees received directly fromstudents for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services. ShoeBuy's revenue wasderived principally from merchandise sales.Strategic Partnerships, Advertiser Relationships and Online AdvertisingMost of the Company's online advertising revenue is attributable to a services agreement with Google described above. For the years endedDecember 31, 2018, 2017 and 2016, revenue earned from Google represents 19%, 22% and 26%, 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 business-to-business customized browser-based applications and who integrate our paidlistings into their websites. We also pay to market and distribute our services on third-party distribution channels, such as search engines and social mediawebsites such as Facebook. In addition, some of our businesses manage affiliate programs, pursuant to which we pay commissions and fees to third partiesbased on revenue earned. These distribution channels might also offer their own services and products, as well as those of other third parties, which competewith those we 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.2018 DevelopmentsAcquisitionsOn October 22, 2018, IAC acquired TelTech Systems, Inc. ("TelTech"), a developer of mobile applications, including RoboKiller and TapeACall,within its Applications segment.On October 19, 2018, ANGI acquired Handy Technologies, Inc. ("Handy"), a leading platform in the United States for connecting people looking forhousehold services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals.DispositionsOn December 31, 2018, the Company sold CityGrid Media, LLC ("CityGrid"), an advertising network that integrated local content and advertising fordistribution to affiliated and third-party publishers across web and mobile platforms.On December 31, 2018, ANGI sold its pay-per-call advertising service business, Felix Calls, LLC ("Felix").On November 13, 2018, IAC sold Dictionary LLC ("Dictionary.com"), an online and mobile dictionary and thesaurus service.On October 29, 2018, IAC sold Electus, a production and producer service for both unscripted and scripted television and digit content, primarily forinitial sale and distribution in the United States.The combined pre-tax gains for these businesses sold in 2018 is $120.6 million and is included in "Other income (expense), net" in the accompanyingconsolidated statement of operations.Financing TransactionsOn December 7, 2018, the MTCH Credit Facility of $500 million was amended and restated, and is now due on December 7, 2023.37On November 5, 2018,•IAC's revolving credit facility was amended and restated, reducing the facility size from $300 million to $250 million, and now expires November5, 2023.•ANGI entered into a five-year $250 million revolving credit facility and the ANGI Term Loan was amended and restated, and is now due onNovember 5, 2023.Other DevelopmentsDuring the fourth quarter of 2018, IAC realigned its reportable segments. See "Note 1—Organization" to the consolidated financial statements includedin "Item 8—Consolidated Financial Statements and Supplementary Data." The Company's financial information for prior periods have been recast to conformto the current period presentation.On November 6, 2018, MTCH declared a special dividend of $2.00 per share on MTCH common stock and Class B common stock, payable onDecember 19, 2018 to shareholders of record on December 5, 2018. The total amount of this dividend was $556.4 million, of which $451.2 million was paidto IAC and $105.1 million was paid to MTCH noncontrolling interests. MTCH funded the special dividend with cash on hand and borrowings under theMTCH Credit Facility.2018 Consolidated Results•Revenue increased $955.7 million, or 29%, to $4.3 billion due primarily to growth from MTCH of $399.2 million, an increase from ANGI of $395.9million due, in part, to the Combination (defined below), and increases of $59.7 million from Emerging & Other, $56.3 million from Vimeoand $40.1 million from Dotdash.•Operating income increased $376.7 million, or 200%, to $565.1 million due primarily to an increase in Adjusted EBITDA of $413.5 million, adecrease of $26.2 million in stock-based compensation expense, and a change of $4.3 million in acquisition-related contingent considerationfair value adjustments, partially offset by increases of $66.3 million in amortization of intangibles and $1.1 million in depreciation. Thedecrease in stock-based compensation expense was due primarily to a decrease of $51.4 million in modification and acceleration chargesrelated to the Combination ($70.6 million in 2018 compared to $122.1 million in 2017), partially offset by the modification of certain awardsin 2018, due in part, to the sale of businesses during the fourth quarter of 2018 and the issuance of new equity awards since 2017. The increasein amortization of intangibles was due primarily to the Combination and the inclusion in 2018 of an impairment charge of $27.7 million atApplications related to a trade name at the Desktop business.•Adjusted EBITDA increased $413.5 million, or 72%, to $988.8 million due primarily to growth of $209.6 million from ANGI, $185.0 million fromMTCH, $24.1 million from Dotdash and $10.3 million from Emerging & Other, partially offset by a decrease of $4.9 million from Applicationsand increased losses of $6.3 million and $4.4 million from Corporate and Vimeo, respectively.Events affecting year-over-year comparability include:(i)the combination on September 29, 2017 of the businesses comprising the Company's former HomeAdvisor segment and Angie's List, Inc.("Angie's List") under a new publicly traded company called ANGI Homeservices Inc. (the "Combination"), which comprises the Company'sANGI segment. Stock-based compensation expense related to the modification of previously issued HomeAdvisor equity awards and previouslyissued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination, is expected to beapproximately $35 million in 2019 and $20 million in 2020;(ii)the adoption of the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue fromContracts with Customers, on January 1, 2018. For the year ended December 31, 2018, the adoption of ASU No. 2014-09 increasedconsolidated operating income by $2.6 million, due primarily to a reduction in sales commissions expense of $4.9 million at ANGI due to thecapitalization and amortization of certain sales commissions. For the year ended December 31, 2018, the effect of ASU No. 2014-09 decreasedconsolidated revenue by $0.5 million;(iii)the adoption of FASB ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, on January 1, 2018. Forthe year ended December 31, 2018, the adoption of ASU No. 2016-0138increased other income (expense), net by $124.2 million, which includes gross unrealized gains related to the remeasurement of Company'sremaining investments in an investee following the sale of a portion of the Company's investment during the second quarter of 2018; and(iv)in addition to those listed under "2018 Developments" above, the acquisitions and dispositions of the following businesses:Acquisitions: Reportable Segment: Acquisition Date:BlueCrew - controlling interest Emerging & Other February 26, 2018Hinge - controlling interest * MTCH Second quarter of 2018iTranslate Applications March 15, 2018HomeStars Inc. ("HomeStars") - controlling interest ANGI February 8, 2017MyBuilder Limited ("MyBuilder") - controlling interest ANGI March 24, 2017Livestream Vimeo October 18, 2017My Hammer Holding AG ("MyHammer) - controlling interest ANGI November 3, 2016_______________________* In the fourth quarter of 2018, MTCH acquired the remaining noncontrolling interests in Hinge.Dispositions: Reportable Segment: Sale Date:The Princeton Review Emerging & Other March 31, 2017PriceRunner Emerging & Other March 18, 2016ASKfm Emerging & Other June 30, 2016ShoeBuy Emerging & Other December 30, 2016(v)the transfer of Daily Burn from the Emerging & Other segment to the Applications segment effective April 1, 2018.(vi)restructuring charges in 2016 of $14.5 million, $2.6 million and $1.1 million at Ask Media Group, Applications and Dotdash, respectively, toreduce costs in light of significant declines in revenue from the Google contract, which was effective April 1, 2016, as well as declines fromcertain other legacy businesses.39Results of Operations for the Years Ended December 31, 2018, 2017 and 2016Revenue Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Match Group$1,729,850 $399,189 30% $1,330,661 $212,551 19% $1,118,110ANGI Homeservices1,132,241 395,855 54% 736,386 237,496 48% 498,890Vimeo159,641 56,309 54% 103,332 24,527 31% 78,805Dotdash130,991 40,101 44% 90,890 12,977 17% 77,913Applications582,287 4,289 1% 577,998 (26,142) (4)% 604,140Emerging & Other528,250 59,661 13% 468,589 (294,020) (39)% 762,609Inter-segment elimination(368) 249 40% (617) (32) (6)% (585)Total$4,262,892 $955,653 29% $3,307,239 $167,357 5%$3,139,882For the year ended December 31, 2018 compared to the year ended December 31, 2017MTCH revenue increased 30% to $1.7 billion driven by International Direct Revenue growth of $234.8 million, or 43%, and North America DirectRevenue growth of $161.1 million, or 22%. Both International and North America Direct Revenue growth were driven by higher Average Subscribers, up31% to 3.7 million and 17% to 4.2 million, respectively, due primarily to continued growth in Subscribers at Tinder. Total ARPU increased 6% due toTinder, as Subscribers purchased premium subscriptions, such as Tinder Gold, as well as additional à la carte features.ANGI revenue increased 54% to $1.1 billion driven by the Marketplace growth of $193.1 million, or 33%, the contribution from Angie's List andgrowth of $12.6 million, or 22%, at the European businesses. Marketplace Revenue growth was driven by a 30% increase in Marketplace Service Requests to23.5 million and a 18% increase in Marketplace Paying SPs to 214,000. Angie's List revenue reflects the write-off of deferred revenue due to the Combinationof $5.5 million in 2018 compared to $7.8 million in 2017. Revenue growth at the European businesses was driven by the acquisition of a controlling interestin MyBuilder on March 24, 2017, as well as growth across other regions. European revenue also benefited from the weakening of the U.S. dollar relative tothe Euro.Vimeo revenue grew 54% to $159.6 million due to Platform revenue growth of $47.0 million, or 47%, and Hardware revenue growth of $9.3 million,both due in part, to the contribution of Livestream. Platform revenue growth was further impacted by a 9% increase in Vimeo Ending Subscribers to 952,000and average revenue per user growth of 31%.Dotdash revenue grew 44% to $131.0 million due to strong advertising growth across several verticals, particularly Verywell and The Spruce, as well asgrowth in affiliate commerce commission revenue.Applications revenue increased 1% to $582.3 million due to an increase of $67.7 million, or 121%, in Mosaic Group, partially offset by a decline of$63.4 million, or 12%, in Desktop. The increase in Mosaic Group revenue was driven primarily by growth of 55% related to the ongoing transition tosubscription products as well as higher marketing expense and new products, contributions from iTranslate and TelTech, and the transfer of Daily Burn fromthe Emerging & Other segment effective April 1, 2018. The decline at Desktop was driven by the business-to-business partnership operations' loss of certainpartners and a decrease in the direct-to-consumer desktop applications business due primarily to lower revenue per query. The adoption of ASU No. 2014-09resulted in a net increase in revenue of $0.8 million (an increase of $7.3 million in Mosaic Group, partially offset by a decrease of $6.5 million in Desktop).Emerging & Other revenue increased 13% to $528.3 million due primarily to higher revenue at Ask Media Group due to growth in paid traffic,primarily in international markets, and the contribution from BlueCrew, partially offset by the sales of Electus and Dictionary.com in the fourth quarter of2018, the sale of The Princeton Review in 2017, lower revenue from IAC Films due to the sale of a film in the third quarter of 2017 and the transfer of DailyBurn.40For the year ended December 31, 2017 compared to the year ended December 31, 2016MTCH revenue increased 19% to $1.3 billion driven by International Direct Revenue growth of $146.5 million, or 37%, and North America DirectRevenue growth of $67.4 million, or 10%. Both International and North America Direct Revenue growth were driven by higher Average Subscribers, up 33%to 2.8 million and 9% to 3.6 million, respectively, due primarily to continued growth in Subscribers at Tinder. Total ARPU increased 1%.ANGI revenue increased 48% to $736.4 million driven by Marketplace growth of $152.5 million, or 36%, and growth of $20.4 million, or 55%, at theEuropean businesses. 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 in 2017 includes the contribution from Angie's List since the date of Combination, which reflects the write-offof deferred revenue of $7.8 million. Revenue growth at the European businesses was driven by the acquisitions of controlling interests in MyHammer onNovember 3, 2016 and MyBuilder, as well as by organic growth across other regions.Vimeo revenue grew 31% to $103.3 million due to Platform revenue growth of $20.8 million, or 26%, and Hardware revenue of $3.7 million both duein part, to the contribution of Livestream. Platform revenue growth was further impacted by a 14% increase in Vimeo Ending Subscribers to 873,000 andaverage revenue per user growth of 11%.Dotdash revenue grew 17% to $90.9 million due to an increase in organic traffic and advertising revenue.Applications revenue decreased 4% due to a decline of $41.2 million, or 7%, in Desktop, partially offset by an increase of $15.0 million, or 37%, inMosaic Group. The decline at Desktop were driven by the business-to-business partnership operations' loss of certain partners, and a decrease in the direct-to-consumer desktop applications business due primarily to lower revenue per query, partially offset by higher subscription revenue. The increase in MosaicGroup revenue was driven by higher advertising and subscription revenue.Emerging & Other revenue decreased 39% to $468.6 million due primarily to the sales of ShoeBuy, The Princeton Review and PriceRunner, declines inpaid traffic primarily as a result of the Google contract at Ask Media Group and a decline at College Humor Media, partially offset by the sales of TheMeyerowitz Stories (New and Selected) and The Legacy of a Whitetail Deer Hunter and the release of Lady Bird at IAC Films, and an increase at Electus.Cost of revenue Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Cost of revenue (exclusive ofdepreciation shown separatelybelow)$911,146 $260,138 40% $651,008 $(104,722) (14)% $755,730As a percentage of revenue21% 20% 24%For the year ended December 31, 2018 compared to the year ended December 31, 2017Cost of revenue in 2018 increased from 2017 due to increases of $130.5 million from MTCH, $79.0 million from Emerging & Other, $21.7 million fromANGI and $19.0 million from Vimeo.•The MTCH increase was due primarily to an increase of $123.8 million in in-app purchase fees as MTCH's revenues are increasingly sourcedthrough mobile app stores.•The Emerging & Other increase was due primarily to an increase of $143.2 million in traffic acquisition costs principally driven by higher revenue atAsk Media Group, primarily in international markets, and the expense from the inclusion of BlueCrew, which was acquired on February 26, 2018,partially offset by a decrease of $71.1 million in production costs, driven primarily by the sale of Electus in 2018 and lower revenue from IAC Films,the sale of The Princeton Review in 2017 and the transfer of Daily Burn to Applications.•The ANGI increase was due primarily to increases of $7.2 million in traffic acquisition costs, $7.0 million in credit card processing fees, including$3.5 million from the inclusion of Angie's List, and higher Marketplace Revenue, $3.741million in costs associated with publishing and distributing the Angie's List Magazine and $2.5 million in hosting fees, principally from theinclusion of Angie's List.•The Vimeo increase was due primarily to the expense from the inclusion of Livestream.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 $180.1 million from Emerging & Other and $20.9 million from Applications, partiallyoffset by increases of $83.9 million from MTCH, $8.2 million from ANGI and $6.9 million from Vimeo.•The Emerging & Other decrease was due primarily to the sales of ShoeBuy and The Princeton Review, a reduction of $13.2 million in trafficacquisition costs and $8.4 million in rent expense due to vacating a data center in the fourth quarter of 2016 at Ask Media Group and lowerproduction costs at College Humor Media, partially offset by an increase in production costs at IAC Films related to the sales of The MeyerowitzStories (New and Selected) and The Legacy of a Whitetail Deer Hunter and the release of Lady Bird in 2017.•The Applications decrease was due primarily to a reduction of $16.6 million in traffic acquisition costs driven by a decline in revenue at Desktopand a decrease of $2.9 million in compensation expense due, in part, to the reductions in workforce in 2016.•The MTCH increase was due primarily to increases of $75.4 million in in-app purchase fees and $5.9 million in hosting fees. The increases were dueprimarily to the growth at Tinder.•The ANGI increase was due primarily to the inclusion of expense of $3.7 million from Angie's List resulting from the Combination, an increase 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 a reduction intraffic acquisition costs of $0.4 million.•The Vimeo increase was due primarily to the expense from the inclusion of Livestream and an increase of $2.6 million in hosting fees due tosubscription growth.Selling and marketing expense Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Selling and marketing expense$1,519,440 $138,219 10% $1,381,221 $134,124 11% $1,247,097As a percentage of revenue36% 42% 40%For the year ended December 31, 2018 compared to the year ended December 31, 2017Selling and marketing expense in 2018 increased from 2017 due to increases of $77.4 million from ANGI, $44.3 million from MTCH and $26.1 millionfrom Vimeo, partially offset by a decrease of $13.2 million from Emerging & Other.•The ANGI increase was due primarily to increases in advertising expense of $53.7 million, reflecting the impact from the inclusion of Angie's List,compensation expense of $12.9 million and facilities costs of $5.1 million. The increase in advertising expense was due primarily to increasedinvestments in online marketing and television spend. Compensation expense increased due primarily to growth in the sales force, partially offset bya decrease in stock-based compensation expense of $22.4 million and the inclusion of $7.4 million in severance and retention costs in 2017 relatedto the Combination. The decrease in stock-based compensation expense reflects decreases of $13.3 million in expense due to the modification ofpreviously issued HomeAdvisor equity awards, which were converted into ANGI Homeservices' equity awards ($1.6 million in 2018 compared to$14.8 million in 2017), and $9.0 million in expense related to previously issued Angie's List equity awards, including the acceleration of certainconverted equity awards resulting from the termination of Angie's List employees in connection with the Combination ($0.6 million in 2018compared to $9.6 million in 2017). Compensation expense in 2018 also reflects a reduction in sales commissions expense of $4.9 million due to theadoption of ASU No. 2014-09. As a percentage of revenue, selling42and marketing expense declined due, in part, to accelerated revenue growth driven by capacity expansion efforts combined with marketingoptimization efforts at HomeAdvisor.•The MTCH increase was due primarily to higher advertising expense of $45.6 million due primarily to increased marketing expense as a result ofmarketing initiatives at Tinder, Pairs, PlentyOfFish, OkCupid and Meetic, and the inclusion of Hinge, acquired in 2018, partially offset by loweroffline marketing spend at Match and Match Affinity brands. As a percentage of revenue, selling and marketing expense decreased due primarily tothe ongoing shift towards brands with lower marketing spend.•The Vimeo increase was due primarily to increased investment in marketing of $13.2 million, $8.8 million of expense from the inclusion ofLivestream and an increase in compensation expense of $3.2 million, due, in part, to an increase in the sales force.•The Emerging & Other decrease was due primarily to the transfer of Daily Burn to the Applications segment, the sale of The Princeton Review and adecrease in online marketing of $9.0 million at Ask Media Group, partially offset by higher compensation expense of $6.8 million at Electus and theexpense from the inclusion of BlueCrew. Selling and marketing expense was further impacted by an increase of $2.2 million in compensationexpense at The Daily Beast due, in part, to an increase in the sales force.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, $26.5 million from MTCH and $11.7million from Vimeo, partially offset by decreases of $53.0 million from Emerging & Other and $6.7 million from Applications.•The ANGI increase was due primarily to higher advertising expense of $78.2 million, of which $5.3 million was from the inclusion of Angie's List,an increase of $64.9 million in compensation expense, of which $24.4 million was from the inclusion of Angie's List, and $9.5 million of expensefrom acquisitions made prior to the Combination. The increase in advertising expense was due primarily to increased investments in onlinemarketing and television spend. Compensation increased due primarily to an increase of $24.9 million in stock-based compensation expense, ofwhich $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 retentioncosts related to the Combination. The increase in stock-based compensation expense reflects $14.8 million of expense in 2017 due to themodification of previously issued HomeAdvisor equity awards, which were converted into ANGI Homeservices' equity awards and $9.6 million ofexpense in 2017 related to previously issued Angie's List equity awards, including the acceleration of certain converted equity awards resulting fromthe termination of Angie's List employees in connection with the Combination.•The MTCH increase was due primarily to higher advertising expense of $15.3 million and an increase in compensation expense of $9.1 million. Theincrease in advertising expense was due primarily to an increase in strategic investments in certain international markets at Tinder and increasedmarketing related to the launch of a new brand by Meetic in Europe, partially offset by a reduction in marketing spend at MTCH's affinity brands.The increase in compensation expense was primarily related to an increase in headcount at Tinder and the employer portion of payroll taxes paid inconnection with the exercise of MTCH options. As a percentage of revenue, selling and marketing expense decreased due primarily to a continuedshift towards brands with lower marketing spend and reductions in marketing spend at the affinity brands.•The Vimeo increase was due primarily to increases in marketing expense of $10.6 million and $2.3 million of compensation expense.•The Emerging & Other decrease was due primarily to the sales of ShoeBuy and The Princeton Review, decreases of $21.1 million and $4.5 million inonline marketing and compensation expense, respectively, at Ask Media Group and a decrease of $3.5 million in offline marketing at Daily Burn,partially offset by increases in marketing expense at IAC Films of $6.5 million and compensation expense at Electus of $1.7 million. Onlinemarketing and compensation expense at Ask Media Group decreased principally related to lower revenue resulting from changes in the Googlecontract and reductions in workforce that occurred in 2016, including $3.1 million in restructuring costs in 2016.•The Applications decrease was due primarily to lower online marketing expense of $10.0 million at Desktop, partially offset by higher onlinemarketing expense of $6.5 million at Mosaic Group.43General and administrative expense Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)General and administrativeexpense$774,079 $54,822 8% $719,257 $188,811 36% $530,446As a percentage of revenue18% 22% 17%For the year ended December 31, 2018 compared to the year ended December 31, 2017General and administrative expense in 2018 increased from 2017 due to increases of $36.8 million from Corporate, $21.7 million from ANGI and $5.9million from Vimeo, partially offset by a decrease of $14.8 million from Emerging & Other.•The Corporate increase was due primarily to higher compensation costs, including an increase in stock-based compensation expense related to amark-to-market adjustment.•The ANGI increase was due primarily to an increase of $19.7 million in bad debt expense due, in part, to higher Marketplace Revenue, increases of$8.8 million in software license and maintenance costs and $2.9 million in facilities costs, both reflecting the impact from the inclusion of Angie'sList, $2.4 million in compensation expense and an increase in customer service expense of $3.4 million, partially offset by a reduction in transactionand integration-related costs principally related to the Combination of $21.9 million. The increase in compensation expense was due primarily to anincrease in headcount following the Combination and existing business growth as well as $3.8 million of expense from the inclusion of Handy,almost entirely offset by a decrease of $25.6 million in stock-based compensation expense and a decrease of $9.2 million in severance and retentioncosts related to the Combination ($2.7 million in 2018 compared to $11.8 million in 2017). The decrease in stock-based compensation expensereflects decreases of $12.9 million in expense due to the modification of previously issued HomeAdvisor equity awards, which were converted intoANGI Homeservices' equity awards ($52.9 million in 2018 compared to $65.7 million in 2017) and $9.6 million in expense related to previouslyissued Angie's List equity awards, including the acceleration of certain converted equity awards resulting from the termination of Angie's Listemployees in connection with the Combination ($8.1 million in 2018 compared to $17.7 million in 2017), and the inclusion in 2017 of amodification charge related to a HomeAdvisor equity award, partially offset by acceleration of expense related to certain equity awards in the fourthquarter of 2018 in connection with the chief executive officer transition and the issuance of new equity awards since 2017.•The Vimeo increase was due primarily to $4.9 million of expense from the inclusion of Livestream and an increase in legal costs in 2018.•The Emerging & Other decrease was due primarily to the sale of The Princeton Review, the transfer of Daily Burn to the Applications segment, afavorable legal settlement of $4.8 million in 2018, partially offset by $3.2 million of expense from the inclusion of BlueCrew.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, $44.8 million from MTCH and $20.0million from Corporate, partially offset by decreases of $64.8 million from Emerging & Other and $10.2 million from Applications.•The ANGI increase was due primarily to higher compensation expense of $130.7 million, of which $38.4 million was from the inclusion of Angie'sList, and $24.3 million in costs related to the Combination including transaction related costs of $14.3 million and integration related costs of $10.0million. The increase in compensation expense 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 reflects $65.7 million of expense in 2017due to the modification of previously issued HomeAdvisor equity awards, which were converted into ANGI Homeservices' equity awards, and $17.7million of expense in 2017 related to previously issued Angie's List equity awards, including the acceleration of certain converted equity awardsresulting from the termination of Angie's List employees in connection with the Combination as well as a modification charge44related to a HomeAdvisor equity award in 2017. General and administrative expense also includes increases of $9.2 million in bad debt expense due,in part, to higher Marketplace Revenue, $3.9 million in customer service expense and $3.2 million in software license and maintenance costs, aswell as $9.8 million of expense from acquisitions made prior to the Combination.•The MTCH increase was due primarily to an increase of $20.6 million in compensation expense, a change of $14.5 million in acquisition-relatedcontingent consideration fair value adjustments (expense of $5.3 million in 2017 compared to income of $9.2 million in 2016) and an increase of$6.8 million in professional fees. The increase in compensation expense was due to an increase of $9.1 million in stock-based compensation expensedue primarily to an increase in expense related to a subsidiary denominated equity award held by a non-employee, which award was settled in thethird quarter of 2017, the employer portion of payroll taxes paid in connection with the exercise of MTCH options and an increase in headcountfrom business growth. The increase in professional fees was due primarily to the settlement of the Tinder equity plan.•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 Emerging & Other decrease was due primarily to the sales of The Princeton Review, ShoeBuy and ASKfm, and the effect of the reductions inworkforce in 2016, including $2.3 million in restructuring costs included in 2016 at Ask Media Group.•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.Product development expense Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Product development expense$309,329 $58,450 23% $250,879 $38,114 18% $212,765As a percentage of revenue7% 8% 7%For the year ended December 31, 2018 compared to the year ended December 31, 2017Product development expense in 2018 increased from 2017 due to increases of $30.9 million from MTCH, $13.2 million from ANGI, $9.8 million fromVimeo and $6.0 million from Dotdash.•The MTCH increase was due primarily to an increase of $28.8 million in compensation expense, due primarily to higher headcount at Tinder.•The ANGI increase was due primarily to increases of $4.9 million in compensation expense and $4.5 million in software license and maintenancecosts, reflecting the impact from the inclusion of Angie's List. The increase in compensation expense was due primarily to increased headcount,partially offset by a decrease of $6.1 million in stock-based compensation expense resulting from a lower modification charge related to theCombination.•The Vimeo increase was due primarily to $8.7 million of expense from the inclusion of Livestream.•The Dotdash increase was due primarily to an increase of $5.7 million in compensation expense, due primarily to higher headcount.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, $23.0 million from MTCH and $3.6 millionfrom Vimeo, partially offset by decreases of $10.9 million from Emerging & Other and $4.4 million from Applications.45•The ANGI increase was due primarily to an increase of $23.0 million in compensation expense, 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 expense was due to anincrease of $14.5 million in stock-based compensation expense principally due to the modification charge related to the Combination and increasedheadcount.•The MTCH increase was due primarily to an increase of $20.7 million in compensation expense 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 MTCH options, and an increase of $6.3million in stock-based compensation expense due primarily to new grants issued since 2016.•The Vimeo increase was due primarily to $2.2 million of expense from the inclusion of Livestream.•The Emerging & Other decrease was due primarily to the sales of The Princeton Review and ASKfm and a decrease of $4.3 million in compensationexpense due, in part, to reductions in workforce in 2016, including $1.2 million in restructuring costs in 2016 at Ask Media Group.•The Applications decrease was due primarily to a decrease of $3.6 million in compensation expense due, in part, to a decrease in headcount relatedto reductions in workforce in 2016.Depreciation Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Depreciation$75,360 $1,095 1% $74,265 $2,589 4% $71,676As a percentage of revenue2% 2% 2%For the year ended December 31, 2018 compared to the year ended December 31, 2017Depreciation in 2018 increased from 2017 due primarily to continued corporate growth at ANGI, partially offset by certain fixed assets becoming fullydepreciated and the sale of The Princeton Review.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 and MTCH related to continued corporate growth,partially offset by the sales of The Princeton Review and ShoeBuy.Operating income (loss) Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Match Group$553,294 $192,777 53 % $360,517 $44,968 14 % $315,549ANGI Homeservices63,906 213,082 NM (149,176) (174,539) NM 25,363Vimeo(35,594) (8,266) (30)% (27,328) (1,978) (8)% (25,350)Dotdash18,778 34,472 NM (15,694) 233,011 94 % (248,705)Applications94,834 (35,342) (27)% 130,176 20,513 19 % 109,663Emerging & Other29,964 12,552 72 % 17,412 117,108 NM (99,696)Corporate(160,043) (32,602) (26)% (127,441) (17,992) (16)% (109,449)Total$565,139 $376,673 200 % $188,466 $221,091 NM $(32,625) As a percentage of revenue13% 6% (1)%________________________NM = Not meaningful.46For the year ended December 31, 2018 compared to the year ended December 31, 2017Operating income in 2018 increased from 2017 due primarily to an increase in Adjusted EBITDA of $413.5 million described below, a decrease of$26.2 million in stock-based compensation expense and a change of $4.3 million in acquisition-related contingent consideration fair value adjustments,partially offset by increases of $66.3 million in amortization of intangibles and $1.1 million in depreciation. The decrease in stock-based compensationexpense was due primarily to a decrease of $51.4 million in modification and acceleration charges related to the Combination ($70.6 million in 2018compared to $122.1 million in 2017) and the inclusion in 2017 of a modification charge related to a HomeAdvisor equity award, partially offset by themodification of certain awards in 2018, due in part, to the sale of businesses during the fourth quarter of 2018, and the issuance of new equity awards since2017. The increase in amortization of intangibles reflects an increase in amortization expense of $39.4 million related to the Combination, the inclusion in2018 of an indefinite-lived intangible asset impairment charge of $27.7 million at Applications related to a trade name at the Desktop business and anincrease in amortization expense of $4.0 million related to the acquisition of Livestream, partially offset by a Dotdash definite-lived trade name that becamefully amortized in 2017. The indefinite-lived intangible asset impairment charge at Desktop was due to Google’s policy changes related to its Chromebrowser which became effective on September 12, 2018 and have negatively impacted the distribution of our business to consumer desktop products.At December 31, 2018, there was $326.0 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 2.3 years.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 goodwill impairment charge of $275.4 million atIAC Publishing (which in connection with the Company's realignment of its reportable segments in the fourth quarter of 2018 was allocated to the Dotdashand the Emerging & Other reportable segments based upon their relative fair values as of October 1, 2018), an increase of $74.1 million in Adjusted EBITDAdescribed below, and a decrease of $37.3 million in amortization of intangibles, partially offset by an increase of $159.8 million in stock-based compensationexpense, a change of $3.2 million in acquisition-related contingent consideration fair value adjustments and an increase of $2.6 million in depreciationexpense. The goodwill impairment charge at IAC Publishing in 2016 was driven by the impact from the Google contract, traffic trends and monetizationchallenges. The decrease in amortization of intangibles was due primarily to lower expense in 2017 as a result of a Dotdash trade name and certain intangibleassets from the PlentyOfFish acquisition becoming fully amortized and impairment charges in 2016 of $9.0 million and $2.6 million related to certainDictionary.com and Dotdash indefinite-lived trade names, respectively, partially offset by expense in 2017 related to the Combination. The increase in stock-based compensation expense was due primarily to an increase of $140.3 million at ANGI due primarily to the modification and acceleration charges relatedto the Combination, as well as an increase in expense related to a subsidiary denominated equity award held by a non-employee, which award was settledduring the third quarter of 2017, and the issuance of new equity awards since 2016.Adjusted EBITDA Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Match Group$653,931 $184,990 39 % $468,941 $65,561 16 % $403,380ANGI Homeservices247,506 209,648 554 % 37,858 (7,993) (17)% 45,851Vimeo(28,045) (4,438) (19)% (23,607) (3,326) (16)% (20,281)Dotdash21,384 24,147 NM (2,763) 14,083 84 % (16,846)Applications131,837 (4,920) (4)% 136,757 4,481 3 % 132,276Emerging & Other36,178 10,316 40 % 25,862 15,751 156 % 10,111Corporate(74,017) (6,262) (9)% (67,755) (14,483) (27)% (53,272)Total$988,774 $413,481 72 % $575,293 $74,074 15 % $501,219 As a percentage of revenue23% 17% 16%47For a reconciliation of net earnings (loss) attributable to IAC shareholders to operating income (loss) to consolidated Adjusted EBITDA, see "Principlesof Financial Reporting." For a reconciliation of operating income (loss) to Adjusted EBITDA for the Company's reportable segments, see "Note 12—SegmentInformation" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."For the year ended December 31, 2018 compared to the year ended December 31, 2017MTCH Adjusted EBITDA increased 39% to $653.9 million due primarily to the increase of $399.2 million in revenue due to growth at Tinder, andlower selling and marketing expense as a percentage of revenue due primarily to the ongoing shift towards brands with lower marketing spend, partiallyoffset by higher in-app purchase fees as revenues are increasingly sourced through mobile app stores and higher litigation costs.ANGI Adjusted EBITDA increased 554% to $247.5 million due primarily to the increase of $395.9 million in revenue, a reduction in transaction andintegration-related costs principally related to the Combination of $39.1 million and lower selling and marketing expense as a percentage of revenue,partially offset by higher compensation expense due, in part, to increased headcount following the Combination, and increases of $21.7 million in cost ofrevenue, $19.7 million in bad debt expense, $15.2 million in software license and maintenance cost and $9.4 million in facilities costs. Additionally,Adjusted EBITDA in 2018 benefited from a reduction in sales commissions expense of $4.9 million due to the adoption of ASU No. 2014-09.Vimeo Adjusted EBITDA loss increased 19% to a loss of $28.0 million, despite higher revenue, driven by investments in marketing and productdevelopment expense to continue to grow the business and an increase in legal costs.Dotdash Adjusted EBITDA improved to a profit of $21.4 million in 2018 from a loss of $2.8 million in 2017, due primarily to higher revenue and loweroperating expenses as a percentage of revenue.Applications Adjusted EBITDA decreased 4% to $131.8 million, despite higher revenue, due primarily to higher marketing expense at Mosaic Groupand losses at Daily Burn.Emerging & Other Adjusted EBITDA increased 40% to $36.2 million due primarily to higher revenue, a favorable legal settlement of $4.8 million inthe third quarter of 2018 and profits at IAC Films, partially offset by increased investments in College Humor Media and BlueCrew, and reduced profits atElectus.Corporate Adjusted EBITDA loss increased 9% to $74.0 million due primarily to higher compensation costs.For the year ended December 31, 2017 compared to the year ended December 31, 2016MTCH Adjusted EBITDA increased 16% to $468.9 million due primarily to an increase of $212.6 million in revenue and lower selling and marketingexpense as a percentage of revenue due to the ongoing product mix towards brands with lower marketing spend and a reduction in marketing spend atMTCH's Affinity brands, partially offset by an increase in cost of revenue, general and administrative expense and product development expense. Generaland administrative expense and product development expense increased due, in part, to expense of $12.7 million associated with the employer portion ofpayroll taxes and professional fees resulting from the settlement of the Tinder equity plan.ANGI Adjusted EBITDA decreased 17% to $37.9 million, despite an increase of $237.5 million in revenue, due primarily to an increase in selling andmarketing expense, higher compensation expense due, in part, to increase headcount, the inclusion in 2017 of $44.1 million in costs related to theCombination (including severance, retention, transaction and integration related costs) and increases in bad debt expense due, in part, to higher MarketplaceRevenue, outsourced customer service expense, software license and maintenance costs, and higher losses at the European businesses driven primarily by itsexpansion strategy. Adjusted EBITDA in 2017 was further impacted by write-offs of deferred revenue related to the Combination of $7.8 million.Vimeo Adjusted EBITDA loss increased 16% to a loss of $23.6 million, despite higher revenue (including the impact of deferred revenue write-offs of$2.1 million related to acquisition of Livestream), reflecting our investments in marketing and product development to grow the business.Dotdash Adjusted EBITDA loss improved 84% to a loss of $2.8 million due primarily to higher revenue and lower operating expenses as a percentageof revenue.Applications Adjusted EBITDA increased 3% to 136.8 million, despite a 4% decrease in revenue, due primarily to lower operating costs. AdjustedEBITDA in 2016 includes $2.6 million in restructuring costs.48Emerging & Other Adjusted EBITDA increased 156% to $25.9 million, despite lower revenue, due primarily to the inclusion in 2016 of $14.5 millionin restructuring charges at Ask Media Group related to vacating a data center and severance costs in an effort to reduce costs in light of significant declines inrevenue from the Google contract, increased profits at Dictionary.com and the contribution from IAC Films, partially offset by increased losses at CollegeHumor Media and reduced profits at Electus.Corporate Adjusted EBITDA loss increased 27% to $67.8 million due primarily to higher compensation costs and professional fees.Interest expense Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Interest expense$109,327 $4,032 4% $105,295 $(3,815) (3)% 109,110Interest expense in 2018 increased from 2017 due primarily to increases in the average outstanding long-term debt balance and interest rates on variablerate debt compared to the prior year.Interest 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 MTCH Term Loan and $6.6 million related to the repayment of the outstanding balances of the 4.875% Senior Notes and 6.75% MTCHSenior Notes in the fourth quarter of 2017. Partially offsetting these decreases are increases of $10.9 million of interest expense associated with the 6.375%MTCH Senior Notes, $5.2 million from the issuance of the Exchangeable Notes, $1.8 million related to the 5.00% MTCH Senior Notes and $1.7 million fromthe ANGI Term Loan.Other income (expense), net Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Other income (expense), net$305,746 $321,959 NM $(16,213) $(76,863) NM $60,650Other income, net in 2018 includes: $124.2 million of net unrealized gains related to certain equity investments that were adjusted to fair value inaccordance with ASU No. 2016-01, which was adopted on January 1, 2018; $120.6 million in gains related to the sales of Dictionary.com, Electus, Felix andCityGrid; $30.4 million of interest income; $27.9 million in realized gains related to the sale of certain investments; and $5.3 million in net foreign currencyexchange gains due primarily to the strengthening of the dollar relative to the British Pound.Other 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; $15.4 million expense related to the extinguishment of the 6.75% MTCH Senior Notes and repricing of the MTCH Term Loan; $13.0 millionmark-to-market charge principally pertaining to a subsidiary denominated equity award held by a non-employee; $12.2 million in other-than-temporaryimpairment charges related to certain investments; $1.2 million expense related to the write-off of deferred financing costs associated with the repayment ofthe 4.875% Senior Notes; $34.9 million in realized gains related to the sale of certain investments; and $11.4 million of interest income.Other income, net in 2016 includes: $37.5 million and $12.0 million in realized gains related to the sales of ShoeBuy and PriceRunner, respectively;$34.4 million in net foreign currency exchange gains due primarily to the strengthening of the dollar relative to the British Pound and Euro; $5.1 million ofinterest income; $3.6 million gain related to the sale of certain equity investments; $12.1 million non-cash charge related to the write-off of a proportionateshare of original issue discount and deferred financing costs associated with the repayment of $440 million of the MTCH Term Loan; $10.7 million in other-than-temporary impairment charges related to certain investments; $3.8 million loss related to the sale of ASKfm; $3.6 million loss on the 4.75% and 4.875%Senior Note redemptions and repurchases; and $2.5 million mark-to-market charge principally pertaining to a subsidiary denominated equity award held by anon-employee.49Income tax (provision) benefit Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Income tax (provision) benefit$(3,811) NM NM $291,050 $226,116 348% $64,934Effective income tax rate1% NM 80%In 2018, the Company recorded an income tax provision of $3.8 million, which represented an effective tax rate of 1%. The effective income tax ratewas lower than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards and the finalizedTransition Tax.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act subjected to U.S. taxation certain previously deferredearnings of foreign subsidiaries as of December 31, 2017 ("Transition Tax") and implemented a number of changes that took effect on January 1, 2018,including but not limited to, a reduction of the U.S. federal corporate tax rate from 35% to 21% and a new minimum tax on global intangible low-taxedincome ("GILTI") earned by foreign subsidiaries. The Company was able to make a reasonable estimate of the Transition Tax and recorded a provisional taxexpense in the fourth quarter of 2017. In the third quarter of 2018, the Company finalized this calculation, which resulted in a $9.2 million reduction in theTransition Tax. The net reduction in the Transition Tax was due primarily to the utilization of additional foreign tax credits and a reduction in state taxes,partially offset by additional taxable earnings and profits of our foreign subsidiaries based on recently issued Internal Revenue Service guidance. Theadjustment of the Company’s provisional tax expense was recorded as a change in estimate in accordance with Staff Accounting Bulletin No. 118, IncomeTax Accounting Implications of the Tax Cuts and Jobs Act, which was also included in ASU No. 2018-05, Income Taxes (Topic 740), Amendments to SECParagraphs Pursuant to SEC Staff Accounting Bulletin No. 118 ("SAB 118"), which was adopted by the Company upon issuance in March 2018. Despite thecompletion of the Company’s accounting for the Tax Act under SAB 118, many aspects of the law remain unclear and we expect ongoing guidance to beissued at both the federal and state levels. We will continue to monitor and assess the impact of any new developments.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 ASU No.2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, on January 1, 2017 and foreignincome taxed at lower rates, partially offset by the effect of the Tax Act. Under ASU No. 2016-09, excess tax benefits generated by the exercise, purchase orsettlement of stock-based awards of $361.8 million in 2017 are recognized as a reduction to the income tax provision rather than as an increase to additionalpaid-in capital.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 Dotdash and Emerging & Other segments.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 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. Years Ended December 31, 2018 $ Change % Change 2017 $ Change % Change 2016 (Dollars in thousands)Net earnings attributable to noncontrollinginterests$130,786 $77,702 146% $53,084 $27,955 111% $25,12950Net earnings attributable to noncontrolling interests in 2018 primarily represents the publicly-held interest in MTCH's and ANGI's earnings as well asthe net earnings attributable to the noncontrolling interests in a subsidiary that holds the unrealized gains related to certain equity investments that wereadjusted during the second quarter of 2018 to fair value in accordance with ASU No. 2016-01, partially offset by net losses attributable to the noncontrollinginterests in certain subsidiaries within the Emerging & Other and Vimeo segments.Net earnings attributable to noncontrolling interests in 2017 primarily represents the publicly-held interest in MTCH's earnings, partially offset by thepublicly-held interest in ANGI's losses.Net earnings attributable to noncontrolling interests in 2016 primarily represented the proportionate share of the noncontrolling holders' ownership inMTCH.51PRINCIPLES 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. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certainlimitations in that it does not take into account the impact to our consolidated statement of operations of certain expenses.The following table reconciles net earnings (loss) attributable to IAC shareholders to operating income (loss) to consolidated Adjusted EBITDA: Years Ended December 31, 2018 2017 2016 (In thousands)Net earnings (loss) attributable to IAC shareholders$626,961 $304,924 $(41,280)Add back: Net earnings attributable to noncontrolling interests130,786 53,084 25,129 Income tax provision (benefit)3,811 (291,050) (64,934) Other (income) expense, net(305,746) 16,213 (60,650) Interest expense109,327 105,295 109,110Operating income (loss)565,139 188,466 (32,625)Stock-based compensation expense238,420 264,618 104,820Depreciation75,360 74,265 71,676Amortization of intangibles108,399 42,143 79,426Acquisition-related contingent consideration fair value adjustments1,456 5,801 2,555Goodwill impairment— ——275,367Adjusted EBITDA$988,774 $575,293 $501,219For a reconciliation of operating income (loss) to Adjusted EBITDA for the Company's reportable segments, see "Note 12—Segment Information" to theconsolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."Non-Cash Expenses That Are Excluded From Our 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. Performance-based RSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period isthe end of the contingency period). To the extent that stock-based awards are settled on a net basis, the Company remits the required tax-withholdingamounts from its current funds.52 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 technology, serviceprofessional and contractor relationships, customer lists and user base, memberships, trade names and content, 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.53FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCESFinancial Position December 31, 2018 2017 (In thousands)Cash and cash equivalents: United States $1,971,282 $1,178,616All other countries(a) 160,350 452,193Total cash and cash equivalents 2,131,632 1,630,809Marketable securities (United States) 123,665 4,995Total cash and cash equivalents and marketable securities(b)(c) $2,255,297 $1,635,804 MTCH Debt: MTCH Term Loan $425,000 $425,000MTCH Credit Facility 260,000 —6.375% MTCH Senior Notes 400,000 400,0005.00% MTCH Senior Notes 450,000 450,000Total MTCH long-term debt 1,535,000 1,275,000Less: unamortized original issue discount 7,352 8,668Less: unamortized debt issuance costs 11,737 13,636Total MTCH debt, net 1,515,911 1,252,696 ANGI Debt: ANGI Term Loan 261,250 275,000Less: current portion of ANGI Term Loan 13,750 13,750Less: unamortized debt issuance costs 2,529 2,938Total ANGI debt, net 244,971 258,312 IAC Debt: Exchangeable Notes 517,500 517,5004.75% Senior Notes 34,489 34,859Total IAC long-term debt 551,989 552,359Less: unamortized original issue discount 54,025 67,158Less: unamortized debt issuance costs 13,298 16,740Total IAC debt, net 484,666 468,461 Total long-term debt, net $2,245,548 $1,979,469_________________________________________________________________________(a) At December 31, 2018, all of the Company’s international cash can be repatriated without significant tax consequences. During the year ended December 31, 2018,international cash totaling $396.2 million was repatriated to the U.S.(b) Cash and cash equivalents at December 31, 2018 and December 31, 2017 includes MTCH's domestic and international cash and cash equivalents of $83.9 million and$103.1 million; and $203.5 million and $69.2 million, respectively. MTCH 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, the Company cannot freely access the cash of MTCH and its subsidiaries.(c) Cash and cash equivalents at December 31, 2018 and December 31, 2017 includes ANGI's domestic and international cash and cash equivalents of $328.8 million and $8.2million; and $214.8 million and $6.7 million, respectively. Marketable securities at December 31, 2018 include $24.9 million at ANGI. ANGI held no marketable securitiesat December 31, 2017. ANGI is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Companywith funds. As a result, the Company cannot freely access the cash of ANGI and its subsidiaries.54IAC, MTCH and ANGI Long-term DebtFor a detailed description of IAC, MTCH and ANGI long-term debt, see "Note 7—Long-term Debt" to the consolidated financial statements 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, 2018 2017 2016 (In thousands)Net cash provided by (used in): Operating activities$988,128 $416,699 $344,238Investing activities(173,440) 42,049 12,862Financing activities(312,798) (196,869) (492,140)Net 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 goodwill impairments, stock-based compensation expense, net gains from the sale of businesses and investments, unrealized gains and losses onequity securities, amortization of intangibles, depreciation, bad debt expense, and deferred income taxes.2018Adjustments to earnings consist primarily of $238.4 million of stock-based compensation expense, $108.4 million of amortization of intangibles, $75.4million of depreciation, $48.4 million of bad debt expense, partially offset by $147.8 million of net gains from the sale of businesses and investments, $124.2million of net unrealized gains on certain equity securities, and $34.7 million of deferred income taxes. The deferred income tax benefit primarily relates toamortization of intangibles, a decrease in the valuation allowance, and an increase in credit carryforwards, partially offset by the deferred income taxprovision on the net unrealized gains on certain equity securities. The increase from changes in working capital primarily consists of an increase in accountspayable and other liabilities of $53.6 million, an increase in deferred revenue of $49.5 million, and an increase in income taxes payable and receivable of$27.0 million, partially offset by an increase in other assets of $44.6 million and an increase in accounts receivable of $34.8 million. The increase in accountspayable and other liabilities is primarily due to increases in (i) accrued employee compensation due, in part, to the timing of payments of cash bonuses, (ii)payables and accruals at Ask Media Group due to growth in paid traffic, primarily in international markets, (iii) accrued advertising at MTCH and (iv)payables at Vimeo due to timing of payments. The increase in deferred revenue is due primarily to growth in subscription sales at Vimeo, MTCH andApplications. The increase in income taxes payable and receivable is due to 2018 income tax accruals in excess of 2018 income tax payments. The increasein other assets is primarily due to increases in (i) capitalized mobile app store fees at MTCH and Applications, (ii) capitalized production costs of variousproduction deals at College Humor Media, Electus, and IAC Films, and (iii) capitalized sales commissions at ANGI. The increase in accounts receivable isprimarily due to revenue growth at ANGI, Ask Media Group, and Dotdash, partially offset by decreases at MTCH and Applications due to an accelerated cashreceipt from a mobile app store provider.Net cash used in investing activities includes cash used for acquisitions and investments of $117.5 million, which includes the TelTech, iTranslate,BlueCrew, and Handy acquisitions, purchases (net of maturities and sales) of marketable debt securities of $116.1 million, capital expenditures of $85.6million, primarily related to investments in the development of capitalized software at ANGI and MTCH to support their products and services and computerhardware, partially offset by net proceeds from the sale of businesses and investments of $136.7 million, which includes the sales of Dictionary.com andElectus, and $10.4 million in net proceeds from the sale of Angie's List's campus located in Indianapolis.Net cash used in financing activities includes $207.7 million and $29.8 million for withholding taxes paid on behalf ofMTCH and ANGI employees, respectively, for stock-based awards that were net settled, $133.5 million for the repurchase of 3.1 million shares, on asettlement date basis, of MTCH common stock at an average price of $43.72 per share, $105.1 million for dividends paid to MTCH's noncontrolling interestholders, $82.9 million for the repurchase of 0.5 million shares, on a settlement date basis, of IAC common stock at an average price of $152.23 per share,$19.0 million for withholding taxes paid on behalf of IAC employees for stock-based awards that were net settled, $16.1 million for the purchase ofnoncontrolling55interests, and $13.8 million in principal payments on ANGI debt, partially offset by $260.0 million in borrowings under the MTCH Credit Facility and $41.7million in proceeds from the exercise of IAC stock options.2017Adjustments to earnings consist primarily of $264.6 million of stock-based compensation expense, $74.3 million ofdepreciation, $42.1 million of amortization of intangibles, $28.9 million of bad debt expense, and $61.6 million of other adjustments, which primarilyconsist of losses on bond redemptions and net foreign currency exchange losses, partially offset by $285.3 million of deferred income taxes and $32.7million of net gains from the sale of businesses and investments. The deferred income tax benefit primarily relates to the net operating loss created primarilyby excess tax benefits of $361.8 million related to stock-based awards and the modification charge for the conversion and acceleration of stock-based awardsin connection with the Combination, partially offset by the provisional Transition Tax. The decrease from changes in working capital consists primarily of anincrease in accounts receivable of $115.2 million and a decrease in accounts payable and other liabilities of $25.3 million, partially offset by an increase indeferred revenue of $39.2 million. The increase in accounts receivable is primarily due to (i) the timing of cash receipts and the increasing proportion ofrevenue sourced through mobile app stores at MTCH, which is settled more slowly than traditional credit cards; and (ii) revenue growth at ANGI. Thedecrease in accounts payable and other liabilities is due to: (i) a decrease at MTCH due to the cash settlement of former subsidiary denominated equityawards held by a non-employee, (ii) a contingent consideration payment related to a business acquisition, (iii) a decrease in accrued employee compensationmainly related to the timing of payments of cash bonuses, partially offset by (iv) an increase in accrued advertising at MTCH. The increase in deferredrevenue is due mainly to growth in subscription sales at MTCH and Vimeo, as well as growth in subscription sales and time-based advertising to serviceprofessionals at ANGI, partially offset by decreases at Electus and Notional mainly due to the delivery of programming related to various production deals.Net cash provided by investing activities includes net proceeds from the sale of businesses and investments of $185.8 million, which is primarilyrelated to the sales of The Princeton Review and a MTCH cost method investment, and proceeds from maturities and sales (net of purchases) of marketabledebt securities of $84.5 million, partially offset by acquisitions and purchases of investments of $155.7 million, which includes the Livestream, MyBuilder,Angie's List and HomeStars acquisitions, and capital expenditures of $75.5 million, primarily related to investments in development of capitalized softwareat MTCH and ANGI to support their products and services, computer hardware and the Company's purchase of a 50% ownership interest in an aircraft as areplacement for a then 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 MTCH and IAC debt of $445.2 million and $393.5 million, respectively, thepayment 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 forwithholding taxes paid on behalf of MTCH, IAC and ANGI employees, respectively, for stock-based awards that were net settled, $74.4 million for theExchangeable Notes hedge, $56.4 million for the repurchase of 0.8 million shares, on a settlement date basis, of IAC common stock at an average price of$69.24 per share, $33.7 million of debt issuance costs primarily related to the Exchangeable Notes and the 5.00% MTCH 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 MTCH debt, $517.5 million in proceeds from the issuance of the Exchangeable Notes, $275.0million in proceeds from the ANGI Term Loan, $82.4 million, $59.4 million and $1.7 million in proceeds from the exercise of IAC, MTCH and ANGI stockoptions, respectively, and $23.7 million in proceeds from the issuance of warrants.2016Adjustments to earnings consist primarily of $198.3 million and $77.0 million of goodwill impairment at the Dotdash and the Emerging & Othersegments, respectively, $104.8 million of stock-based compensation expense, $79.4 million of amortization of intangibles, $71.7 million of depreciation,and $17.7 million of bad debt expense, 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 Dotdash and Emerging & Other goodwill impairments. The decrease from changesin working capital consists primarily of a decrease in accounts payable and other liabilities of $52.4 million, an increase in other assets of $12.8 million,partially offset by an increase in deferred revenue of $35.8 million and an increase in income taxes payable and receivable of $9.0 million. The decrease inaccounts payable and other liabilities is due to (i) a decrease in accrued advertising and revenue share expense at Ask Media Group, Dotdash andApplications mainly due to the effect of the new Google contract, which became effective April 1, 2016, (ii) a decrease in VAT payables related mainly todecreases in international revenue at Ask Media Group, and (iii) decreases in payables at MTCH due to the timing of payments. The56increase in other assets is primarily related to an increase in production costs at IAC Films. The increase in deferred revenue is mainly due to growth insubscription sales at MTCH, ANGI and Vimeo. The increase in income taxes payable and receivable is primarily due to receipt of 2015 capital loss refund in2016 and 2016 income tax accruals in excess 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 sales of PriceRunner and ShoeBuy, partially offset by capital expenditures of $78.0 million, primarily related to investments in development ofcapitalized software at MTCH and ANGI to support their products and services, as well as leasehold improvements and computer hardware, purchases (net ofsales 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 MTCH debt, $308.9 million for the repurchase of 6.2 millionshares, on a settlement date basis, of IAC common stock at an average price of $49.74 per share, $126.4 million in principal payments on IAC debt and $29.8million and $26.7 million for the payment of withholding taxes paid on behalf of MTCH and IAC employees, respectively, for stock-based awards that werenet settled, partially offset by $400.0 million in proceeds from the issuance of MTCH debt and $39.4 million and $25.8 million in proceeds from the exerciseof MTCH and IAC stock options, respectively.Liquidity and Capital ResourcesThe Company's principal sources of liquidity are its cash and cash equivalents and marketable securities, cash flows generated from operations andavailable borrowings under the IAC Credit Facility. IAC's consolidated cash and cash equivalents and marketable securities at December 31, 2018 were $2.3billion, of which $186.9 million was held by MTCH and $361.9 million was held by ANGI. The Company generated $988.1 million of operating cash flowsfor the year ended December 31, 2018, of which $603.5 million was generated by MTCH and $223.7 million was generated by ANGI. Each of MTCH andANGI is a separate and distinct legal entity with its own public shareholders and board of directors and has no obligation to provide the Company with funds.As a result, the Company cannot freely access the cash of MTCH and ANGI and their respective subsidiaries. In addition, agreements governing MTCH andANGI indebtedness limit the payment of dividends or distributions and loans or advances to stockholders, including the Company, in the event a default hasoccurred or in the case of MTCH, its secured net leverage ratio (as defined in the MTCH Term Loan) exceeds 2.0 to 1.0 or its consolidated leverage ratio (asdefined in the MTCH indentures) exceeds 5.0 to 1.0, and in the case of ANGI, its consolidated net leverage ratio (as defined in the ANGI Term Loan) exceeds4.5 to 1.0. There were no such limitations at December 31, 2018.On December 7, 2018, the MTCH $500 million revolving credit facility was amended and restated, and now expires on December 7, 2023. At December31, 2018, the outstanding borrowings under the MTCH Credit Facility were $260.0 million which bear interest at LIBOR plus 1.50%, or approximately4.00%. Borrowings under the MTCH Credit Facility were repaid with a portion of the net proceeds from the 5.625% MTCH Senior Notes issued on February15, 2019. On November 5, 2018, ANGI entered into a five-year $250 million revolving credit facility. The annual commitment fee on undrawn funds iscurrently 25 basis points and is based on the consolidated net leverage ratio most recently reported. Borrowings under the ANGI Credit Facility bear interest,at ANGI's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on ANGI'sconsolidated net leverage ratio. At December 31, 2018, there were no outstanding borrowings under the ANGI Credit Facility. On November 5, 2018, theANGI Term Loan was amended and restated, and is now due on November 5, 2023. On November 5, 2018, the IAC Credit Facility was amended and restated,reducing the facility size from $300 million to $250 million, and now expires on November 5, 2023. There were no outstanding borrowings under the IACCredit Facility at December 31, 2018.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 2019 capital expenditures are expected to be higher than 2018 by approximately 25% to 30%, driven, in part, by higher capital expendituresfor ANGI related to the development of capitalized software to support its products and services, and leasehold improvements related to the expansion ofoffice space at MTCH's Tinder business.During the year ended December 31, 2018, IAC repurchased 0.5 million shares, on a trade date basis, of its common stock at an average price of $152.23per share, or $82.9 million in aggregate. IAC has 8.0 million shares remaining in its share repurchase authorization. IAC may purchase shares over anindefinite period of time on the open market and in privately negotiated transactions, depending on those factors IAC management deems relevant at anyparticular time, including, without limitation, market conditions, share price and future outlook.57During the year ended December 31, 2018, MTCH repurchased 3.1 million shares, on a trade date basis, of its common stock at an average price of$43.72 per share, or $133.5 million in aggregate. MTCH has 2.9 million shares remaining in its share repurchase authorization.On February 6, 2019, the Board of Directors of ANGI authorized ANGI to repurchase up to 15 million shares of its common stock.The Company has granted stock settled stock appreciation rights denominated in the equity of certain non-publicly traded subsidiaries to employeesand management of those subsidiaries. These equity awards are settled on a net basis, with the award holder entitled to receive a payment in IAC shares equalto the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment. The number of IAC common shares thatwould be required to settle these vested and unvested interests, other than for MTCH, ANGI and their subsidiaries, at current estimated fair values, at February1, 2019, is 0.1 million shares. Withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been $16.0million at February 1, 2019, assuming a 50% withholding rate. The number of IAC common shares ultimately needed to settle these awards may varysignificantly as a result of both movements in the Company's stock price and the determination of fair value of the relevant subsidiary that is different thanthe Company's estimate. The Company's RSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of sharesof IAC common stock. These equity awards are settled on a net basis. The number of IAC common shares that would be required to settle these awards atFebruary 1, 2019 is 0.2 million shares. Withholding taxes, which will be paid by the Company on behalf of the employees upon vest, would have been $43.1million at February 1, 2019, assuming a 50% withholding rate.The Company has historically settled its stock options on a gross basis. Assuming all stock options outstanding on February 1, 2019 were net settled onthat date, the Company would have remitted $428.9 million (of which $270.3 million is related to vested stock options and $158.6 million is related tounvested stock options) in cash for withholding taxes (assuming a 50% withholding rate).The Company's publicly traded subsidiaries have also granted equity awards denominated in the shares of those subsidiaries, some of which may besettled using IAC shares.MTCH currently settles substantially all equity awards on a net basis. Assuming all MTCH equity awards outstanding on February 1, 2019 were netsettled on that date, MTCH would have issued 10.2 million common shares (of which 2.0 million is related to vested shares and 8.1 million is related tounvested shares) and would have remitted $556.2 million (of which $110.7 million is related to vested shares and $445.4 million is related to unvestedshares) in cash for withholding taxes (assuming a 50% withholding rate). If MTCH decided to issue a sufficient number of shares to cover the $556.2 millionemployee withholding tax obligation, 10.2 million additional shares would be issued by MTCH. Certain MTCH stock options ("Tandem Awards") can besettled in MTCH or IAC common stock at the Company's election. Assuming all vested and unvested Tandem Awards outstanding on February 1, 2019 wereexercised on that date and settled using IAC stock, 0.4 million IAC common shares would have been issued in settlement and MTCH would have issued 1.5million shares, which is included in the amount above, to IAC as reimbursement.In connection with the Combination, previously issued stock appreciation rights related to the common stock of HomeAdvisor (US) were converted intoANGI stock appreciation rights that are settleable, at ANGI's option, on a net basis with ANGI remitting withholding taxes on behalf of the employee or on agross basis with ANGI issuing a sufficient number of Class A shares to cover the withholding taxes. In addition, at IAC's option, these awards can be settled ineither Class A shares of ANGI or shares of IAC common stock. If settled in IAC common stock, ANGI reimburses IAC in either cash or through the issuance ofClass A shares to IAC. Assuming all of the stock appreciation rights outstanding on February 1, 2019 were net settled on that date using IAC stock, 1.0million IAC common shares would have been issued in settlement and IAC would have been issued 13.0 million shares of ANGI Class A stock and ANGIwould have remitted $219.6 million in cash for withholding taxes (assuming a 50% withholding rate). If ANGI decided to issue a sufficient number of sharesto cover the $219.6 million employee withholding tax obligation, 13.0 million additional Class A shares would be issued by ANGI. ANGI's cash withholdingobligation on all other ANGI net settled awards outstanding on February 1, 2019 is $38.5 million (assuming a 50% withholding rate), which is the equivalentof 2.3 million shares.Prior to the Combination in 2017, the Company issued a number of IAC denominated PSUs to certain ANGI employees. Vesting of the PSUs iscontingent upon ANGI's performance. Assuming all of the PSUs outstanding on February 1, 2019 were net settled on that date using IAC stock, 0.1 millionIAC common shares would have been issued in settlement, IAC would have been issued 0.7 million shares of ANGI Class A stock and ANGI would haveremitted $12.0 million in cash for withholding taxes (assuming a 50% withholding rate).58As of December 31, 2018, IAC's economic and voting interest in MTCH is 81.1% and 97.6%, respectively, and in ANGI is 83.9% and 98.1%,respectively. As described above, certain MTCH and ANGI equity awards can be settled either in IAC common shares or the common shares of thesesubsidiaries at IAC's election. The Company currently expects to settle a sufficient number of awards in IAC shares to maintain an economic interest in bothMTCH and ANGI of at least 80% and to otherwise take such other steps as necessary to maintain an economic interest in each of MTCH and ANGI of at least80%.The Company does not expect to be a full U.S. federal cash income tax payer until 2022. The ultimate timing is dependent primarily on the performanceof the Company and the amount and timing of tax deductions related to stock-based awards.At December 31, 2018, all of the Company’s international cash can be repatriated without significant tax consequences. During the year endedDecember 31, 2018, international cash totaling $396.2 million was repatriated to the U.S.The Company believes its existing cash, cash equivalents, marketable securities, available borrowings under the IAC Credit Facility and expectedpositive cash flows generated from operations will be sufficient to fund its normal operating requirements, including capital expenditures, debt service, thepayment of withholding taxes paid on behalf of employees for net-settled stock-based awards, and investing and other commitments for the foreseeablefuture. The Company's liquidity could be negatively affected by a decrease in demand for its products and services. The Company’s indebtedness could limitits ability to: (i) obtain additional financing to fund working capital needs, acquisitions, capital expenditures, debt service or other requirements; and (ii) useoperating cash flow to make acquisitions or capital expenditures, or invest in other areas, such as developing business opportunities. The Company may needto raise additional capital through future debt or equity financing to make additional acquisitions and investments or to provide for greater financialflexibility. Additional financing may not be available on terms favorable to the Company or at all.59CONTRACTUAL 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) (c)$109,608 $224,974 $1,622,736 $952,750 $2,910,068Operating leases(d)38,770 87,438 64,633 255,563 446,404Purchase obligations(e)40,428 23,897 — — 64,325Total contractual obligations$188,806 $336,309 $1,687,369 $1,208,313 $3,420,797_______________________________________________________________________________(a) The Company has excluded $49.1 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, 2018 consists of $1.4 billion bearinginterest at fixed rates and $0.9 billion bearing interest at variable rates. The variable rate instruments consist of a $425.0 million MTCH Term Loan, a $261.3 million ANGITerm Loan and $260.0 million of outstanding borrowings under the MTCH Credit Facility. The MTCH Term Loan bears interest at LIBOR plus 2.50%, or 5.09%, atDecember 31, 2018. The ANGI Term Loan bears interest at LIBOR plus 1.50%, or approximately 4.00% at December 31, 2018. The outstanding borrowings under theMTCH Credit Facility bear interest at LIBOR plus 1.50%, or approximately 4.00% at December 31, 2018. The amount of interest ultimately paid on the MTCH and ANGIterm loans, and the MTCH Credit Facility may differ based on changes in interest rates. For additional information on long-term debt arrangements, see "Note 7—Long-termDebt" to the consolidated financial statements included in "Item 8—Consolidated Financial Statements and Supplementary Data."(c) Subsequent to December 31, 2018, the outstanding borrowings under the MTCH Credit Facility were repaid in full with a portion of the net proceeds from the 5.625%MTCH Senior Notes issued on February 15, 2019. The principal and interest related to the 5.625% MTCH Senior Notes are not included in the table above.(d) 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 certain lease agreements. These operating expenses are notincluded in the table above. For additional information on operating leases, see "Note 13—Commitments and Contingencies" to the consolidated financial statements includedin "Item 8—Consolidated Financial Statements and Supplementary Data."(e) The purchase obligations principally include web hosting commitments. Amount of Commitment Expiration Per PeriodOther Commercial Commitments(f)Less Than1 Year 1–3Years 3–5Years More Than5 Years Total (In thousands)Letters of credit and surety bonds$449 $— $— $2,272 $2,721_______________________________________________________________________________(f)Commercial commitments are funding commitments that could potentially require the Company to perform 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, 2018.60CRITICAL 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 $243.3 million (including the value of ANGIHomeservices Class A common stock issued in connection with the acquisition of Handy), $912.1 million (including the value of ANGI Class A commonstock issued in connection with the Combination) and $36.1 million in acquisitions in the years ended December 31, 2018, 2017 and 2016, respectively. Thepurchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, includingidentifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. The fair value of these intangible assets is basedon valuations that use information and assumptions provided by management. The excess purchase price over the net tangible and identifiable intangibleassets is recorded as goodwill and is assigned to the reporting unit(s) that is expected to benefit 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 is 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 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 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.Recoverability of Goodwill and Indefinite-Lived Intangible AssetsGoodwill is the Company's largest asset with a carrying value of $2.7 billion and $2.6 billion at December 31, 2018 and 2017, respectively. Indefinite-lived intangible assets, which consist of the Company's acquired trade names and trademarks, have a carrying value of $458.1 million and $459.1 million atDecember 31, 2018 and 2017, 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, 2018, a qualitative assessment of the MTCH, ANGI, Vimeo, College Humor Media and BlueCrewreporting 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:•MTCH's October 1, 2018 market capitalization of $15.7 billion exceeded its carrying value by approximately $15.1 billion and MTCH's strongoperating performance.•ANGI's October 1, 2018 market capitalization of $10.7 billion exceeded its carrying value by approximately $9.6 billion and ANGI's strongoperating performance.•The Company performed valuations of the Vimeo, College Humor Media and BlueCrew reporting units during 2018. These valuations wereprepared primarily in connection with the issuance and/or settlement of equity awards that are denominated in the equity of these businesses. Thevaluations were prepared time proximate to, however, not as of, October 1, 2018. The fair value of each of these businesses was in excess of itsOctober 1, 2018 carrying value.61The Company tests goodwill for impairment when it concludes that it is more likely than not that there may be an impairment. For the Company'sannual goodwill test at October 1, 2018, the Company quantitatively tested the Desktop and Mosaic Group reporting units (included in the Applicationssegment). The Company's quantitative test indicated that the fair value of these reporting units is in excess of their respective carrying values; therefore, thegoodwill of these reporting units is not impaired. The Company's Dotdash, Ask Media Group and The Daily Beast reporting units have no goodwill.The aggregate goodwill balance for the reporting units for which the most recent estimate of fair value is less than 110% of their carrying values isapproximately $265.1 million.The annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of the Company's reporting unitthat is being tested to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of thereporting unit is not impaired. If the carrying value of a reporting unit exceeds its estimated fair value, an impairment equal to the excess is recorded.The fair value of the Company's reporting units (except for MTCH and ANGI described above) is determined using both an income approach based ondiscounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 eachyear. The Company uses the same approach in determining the fair value of its businesses in connection with its non-public subsidiary denominated stock-based compensation plans, which can be a significant factor in the decision to apply the qualitative screen. Determining fair value using a DCF analysisrequires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriatediscount rates. The expected cash flows used in the DCF analyses are based on the Company's most recent forecast and budget and, for years beyond thebudget, the Company's estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect therisks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, areassessed based on each reporting unit's current results and forecasted future performance, as well as macroeconomic and industry specific factors. Thediscount rates used in the quantitative test for determining the fair value of the Company's reporting units ranged from 12.5% to 15% in 2018 and 12.5% to17.5% in 2017. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of aselected peer group of companies. From the comparable companies, a representative market multiple is determined which is applied to financial metrics toestimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant interms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors. While a primarydriver in the determination of the fair values of the Company's reporting units is the estimate of future revenue and profitability, the determination of fairvalue is based, in part, upon the Company's assessment of macroeconomic factors, industry and competitive dynamics and the strategies of its businesses inresponse 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. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgmentsinherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows.The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangibleassets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license theCompany's trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessedannually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used inthe Company's annual indefinite-lived impairment assessment ranged from 10.5% to 35% in 2018 and 11% to 16% in 2017, and the royalty rates used rangedfrom 0.75% to 8.0% in 2018 and 2% to 7% in 2017.The aggregate indefinite-lived intangible asset balance for which the most recent estimate of fair value is less than 110% of their carrying values isapproximately $131.3 million.The 2018 annual assessment of goodwill did not identify any impairments. The 2018 annual assessment of indefinite-lived intangible assets identifiedimpairment charges of $27.7 million and $1.1 million related to certain Desktop and College Humor Media indefinite-lived trade names, respectively. Theindefinite-lived intangible asset impairment charge at Desktop was due to Google’s policy changes related to its Chrome browser which became effective onSeptember 12, 2018 and have negatively impacted the distribution of our B2C downloadable desktop products. The impairment charge related to the B2Ctrade name was identified in our annual impairment assessment as of October 1, 2018 and reflects the projected reduction in profits and revenues and theresultant reduction in the assumed royalty rate from these policy changes. The impairment charges are included in "Amortization of intangibles" in theaccompanying consolidated statement of operations.The 2017 annual assessments did not identify any impairments.62While the 2016 annual assessment did not identify any material impairments, during the second quarter of 2016, the Company recorded an impairmentcharge equal to the entire $275.4 million at IAC Publishing. In connection with the Company's realignment of its reportable segments in the fourth quarter of2018, $198.3 million and $77.0 million was allocated to the Dotdash and the Emerging & Other reportable segments, respectively, based upon their relativefair values as of October 1, 2018. In addition, amortization of intangibles was further impacted by the inclusion of impairment charges in 2016 of $9.0million and $2.6 million related to certain Dictionary.com and Dotdash indefinite-lived trade names, 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 indicate that these lives may be changed.The carrying value of property and equipment and definite-lived intangible assets is $492.1 million and $519.8 million at December 31, 2018 and 2017,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 if it is determined that it is more likely than not that the deferred tax asset will not be realized. At December 31,2018 and 2017, the balance of the Company's net deferred tax asset is $41.2 million and $31.3 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, 2018 and 2017, the Company has unrecognized taxbenefits, including interest and penalties, of $52.3 million and $39.7 million, respectively. We consider many factors when evaluating and estimating our taxpositions and tax benefits, which may require periodic adjustment 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.At December 31, 2018, all of the Company’s international cash can be repatriated without significant tax consequences. The Company has not providedfor approximately $1.0 million of foreign deferred taxes for the $103.1 million of the foreign cash earnings that is indefinitely reinvested outside the U.S. TheCompany reassesses its intention to remit or permanently reinvest these cash earnings each reporting period; any required adjustment to the income taxprovision would be reflected in the period that the Company changes this intention. During the year ended December 31, 2018, international cash totaling$396.2 million was repatriated to the U.S.On December 22, 2017, the U.S. enacted the Tax Act. The Tax Act imposes a new minimum tax on GILTI earned by foreign subsidiaries beginning in2018. The Financial Accounting Standards Board ("FASB") Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that anentity may make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years orprovide for the tax expense related to GILTI in the year the tax is incurred. The Company elects to recognize the tax on GILTI as a period expense in theperiod the tax is incurred.63Stock-Based CompensationThe Company recorded stock-based compensation expense of $238.4 million, $264.6 million and $104.8 million for the years ended December 31,2018, 2017 and 2016, respectively. Included in stock-based compensation expense in 2018 and 2017 is $70.6 million and $122.1 million, respectively,related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were convertedinto ANGI Homeservices' equity awards in the Combination, and the acceleration of certain converted equity awards resulting from the termination of Angie'sList employees in connection with the Combination. The Company estimated the fair value of stock options issued (including those modified in connectionwith the Combination) in 2018, 2017 and 2016 using a Black-Scholes option pricing model and, for those with a market condition, a lattice model. For stockoptions, including subsidiary denominated equity, the value of the stock option is measured at the grant date at fair value and expensed over the vestingterm. The impact on stock-based compensation expense for the year ended December 31, 2018, assuming a 1% increase in the risk-free interest rate, a 10%increase in the volatility factor and a one-year increase in the weighted average expected term of the outstanding options would be an increase of$3.8 million, $17.5 million and $6.1 million, respectively. The Company also issues RSUs and performance-based RSUs. For RSUs, the value of theinstrument is measured at the grant date as the fair value of the underlying IAC common stock and expensed as stock-based compensation expense over thevesting term. For performance-based RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying IAC common stockand expensed as stock-based compensation over the vesting term when the performance targets are considered probable of being achieved.Investments in Debt and Equity SecuritiesDebt SecuritiesThe 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 debt securities are adjusted to fair value each quarter, and the unrealized gains and losses, net of tax,are included in accumulated other comprehensive income (loss) as a separate component of shareholders' equity. The specific-identification method is usedto determine the cost of debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss)into earnings. The Company also invests in non-marketable debt securities as part of its investment strategy. We review our debt securities for impairmenteach reporting period. The Company recognizes an unrealized loss on debt securities in net earnings when the impairment is determined to be other-than-temporary. Factors we consider in making this determination include the duration, severity and reason for the decline in value and the potential recovery andour intent to sell the debt security. We also consider whether we will be required to sell the security before recovery of its amortized cost basis and whetherthe amortized cost basis cannot be recovered because of credit losses. If an impairment is considered to be other-than-temporary, the debt security will bewritten down to its fair value and the loss will be recognized within other income (expense), net. The carrying value of marketable debt securities atDecember 31, 2018 is $123.7 million and consist of treasury discount notes and commercial paper rated A1/P1 or better.Equity SecuritiesThe Company invests in equity securities as part of its investment strategy. Our equity securities, other than those of our consolidated subsidiaries andthose accounted for under the equity method, are accounted for at fair value or under the measurement alternative of ASU No. 2016-01, following itsadoption on January 1, 2018, with changes recognized within other income (expense), net each reporting period. Under the measurement alternative, equityinvestments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable pricechanges in orderly transactions for identical or similar investments of the same issuer; value is generally determined based on a market approach as of thetransaction date. An investment will be considered identical or similar if it has identical or similar rights to the equity investments held by the Company. TheCompany reviews its equity securities for impairment each reporting period when there are qualitative factors or events that indicate possible impairment.Factors we consider in making this determination include negative changes in industry and market conditions, financial performance, business prospects, andother relevant events and factors. Once the qualitative indicators are identified and the fair value of the security is below the carrying value, the Companywrites down the security to its fair value and records the corresponding charge within other income (expense), net. The carrying value of the Company’sequity securities without readily determinable fair values at December 31, 2018, is $235.1 million and is included in long-term investments in theaccompanying consolidated balance sheet. During 2018, the Company recognized gross unrealized gains of $129.0 million related to the remeasurement ofcertain investments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. In addition,during 2018, the Company recognized other-than-temporary impairments of $4.9 million related to equity securities without readily determinable fair valuesand $0.6 million related to an equity method investment. During 2017 and 2016, the Company recognized other-than-temporary impairments of $12.2million and $10.7 million, respectively, related to cost and equity method investments.64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."65Item 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, treasurydiscount notes, commercial paper and time deposits, 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, 2018, a 100 basis point increase or decrease in the level ofinterest rates would, respectively, decrease or increase the fair value of these securities by $0.1 million. Such potential increase or decrease in fair value isbased on certain simplifying assumptions, including a constant level and rate of debt securities and an immediate across-the-board increase or decrease in thelevel of interest rates with no other subsequent changes for the remainder of the period. However, since almost all of the Company's cash and cash equivalentsbalance of $2.1 billion was invested in short-term fixed or variable rate money market instruments, the Company would also earn more (less) interest incomedue to such an increase (decrease) in interest rates.At December 31, 2018, the Company's outstanding debt was $2.3 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 $58.2 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 MTCHTerm Loan, the $261.3 million outstanding balance on the ANGI Term Loan, and the $260 million of outstanding borrowings under the MTCH CreditFacility bear interest at variable rates. The MTCH Term Loan bears interest at LIBOR plus 2.50%. As of December 31, 2018, the rate in effect was 5.09%. IfLIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the MTCH Term Loan would increase or decrease by$4.3 million. The ANGI Term Loan bears interest at LIBOR plus 1.50%. As of December 31, 2018, the rate in effect was approximately 4.00%. If LIBOR wereto increase or decrease by 100 basis points, then the annual interest expense on the ANGI Term Loan would increase or decrease by $2.6 million. The MTCHCredit Facility bears interest at LIBOR plus 1.50%. As of December 31, 2018, the rate in effect was approximately 4.00%. If LIBOR were to increase ordecrease by 100 basis points, then the annual interest expense on the MTCH Credit Facility would increase or decrease by $2.6 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, 2018, 2017 and 2016, international revenue accounted for 34%, 30% and 26%, respectively, of our consolidatedrevenue. The Company has exposure to foreign currency exchange risk relates to investments in foreign subsidiaries that transact business in a functionalcurrency other than the U.S. dollar. As a result, as foreign currency exchange rates fluctuate, the translation of the statement of operations of the Company'sinternational businesses into U.S. dollars affects year-over-year comparability of operating results. The average GBP and Euro exchange rates strengthenedagainst the U.S. dollar by approximately 4% and 5%, respectively, in 2018 compared to 2017.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 gains of $5.3million, losses of $16.8 million and gains of $34.4 million for the years ended December 31, 2018, 2017 and 2016, respectively. The increase in GBP versusthe U.S. dollar during 2018 and 2017 and the decrease in the GBP versus the U.S. dollar during 2016, following the Brexit vote on June 23, 2016, generatedthe majority of the Company's foreign currency exchange gains and losses in these years. The foreign exchange gains and losses are primarily related to a U.S.dollar denominated intercompany loan related to a 2016 acquisition in which the receivable is held by a foreign subsidiary with a GBP functional currency.The foreign exchange losses in 2017 and gains in 2016 were further impacted by U.S. dollar denominated cash, the majority of which is from the proceedsreceived in the PriceRunner sale in March 2016, held by a foreign subsidiary with a GBP functional currency. Subsequent to December 31, 2017, theCompany moved this U.S. dollar denominated cash to a U.S. dollar functional currency entity.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 increases our exposure to foreign exchange ratefluctuations. Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could have a significant impacton our future results of operations.66Item 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, 2018 and2017, 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, 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31,2018, 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, 2018, 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, 2019 expressed an unqualifiedopinion thereon.Adoption of Accounting Standards UpdatesAs discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for the recognition, measurement,presentation and disclosure of certain equity securities due to the adoption of ASU No. 2016-01, Recognition and Measurement of Financial Assets andFinancial Liabilities. Additionally, as discussed in Note 11 to the consolidated financial statements, the Company changed its method of accounting forstock compensation in 2017 due to the 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, 201967Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED BALANCE SHEET December 31, 2018 2017 (In thousands, except par value amounts)ASSETS Cash and cash equivalents$2,131,632 $1,630,809Marketable securities123,665 4,995Accounts receivable, net of allowance and reserves of $18,860 and $11,489, respectively279,189 304,027Other current assets228,253 185,374Total current assets2,762,739 2,125,205 Property and equipment, net of accumulated depreciation and amortization318,800 315,170Goodwill2,726,859 2,559,066Intangible assets, net of accumulated amortization631,422 663,737Long-term investments235,055 64,977Deferred income taxes64,786 66,321Other non-current assets134,924 73,334TOTAL ASSETS$6,874,585 $5,867,810 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Current portion of long-term debt$13,750 $13,750Accounts payable, trade74,907 76,571Deferred revenue360,015 342,483Accrued expenses and other current liabilities434,886 366,924Total current liabilities883,558 799,728 Long-term debt, net2,245,548 1,979,469Income taxes payable37,584 25,624Deferred income taxes23,600 35,070Other long-term liabilities66,807 38,229 Redeemable noncontrolling interests65,687 42,867 Commitments and contingencies SHAREHOLDERS' EQUITY: Common stock $.001 par value; authorized 1,600,000 shares; issued 262,303 and 260,624 shares,respectively, and outstanding 77,963 and 76,829 shares, respectively262 261Class B convertible common stock $.001 par value; authorized 400,000 shares; issued 16,157 shares andoutstanding 5,789 shares16 16Additional paid-in capital12,022,387 12,165,002Retained earnings1,258,794 595,038Accumulated other comprehensive loss(128,722) (103,568)Treasury stock 194,708 and 194,163 shares, respectively(10,309,612) (10,226,721)Total IAC shareholders' equity2,843,125 2,430,028Noncontrolling interests708,676 516,795Total shareholders' equity3,551,801 2,946,823TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$6,874,585 $5,867,810The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.68Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF OPERATIONS Years Ended December 31, 2018 2017 2016 (In thousands, except per share data)Revenue$4,262,892 $3,307,239 $3,139,882Operating costs and expenses: Cost of revenue (exclusive of depreciation shown separately below)911,146 651,008 755,730Selling and marketing expense1,519,440 1,381,221 1,247,097General and administrative expense774,079 719,257 530,446Product development expense309,329 250,879 212,765Depreciation75,360 74,265 71,676Amortization of intangibles108,399 42,143 79,426Goodwill impairment— — 275,367Total operating costs and expenses3,697,753 3,118,773 3,172,507Operating income (loss)565,139 188,466 (32,625)Interest expense(109,327) (105,295) (109,110)Other income (expense), net305,746 (16,213) 60,650Earnings (loss) before income taxes761,558 66,958 (81,085)Income tax (provision) benefit(3,811) 291,050 64,934Net earnings (loss)757,747 358,008 (16,151)Net earnings attributable to noncontrolling interests(130,786) (53,084) (25,129)Net earnings (loss) attributable to IAC shareholders$626,961 $304,924 $(41,280) Per share information attributable to IAC shareholders: Basic earnings (loss) per share$7.52 $3.81 $(0.52)Diluted earnings (loss) per share$6.59 $3.18 $(0.52) Stock-based compensation expense by function: Cost of revenue$2,482 $1,881 $2,305Selling and marketing expense7,943 31,318 6,000General and administrative expense188,510 192,957 77,151Product development expense39,485 38,462 19,364Total stock-based compensation expense$238,420 $264,618 $104,820The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.69Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS Years Ended December 31, 2018 2017 2016 (In thousands)Net earnings (loss)$757,747 $358,008 $(16,151)Other comprehensive (loss) income, net of tax: Change in foreign currency translation adjustment(31,411) 80,269 (43,126)Change in unrealized gains and losses on available-for-sale securities (net of tax benefitof $3,846 and $884 in 2017 and 2016, respectively)5 (4,026) 1,484Total other comprehensive (loss) income(31,406) 76,243 (41,642)Comprehensive income (loss), net of tax726,341 434,251 (57,793)Components of comprehensive (income) loss attributable to noncontrolling interests: Net earnings attributable to noncontrolling interests(130,786) (53,084) (25,129)Change in foreign currency translation adjustment attributable to noncontrolling interests6,129 (13,797) 6,033Change in unrealized gain and losses of available-for-sale securities attributable tononcontrolling interests(1) — 458Comprehensive income attributable to noncontrolling interests(124,658) (66,881) (18,638)Comprehensive income (loss) attributable to IAC shareholders$601,683 $367,370 $(76,431)The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.70Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITYYears Ended December 31, 2018, 2017 and 2016 IAC Shareholders' Equity Common Stock $.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, 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 oftax385 — — — — — — (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 tostock-based awards, net of withholdingtaxes— 2 1,657 — — (772) — — — (770) — (770)Income tax benefit related to stock-basedawards— — — — — 49,406 — — — 49,406 — 49,406Purchase of treasury stock— — — — — — — — (315,250) (315,250) — (315,250)Purchase of redeemable noncontrollinginterests(2,529) — — — — — — — — — — —Adjustment of redeemable noncontrollinginterests to fair value7,921 — — — — (7,560) — — — (7,560) — (7,560)Purchase of noncontrolling interests— — — — — — — — — — (211) (211)Issuance of Match Group common stockpursuant to stock-based awards, net ofwithholding taxes— — — — — — — — — — 10,224 10,224Reallocation of shareholders' equitybalances related to the noncontrollinginterests created in the Match Group IPO— — — — — 342,507 — 21,131 — 363,638 (363,638) —Changes in noncontrolling interests ofMatch Group due to the issuance of itscommon stock— — — — — (7,691) — — — (7,691) 7,691 —Noncontrolling interests created in anacquisition— — — — — 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 tostock-based awards, net of withholdingtaxes— 5 4,952 — — (10,509) — — — (10,504) — (10,504)Purchase of treasury stock— — — — — — — — (50,121) (50,121) — (50,121)Purchase of redeemable noncontrollinginterests(14,641) — — — — — — — — — — —Purchase of noncontrolling interests— — — — — — — — — — (848) (848)Adjustment of redeemable noncontrollinginterests to fair value6,341 — — — — (6,341) — — — (6,341) — (6,341)Issuance of Match Group common stockpursuant to stock-based awards, net ofwithholding taxes, and impact tononcontrolling interests in Match Group— — — — — (460,890) — 116 — (460,774) (3,435) (464,209)Acquisition of Angie's List and creation ofnoncontrolling interests in ANGIHomeservices— — — — — 645,475 — — — 645,475 133,996 779,471Noncontrolling interests created inacquisitions17,758 — — — — — — — — — — —71IAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)Years Ended December 31, 2018, 2017 and 2016 IAC Shareholders' Equity Common Stock $.001Par Value Class BConvertibleCommonStock $.001Par Value AdditionalPaid-inCapital AccumulatedOtherComprehensive(Loss) Income TreasuryStock RedeemableNoncontrollingInterests $ Shares $ Shares RetainedEarnings Total IACShareholders'Equity NoncontrollingInterests TotalShareholders'Equity (In thousands)Issuance of ANGI Homeservices commonstock pursuant to stock-based awards, netof withholding taxes, and impact tononcontrolling interests in ANGIHomeservices— — — — — (11,216) — (7) — (11,223) 2,730 (8,493)Purchase of exchangeable note hedge— — — — — (74,365) — — — (74,365) — (74,365)Equity component of exchangeable debtissuance, net of deferred financing costsand 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 $2,946,823Cumulative effect of adoption of ASU No.2014-09— — — — — — 36,795 — — 36,795 3,410 40,205Net earnings33,897 — — — — — 626,961 — — 626,961 96,889 723,850Other comprehensive loss, net of tax(702) — — — — — — (25,278) — (25,278) (5,426) (30,704)Stock-based compensation expense1,138 — — — — 75,311 — — — 75,311 161,971 237,282Issuance of common stock pursuant tostock-based awards, net of withholdingtaxes— 1 1,679 — — 21,785 — — — 21,786 — 21,786Purchase of treasury stock— — — — — — — — (82,891) (82,891) — (82,891)Purchase of noncontrolling interests(8,350) — — — — — — — — — (9,364) (9,364)Adjustment of redeemable noncontrollinginterests to fair value4,098 — — — — (4,098) — — — (4,098) — (4,098)Issuance of Match Group common stockpursuant to stock-based awards, net ofwithholding taxes, and impact tononcontrolling interests in Match Group— — — — — (342,592) — 135 — (342,457) 1,057 (341,400)Issuance of ANGI Homeservices commonstock pursuant to an acquisition, stock-based awards, net of withholding taxes,and impact to noncontrolling interests inANGI Homeservices— — — — — 106,215 — (11) — 106,204 34,502 140,706Dividends paid to Match Groupnoncontrolling interests— — — — — — — — — — (105,126) (105,126)Noncontrolling interests created inacquisitions2,261 — — — — — — — — — 14,307 14,307Other(9,522) — — — — 764 — — — 764 (339) 425Balance at December 31, 2018$65,687 $262 262,303 $16 16,157 $12,022,387 $1,258,794 $(128,722) $(10,309,612) $2,843,125 $708,676 $3,551,801The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.72Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS Years Ended December 31, 2018 2017 2016 (In thousands)Cash flows from operating activities: Net earnings (loss)$757,747 $358,008 $(16,151)Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Stock-based compensation expense238,420 264,618 104,820Amortization of intangibles108,399 42,143 79,426Depreciation75,360 74,265 71,676Bad debt expense48,445 28,930 17,733Goodwill impairment— — 275,367Deferred income taxes(34,679) (285,278) (119,181) Unrealized gains on equity securities, net(124,170) — — Gains from the sale of businesses and investments, net(147,829) (32,673) (50,965) Other adjustments, net15,763 61,647 596 Changes in assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable(34,828) (115,169) 1,283Other assets(44,557) 5,688 (12,808)Accounts payable and other liabilities53,555 (25,289) (52,359)Income taxes payable and receivable27,034 655 8,998Deferred revenue49,468 39,154 35,803Net cash provided by operating activities988,128 416,699 344,238Cash flows from investing activities: Acquisitions, net of cash acquired(64,496) (146,553) (18,403)Capital expenditures(85,634) (75,523) (78,039)Proceeds from maturities and sales of marketable debt securities333,600 114,350 252,369Purchases of marketable debt securities(449,676) (29,891) (313,943)Investments in time deposits— — (87,500)Proceeds from maturities of time deposits— — 87,500Net proceeds from the sale of businesses and investments136,719 185,778 172,228Purchases of investments(52,980) (9,106) (12,565)Other, net9,027 2,994 11,215Net cash (used in) provided by investing activities(173,440) 42,049 12,862Cash flows from financing activities: Proceeds from issuance of IAC debt— 517,500 —Repurchases of IAC debt(363) (393,464) (126,409)Proceeds from issuance of Match Group debt260,000 525,000 400,000Principal payments on Match Group debt— (445,172) (450,000)Borrowing under ANGI Homeservices Term Loan— 275,000 —Principal payments on ANGI Homeservices Term Loan(13,750) — —Purchase of exchangeable note hedge— (74,365) —Proceeds from issuance of warrants— 23,650 —Debt issuance costs(5,449) (33,744) (7,811)Purchase of IAC treasury stock(82,891) (56,424) (308,948)Purchase of Match Group treasury stock(133,455) — —Proceeds from the exercise of IAC stock options41,700 82,397 25,821Proceeds from the exercise of Match Group and ANGI Homeservices stock options4,705 61,095 39,378Withholding taxes paid on behalf of IAC employees on net settled stock-based awards(18,982) (93,832) (26,716)Withholding taxes paid on behalf of Match Group and ANGI Homeservices employees on net settled stock-based awards(237,564) (264,323) (29,830)Purchase of Match Group stock-based awards— (272,459) —Dividends paid to Match Group noncontrolling interests(105,126) — — Purchase of noncontrolling interests(16,063) (15,439) (2,740)Acquisition-related contingent consideration payments(185) (27,289) (2,180)Other, net(5,375) (5,000) (2,705)Net cash used in financing activities(312,798) (196,869) (492,140)Total cash provided (used)501,890 261,879 (135,040)Effect of exchange rate changes on cash, cash equivalents, and restricted cash(1,887) 11,604 (6,434)Net increase (decrease) in cash, cash equivalents, and restricted cash500,003 273,483 (141,474)Cash, cash equivalents, and restricted cash at beginning of period1,633,682 1,360,199 1,501,673Cash, cash equivalents, and restricted cash at end of period$2,133,685 $1,633,682 $1,360,199The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.73Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE 1—ORGANIZATIONIAC has majority ownership of both Match Group, which includes Tinder, Match, PlentyOfFish and OkCupid, and ANGI Homeservices, which includesHomeAdvisor, Angie’s List and Handy, and also operates Vimeo, Dotdash and The Daily Beast, among many other online businesses.As used herein, "IAC," the "Company," "we," "our" or "us" and similar terms refer to IAC/InterActiveCorp and its subsidiaries (unless the context requiresotherwise).During the fourth quarter of 2018, the Company realigned its reportable segments as follows:•the Match Group, ANGI Homeservices and Applications segments remain unchanged;•Vimeo is now reported as its own segment (it was previously included in the Video segment, which has been eliminated);•Dotdash is now reported as its own segment (it was previously included in the Publishing segment, which has been eliminated); and•the Company's Other segment has been renamed, Emerging & Other, and the businesses previously included in the Video segment (other thanVimeo) and the Publishing segment (other than Dotdash) are now included in the Emerging & Other segment.Match GroupOur Match Group segment consists of the businesses and operations of Match Group, Inc. ("Match Group" or "MTCH").MTCH completed its initial public offering ("IPO") on November 24, 2015. At December 31, 2018, IAC’s economic and voting interest in MTCH were81.1% and 97.6%, respectively.MTCH is a leading provider of dating products available in over 40 languages to our users all over the world through applications and websites that weown and operate. MTCH operates a portfolio of dating brands, including Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, Pairs and Hinge, as well asa number of other brands, each designed to increase users likelihood of finding a meaningful connection. Through our portfolio of trusted brands, we providetailored products to meet the varying preferences of our users.ANGI HomeservicesOur ANGI Homeservices segment includes the North American (United States and Canada) and European businesses and operations of ANGIHomeservices Inc. ("ANGI"). On September 29, 2017, the Company's HomeAdvisor business and Angie's List Inc. ("Angie's List") combined under a newpublicly traded company called ANGI Homeservices Inc. (the "Combination"). At December 31, 2018, IAC’s economic and voting interest in ANGI were83.9% and 98.1%, respectively.ANGI connects millions of homeowners to home service professionals through its portfolio of digital home service brands, including HomeAdvisor®,Angie’s List® and Handy Technologies, Inc. ("Handy"). Combined, these leading marketplaces have collected more than 15 million reviews over the courseof 20 years, allowing homeowners to research, match and connect on-demand to the largest network of service professionals online, through our mobile appsor by voice assistants.On October 19, 2018, ANGI acquired Handy, a leading platform in the United States for connecting people looking for household services (primarilycleaning and handyman services) with top-quality, pre-screened independent service professionals. ANGI also owns and operates mHelpDesk, a provider ofcloud-based field service software for small to mid-size businesses, primarily sold today to HomeAdvisor service professionals, and CraftJack. Prior to its saleon December 31, 2018, ANGI also operated Felix, a pay-per-call advertising service business. In addition to its market-leading U.S. operations, ANGI ownsleading home services online marketplaces in France (Travaux), Germany (MyHammer), Netherlands (Werkspot), United74Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Kingdom (MyBuilder Limited or "MyBuilder," acquired a controlling interest on March 24, 2017), Canada (HomeStars Inc. or "HomeStars," acquired acontrolling interest on February 8, 2017) and Italy (Instapro), as well as operations in Austria (MyHammer).VimeoVimeo operates a global video platform for creative professionals, marketers and enterprises to connect with their audiences, customers and employees.Vimeo provides cloud-based software products to stream, host, distribute and monetize videos online and across devices, as well as premium video tools on asubscription basis. Vimeo also sells live streaming accessories.DotdashDotdash is a portfolio of digital brands providing expert information and inspiration in select vertical content categories.ApplicationsOur Applications segment consists of our Desktop business and Mosaic Group (previously referred to as Mobile), our mobile business. Through thesebusinesses, we are a leading provider of global, advertising-driven desktop and subscription-based mobile applications.Through our Desktop business, we own and operate a portfolio of desktop browser applications that provide users with access to a wide variety of onlinecontent, tools and services. We provide users who download our desktop browser applications with new tab search services, as well as the option of defaultbrowser search services. We distribute our desktop browser applications to consumers free of charge on an opt-in basis directly through direct to consumer(primarily Chrome Web Store) and partnership distribution channels.Through Mosaic Group, we are a leading provider of global subscription mobile applications. Mosaic Group consists of the following businesses that weown and operate: Apalon, iTranslate, acquired in March 2018, TelTech, acquired in October 2018, and Daily Burn, transferred from the Emerging & Othersegment effective April 1, 2018.Apalon is a leading mobile development company with one of the largest and most popular application portfolios worldwide. iTranslate develops anddistributes applications that enable users to read, write, speak and learn foreign languages anywhere in the world. TelTech develops and distributes uniqueand innovative mobile communications applications that help protect consumer privacy. Daily Burn is a health and fitness property that provides streamingfitness and workout videos across a variety of platforms (including iOS, Android, Roku and other Internet-enabled television platforms).Emerging & OtherOur Emerging & Other segment primarily includes:•Ask Media Group, a collection of websites providing general search services and information;•BlueCrew, an on-demand staffing platform that connects temporary workers with traditional blue-collar jobs in areas like warehouse, delivery andmoving, data entry and customer service; •The Daily Beast, a website dedicated to news, commentary, culture and entertainment that publishes original reporting and opinion from its roster offull-time journalists and contributors;•College Humor Media, a provider of digital content, including its recently launched subscription only property, Dropout.tv; and•IAC Films, a provider of production and producer services for feature films, primarily for initial sale and distribution through theatrical releases andvideo-on-demand services in the United States and internationally.•For periods prior to their sales:75Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)◦CityGrid, an advertising network that integrated local content and advertising for distribution to affiliated and third-party publishers acrossweb and mobile platforms, sold December 31, 2018.◦Dictionary.com, an online and mobile dictionary and thesaurus service, sold November 13, 2018.◦Electus, including Notional, a provider of production and producer services for both unscripted and scripted television and digital content,primarily for initial sale and distribution in the United States, sold October 29, 2018.◦The Princeton Review, a provider of educational test preparation, academic tutoring and college counseling services, sold on March 31,2017.◦ShoeBuy, an Internet retailer of footwear and related apparel and accessories, sold December 30, 2016.◦ASKfm, a questions and answers social network, sold June 30, 2016.◦PriceRunner, a shopping comparison website, sold March 18, 2016.NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation and ConsolidationThe Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP").The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities inwhich the Company has a controlling financial interest. Intercompany transactions and accounts have been eliminated.Accounting for Investments and Equity SecuritiesInvestments 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 and areincluded in "Long-term investments" in the accompanying consolidated balance sheet. At December 31, 2018, the Company did not have any investmentsaccounted for using the equity method.Investments in equity securities, other than those of our consolidated subsidiaries and those accounted for under the equity method, are accounted for atfair value or under the measurement alternative of Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, following its adoption on January 1, 2018, with any changes to fair valuerecognized within other income (expense), net each reporting period. Under the measurement alternative, equity investments without readily determinablefair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical orsimilar investments of the same issuer; value is generally determined based on a market approach as of the transaction date. An investment will be consideredidentical or similar if it has identical or similar rights to the equity investments held by the Company. The Company reviews its equity securities forimpairment each reporting period when there are qualitative factors or events that indicate possible impairment. Factors we consider in making thisdetermination include negative changes in industry and market conditions, financial performance, business prospects, and other relevant events and factors.When indicators of impairment exist, the Company prepares quantitative assessments of the fair value of our equity securities, which require judgment andthe use of estimates. When our assessment indicates that the fair value of the security is below the carrying value, the Company writes down the security to itsfair value and records the corresponding charge within other income (expense), net. See "Accounting Pronouncements adopted by the Company" below forfurther information.76Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)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-lived intangible assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the fair values of marketable debtsecurities and equity securities without readily determinable fair values; the carrying value of accounts receivable, including the determination of theallowance for doubtful accounts; the determination of revenue reserves; the fair value of acquisition-related contingent consideration arrangements;unrecognized tax benefits; the valuation allowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, amongothers. The Company bases its estimates and judgments on historical experience, its forecasts and budgets and other factors that the Company considersrelevant.Revenue RecognitionThe Company adopted the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, effective January 1, 2018 using the modifiedretrospective transition method for open contracts as of the date of initial application. See "Accounting Pronouncements adopted by the Company" below forfurther information.The Company accounts for a contract with a customer when it has approval and commitment from all parties, the rights of the parties and payment termsare identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promisedservices or goods is transferred to our customers, and in an amount that reflects the consideration the Company is contractually due in exchange for thoseservices or goods.Transaction PriceThe objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for its services or goods,including amounts that are variable. The Company determines the total transaction price, including an estimate of any variable consideration, at contractinception and reassesses this estimate each reporting period.The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on andconcurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a componentof revenue or cost of revenue.For contracts that have an original duration of one year or less, the Company uses the practical expedient available under ASU No. 2014-09 applicableto such contracts and does not consider the time value of money.Arrangements with Multiple Performance ObligationsThe Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue toeach performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the pricescharged to customers, which are directly observable or based on an estimate if not directly observable. For our multiple performance obligation arrangementsthat include functional intellectual property ("IP"), which comprise the downloadable apps and software of the Applications segment, the Company uses aresidual approach to determine standalone selling prices for the functional IP.Assets Recognized from the Costs to Obtain a Contract with a CustomerThe Company has determined that certain costs, primarily commissions paid to employees pursuant to certain sales incentive programs and mobile appstore fees, meet the requirements to be capitalized as a cost of obtaining a contract. Commissions paid to employees pursuant to certain sales incentiveprograms are amortized over the estimated customer relationship period. The Company calculates the estimated customer relationship period as the averagecustomer life, which is77Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)based on historical data. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the averagecustomer life includes renewal periods. For sales incentive programs where the customer relationship period is one year or less, the Company has elected thepractical expedient to expense the costs as incurred. The Company generally capitalizes and amortizes mobile app store fees over the term of the applicablesubscription.During the year ended December 31, 2018, the Company recognized expense of $355.3 million related to the amortization of these costs. The currentand non-current contract asset balances at December 31, 2018 are $69.8 million and $4.5 million, respectively. The current and non-current contract assetsare included in "Other current assets" and "Other non-current assets," respectively, in the accompanying consolidated balance sheet.Performance ObligationsAs permitted under the practical expedient available under ASU No. 2014-09, the Company does not disclose the value of unsatisfied performanceobligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely tounsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Companyrecognizes revenue at the amount which we have the right to invoice for services performed.Match GroupMatch Group revenue is primarily derived directly from users in the form of recurring subscriptions. Subscription revenue is presented net of credits andcredit card chargebacks. Subscribers pay in advance, primarily by credit card or through mobile app stores, and, subject to certain conditions identified in ourterms and conditions, generally all purchases are final and nonrefundable. Revenue is initially deferred and is recognized using the straight-line method overthe term of the applicable subscription period, which generally ranges from one to six months. Revenue is also earned from online advertising, the purchaseof à la carte features and offline events. Online advertising revenue is recognized when an advertisement is displayed. Revenue from the purchase of à la cartefeatures is recognized based on usage. Revenue associated with offline events is recognized when each event occurs.ANGI HomeservicesANGI revenue is primarily derived from (i) consumer connection revenue, which comprises fees paid by HomeAdvisor service professionals forconsumer matches (regardless of whether the service professional ultimately provides the requested service) and booking fees from completed jobs sourcedthrough the Handy platform, and (ii) membership subscription fees paid by HomeAdvisor service professionals. Consumer connection revenue varies basedupon several factors, including the service requested, product experience offered and geographic location of service. The Company’s consumer connectionrevenue is generated and recognized when an in-network service professional is delivered a consumer match or when a job sourced through the Handyplatform is completed. Membership subscription revenue from service professionals is initially deferred and is recognized using the straight-line method overthe applicable subscription period, which is typically one year. Consumer connection revenue is generally billed one week following a consumer match, withpayment due upon receipt of invoice or collected when a consumer schedules a job through the Handy platform. The Company maintains revenue reservesfor potential credits for services provided by Handy service professionals to consumers.ANGI revenue is also derived from Angie's List (i) sales of time-based website, mobile and call center advertising to service professionals and (ii)membership subscription fees from consumers. Angie's List service professionals generally pay for advertisements in advance on a monthly or annual basis atthe option of the service professional, with the average advertising contract term being approximately one year. Angie's List website, mobile and call centeradvertising revenue is recognized ratably over the contract term. Revenue from the sale of advertising in the Angie’s List Magazine is recognized in theperiod in which the publication is distributed. Angie's List prepaid consumer membership subscription fees are recognized as revenue using the straight-linemethod over the term of the applicable subscription period, which is typically one year.78Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)VimeoVimeo revenue is derived primarily from annual and monthly SaaS subscription fees paid by creators for premium capabilities and, to a lesser extent,sales of live streaming hardware, software and professional services. Subscription revenue is recognized over the terms of the applicable subscription period,which are typically one month or one year.DotdashDotdash revenue consists principally of digital advertising revenue and affiliate commerce commission revenue. Digital advertising revenue isgenerated primarily through digital display advertisements sold directly and through programmatic advertising networks. Affiliate commerce commissionrevenue is generated when Dotdash refers users to commerce partner websites resulting in a purchase or transaction.ApplicationsDesktop revenue largely consists of advertising revenue generated principally through the display of paid listings in response to search queries. Thesubstantial majority of the paid listings displayed by our Desktop businesses is supplied to us by Google Inc. ("Google") pursuant to our services agreementwith Google. Pursuant to this agreement, those of our Desktop businesses that provide search services transmit search queries to Google, which in turntransmits a set of relevant and responsive paid listings back to these businesses for display in search results. This ad-serving process occurs independently of,but concurrently 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 Desktop businesses and then clicks on a Google paid listing displayed in response to the query, Google bills the advertiserthat purchased the paid listing directly and shares a portion of the fee charged to the advertiser with us. The Company recognizes 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 lesser extent, Desktop revenue also includes fees related to subscription downloadable desktop applications as well as display advertisements. Feesrelated to subscription downloadable desktop applications are generally recognized over the term of the applicable subscription period, which is primarilyone or two years. Fees related to display advertisements are recognized when an advertisement is displayed.Mosaic Group revenue consists primarily of fees related to subscription downloadable mobile applications distributed through the Apple App andGoogle Play stores, as well as display advertisements. Fees related to subscription downloadable mobile applications are generally recognized at the time ofthe sale when the software license is delivered. To the extent updates or maintenance is required or expected, revenue is recognized over the term of theapplicable subscription period, which is primarily one or two years. Fees related to display advertisements are recognized when an advertisement isdisplayed.Emerging & OtherRevenue of Ask Media Group consists principally of advertising revenue, which is generated primarily through the display of paid listings in responseto search queries and display advertisements (sold directly and through programmatic ad sales). The majority of the paid listings displayed are supplied to usby Google in the manner, and pursuant to the services agreement with Google, described above under "Applications."The Daily Beast revenue consists of advertising revenue, which is generated primarily through display advertisements (sold directly and throughprogrammatic ad sales). BlueCrew revenue consists of service revenue, which is generated through staffing temporary workers and recognized as control of the promisedservices is transferred to our customers.79Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Revenue of College Humor Media and IAC Films is generated primarily through media production and distribution and advertising. Productionrevenue is recognized when control is transferred to the customer to broadcast or exhibit, and advertising revenue is recognized when an advertisement isdisplayed or over the advertising period.Accounts Receivables, Net of Allowance for Doubtful Accounts and Revenue ReservesAccounts receivable include amounts billed and currently due from customers. The Company maintains an allowance for doubtful accounts to providefor the estimated amount of accounts receivable that will not be collected. The allowance for doubtful accounts is based upon a number of factors, includingthe length of time accounts receivable are past due, the Company’s previous loss history and the specific customer’s ability to pay its obligation. The timebetween the Company issuance of an invoice and payment due date is not significant; customer payments that are not collected in advance of the transfer ofpromised services or goods are generally due no later than 30 days from invoice date. The Company also maintains allowances to reserve for potential creditsissued to consumers or other revenue adjustments. The amounts of these reserves are based primarily upon historical experience.Deferred RevenueDeferred revenue consists of advance payments that are received or are contractually due in advance of the Company's performance. The Company’sdeferred revenue is reported on a contract by contract basis at the end of each reporting period. The Company classifies deferred revenue as current when theterm of the applicable subscription period or expected completion of our performance obligation is one year or less. The deferred revenue balance at January1, 2018 is $332.2 million. During the year ended December 31, 2018, the Company recognized $330.2 million of revenue that was included in the deferredrevenue balance as of January 1, 2018. The current and non-current deferred revenue balances at December 31, 2018 are $360.0 million and $1.7 million,respectively. Non-current deferred revenue is included in "Other long-term liabilities" in the accompanying consolidated balance sheet.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, treasury discount notes, commercial paper rated A1/P1 or better, time depositsand certificates of deposit. Internationally, cash equivalents primarily consist of AAA rated government money market funds and time deposits.Investments in Debt SecuritiesThe 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 debt securities are adjusted to fair value each quarter, and the unrealized gains and losses, net of tax,are included in accumulated other comprehensive income (loss) as a separate component of shareholders' equity. The specific-identification method is usedto determine the cost of debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss)into earnings. The Company also invests in non-marketable debt securities as part of its investment strategy. We review our debt securities for impairmenteach reporting period. The Company recognizes an unrealized loss on debt securities in net earnings when the impairment is determined to be other-than-temporary. Factors we consider in making such determination include the duration, severity and reason for the decline in value and the potential recoveryand our intent to sell the debt security. We also consider whether we will be required to sell the security before recovery of its amortized cost basis andwhether the amortized cost basis cannot be recovered because of credit losses. If an impairment is considered to be other-than-temporary, the debt securitywill be written down to its fair value and the loss will be recognized within other income (expense), net. At December 31, 2018, marketable debt securitiesconsist of treasury discount notes and commercial paper rated A1/P1 or better.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 Inc. ("Google").80Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the years ended December 31, 2018, 2017 and 2016, consolidated revenue earned from Google was $825.2 million, $740.7 million and $824.4million, representing 19%, 22% and 26%, respectively, of the Company's consolidated revenue. A meaningful portion of this revenue is attributable to theservice agreement with Google and earned by the Desktop business within the Applications segment and the Ask Media Group within the Emerging & Othersegment. For the years ended December 31, 2018, 2017 and 2016, revenue earned from Google represents 73%, 83% and 87% of Applications revenue and94%, 96% and 96% of Ask Media Group revenue (and 68%, 48% and 35% of Emerging & Other revenue), respectively. Accounts receivable related torevenue earned from Google totaled $69.1 million and $72.4 million at December 31, 2018 and 2017, respectively.The services agreement became effective on April 1, 2016, following the expiration of the previous services agreement, and expires on March 31, 2020.The services agreement requires that the Company comply with certain guidelines promulgated by Google. Google may generally unilaterally update itspolicies and guidelines without advance notice, which could in turn require modifications to, or prohibit and/or render obsolete certain of our products,services and/or business practices, which could be costly to address or otherwise have an adverse effect on our business, financial condition and results ofoperations. Google’s policy changes related to its Chrome browser became effective on September 12, 2018 and negatively impacted the distribution of ourbusiness-to-consumer ("B2C") desktop products. The impact of these changes on revenue and profits in 2018 were modest as the Company optimizedmarketing spend in anticipation of the changes. However, we expect these changes to reduce revenue and profits of the Desktop business in the future, whichamong other reasons led to a $27.7 million impairment of the related indefinite-lived intangible asset in the fourth quarter of 2018. See "Note 21—Subsequent Events (Unaudited)" for a discussion of the Company's amended services agreement with Google entered into on February 11, 2019.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.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 $58.1 million and $46.4 million at December 31, 2018 and 2017, 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 valuations that use information and assumptions81Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)provided by management. The excess purchase price over the net tangible and identifiable intangible assets is recorded as goodwill and is assigned to thereporting unit(s) that is expected to benefit 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 is 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 6—Financial Instruments" for a discussion of contingent consideration 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 equal to the excess is recorded.For the Company's annual goodwill test at October 1, 2018, a qualitative assessment of the MTCH, ANGI, Vimeo, College Humor Media and BlueCrewreporting 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:•MTCH's October 1, 2018 market capitalization of $15.7 billion exceeded its carrying value by approximately $15.1 billion and MTCH's strongoperating performance.•ANGI's October 1, 2018 market capitalization of $10.7 billion exceeded its carrying value by approximately $9.6 billion and ANGI's strongoperating performance.•The Company performed valuations of the Vimeo, College Humor Media and BlueCrew reporting units during 2018. These valuations wereprepared primarily in connection with the issuance and/or settlement of equity grants that are denominated in the equity of these businesses. Thevaluations were prepared time proximate to, however, not as of, October 1, 2018. The fair value of each of these businesses was in excess of itsOctober 1, 2018 carrying value.The Company tests goodwill for impairment when it concludes that it is more likely than not that there may be an impairment. For the Company'sannual goodwill test at October 1, 2018, the Company quantitatively tested the Desktop and Mosaic Group reporting units (included in the Applicationssegment). The Company's quantitative test indicated that the fair value of these reporting units are in excess of their respective carrying values; therefore, thegoodwill of these reporting units are not impaired. The Company's Dotdash, Ask Media Group and The Daily Beast reporting units have no goodwill.The aggregate goodwill balance for the reporting units for which the most recent estimate of fair value is less than 110% of their carrying values isapproximately $265.1 million.The fair value of the Company's reporting units (except for MTCH and ANGI described above) is determined using both an income approach based ondiscounted cash flows ("DCF") and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 eachyear. The Company uses the same approach in determining the fair value of its businesses in connection with its non-public subsidiary denominated stock-based compensation plans, which82Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)can be a significant factor in the decision to apply the qualitative screen. Determining fair value using a DCF analysis requires the exercise of significantjudgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cashflows used in the DCF analyses 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, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expectedfuture cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on each reportingunit's current results and forecasted future performance, as well as macroeconomic and industry specific factors. The discount rates used in the quantitativetest for determining the fair value of the Company's reporting units ranged from 12.5% to 15% in 2018 and 12.5% to 17.5% in 2017. Determining fair valueusing a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies.From the comparable companies, a representative market multiple is determined which is applied to financial metrics to estimate the fair value of a reportingunit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetizationmodel, margin and growth characteristics, and brand strength operating in their respective sectors. While a primary driver in the determination of the fairvalues of the Company's reporting units is the estimate of future revenue and profitability, the determination of fair value is based, in part, upon theCompany's assessment of macroeconomic factors, industry and competitive 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. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgmentsinherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows.The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangibleassets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license theCompany's trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessedannually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used inthe Company's annual indefinite-lived impairment assessment ranged from 10.5% to 35% in 2018 and 11% to 16% 2017, and the royalty rates used rangedfrom 0.75% to 8.0% in 2018 and 2% to 7% in 2017.The aggregate indefinite-lived intangible asset balance for which the most recent estimate of fair value is less than 110% of their carrying values isapproximately $131.3 million.The 2018 annual assessment of goodwill did not identify any impairments. The 2018 annual assessment of indefinite-lived intangible assets identifiedimpairment charges of $27.7 million and $1.1 million related to certain Desktop and College Humor Media indefinite-lived trade names, respectively. Theindefinite-lived intangible asset impairment charge at Desktop was due to Google’s policy changes related to its Chrome browser which became effective onSeptember 12, 2018 and have negatively impacted the distribution of our B2C downloadable desktop products. The impairment charge related to the B2Ctrade name was identified in our annual impairment assessment as of October 1, 2018 and reflects the projected reduction in profits and revenues and theresultant reduction in the assumed royalty rate from these policy changes. The impairment charges are included in "Amortization of intangibles" in theaccompanying consolidated statement of operations.The 2017 annual assessments 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 an impairmentcharge equal to the entire $275.4 million at IAC Publishing. In connection with the Company's realignment of its reportable segments in the fourth quarter of2018, $198.3 million and $77.0 million was allocated to the Dotdash and the Emerging & Other reportable segments, respectively, based upon their relativefair values as of October 1, 2018. In addition, amortization of intangibles was further impacted by the inclusion of impairment charges in 2016 of $9.0million and $2.6 million related to certain Dictionary.com and Dotdash indefinite-lived trade names, respectively. The goodwill impairment charges at IACPublishing was driven by the impact from the Google contract, traffic trends and monetization challenges and the corresponding impact on the then estimateof fair value. The expected cash flows used in the IAC Publishing DCF analysis were based on the Company's most recent forecast for the second half of 2016and each of the years in the forecast period, which were updated to include the effects of the Google contract, traffic trends and monetization challenges andthe cost savings from our restructuring efforts. For years beyond the forecast period, the Company's estimated cash flows83Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)were based on forecasted growth rates. The discount rate used in the DCF analysis reflected the risks inherent in the expected future cash flows of the IACPublishing reporting unit. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and tradingmultiples of a selected peer group of companies. From the comparable companies, a representative market multiple was determined which was applied tofinancial metrics to estimate the fair value of the IAC Publishing reporting unit. To determine a peer group of companies for IAC Publishing, we consideredcompanies relevant in terms of business model, revenue profile, margin and growth characteristics and brand strength. The indefinite-lived intangible assetimpairment charges related to certain trade names and trademarks and were due to reduced level of revenue and profits, which, in turn, also led to a reductionin 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 the discount ratethat was used reflected the risks inherent in the expected future cash flows of the trade names and trademarks. The impairment charge is included in"Amortization of intangibles" in the accompanying consolidated statement of operations.The Company’s operating segments are MTCH, ANGI, Vimeo, Dotdash and Applications, which are also reportable segments, and within its Emerging& Other reportable segment, Ask Media Group, BlueCrew, The Daily Beast, College Humor Media and IAC Films. The Company’s reporting units areconsistent with its operating segments, with the exception of Desktop and Mosaic Group, which are separate reporting units within the Applicationsoperating segment. Goodwill is tested for impairment at the reporting unit level. See "Note 12—Segment Information" for additional information regardingthe 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:•Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.•Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets,quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from orcorroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable marketprices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiplemarket 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 6—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 are adjusted to fair value only when animpairment is recognized. The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair valuewhen observable price changes are identified or an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs.84Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Traffic Acquisition CostsTraffic acquisition costs consist of (i) the amortization of fees paid to Apple and Google related to the distribution and the facilitation of in-apppurchases and (ii) payments made to partners who distribute our business-to-business customized browser-based applications and who integrate our paidlistings into their websites. These payments include amounts based on revenue share and other arrangements. The Company expenses these payments in theperiod incurred as a component of cost of revenue.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 B2C downloadable applications, offlinemarketing, which is primarily television advertising, and partner-related payments to those who direct traffic to the brands within our MTCH and ANGIsegments. Advertising expense is $1.2 billion, $1.1 billion and $1.0 billion for the years ended December 31, 2018, 2017 and 2016, 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 direct-to consumer operations. These fees areamortized over the estimated useful lives of the access points to the extent the Company can reasonably estimate a probable future economic benefit and theperiod over 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 if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Companyrecords interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax 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 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.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 FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity may make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverseas GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. The Company elects to recognize the tax on GILTI as aperiod 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.85Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)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 otherincome (expense), net. See "Note 17—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 losses totaled $0.1 million and gains totaled $0.7 million and $9.9 million during the years endedDecember 31, 2018, 2017 and 2016, respectively, and were included in "Other income (expense), net" in the accompanying consolidated statement ofoperations.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 11—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. Two of these arrangements were exercised during both the years ended December 31, 2018 and2017 and one of these arrangements was exercised during the year ended December 31, 2016. These put arrangements are exercisable by the counter-partyoutside the control of the Company. Accordingly, to the extent that the fair value of these interests exceeds the value determined by normal noncontrollinginterest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital. During the years endedDecember 31, 2018, 2017 and 2016, the Company recorded adjustments of $4.1 million, $6.3 million and $7.9 million, respectively, to increase theseinterests to fair value. Fair value determinations require high levels of judgment and are based on various valuation techniques, including marketcomparables and discounted cash flow projections.Recent Accounting PronouncementsAccounting Pronouncements adopted by the CompanyASU No. 2014-09, Revenue from Contracts with CustomersIn May 2014, the FASB issued ASU No. 2014-09, which superseded nearly all previous revenue recognition guidance. The Company adopted ASU No.2014-09 effective January 1, 2018 using the modified retrospective transition method for open contracts as of the date of initial application. The cumulativeeffect to the Company's retained earnings at January 1, 2018 was an increase of $40.2 million, of which $3.4 million was related to the noncontrolling interestin ANGI; the adjustment to retained earnings was principally related to the Company’s ANGI and Applications segments.86Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)•Within ANGI, the effect of the adoption of ASU No. 2014-09 is that commissions paid to employees pursuant to certain sales incentive programs,which represent the incremental direct costs of obtaining a service professional contract, are now capitalized and amortized over the estimated life ofa service professional (also referred to as the estimated customer relationship period). These costs were expensed as incurred prior to January 1, 2018.The cumulative effect of the adoption of ASU No. 2014-09 was the establishment of a current and non-current asset for capitalized salescommissions of $29.7 million and $4.2 million, respectively, and a related deferred tax liability of $8.0 million, resulting in a net increase toretained earnings of $25.9 million on January 1, 2018.•Within Applications, the primary effect of the adoption of ASU No. 2014-09 is to accelerate the recognition of the portion of the revenue of certaindesktop applications sold by SlimWare that qualifies as functional intellectual property ("functional IP") under ASU No. 2014-09. This revenue waspreviously deferred and recognized over the applicable subscription term. The cumulative effect of the adoption of ASU No. 2014-09 for SlimWarewas a reduction in deferred revenue of $20.3 million and the establishment of a deferred tax liability of $4.9 million, resulting in a net increase toretained earnings of $15.5 million on January 1, 2018.The Company's disaggregated revenue disclosures are presented in "Note 12—Segment Information."87Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The following table presents the impact of the adoption of ASU No. 2014-09 by segment under Accounting Standards Codification ("ASC") 606,Revenue from Contracts with Customers, as reported, and ASC 605, Revenue Recognition, for the year ended December 31, 2018. Under ASC 606(as reported) Under ASC 605 Effect of adoption ofASU No. 2014-09 (In thousands)Revenue by segment: Match Group$1,729,850 $1,729,850 $—ANGI Homeservices1,132,241 1,132,241 —Vimeo159,641 160,931 (1,290)Dotdash130,991 130,991 —Applications582,287 581,492 795Emerging & Other528,250 528,250 —Inter-segment eliminations(368) (368) —Total$4,262,892 $4,263,387 $(495) Operating costs and expenses by segment:Match Group$1,176,556 $1,176,556 $—ANGI Homeservices1,068,335 1,073,275 (4,940)Vimeo195,235 196,212 (977)Dotdash112,213 112,213 —Applications487,453 484,644 2,809Emerging & Other498,286 498,286 —Corporate159,675 159,675 —Total$3,697,753 $3,700,861 $(3,108) Operating income (loss) by segment:Match Group$553,294 $553,294 $—ANGI Homeservices63,906 58,966 4,940Vimeo(35,594) (35,281) (313)Dotdash18,778 18,778 —Applications94,834 96,848 (2,014)Emerging & Other29,964 29,964 —Corporate(160,043) (160,043) —Total$565,139 $562,526 $2,613 Net earnings$757,747 $755,741 $2,006ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial LiabilitiesIn January 2016, the FASB issued ASU No. 2016-01, which updates certain aspects of recognition, measurement, presentation, and disclosure offinancial instruments. Under ASU No. 2016-01, equity securities, other than those of our consolidated subsidiaries and those accounted for under the equitymethod, will be measured at fair value with changes in fair88Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)value recognized in the statement of operations each reporting period. ASU No. 2016-01 is effective for reporting periods beginning after December 15, 2017.There was no cumulative impact to the Company's consolidated financial statements upon adoption of ASU No. 2016-01 on January 1, 2018. The adoptionof ASU No. 2016-01 increases the volatility of the Company's other income (expense), net as a result of the remeasurement of these instruments. For the yearended December 31, 2018, other income (expense), net includes net unrealized gains related to certain equity securities that were adjusted to fair value in thesecond quarter of 2018 in accordance with ASU No. 2016-01 of $126.4 million. See "Note 6—Financial Instruments" for additional information.ASU No. 2016-18, Restricted CashIn November 2016, the FASB issued ASU No. 2016-18, which requires companies to explain the changes in the total of cash, cash equivalents,restricted cash and restricted cash equivalents in the statement of cash flows. Therefore, amounts generally described as restricted cash or restricted cashequivalents are combined with unrestricted cash and cash equivalents when reconciling the beginning and end of period balances on the statement of cashflows. ASU No. 2016-18 also requires companies to disclose the nature of their restricted cash and restricted cash equivalents balances. Additionally, whencash, cash equivalents, restricted cash, and restricted cash equivalents are presented within different captions on the balance sheet, a reconciliation of thetotals in the statement of cash flows to the related captions in the balance sheet is required. ASU No. 2016-18 is effective for reporting periods beginning afterDecember 15, 2017. The Company's adoption of ASU No. 2016-18 effective January 1, 2018, on a retrospective basis, did not have a material effect on itsconsolidated financial statements.The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet to the totalamounts shown in the consolidated statement of cash flows: December 31, 2018 December 31, 2017 December 31, 2016 December 31, 2015 (In thousands)Cash and cash equivalents$2,131,632 $1,630,809 $1,329,187 $1,481,447Restricted cash included in other current assets1,633 2,873 20,464 126Restricted cash included in other assets420 — 10,548 20,100Total cash, cash equivalents and restricted cash as shownon the consolidated statement of cash flows$2,133,685 $1,633,682 $1,360,199 $1,501,673Restricted cash at December 31, 2018 primarily consists of a cash collateralized letter of credit and a deposit related to corporate credit cards.Restricted cash at December 31, 2017 primarily supports a letter of credit to a supplier, which was released to the Company in the second quarter of2018.Restricted cash at December 31, 2016 primarily included funds held in escrow for the redemption and repurchase of IAC Senior Notes and theMyHammer tender offer. In the first quarter of 2017, the Senior Notes were redeemed and repurchased and the funds held in escrow for the MyHammer tenderoffer were returned to the Company.Restricted cash at December 31, 2015 primarily includes the repurchase of IAC Senior Notes.ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurredin a Cloud Computing Arrangement That Is a Service ContractIn August 2018, the FASB issued ASU No. 2018-15, which clarifies the accounting for implementation costs in a cloud computing arrangement that is aservices contract to follow the internal-use software guidance of ASC 350-40, Intangibles - Goodwill and Other, Internal-use Software. The provisions ofASU No. 2018-15 are effective for reporting periods beginning after December 15, 2019, including interim periods and early adoption is permitted, includingadoption in any interim period. The provisions of ASU No. 2018-15 may be adopted prospectively to all implementation costs incurred after the date of89Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)adoption or retrospectively. The Company early adopted the provisions of ASU No. 2018-15 on October 1, 2018 prospectively and the adoption of thisstandard did not have material impact on its consolidated financial statements.ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment AccountingIn June 2018, the FASB issued ASU No. 2018-07, which largely aligns the measurement and classification guidance for share-based payments grantedto non-employees with the guidance for share-based payments granted to employees. The new guidance supersedes Subtopic 505-50, Equity - Equity-Basedpayments to Nonemployees. ASU No. 2018-07 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. TheCompany adopted ASU No. 2018-07 effective April 1, 2018 and its adoption did not have a material effect on its consolidated financial statements. Theeffect of the adoption of ASU No. 2018-07 will be to minimize the volatility of expense related to stock-based awards to non-employees in the future.Accounting Pronouncement not yet adopted by the CompanyASU No. 2016-02, Leases (Topic 842)In February 2016, the FASB issued ASU No. 2016-02, which supersedes existing guidance on accounting for leases and generally requires all leases tobe recognized in the statement of financial position. The provisions of ASU No. 2016-02 are effective for reporting periods beginning after December 15,2018. The Company will adopt the new lease guidance effective January 1, 2019. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842):Targeted Improvements, which provides the option of an additional transition method that allows entities to initially apply the new lease guidance at theadoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company expects toimplement the transition method option provided by ASU No. 2018-11.The Company is not a lessor, 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 the adoption ofASU 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 lease liability to reflectthe Company's rights and obligations under its operating leases. The Company will also be required to provide the additional disclosures stipulated in ASUNo. 2016-02.The adoption of ASU No. 2016-02 will not have an impact on the leverage calculation set forth in any of the agreements governing the outstandingdebt of the Company or its MTCH and ANGI subsidiaries, or our credit agreement or the credit agreement of MTCH and ANGI because, in each circumstance,the leverage calculations are not affected by the lease 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 solution to implement ASU No. 2016-02;•the Company has input lease summaries into the software solution;•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 internal controls related to the new standard.Development of the selected software solution by the third-party vendor is ongoing. While significant progress has been made, certain key deliverablesremain, which the Company expects to be delivered in March 2019. The Company's ability to adopt ASU No. 2016-02 in an efficient and effective manner iscontingent upon the delivery and testing of these remaining deliverables. The Company has been able to develop a preliminary estimate of the impact of theadoption of ASU No. 2016-02 through the use of the third-party software solution, supplemented by our user acceptance testing. This preliminary estimate isthat a $160 million right of use asset and related lease liability will be recognized on the Company's consolidated balance sheet upon adoption. TheCompany does not expect a material impact on its results of operations or cash flows.90Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)ReclassificationsCertain prior year amounts have been reclassified to conform to the current year presentation.NOTE 3—INCOME TAXESU.S. and foreign earnings (loss) before income taxes and noncontrolling interests are as follows: Years Ended December 31, 2018 2017 2016 (In thousands)U.S. $630,417 $(52,606) $(248,433)Foreign131,141 119,564 167,348 Total$761,558 $66,958 $(81,085)The components of the income tax provision (benefit) are as follows: Years Ended December 31, 2018 2017 2016 (In thousands)Current income tax provision (benefit): Federal$(2,849) $(31,844) $23,343State2,569 1,964 3,662Foreign38,770 24,108 27,242 Current income tax provision (benefit)38,490 (5,772) 54,247 Deferred income tax provision (benefit): Federal(21,792) (255,477) (100,798)State172 (28,364) (9,518)Foreign(13,059) (1,437) (8,865) Deferred income tax benefit(34,679) (285,278) (119,181) Income tax provision (benefit)$3,811 $(291,050) $(64,934)The tax provision for the year ended December 31, 2018 includes a $143.3 million benefit for excess tax deductions attributable to stock-basedcompensation. Of this amount, $142.2 million reduced income taxes payable and $1.1 million increased the deferred tax asset for net operating losses("NOLs"). The deferred tax asset for NOLs was increased by $361.8 million for the year ended December 31, 2017 for excess tax deductions attributable tostock-based compensation. The related income tax benefit was recorded as a component of the deferred income tax benefit. The current income tax payablewas reduced by $51.8 million for the year ended December 31, 2016 for excess tax deductions attributable to stock-based compensation. For the year endedDecember 31, 2016, the related income tax benefits were recorded as increases to additional paid-in capital.91Table of ContentsIAC/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, 2018 and 2017: December 31, 2018 2017 (In thousands)Income taxes receivable (payable): Other current assets$10,132 $33,239Other non-current assets11,401 1,949Accrued expenses and other current liabilities(12,745) (11,798)Income taxes payable(37,584) (25,624) Net income taxes payable$(28,796) $(2,234) Deferred tax assets (liabilities): Other non-current assets$64,786 $66,321Deferred income taxes(23,600) (35,070) Net deferred tax assets$41,186 $31,251The 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, 2018 2017 (In thousands)Deferred tax assets: Accrued expenses$23,525 $22,234NOL carryforwards291,639 292,812Tax credit carryforwards89,397 78,715Stock-based compensation82,698 77,976Other30,106 42,331 Total deferred tax assets517,365 514,068Less valuation allowance(115,853) (132,598) Net deferred tax assets401,512 381,470 Deferred tax liabilities: Investment in subsidiaries(238,650) (247,167)Intangibles(77,669) (87,811)Fair value investment(22,927) —Other(21,080) (15,241) Total deferred tax liabilities(360,326) (350,219) Net deferred tax assets$41,186 $31,251At December 31, 2018, the Company has federal and state NOLs of $856.0 million and $698.7 million, respectively. If not utilized, $13.9 million offederal NOLs can be carried forward indefinitely, and the remainder will expire at various times primarily between 2023 and 2037, and the state NOLs, if notutilized, will expire at various times between 2019 and 2038.92Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Federal and state NOLs of $569.9 million and $350.4 million, respectively, can be used against future taxable income without restriction and the remainingNOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable state law. At December 31,2018, the Company has foreign NOLs of $383.4 million available to offset future income. Of these foreign NOLs, $352.0 million can be carried forwardindefinitely and $31.4 million will expire at various times between 2019 and 2038. During 2018, the Company recognized tax benefits related to NOLs of$9.5 million.At December 31, 2018, the Company has tax credit carryforwards of $105.4 million. Of this amount, $53.2 million relates to credits for foreign taxes,$48.3 million relates to credits for research activities and $3.9 million relates to various other credits. Of these credit carryforwards, $24.2 million can becarried forward indefinitely and $81.2 million will expire between 2019 and 2038.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.During 2018, the Company's valuation allowance decreased by $16.7 million primarily due to a decrease in foreign tax credits subject to valuationallowance and the realization of previously unbenefited capital losses. At December 31, 2018, the Company has a valuation allowance of $115.9 millionrelated to the portion of tax loss carryforwards, foreign tax credits 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 provision (benefit) to the amounts computed by applying the statutory federal income tax rate to earnings beforeincome taxes is shown as follows: Years Ended December 31, 2018 2017 2016 (In thousands)Income tax provision (benefit) at the federal statutory rate of 21% (35% for 2017 and 2016)$159,927 $23,435 $(28,446)State income taxes, net of effect of federal tax benefit14,887 86 (3,880)Stock-based compensation(129,654) (358,901) 3,998Realization of certain deferred tax assets(13,200) (3,133) —Transition tax(9,190) 62,667 —Deferred tax adjustment for enacted changes in tax laws and rates(7,488) 705 (4,594)Research credit(4,023) (5,304) (2,231)Foreign income taxed at a different statutory tax rate(3,206) (14,725) (27,115)Non-taxable sale and non-deductible goodwill associated with ShoeBuy— — (13,142)Goodwill impairment of Dotdash and Emerging & Other— — 10,649Non-deductible impairments for certain cost method investments— 2,669 3,489Other, net(4,242) 1,451 (3,662) Income tax provision (benefit)$3,811 $(291,050) $(64,934)93Table of ContentsIAC/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, 2018 2017 2016 (In thousands)Balance at January 1$36,732 $38,372 $40,808Additions based on tax positions related to the current year10,334 2,050 2,033Additions for tax positions of prior years4,716 1,994 2,676Reductions for tax positions of prior years(400) (3,761) (743)Settlements— — (5,107)Expiration of applicable statutes of limitations(2,507) (1,923) (1,295)Balance at December 31$48,875 $36,732 $38,372The 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, 2018, 2017 and 2016 is a $0.3 million expense, $0.1 million benefit and $0.4 million expense, respectively,net of related deferred taxes of $0.1 million, less than $0.1 million and $0.2 million, respectively, for interest on unrecognized tax benefits. At December 31,2018 and 2017, the Company has accrued $3.4 million and $3.0 million, respectively, for the payment of interest. At December 31, 2018 and 2017, theCompany has accrued $1.4 million and $1.7 million, respectively, 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 Service("IRS") is currently auditing the Company’s federal income tax returns for the years ended December 31, 2010 through 2016. The statute of limitations for theyears 2010 through 2015 has been extended to December 31, 2019. Various other jurisdictions are open to examination for tax years beginning with 2009.Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from examination of prior year tax returns.We consider many factors when evaluating and estimating our tax positions and tax benefits, which may not accurately anticipate actual outcomes and,therefore, may require periodic adjustment. Although management currently believes changes in unrecognized tax benefits from period to period anddifferences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on theliquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of thesematters may change in the future.At December 31, 2018 and 2017, unrecognized tax benefits, including interest and penalties, were $52.3 million and $39.7 million, respectively. Ifunrecognized tax benefits at December 31, 2018 are subsequently recognized, $49.1 million, net of related deferred tax assets and interest, would reduceincome tax expense. The comparable amount as of December 31, 2017 was $37.2 million. The Company believes that it is reasonably possible that itsunrecognized tax benefits could decrease by $21.6 million by December 31, 2019, due to expirations of statutes of limitations or other settlements; $21.6million of which would reduce the income tax provision.On December 22, 2017, the U.S. enacted the Tax Act. The Tax Act subjected to U.S. taxation certain previously deferred earnings of foreign subsidiariesas of December 31, 2017 ("Transition Tax") and implemented a number of changes that took 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 was able tomake a reasonable estimate of the Transition Tax and recorded a provisional tax expense in the fourth quarter of 2017. In the third quarter of 2018, theCompany finalized this calculation, which resulted in a $9.2 million reduction in the Transition Tax. The net reduction in the Transition Tax was dueprimarily to the utilization of additional foreign tax credits and a reduction in state taxes, partially offset by additional taxable earnings and profits of ourforeign subsidiaries based on recently issued IRS guidance. The adjustment of the Company’s provisional tax expense was recorded as a change in estimatein accordance with Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which is also included in the FASBissued ASU No. 2018-05, Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 ("SAB94Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)118"), which was issued and adopted by the Company in March 2018. Despite the completion of the Company’s accounting for the Tax Act under SAB 118,many aspects of the law remain unclear and we expect ongoing guidance to be issued at both the federal and state levels. We will continue to monitor andassess the impact of any new developments.At December 31, 2018, all of the Company’s international cash can be repatriated without significant tax consequences. The Company has not providedfor approximately $1.0 million of foreign deferred taxes for the $103.1 million of the foreign cash earnings that is indefinitely reinvested outside the U.S. TheCompany reassesses its intention to remit or permanently reinvest these cash earnings each reporting period; any required adjustment to the income taxprovision would be reflected in the period that the Company changes this intention.NOTE 4—BUSINESS COMBINATIONThrough the Combination, ANGI acquired 100% of the common stock of Angie's List on September 29, 2017 for a total purchase price valued at $781.4million.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: 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.95Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)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: 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.Unaudited 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 includes96Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of theresults that would have been achieved had the Combination actually occurred on January 1, 2016. For the year ended December 31, 2017, pro formaadjustments include (i) reductions in stock-based compensation expense of $77.1 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-basedcompensation expense is related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, bothof which were converted into ANGI Homeservices' equity awards in the Combination, and the acceleration of certain converted equity awards resulting fromthe termination of Angie's List employees in connection with the Combination. The transaction related costs include severance and retention costs of $19.8million related to the Combination. For the year ended December 31, 2016, pro forma adjustments include a reduction in revenue of $34.1 million due to thewrite-off of deferred revenue at the assumed date of acquisition as well as increases in stock-based compensation expense of $81.4 million and amortizationof intangibles of $56.1 million. Years Ended December 31, 2017 2016 (In thousands, except per share data)Revenue$3,529,600 $3,429,105Net earnings (loss) attributable to ANGI Homeservices Inc. shareholders$364,496 $(143,133)Basic earnings (loss) per share attributable to ANGI Homeservices Inc. shareholders$4.55 $(1.79)Diluted earnings (loss) per share attributable to ANGI Homeservices Inc. shareholders$4.27 $(1.79)NOTE 5—GOODWILL AND INTANGIBLE ASSETSGoodwill and intangible assets, net are as follows: December 31, 2018 2017 (In thousands)Goodwill$2,726,859 $2,559,066Intangible assets with indefinite lives458,104 459,143Intangible assets with definite lives, net of accumulated amortization173,318 204,594Total goodwill and intangible assets, net$3,358,281 $3,222,80397Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)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, 2018: Balance atDecember 31,2017 Additions (Deductions) Transfers In/(Out) ForeignExchangeTranslation Balance atDecember 31,2018 (In thousands)Match Group$1,247,899 $11,187 $— $— $(14,073) $1,245,013ANGI Homeservices768,317 142,768 (14,373) — (3,912) 892,800Vimeo77,303 — (151) — — 77,152Applications: Desktop265,146 — — — — 265,146 Mosaic Group182,096 50,784 — 7,323 (457) 239,746Total Applications447,242 50,784 — 7,323 (457) 504,892Emerging & Other18,305 3,684 (7,664) (7,323) — 7,002Total$2,559,066 $208,423 $(22,188) $— $(18,442) $2,726,859Additions primarily relate to the acquisitions of Handy (included in the ANGI Homeservices segment), TelTech and iTranslate (included in theApplications segment), Hinge (included in the Match Group segment), and BlueCrew (included in the Emerging & Other segment). Deductions relate to thesales of Felix (included in the ANGI Homeservices segment) and Electus (included in the Emerging & 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, 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 — 6,934 768,317Vimeo9,649 67,654 — — 77,303Applications: Desktop265,146 — — — 265,146 Mosaic Group182,096 — — — 182,096Total Applications447,242 — — — 447,242Emerging & Other90,012 2,715 (74,430) 8 18,305Total$1,924,052 $661,396 $(74,430) $48,048 $2,559,066Additions primarily relate to the acquisitions of Angie's List, MyBuilder and HomeStars (included in the ANGI Homeservices segment), and Livestream(included in the Vimeo segment). Deductions relate to the sale of The Princeton Review (included in the Emerging & Other segment).Prior to the fourth quarter of 2018, IAC Publishing was a reportable segment consisting of one operating segment and one reporting unit. In the fourthquarter of 2018, IAC Publishing was split into the Dotdash and the Emerging & Other segments (related to the remaining businesses previously included inthe IAC Publishing segment). The accumulated goodwill impairment of IAC Publishing was allocated to these businesses based upon their relative fair valuesas of October 1, 2018. The December 31, 2018 and 2017 goodwill balance reflects accumulated impairment losses of $529.1 million, $399.7 million, $198.3million and $11.6 million at Applications, the businesses previously included in the IAC Publishing segment, excluding98Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Dotdash (included in the Emerging & Other segment), Dotdash and College Humor Media (included in the Emerging & Other segment), respectively.Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. At December 31, 2018 and 2017, intangibleassets with definite lives are as follows: December 31, 2018 GrossCarryingAmount AccumulatedAmortization Net Weighted-AverageUseful Life(Years) (In thousands) Technology$143,303 $(53,199) $90,104 4.7Service professional and contractor relationships99,528 (44,674) 54,854 2.9Customer lists and user base30,099 (15,126) 14,973 2.9Memberships15,900 (6,640) 9,260 3.0Trade names12,393 (9,393) 3,000 3.3Other8,500 (7,373) 1,127 4.8Total$309,723 $(136,405) $173,318 3.8 December 31, 2017 GrossCarryingAmount AccumulatedAmortization Net Weighted-AverageUseful Life(Years) (In thousands) Technology$115,200 $(37,357) $77,843 4.8Service professional and contractor relationships99,497 (11,452) 88,045 3.0Customer lists and user base23,468 (5,401) 18,067 2.2Memberships15,900 (1,340) 14,560 3.0Trade names16,986 (13,634) 3,352 2.6Other8,500 (5,773) 2,727 4.8Total$279,551 $(74,957) $204,594 3.7At December 31, 2018, 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)2019$71,155202051,916202119,433202216,310202310,239Thereafter4,265Total$173,31899Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 6—FINANCIAL INSTRUMENTSMarketable SecuritiesAt December 31, 2018 and 2017, the fair value of marketable securities are as follows: December 31, 2018 2017 (In thousands)Available-for-sale marketable debt securities$123,246 $4,995Marketable equity security419 — Total marketable securities$123,665 $4,995At December 31, 2018, current available-for-sale marketable debt securities are as follows: AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value (In thousands)Treasury discount notes$112,291 $3 $(3) $112,291Commercial paper10,955 — — 10,955Total available-for-sale marketable debt securities$123,246 $3 $(3) $123,246The contractual maturities of debt securities classified as current available-for-sale at December 31, 2018 are within one year. There are no investmentsin available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of December 31,2018.At December 31, 2017, current available-for-sale marketable debt securities are as follows: AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Fair Value (In thousands)Commercial paper$4,995 $— $— $4,995Total available-for-sale marketable debt securities$4,995 $— $— $4,995The following table presents the proceeds from maturities and sales of available-for-sale marketable debt securities and the related gross realized gains: December 31, 2018 2017 2016 (In thousands)Proceeds from maturities and sales of available-for-sale marketable debt securities$333,600 $114,350 $279,485Gross realized gains— — 3,556Gross realized gains from the maturities and sales of available-for-sale marketable debt securities for the year ended December 31, 2016 are included in"Other income (expense), net" in the accompanying consolidated statement of operations.100Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)There were no gross realized losses from the maturities and sales of available-for-sale marketable debt securities for the years ended December 31, 2018, 2017,and 2016.Long-term investmentsLong-term investments consist of: December 31, 2018 2017 (In thousands)Equity securities without readily determinable fair values$235,055 $—Equity method investments— 1,559Cost method investments— 63,418Total long-term investments$235,055 $64,977Equity securities without readily determinable fair valuesThe following table presents a summary of realized and unrealized gains and losses recorded in other income (expense), net, as adjustments to thecarrying value of equity securities without readily determinable fair values held as of December 31, 2018. The gross unrealized gains principally relate to theCompany's remaining investments in an investee following the sale of a portion of the Company's investment during the second quarter of 2018. Year EndedDecember 31, 2018 (In thousands)Upward adjustments (gross unrealized gains) $128,986Downward adjustments including impairments (gross unrealized losses) (4,931)Total $124,055Realized and unrealized gains and losses for the Company's marketable equity security and investments without readily determinable fair values for theyear ended December 31, 2018 are as follows: Year EndedDecember 31, 2018 (In thousands)Realized gains, net, for equity securities sold $27,874Unrealized gains, net, on equity securities held 124,170Total gains recognized, net, in other income (expense), net $152,044Equity method investmentsIn 2018 and 2017, the Company recorded other-than-temporary impairment charges on certain of its investments of $0.6 million and $2.7 million,respectively. These charges are included in "Other income (expense), net" in the accompanying consolidated statement of operations.101Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Cost method investments (prior to the adoption of ASU No. 2016-01)In 2017 and 2016, the Company recorded $9.5 million and $10.0 million, respectively, of other-than-temporary impairment charges for certain of itsinvestments as a result of our assessment of the near-term prospects and financial condition of the investees. These charges are included in "Other income(expense), 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 income (expense), net" in the accompanying consolidated statement of operations.Fair Value MeasurementsThe following tables present the Company's financial instruments that are measured at fair value on a recurring basis: December 31, 2018 Quoted MarketPrices in ActiveMarkets forIdentical Assets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) TotalFair ValueMeasurements (In thousands)Assets: Cash equivalents: Money market funds$880,815 $— $— $880,815Treasury discount notes— 561,733 — 561,733Commercial paper— 162,417 — 162,417Time deposits— 90,036 — 90,036Marketable securities: Treasury discount notes— 112,291 — 112,291 Commercial paper— 10,955 — 10,955Marketable equity security419 — — 419Total$881,234 $937,432 $— $1,818,666 Liabilities: Contingent consideration arrangements$— $— $(28,631) $(28,631)102Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 $— $— $780,425Commercial paper— 215,325 — 215,325Treasury discount notes— 100,457 — 100,457Time deposits— 60,000 — 60,000Certificates of deposit— 6,195 — 6,195Marketable securities: Commercial paper— 4,995 — 4,995Total$780,425 $386,972 $— $1,167,397 Liabilities: Contingent consideration arrangements$— $— $(2,647) $(2,647)The Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are itscontingent consideration arrangements. Contingent Consideration Arrangements Years Ended December 31, 2018 2017 (In thousands)Balance at January 1$(2,647) $(33,871)Total net (losses) gains: Included in earnings: Fair value adjustments(1,456) (5,801)Included in other comprehensive income (loss)45 (1,404)Fair value at date of acquisition(25,521) —Settlements948 38,429Balance at December 31$(28,631) $(2,647)Contingent consideration arrangementsAt December 31, 2018, the Company has two contingent consideration arrangements outstanding related to business acquisitions. One arrangement hasa $2.0 million maximum contingent payment that has been earned and will be paid by the Company in the first quarter of 2019. The second arrangement hasa total maximum contingent payment of $45.0 million. At December 31, 2018, the gross fair value of this arrangement, before unamortized discount, is $44.0million.The contingent consideration arrangements are based upon earnings performance and/or operating metrics. The Company generally determines 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 December 31, 2018 reflect103Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)discount rates ranging from 12% to 25%. The fair values of the contingent consideration arrangements at December 31, 2017 reflect discount rates of 12%.The fair value of 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, 2018 and 2017 includes a current portion of $2.0 million and $0.6 million,respectively, and non-current portion of $26.6 million and $2.0 million at December 31, 2018 and 2017, which are included in "Accrued expenses and othercurrent liabilities" and "Other long-term liabilities," respectively, in the accompanying consolidated balance sheet.Financial instruments measured at fair value only for disclosure purposesThe following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes: December 31, 2018 December 31, 2017 CarryingValue FairValue CarryingValue FairValue (In thousands)Current portion of long-term debt$(13,750) $(12,753) $(13,750) $(13,802)Long-term debt, net(a)(2,245,548) (2,460,204) (1,979,469) (2,168,108)_________________(a) At December 31, 2018 and 2017, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $88.9 million and $109.1million, respectively.Excluding the MTCH Credit Facility, the fair value of long-term debt, including the current portion, is estimated using observable market prices orindices for similar liabilities, which are Level 2 inputs. The Company considers the outstanding borrowings under the MTCH Credit Facility, which has avariable interest rate, to have a fair value equal to its carrying value.104Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 7—LONG-TERM DEBTLong-term debt consists of: December 31, 2018 2017 (In thousands)MTCH Debt: MTCH Term Loan due November 16, 2022$425,000 $425,000MTCH Credit Facility due December 7, 2023260,000 —6.375% Senior Notes due June 1, 2024 (the "6.375% MTCH Senior Notes"); interest payable each June 1 andDecember 1400,000 400,0005.00% Senior Notes due December 15, 2027 (the "5.00% MTCH Senior Notes"); interest payable each June 15and December 15450,000 450,000Total MTCH long-term debt1,535,000 1,275,000Less: unamortized original issue discount7,352 8,668Less: unamortized debt issuance costs11,737 13,636Total MTCH debt, net1,515,911 1,252,696 ANGI Debt: ANGI Term Loan due November 5, 2023261,250 275,000Less: current portion of ANGI Term Loan13,750 13,750Less: unamortized debt issuance costs2,529 2,938Total ANGI debt, net244,971 258,312 IAC Debt: 0.875% Exchangeable Senior Notes due October 1, 2022 (the "Exchangeable Notes"); interest payable eachApril 1 and October 1517,500 517,5004.75% Senior Notes due December 15, 2022 (the "4.75% Senior Notes"); interest payable each June 15 andDecember 1534,489 34,859Total IAC long-term debt551,989 552,359Less: unamortized original issue discount54,025 67,158Less: unamortized debt issuance costs13,298 16,740Total IAC debt, net484,666 468,461 Total long-term debt, net$2,245,548 $1,979,469105Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)MTCH Senior NotesThe 6.375% MTCH Senior Notes were issued on June 1, 2016. The proceeds of $400 million were used to prepay a portion of indebtedness outstandingunder the MTCH Term Loan. At any time prior to June 1, 2019, these 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 set forth in the indenture governing the notes. Thereafter, these notes may be redeemedat 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 June 1 of the years indicated below:YearPercentage2019104.781%2020103.188%2021101.594%2022 and thereafter100.000%On December 4, 2017, MTCH issued $450 million aggregate principal amount of its 5.00% Senior Notes. The proceeds from these notes, along withcash on hand, were used to redeem the $445.2 million outstanding balance of the 6.75% MTCH Senior Notes, which were due on December 15, 2022, andpay the related call premium. At any time prior to December 15, 2022, the 5.00% MTCH Senior Notes may be redeemed at a redemption price equal to thesum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium set forth in the indenture governing the notes. Thereafter,these notes may be redeemed at the redemption prices set forth below, together with accrued and unpaid interest thereon to the applicable redemption date, ifredeemed during the twelve-month period beginning on December 15 of the years indicated below:YearPercentage2022102.500%2023101.667%2024100.833%2025 and thereafter100.000%The indentures governing the 6.375% and 5.00% MTCH Senior Notes (i) contain covenants that would limit MTCH's ability to pay dividends, makedistributions or repurchase MTCH stock in the event a default has occurred or MTCH's consolidated leverage ratio (as defined in the indentures) exceeds 5.0to 1.0 and (ii) are ranked equally with each other. At December 31, 2018, there were no limitations pursuant thereto. There are additional covenants that limitMTCH's ability and the ability of its subsidiaries to, among other things, (i) incur indebtedness, make investments, or sell assets in the event MTCH is not incompliance with certain ratios set forth in the indentures, and (ii) incur liens, enter into agreements restricting MTCH subsidiaries' ability to pay dividends,enter into transactions with affiliates and consolidate, merge or sell substantially all of their assets.MTCH Term Loan and MTCH Credit FacilityAt both December 31, 2018 and 2017, the outstanding balance on the MTCH Term Loan was $425 million. The MTCH Term Loan bears interest atLIBOR plus 2.50% and was 5.09% and 3.85% at December 31, 2018 and 2017, respectively. The MTCH Term Loan provides for annual principal paymentsas part of an excess cash flow sweep provision, the amount of which, if any, is governed by the secured net leverage ratio contained in the credit agreement.Interest payments are due at least quarterly through the term of the loan.On December 7, 2018, the MTCH $500 million revolving credit facility (the "MTCH Credit Facility") was amended and restated, and is due onDecember 7, 2023. At December 31, 2018, the outstanding borrowings under the MTCH Credit Facility were $260.0 million which bear interest at LIBORplus 1.50%, or approximately 4.00%. At December 31, 2017, there were no106Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)outstanding borrowings under the MTCH Credit Facility. The annual commitment fee on undrawn funds based on the current consolidated net leverage ratiois 25 basis points and 30 basis points at December 31, 2018 and 2017, respectively. Borrowings under the MTCH Credit Facility bear interest, at MTCH'soption, at a base rate or LIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on MTCH's consolidated netleverage ratio. The terms of the MTCH Credit Facility require MTCH to maintain a consolidated net leverage ratio of not more than 5.0 to 1.0 and a minimuminterest coverage ratio of not less than 2.0 to 1.0 (in each case as defined in the agreement).The MTCH Term Loan and MTCH Credit Facility contain covenants that would limit MTCH’s ability to pay dividends, make distributions orrepurchase MTCH stock in the event MTCH’s secured net leverage ratio exceeds 2.0 to 1.0, while the MTCH Term Loan remains outstanding and, thereafter,if the consolidated net leverage ratio exceeds 4.0 to 1.0, or in the event a default has occurred. There are additional covenants under these MTCH debtagreements that limit the ability of MTCH and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions. Obligationsunder the MTCH Credit Facility and MTCH Term Loan are unconditionally guaranteed by certain MTCH wholly-owned domestic subsidiaries, and are alsosecured by the stock of certain MTCH domestic and foreign subsidiaries. The MTCH Term Loan and outstanding borrowings, if any, under the MTCH CreditFacility rank equally with each other, and have priority over the 6.375% and 5.00% MTCH Senior Notes to the extent of the value of the assets securing theborrowings under the MTCH credit agreement.ANGI Term Loan and ANGI Credit FacilityOn November 1, 2017, ANGI borrowed $275 million under a five-year term loan facility ("ANGI Term Loan"). On November 5, 2018, the ANGI TermLoan was amended and restated, and is now due on November 5, 2023. Interest payments are due at least quarterly through the term of the loan and quarterlyprincipal payments of 1.25% of the original principal amount in the first three years from the amendment date, 2.50% in the fourth year and 3.75% in the fifthyear are required. The ANGI Term Loan bears interest at LIBOR plus 1.50%, or approximately 4.00% at December 31, 2018, which is subject to change infuture periods based on ANGI's consolidated net leverage ratio. The ANGI Term Loan bore interest at LIBOR plus 2.00%, or 3.38%, at December 31, 2017.The terms of the ANGI Term Loan require ANGI to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interestcoverage ratio of not less than 2.0 to 1.0 (in each case as defined in the credit agreement). The ANGI Term Loan also contains covenants that would limitANGI’s ability to pay dividends, make distributions or repurchase ANGI stock in the event a default has occurred or ANGI’s consolidated net leverage ratioexceeds 4.25 to 1.0. There are additional covenants under the ANGI Term Loan that limit the ability of ANGI and its subsidiaries to, among other things,incur indebtedness, pay dividends or make distributions.On November 5, 2018, ANGI entered into a five-year $250 million revolving credit facility (the "ANGI Credit Facility"). At December 31, 2018, therewere no outstanding borrowings under the ANGI Credit Facility. The annual commitment fee on undrawn funds is currently 25 basis points, and is based onthe consolidated net leverage ratio most recently reported. Borrowings under the ANGI Credit Facility bear interest, at ANGI's option, at either a base rate orLIBOR, in each case plus an applicable margin, which is determined by reference to a pricing grid based on ANGI's consolidated net leverage ratio. Thefinancial and other covenants are the same as those for the ANGI Term Loan.The ANGI Term Loan and ANGI Credit Facility are guaranteed by ANGI's wholly-owned material domestic subsidiaries and are secured by substantiallyall assets of ANGI and the guarantors, subject to certain exceptions.IAC Exchangeable NotesOn October 2, 2017, IAC FinanceCo, Inc., a direct, wholly-owned subsidiary of the Company, issued $517.5 million aggregate principal amount of its0.875% Exchangeable Senior Notes (the "Exchangeable Notes"). The Exchangeable Notes are guaranteed by the Company. Each $1,000 of principal of theExchangeable Notes is exchangeable for 6.5713 shares of the Company's common stock, which is equivalent to an exchange price of approximately $152.18per share, subject to adjustment upon the occurrence of specified events. Upon exchange, the Company has the right to settle the principal amount ofExchangeable Notes with any of the three following alternatives: (1) shares of our common stock, (2) cash or (3) a combination of cash and shares of ourcommon stock.107Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)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 (and only during such calendar quarter), if the last reported sale price of our commonstock for at least 20 trading days during the period of 30 consecutive trading days during the immediately preceding calendar quarter is greater than or equalto 130% of the exchange price on each applicable trading day, which occurred in the third quarter of 2018; (2) during the five business day period after anyfive consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was lessthan 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 forredemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence ofspecified corporate events as further described under the indenture governing the Exchangeable Notes. On or after July 1, 2022 until the close of business onthe second scheduled trading day immediately preceding the maturity date, holders may exchange all or any portion of their Exchangeable Notes regardlessof the foregoing conditions.A portion of the net proceeds from the sale of the Exchangeable Notes of $499.5 million, after deducting fees and expenses, was used to pay the netpremium of $50.7 million on the Exchangeable Note Hedge and Warrants (defined below).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 "Warrants"). The if-converted value of the Exchangeable Notes exceeds its principal amount by$105.0 million based on the Company's stock price on December 31, 2018. The Exchangeable Note Hedge is expected to reduce the potential dilutive effecton the 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 theprincipal amount of the exchanged notes. The Warrants have a dilutive effect on the Company's common stock to the extent that the market price per share ofthe Company common stock exceeds the strike price of the Warrants. The cost of the Exchangeable Note Hedge was $74.4 million, which was recorded as areduction to additional paid-in capital. The aggregate proceeds from the issuance of the Warrant were $23.6 million, which was recorded as an increase toadditional paid-in capital.For the years ended December 31, 2018 and 2017, the Company incurred interest expense of $21.2 million and $5.2 million, which includesamortization of original issue discount of $13.1 million and $3.2 million, and debt issuance costs of $3.5 million and $0.9 million, respectively. As ofDecember 31, 2018 and 2017, the unamortized discount is $54.0 million and $67.2 million, resulting in a net carrying value of the liability component of$463.5 million and $450.3 million, respectively.108Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)IAC Senior NotesThe 4.75% Senior Notes were issued by IAC on December 21, 2012. These Notes are unconditionally guaranteed by certain of our wholly-owneddomestic subsidiaries, which are designated as guarantor subsidiaries. See "Note 19—Guarantor and Non-Guarantor Financial Information" for financialinformation relating to guarantor and non-guarantor subsidiaries. The 4.75% Senior Notes may be redeemed at redemption prices set forth below, togetherwith accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15 of theyears indicated below:YearPercentage2018101.583%2019100.792%2020 and thereafter100.000%IAC Credit FacilityOn November 5, 2018, the IAC Credit Facility, under which IAC Group, LLC, a direct, wholly-owned subsidiary of the Company is the borrower, wasamended and restated, reducing the facility size from $300 million to $250 million, and now expires on November 5, 2023. At December 31, 2018 and 2017,there were no outstanding borrowings under the IAC Credit Facility. The annual commitment fee on undrawn funds is based on the consolidated net leverageratio (as defined in the agreement) most recently reported, and is 20 basis points and 25 basis points at December 31, 2018 and 2017, respectively.Borrowings under the IAC Credit Facility bear interest, at the Company's option, at a base rate or LIBOR, in each case, plus an applicable margin, which isdetermined by reference to a pricing grid based on the Company's consolidated net leverage ratio. The terms of the IAC Credit Facility require that theCompany maintains a consolidated net leverage ratio of not more than 3.25 to 1.0 before the date on which the Company no longer holds majority of theoutstanding voting stock of each of ANGI and MTCH ("Trigger Date") and no greater than 2.75 to 1.0 on or after the Trigger Date. The terms of the IACCredit Facility also restrict our ability to incur additional indebtedness. Borrowings under the IAC Credit Facility are unconditionally guaranteed bysubstantially the same domestic subsidiaries that guarantee the 4.75% Senior Notes and are also secured by the stock of certain of our domestic and foreignsubsidiaries, which includes MTCH and ANGI. The 4.75% Senior Notes are subordinate to the outstanding borrowings under the IAC Credit Facility to theextent of the value of the assets securing such borrowings.Long-term debt maturities:Years Ending December 31,(In thousands)2019$13,750202013,750202113,75020221,004,4892023452,5002024400,0002027450,000Total2,348,239Less: current portion of long-term debt13,750Less: unamortized original issue discount61,377Less: unamortized debt issuance costs27,564Total long-term debt, net$2,245,548109Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 8—SHAREHOLDERS' EQUITYDescription of Common Stock and Class B Convertible Common StockExcept as described herein, shares of IAC common stock and IAC Class B common stock are identical.Each 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.The holders of shares of IAC common stock and the holders of shares of IAC Class B common stock are entitled to receive, share for share, suchdividends as may be declared by IAC's Board of Directors out of funds legally available therefor. In the event of a liquidation, dissolution, distribution ofassets or winding-up of IAC, the holders of shares of IAC common stock and the holders of shares of IAC Class B common stock are entitled to receive, sharefor share, all the assets of IAC available for distribution to its stockholders, after the rights of the holders of any IAC preferred stock have been satisfied.Reserved Common SharesIn connection with equity compensation plans, the Exchangeable Notes and warrants, 28.0 million shares of IAC common stock are reserved atDecember 31, 2018.Warrants and Exchangeable NotesAt December 31, 2018 and 2017, warrants to acquire initially (subject to adjustment upon the occurrence of specified events) 3.4 million shares of IACcommon stock at $229.70 per share were outstanding. The warrants were issued in connection with the issuance of the Exchangeable Notes on October 2,2017 for aggregate proceeds of $23.6 million. During the years ended December 31, 2018 and 2017, no warrants were exercised and no Exchangeable Noteswere exchanged. See "Note 7—Long-term Debt" for additional information on the Exchangeable Notes.Common Stock RepurchasesDuring the years ended December 31, 2018, 2017 and 2016, the Company repurchased 0.5 million, 0.7 million and 6.3 million shares of IAC commonstock for aggregate consideration, on a trade date basis, of $82.9 million, $50.1 million and $315.3 million, respectively.On May 3, 2016, IAC's Board of Directors authorized the repurchase of an additional 10.0 million shares of IAC common stock. At December 31, 2018,the Company has approximately 8.0 million shares remaining in its share repurchase authorization.110Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 9—ACCUMULATED OTHER COMPREHENSIVE LOSSThe following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated othercomprehensive loss into earnings: Year Ended December 31, 2018 Foreign CurrencyTranslationAdjustment Unrealized Gains OnAvailable-For-SaleSecurities Accumulated OtherComprehensive Loss (In thousands)Balance at January 1$(103,568) $— $(103,568)Other comprehensive (loss) income before reclassifications(25,106) 4 (25,102)Amounts reclassified to earnings(52) — (52)Net current period other comprehensive (loss) income(25,158) 4 (25,154)Balance at December 31$(128,726) $4 $(128,722) Year Ended December 31, 2017 Foreign CurrencyTranslationAdjustment Unrealized Gains OnAvailable-For-SaleSecurities Accumulated OtherComprehensive (Loss)Income (In thousands)Balance at January 1$(170,149) $4,026 $(166,123)Other comprehensive income before reclassifications65,908 7 65,915Amounts reclassified to earnings673 (4,033) (3,360)Net current period other comprehensive income (loss)66,581 (4,026) 62,555Balance at December 31$(103,568) $— $(103,568) Year Ended December 31, 2016 Foreign CurrencyTranslationAdjustment Unrealized Gains OnAvailable-For-SaleSecurities Accumulated OtherComprehensive (Loss)Income (In thousands)Balance at January 1$(154,645) $2,542 $(152,103)Other comprehensive (loss) income before reclassifications, net of tax benefit of $0.7million related to unrealized losses on available-for-sale securities(46,943) 4,855 (42,088)Amounts reclassified to earnings9,850 (2,913) 6,937Net current period other comprehensive (loss) income(37,093) 1,942 (35,151)Reallocation of accumulated other comprehensive loss (income) related to thenoncontrolling interests created in the Match Group IPO21,589 (458) 21,131Balance at December 31$(170,149) $4,026 $(166,123)The amounts reclassified out of foreign currency translation adjustment into earnings for the years ended December 31, 2018, 2017 and 2016 relate tothe liquidation of international subsidiaries. The amounts reclassified out of unrealized gains on available-for-sale securities into earnings for the years endedDecember 31, 2017 and 2016, include a tax benefit of $3.8 million and a tax provision of $0.2 million, respectively.111Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 10—EARNINGS (LOSS) PER SHAREThe following table sets forth the computation of basic and diluted earnings (loss) per share attributable to IAC shareholders: Years Ended December 31, 2018 2017 2016 Basic Diluted Basic Diluted Basic Diluted (In thousands, except per share data)Numerator: Net earnings (loss)$757,747 $757,747 $358,008 $358,008 $(16,151) $(16,151)Net earnings attributable to noncontrolling interests(130,786) (130,786) (53,084) (53,084) (25,129) (25,129)Impact from public subsidiaries' dilutive securities (a)(b)— (25,228) — (33,531) — —Net earnings (loss) attributable to IAC shareholders$626,961 $601,733 $304,924 $271,393 $(41,280) $(41,280) Denominator: Weighted average basic shares outstanding83,407 83,407 80,089 80,089 80,045 80,045Dilutive securities (a) (b) (c) (d) (e) (f) (g)— 7,915 — 5,221 — —Denominator for earnings per share—weighted average shares(a)(b) (c) (d) (e) (f) (g)83,407 91,322 80,089 85,310 80,045 80,045 Earnings (loss) per share attributable to IAC shareholders:Earnings (loss) per share$7.52 $6.59 $3.81 $3.18 $(0.52) $(0.52)__________________________________________________________________(a)For the year ended December 31, 2018, it is more dilutive for IAC to settle certain MTCH equity awards. For the years ended December 31, 2017 and 2016, it is moredilutive for MTCH to settle certain MTCH equity awards.(b)For the years ended December 31, 2018 and 2017, it is more dilutive for IAC to settle certain ANGI equity awards. The impact on earnings of ANGI dilutive securities is notapplicable for 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, exchange of the Company's Exchangeable Notes and vesting of restricted stock units ("RSUs"). For the years endedDecember 31, 2018 and 2017, 3.5 million and 6.9 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 both the years ended December 31, 2018 and 2017, 0.1 million shares underlying market-based awards and PSUs were excluded from the calculation of diluted earnings per share because the market or performance conditions had not 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; therefore, the ExchangeableNotes are only dilutive for periods during which the average price of IAC common stock exceeds the approximate $152.18 per share exchange price per $1,000 principalamount of the Exchangeable Notes. For the year ended December 31, 2018, the average price of IAC common stock exceeded $152.18 and the dilutive impact of theExchangeable Notes was 0.3 million shares. For the year ended December 31, 2017, the Exchangeable Notes were anti-dilutive.(g)See "Note 11—Stock-based Compensation" for additional information on equity instruments denominated in the shares of certain subsidiaries.NOTE 11—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 and PSUs, as well as provide for the future grant of these and other equity awards. These112Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)plans authorize the Company to grant awards to its employees, officers, directors and consultants. At December 31, 2018, there are 11.5 million sharesavailable for grant under the plans.The plans were adopted in 2013 and 2018, 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, 2018, there is $326.0 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 2.3 years.The total income tax benefit recognized in the accompanying consolidated statement of operations for the years ended December 31, 2018, 2017 and2016 related to all stock-based compensation is $189.0 million, $423.0 million and $34.8 million, respectively. The increase in total income tax benefitrecognized in the consolidated statement of operations during 2017 relative to 2016 is due to the adoption of ASU 2016-09, effective January 1, 2017, whichrequired the recognition of excess tax benefits attributable to stock-based compensation to be included as a component of the provision for income taxesrather than recognized in equity. The aggregate income tax benefit recognized related solely to stock options for the years ended December 31, 2018, 2017and 2016, including the portion recognized as a component of equity in 2016 is $169.0 million, $411.6 million, and $63.4 million, respectively.As the Company is currently in an NOL position, there will be some delay in the timing of the realization of the cash benefit of the income taxdeductions related to stock-based compensation because it will be dependent upon the amount and timing of future taxable income and the timing ofestimated income tax payments.IAC Stock OptionsStock options outstanding at December 31, 2018 and changes during the year ended December 31, 2018 are as follows: December 31, 2018 Shares WeightedAverageExercisePrice WeightedAverageRemainingContractualTerm (In Years) AggregateIntrinsicValue (Shares and intrinsic value in thousands)Options outstanding at January 1, 20186,586 $60.57 Granted80 152.53 Exercised(774) 52.56 Forfeited(72) 57.52 Expired(6) 19.51 Options outstanding at December 31, 20185,814 $62.97 6.1 $698,128Options exercisable3,592 $59.64 5.3 $443,293The aggregate intrinsic value in the table above represents the difference between IAC's closing stock price on the last trading day of 2018 and theexercise price, multiplied by the number of in-the-money options that would have been exercised113Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)had all option holders exercised their options on December 31, 2018. The total intrinsic value of stock options exercised during the years endedDecember 31, 2018, 2017 and 2016 is $83.7 million, $164.6 million and $17.1 million, respectively.The following table summarizes the information about stock options outstanding and exercisable at December 31, 2018: Options Outstanding Options ExercisableRange of Exercise PricesOutstanding atDecember 31,2018 Weighted-AverageRemainingContractualLife in Years Weighted-AverageExercisePrice Exercisable atDecember 31,2018 Weighted-AverageRemainingContractualLife in Years Weighted-AverageExercisePrice (Shares in thousands)$20.01 to $30.0030 1.1 $21.60 30 1.1 $21.60$30.01 to $40.00389 2.3 32.30 389 2.3 32.30$40.01 to $50.001,541 5.8 43.35 961 5.0 44.26$50.01 to $60.00246 3.2 59.85 244 3.2 59.86$60.01 to $70.001,173 6.3 65.27 767 6.0 65.62$70.01 to $80.001,840 7.4 75.33 822 6.8 74.72$80.01 to $90.00500 6.3 84.31 375 6.3 84.31Greater than $90.0195 9.1 148.30 4 8.9 125.08 5,814 6.1 62.97 3,592 5.3 59.64The 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 2018, 2017 and2016, 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, 2018 2017 2016Expected volatility27% 29% 29%Risk-free interest rate2.7% 2.0% 1.2%Expected term6.2 years 5.2 years 4.8 yearsDividend yield—% —% —%During 2018, the Company granted market-based stock options that only vest if the price of IAC common stock exceeds the relevant price threshold fora twenty-day consecutive period and the service requirement is met. The market-based vesting condition was achieved in the fourth quarter of 2018. Theservice requirement provides that this award vests in two installments, the first 50% in 2021 and the second 50% in 2022. The grant date fair value of themarket-based award was estimated using a lattice model that incorporates a Monte Carlo simulation of IAC's stock price. The inputs used to fair value thisaward included an expected volatility of 29%, risk-free interest rate of 2.8% and a zero-dividend yield. The expected term of 1.8 years for this award wasderived from the output of the option valuation model. Expense is recognized over the longer of the vesting period of each of the two installments or theexpected term.Approximately less than 0.1 million, 1.2 million and 1.7 million stock options were granted by the Company during the years ended December 31,2018, 2017 and 2016, respectively. The weighted average fair value of stock options granted during the years ended December 31, 2018, 2017 and 2016 are$53.94, $22.94 and $12.34, respectively.114Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Cash received from stock option exercises for the years ended December 31, 2018, 2017 and 2016 was $41.7 million, $82.4 million and $25.8 million,respectively.The Company has historically settled its stock options on a gross basis. Assuming all stock options outstanding on December 31, 2018 were net settledon that date, the Company would have remitted $349.1 million (of which $221.6 million is related to vested stock options and $127.4 million is related tounvested stock options) in cash for withholding taxes (assuming a 50% withholding rate).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, 2018 and changes during the year ended December 31, 2018 are as follows: RSUs PSUs Numberof shares WeightedAverageGrant DateFair Value Numberof shares WeightedAverageGrant DateFair Value (Shares in thousands)Unvested at January 1, 2018360 $80.81 130 $76.00Granted153 183.33 30 152.53Vested(49) 78.54 — —Forfeited(5) 98.81 (17) 76.00Unvested at December 31, 2018459 $115.12 143 $92.02The weighted average fair value of RSUs and PSUs granted during the years ended December 31, 2018, 2017 and 2016 based on market prices of IAC'scommon stock on the grant date was $178.29, $90.04 and $46.92, respectively. The total fair value of RSUs and PSUs that vested during the years endedDecember 31, 2018, 2017 and 2016 was $8.9 million, $32.5 million and $13.5 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, MTCH and ANGI. MTCH andANGI stock-based awards are issued pursuant to their respective stock incentive plans.The Company has granted stock settled stock appreciation rights denominated in the equity of certain non-publicly traded subsidiaries to employeesand management of those subsidiaries. These equity awards vest over a period of years or upon the occurrence of certain prescribed events. The value of thestock settled stock appreciation rights is tied to the value of the common stock of these subsidiaries. Accordingly, these interests only have value to theextent the relevant business appreciates in value above the initial value utilized to determine the exercise price. These interests can have significant value inthe event of significant appreciation. The fair value of these interest is generally determined by negotiation or arbitration, when settled; which will occur atvarious dates through 2025. These equity awards are settled on a net basis, with the award holder entitled to115Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)receive a payment in IAC common shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholdingpayment. The number of IAC common shares ultimately needed to settle these awards may vary significantly from the estimated number below as a result ofboth movements in our stock price and a determination of fair value of the relevant subsidiary that is different than our estimate. The expense associated withthese equity awards is initially measured at fair value at the grant date and is expensed as stock-based compensation over the vesting term. The number ofIAC common shares that would be required to settle these interests at current estimated fair values, including vested and unvested interests, at December 31,2018 is 0.1 million shares. Withholding taxes, which will be paid by the Company on behalf of the employees upon exercise, would have been $16.0 millionat December 31, 2018, assuming a 50% withholding rate.MTCHMTCH currently settles substantially all equity awards on a net basis. Assuming all MTCH equity awards outstanding on December 31, 2018 were netsettled on that date, MTCH would have issued 9.7 million common shares (of which 1.7 million is related to vested shares and 8.0 million is related tounvested shares) and would have remitted $416.2 million (of which $75.0 million is related to vested shares and $341.2 million is related to unvested shares)in cash for withholding taxes (assuming a 50% withholding rate). If MTCH decided to issue a sufficient number of shares to cover the $416.2 millionemployee withholding tax obligation, 9.7 million additional shares would be issued by MTCH.Following the completion of the MTCH IPO, equity awards that related to certain subsidiaries (principally Tinder, Inc.) of MTCH were settleable, atIAC's election, in shares of IAC common stock or MTCH common stock. Pursuant to the Employee Matters Agreement between IAC and MTCH, to the extentshares of IAC common stock are issued in settlement of these awards, MTCH reimburses IAC for the cost of those shares in cash or by issuing IAC shares ofMTCH common stock. In July 2017, Tinder was merged into MTCH and as a result, all Tinder denominated equity awards were converted into MTCHtandem stock options ("Tandem Awards"). All of the MTCH Tandem Awards exercised during 2018 and 2017 were exercised on a net basis and were settledin IAC common shares; the Company issued 0.7 million and 2.0 million shares, respectively, of its common stock to settle these awards and MTCH issued 2.5million and 11.3 million shares, respectively, of its common stock to IAC as reimbursement. Assuming all vested and unvested Tandem Awards outstandingon December 31, 2018 were exercised on that date and settled using IAC stock, 0.3 million IAC common shares would have been issued in settlement andMTCH would have issued 1.4 million shares, which is included in the amount above, to IAC as reimbursement.During 2017, MTCH also purchased certain fully vested Tandem Awards, and made cash payments of approximately $520 million to cover both thewithholding taxes paid on behalf of employees exercising these converted awards and the purchase of certain fully vested awards.During 2016, the Company granted a nominal amount of IAC denominated market-based awards to certain MTCH employees. The number of awardsthat ultimately vest is dependent upon MTCH's stock price. The grant date fair value of each market-based award is estimated using a lattice model thatincorporates a Monte Carlo simulation of MTCH's stock price. Each market-based award is subject to service-based vesting, where a specific period ofcontinued employment must pass before an award vests. Some of the market-based awards contain performance targets set at the time of grant that must beachieved before an award vests.ANGIIn connection with the Combination, previously issued stock appreciation rights related to the common stock of HomeAdvisor (US) were converted intoANGI stock appreciation rights that are settleable, at ANGI's option, on a net basis with ANGI remitting withholding taxes on behalf of the employee or on agross basis with ANGI issuing a sufficient number of Class A shares to cover the withholding taxes. In addition, at IAC's option, these awards can be settled ineither Class A shares of ANGI or shares of IAC common stock. If settled in IAC common stock, ANGI reimburses IAC in either cash or through the issuance ofClass A shares to IAC. Assuming all of the stock appreciation rights outstanding on December 31, 2018 were net settled on that date using IAC stock, 1.1million IAC common shares would have been issued in settlement and IAC would have been issued 12.8 million shares of ANGI Class A stock and ANGIwould have remitted $205.9 million in cash for withholding taxes (assuming a 50% withholding rate). If ANGI decided to issue a sufficient number of sharesto cover the $205.9 million employee withholding tax obligation, 12.8 million additional Class A shares would be issued by ANGI. ANGI's116Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)cash withholding obligation on all other ANGI net settled awards outstanding on December 31, 2018 is $36.5 million (assuming a 50% withholding rate),which is the equivalent of 2.3 million shares.Prior to the Combination in 2017, the Company issued a number of IAC denominated PSUs to certain ANGI employees. Vesting of the PSUs iscontingent upon ANGI's performance. Assuming all of the PSUs outstanding on December 31, 2018 were net settled on that date using IAC stock, 0.1 millionIAC common shares would have been issued in settlement and IAC would have been issued 0.6 million shares of ANGI Class A stock and ANGI would haveremitted $10.4 million in cash for withholding taxes (assuming a 50% withholding rate).Modification of awardsDuring 2018, the Company modified certain equity awards and recognized modification charges of $7.9 million. In addition, in connection with theANGI chief executive officer transition during the fourth quarter of 2018, ANGI accelerated $3.9 million of expense into 2018 from 2019.In connection with the Combination, the previously issued HomeAdvisor (US) stock appreciation rights were converted into ANGI equity awardsresulting in a modification charge of $217.7 million of which $56.9 million and $93.4 million were recognized as stock-based compensation expense in theyears ended December 31, 2018 and 2017, respectively, 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 HomeAdvisor (US) denominated equity awards and recognized a modification chargeof $6.6 million.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 $0.1 million, $0.7 million and $6.3 million were recognized as stock-based compensation in the yearsended December 31, 2018, 2017 and 2016, respectively.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, MTCH settled the vested portion of the award for cash of $13.4 million. In the third quarter of2017, the award was modified and MTCH settled the remaining portion of the award for cash of $33.9 million.NOTE 12—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 Emerging & Other reportable segment, donot meet the quantitative thresholds that require presentation as separate reportable segments.The following table presents revenue by reportable segment:117Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2018 2017 2016 (In thousands)Revenue: Match Group$1,729,850 $1,330,661 $1,118,110ANGI Homeservices1,132,241 736,386 498,890Vimeo159,641 103,332 78,805Dotdash130,991 90,890 77,913Applications582,287 577,998 604,140Emerging & Other528,250 468,589 762,609Inter-segment elimination(368) (617) (585)Total$4,262,892 $3,307,239 $3,139,882The following table presents the revenue of the Company's segments disaggregated by type of service: Years Ended December 31, 2018 2017 2016 (In thousands)Match Group Direct revenue: North America$902,478 $741,334 $673,944 International774,693 539,915 393,420 Direct revenue1,677,171 1,281,249 1,067,364 Indirect revenue (principally advertising revenue)52,679 49,412 50,746 Total Match Group revenue$1,729,850 $1,330,661 $1,118,110 Supplemental information on Direct revenue Tinder$805,316 $403,216 $168,522 Other brands871,855 878,033 898,842 Total Direct revenue$1,677,171 $1,281,249 $1,067,364 ANGI Homeservices Marketplace: Consumer connection revenue$704,341 $521,481 $382,466Membership subscription revenue66,214 56,135 43,573Other revenue3,940 3,798 2,827Marketplace revenue774,495 581,414 428,866Advertising and other revenue287,676 97,483 32,981North America1,062,171 678,897 461,847Consumer connection revenue50,913 40,009 28,124Membership subscription revenue17,362 16,596 7,936Advertising and other revenue1,795 884 983Europe70,070 57,489 37,043 Total ANGI Homeservices revenue$1,132,241 $736,386 $498,890 Vimeo Platform revenue$146,665 $99,650 $78,805Hardware revenue12,976 3,682 —118Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2018 2017 2016 (In thousands) Total Vimeo revenue$159,641 $103,332 $78,805 Dotdash Advertising revenue$113,014 $81,948 $76,099Affiliate commerce commission revenue14,458 7,372 1,685Other revenue3,519 1,570 129 Total Dotdash revenue$130,991 $90,890 $77,913 Applications Desktop Advertising revenue: Google advertising revenue$426,964 $480,774 $523,335Other10,992 6,762 10,037Advertising revenue437,956 487,536 533,372Subscription and other revenue20,815 34,613 29,943 Total Desktop458,771 522,149 563,315Mosaic Group Subscription and other revenue104,975 27,980 21,787Advertising revenue18,541 27,869 19,038 Total Mosaic Group123,516 55,849 40,825 Total Applications revenue$582,287 $577,998 $604,140 Emerging & Other Advertising revenue: Google advertising revenue$357,752 $225,576 $269,192Other66,733 53,911 75,008Advertising revenue424,485 279,487 344,200Other revenue103,765 169,497 160,329Test preparation revenue— 19,605 86,517Product revenue— — 171,563 Total Emerging & Other revenue$528,250 $468,589 $762,609Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below: Years Ended December 31, 2018 2017 2016 (In thousands)Revenue United States$2,824,928 $2,323,050 $2,318,976All other countries1,437,964 984,189 820,906Total$4,262,892 $3,307,239 $3,139,882119Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2018 2017 (In thousands)Long-lived assets (excluding goodwill and intangible assets) United States$289,756 $286,541All other countries29,044 28,629Total$318,800 $315,170The following tables present operating income (loss) and Adjusted EBITDA by reportable segment: Years Ended December 31, 2018 2017 2016 (In thousands)Operating Income (Loss): Match Group$553,294 $360,517 $315,549ANGI Homeservices63,906 (149,176) 25,363Vimeo(35,594) (27,328) (25,350)Dotdash18,778 (15,694) (248,705)Applications94,834 130,176 109,663Emerging & Other29,964 17,412 (99,696)Corporate(160,043) (127,441) (109,449)Total$565,139 $188,466 $(32,625) Years Ended December 31, 2018 2017 2016 (In thousands)Adjusted EBITDA:(a) Match Group$653,931 $468,941 $403,380ANGI Homeservices$247,506 $37,858 $45,851Vimeo$(28,045) $(23,607) $(20,281)Dotdash$21,384 $(2,763) $(16,846)Applications$131,837 $136,757 $132,276Emerging & Other$36,178 $25,862 $10,111Corporate$(74,017) $(67,755) $(53,272)_______________________________________________________________________________(a) 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 businesses, and this measure is one of the primary metrics on which our internal budgets are based and by which management is compensated. Theabove items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certain limitations in that it does not takeinto account the impact to IAC's statement of operations of certain expenses.120Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)The following tables reconcile operating income (loss) for the Company's reportable segments and net earnings attributable to IAC shareholders toAdjusted EBITDA: Year Ended December 31, 2018 OperatingIncome(Loss) Stock-BasedCompensationExpense Depreciation Amortizationof Intangibles Acquisition-relatedContingentConsideration FairValue Adjustments Adjusted EBITDA (In thousands)Match Group$553,294 $66,031 $32,968 $1,318 $320 $653,931ANGI Homeservices63,906 $97,078 $24,310 $62,212 $— $247,506Vimeo(35,594) $— $1,200 $6,349 $— $(28,045)Dotdash18,778 $— $969 $1,637 $— $21,384Applications94,834 $— $2,601 $33,266 $1,136 $131,837Emerging & Other29,964 $919 $1,678 $3,617 $— $36,178Corporate(160,043) $74,392 $11,634 $— $— $(74,017)Total565,139 Interest expense(109,327) Other income, net305,746 Earnings before incometaxes761,558 Income tax provision(3,811) Net earnings757,747 Net earnings attributableto noncontrollinginterests(130,786) Net earnings attributableto IAC shareholders$626,961 121Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 $— $37,858Vimeo(27,328) $— $1,408 $2,313 $— $(23,607)Dotdash(15,694) $— $2,255 $10,676 $— $(2,763)Applications130,176 $— $3,863 $2,170 548—$136,757Emerging & Other17,412 $2,130 $4,065 $2,255 $— $25,862Corporate(127,441) $44,168 $15,518 $— $— $(67,755)Total188,466 Interest expense(105,295) Other expense, net(16,213) Earnings before incometaxes66,958 Income tax benefit291,050 Net earnings358,008 Net earningsattributable tononcontrolling interests(53,084) Net earningsattributable to IACshareholders$304,924 122Table of ContentsIAC/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 $— $— $45,851Vimeo(25,350) $— $1,085 $4,176 $(192) $— $(20,281)Dotdash(248,705) $— $2,775 $30,754 $— $198,330 $(16,846)Applications109,663 $— $5,095 $5,483 $12,035 $— $132,276Emerging & Other(99,696) $1,258 $12,675 $18,928 $(91) $77,037 $10,111Corporate(109,449) $42,276 $13,901 $— $— $— $(53,272)Total(32,625) Interest expense(109,110) Other income, net60,650 Loss before income taxes(81,085) Income tax benefit64,934 Net loss(16,151) Net earnings attributableto noncontrollinginterests(25,129) Net loss attributable toIAC shareholders$(41,280) The following tables reconcile segment assets to total assets by reportable segment: December 31, 2018 Segment Assets (b) Property andEquipment, Net Goodwill Indefinite-LivedIntangibleAssets Definite-LivedIntangibleAssets, Net Total Assets (In thousands)Match Group$377,965 $58,351 $1,245,013 $230,684 $6,956 $1,918,969ANGI Homeservices497,327 70,859 892,800 171,486 132,809 1,765,281Vimeo33,568 1,014 77,152 — 9,442 121,176Dotdash39,276 3,229 — 13,500 1,514 57,519Applications153,781 4,867 504,892 39,463 22,447 725,450Emerging & Other95,858 1,638 7,002 2,971 150 107,619Corporate (c)1,934,943 178,842 — — — 2,113,785Total$3,132,718 $318,800 $2,726,859 $458,104 $173,318 6,809,799Add: Deferred tax assets (d) 64,786Total Assets $6,874,585123Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2017 Segment Assets (b) 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 1,414,630Vimeo30,507 1,972 77,303 — 15,655 125,437Dotdash27,190 4,077 — 6,000 3,152 40,419Applications345,532 7,004 447,242 60,600 847 861,225Emerging & Other255,107 2,377 18,305 10,800 7,767 294,356Corporate (c)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 (d) 66,321Total Assets $5,867,810_____________________________________(b) 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.(c)Corporate assets consist primarily of cash and cash equivalents, marketable securities and IAC's headquarters building.(d)Total segment assets differ from total assets on a consolidated basis as a result of unallocated deferred tax assets.The following table presents capital expenditures by reportable segment: Years Ended December 31, 2018 2017 2016 (In thousands)Capital expenditures: Match Group$30,954 $28,833 $46,098ANGI Homeservices46,976 26,837 16,660Vimeo209 109 1,959Dotdash102 825 1,671Applications111 227 1,196Emerging & Other1,119 852 6,683Corporate6,163 17,840 3,772Total$85,634 $75,523 $78,039NOTE 13—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 certain lease agreements.These operating expenses are not included in the table below.124Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Future minimum payments under operating lease agreements are as follows:Years Ending December 31, (In thousands)2019 $38,7702020 46,4402021 40,9982022 34,0662023 30,567Thereafter 255,563Total $446,404Expenses charged to operations under these agreements are $42.0 million, $37.9 million and $50.8 million for the years ended December 31, 2018,2017 and 2016, respectively.The Company's three most significant operating leases are for IAC's headquarters in New York City that expires in 2081, ANGI's call center in New Yorkthat expires in 2028 and ANGI's headquarters in Denver, Colorado that expires in 2029, which collectively approximate 61% of the future minimumpayments 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: Amount of Commitment Expiration Per Period Less Than1 Year 1-3Years 3-5Years More Than5 Years TotalAmountsCommitted (In thousands)Purchase obligations$40,428 $23,897 $— $— $64,325Letters of credit and surety bonds449 — — 2,272 2,721Total commercial commitments$40,877 $23,897 $— $2,272 $67,046The purchase obligations principally include web hosting commitments. The letters of credit primarily support the Company's casualty insuranceprogram.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.On August 14, 2018, ten then-current and former employees of Match Group, LLC or Tinder, Inc. ("Tinder"), an operating business of Match Group,filed a lawsuit in New York state court against IAC and Match Group. See Sean Rad et al. v. IAC/InterActiveCorp and Match Group, Inc., No. 654038/2018(Supreme Court, New York County). The complaint alleges that in 2017, the defendants: (i) wrongfully interfered with a contractually established process forthe independent valuation of Tinder125Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)by certain investment banks, resulting in a substantial undervaluation of Tinder and a consequent underpayment to the plaintiffs upon exercise of theirTinder stock options, and (ii) then wrongfully merged Tinder into Match Group, thereby depriving one of the plaintiffs (Mr. Rad) of his contractual right tolater valuations of Tinder on a stand-alone basis. The complaint asserts claims for breach of contract, breach of the implied covenant of good faith and fairdealing, unjust enrichment, interference with contractual relations (as against Match Group only), and interference with prospective economic advantage, andseeks compensatory damages in the amount of at least $2 billion, as well as punitive damages. On August 31, 2018, four plaintiffs who were still employedby Match Group filed a notice of discontinuance of their claims without prejudice, leaving the six former employees as the remaining plaintiffs. On October9, 2018, the defendants filed a motion to dismiss the complaint on various grounds, including that the 2017 valuation of Tinder by the investment banks wasan expert determination any challenge to which is both time-barred under applicable law and available only on narrow substantive grounds that the plaintiffshave not pleaded in their complaint. On December 17, 2018, plaintiffs filed their opposition to the motion to dismiss. On January 15, 2019, the defendantsfiled their reply brief. A hearing on the motion is scheduled for March 6, 2019, and discovery in the case is proceeding. IAC and Match Group believe thatthe allegations in this lawsuit are without merit and will continue to defend vigorously against it.NOTE 14—SUPPLEMENTAL CASH FLOW INFORMATIONSupplemental Disclosure of Non-Cash Transactions:The Company recorded acquisition-related contingent consideration liabilities of $25.5 million and $0.2 million during the years ended December 31,2018 and 2016, respectively, in connection with various acquisitions. There were no acquisition-related contingent consideration liabilities recorded for theyear ended December 31, 2017. See "Note 6—Financial Instruments" for additional information on contingent consideration arrangements.On October 19, 2018, ANGI issued 8.6 million shares of its Class A common stock valued at $165.8 million in connection with the acquisition ofHandy.On September 29, 2017, ANGI issued 61.3 million shares of its Class A common stock valued at $763.7 million in connection with the Combination.Supplemental Disclosure of Cash Flow Information: Years Ended December 31, 2018 2017 2016 (In thousands)Cash paid (received) during the year for: Interest$90,485 $92,461 $107,360Income tax payments45,154 35,598 69,103Income tax refunds(33,698) (42,025) (23,877)NOTE 15—RELATED PARTY TRANSACTIONSIAC and MTCH:IAC and MTCH, in connection with MTCH's IPO, entered into the following agreements:•A Master Transaction Agreement, under which MTCH 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 MTCH of the Master Transaction Agreement or other IPO related agreements;126Table of ContentsIAC/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 MTCH common stock and (ii)anti-dilution rights with respect to MTCH common stock;•An Employee Matters Agreement, which governs the respective rights, responsibilities and obligations of IAC and MTCH after the IPO with respectto a range of compensation and benefit issues;•A Tax Sharing Agreement, which governs the respective rights, responsibilities and obligations of IAC and MTCH with respect to tax liabilitiesand benefits, entitlement to refunds, preparation of tax returns, tax contests and other tax matters regarding U.S. federal, state, local and foreignincome taxes; and•A Services Agreement, under which IAC has agreed to provide a range of services to MTCH, including, among others, (i) assistance with certainlegal, finance, internal audit, treasury, information technology support, insurance and tax affairs, including assistance with certain public companyreporting obligations; (ii) payroll processing services; (iii) tax compliance services; and (iv) such other services as to which IAC and MTCH mayagree, and MTCH agrees to provide IAC informational technology services and such other services as to which IAC and MTCH may agree.During the years ended December 31, 2018, 2017 and 2016, 3.0 million, 11.9 million and 1.0 million shares, respectively, of MTCH common stockwere issued to IAC pursuant to the employee matters agreement; 2.5 million, 11.3 million and 0.5 million, respectively, of which were issued asreimbursement for shares of IAC common stock issued in connection with the exercise and settlement of MTCH tandem stock options and equity awardsdenominated in shares of a subsidiary of MTCH, respectively; and 0.5 million, 0.6 million and 0.4 million, respectively, of which were issued asreimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by MTCH employees.For the years ended December 31, 2018, 2017 and 2016, MTCH was charged $7.6 million, $9.9 million and $11.8 million, respectively, by theCompany for services rendered pursuant to a services agreement. Included in these amounts are $5.2 million, $5.1 million and $4.3 million, respectively, forleasing of office space for certain of MTCH's businesses at properties owned by IAC. These amounts were paid in full by MTCH at December 31, 2018, 2017and 2016, respectively.At December 31, 2017, MTCH had a tax receivable of $7.3 million due from the Company pursuant to the tax sharing agreement. Refunds made by theCompany during 2018 and 2017 pursuant to this agreement were $7.0 million and $10.9 million, respectively. There were no outstanding receivables orpayables pursuant to the tax sharing agreement as of December 31, 2018.In December 2017, certain international subsidiaries of MTCH agreed to sell NOLs that were not expected to be utilized to an IAC subsidiary for $0.9million.IAC and ANGI:IAC and ANGI, 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 prior to the Combination. Under the Contribution Agreement, ANGI agrees to indemnify IAC against any lossesarising out of any breach by ANGI of the Contribution Agreement;•An Investor Rights Agreement that provides IAC with (i) specified registration and other rights relating to shares of ANGI common stock owned byIAC; (ii) anti-dilution rights with respect to ANGI common stock; and (iii) specified board matters with respect to designation of ANGI directors;•A Services Agreement, under which IAC has agreed to provide a range of services to ANGI, including, among others, (i) assistance with certainlegal, M&A, human resources, finance, risk management, internal audit and treasury functions, health and wellness, information security servicesand insurance and tax affairs, including assistance with certain public company and unclaimed property reporting obligations; (ii) accounting,controllership and payroll127Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)processing services; (iii) investor relations services; (iv) tax compliance services; and (iv) such other services as to which IAC and ANGI may agree.•A Tax Sharing Agreement, which governs the respective rights, responsibilities and obligations of IAC and ANGI with respect to tax matters,including taxes attributable to ANGI, entitlement to refunds, allocation of tax attributes, preparation of tax returns, certain tax elections, control oftax 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 after the closing of theCombination with respect to a range of compensation and benefit issues.Additionally, on September 29, 2017, the Company and ANGI entered into two intercompany notes (collectively referred to as "Intercompany Notes")to ANGI as follows: (i) a Payoff Intercompany Note, which provided the funds necessary to repay the outstanding balance under Angie's List's previouslyexisting credit agreement, totaling $61.5 million; and (ii) a Working Capital Intercompany Note, which provided ANGI with $15 million for working capitalpurposes. These Intercompany Notes were repaid on November 1, 2017, with a portion of the proceeds from the ANGI Term Loan that were received on thesame date.For the years ended December 31, 2018 and for the period subsequent to the Combination through December 31, 2017, 0.9 million and 0.4 millionshares, respectively, of ANGI Class B common stock were issued to IAC pursuant to the employee matters agreement as reimbursement for shares of IACcommon stock issued in connection with the exercise and vesting of IAC equity awards held by ANGI employees.On October 10, 2018, IAC was issued 5.1 million shares of Class B common stock of ANGI pursuant to the post-closing adjustment provision of theAngie's List merger agreement.For the years ended December 31, 2018 and for the period subsequent to the Combination through December 31, 2017, ANGI was charged $5.7 millionand $1.7 million, respectively, by the Company for services rendered pursuant to the services agreement. At December 31, 2018 and 2017, the Company hada $0.1 million outstanding payable to ANGI and a $0.4 million receivable from ANGI, respectively, pursuant to the services agreement. In addition, ANGIhad an outstanding payable due to IAC of $2.0 million at December 31, 2017 related primarily to transaction related costs incurred in connection with theCombination, which was paid in full during the first quarter of 2018. There were no comparable costs in 2018.At December 31, 2018, ANGI had taxes payable of $12.1 million due to the Company pursuant to the tax sharing agreement. No payments were made tothe Company during 2018 pursuant to this agreement.IAC and Expedia:Each of IAC and Expedia has a 50% ownership interest in two aircrafts that may be used by both companies. The Company and Expedia purchased anaircraft during the second quarter of 2017 to replace a previously owned aircraft, which was subsequently sold on February 13, 2018. The Company paid$17.4 million (50% of the total purchase price and refurbish costs) for its interest in the new aircraft. 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, 2018, 2017 and 2016, total payments made to this entity by the Company were not material.NOTE 16—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, 2018, 2017 and 2016 are $12.9 million, $11.1 million and $10.0 million,respectively. Matching128Table of ContentsIAC/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 2018 and 2017 are due primarily to an increase in participation in the Plan due to increases in headcount from the Combinationand continued corporate growth at ANGI, MTCH, Vimeo and Dotdash.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, 2018, 2017 and 2016 are $3.4 million, $2.5 million and $2.1 million, respectively. The increase incontributions in 2018 and 2017 were due, in part, to an increase in participation in the international plans due to an increase in headcount at MTCH andANGI as a result of continued business growth.NOTE 17—CONSOLIDATED FINANCIAL STATEMENT DETAILS December 31, 2018 2017 (In thousands)Other current assets: Capitalized costs to obtain a contract with a customer$69,817 $—Prepaid expenses55,586 49,350Capitalized downloadable search toolbar costs, net33,365 31,588Income taxes receivable10,132 33,239Production costs2,260 18,570Other57,093 52,627Other current assets$228,253 $185,374 December 31, 2018 2017 (In thousands)Property and equipment, net of accumulated depreciation and amortization: Buildings and leasehold improvements$249,026 $246,038Computer equipment and capitalized software229,083 218,529Furniture and other equipment86,694 88,930Projects in progress29,204 19,094Land11,591 14,390Property and equipment605,598 586,981Accumulated depreciation and amortization(286,798) (271,811)Property and equipment, net of accumulated depreciation and amortization$318,800 $315,170 December 31, 2018 2017 (In thousands)Accrued expenses and other current liabilities: Accrued employee compensation and benefits$137,583 $108,431Accrued advertising expense105,520 96,445Other191,783 162,048Accrued expenses and other current liabilities$434,886 $366,924129Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2018 2017 2016 (In thousands)Revenue: Service revenue$4,249,227 $3,302,937 $2,967,474Product revenue13,665 4,302 172,408Revenue$4,262,892 $3,307,239 $3,139,882 Years Ended December 31, 2018 2017 2016 (In thousands)Cost of revenue: Cost of service revenue$898,736 $647,226 $617,058Cost of product revenue12,410 3,782 138,672Cost of revenue$911,146 $651,008 $755,730 Years Ended December 31, 2018 2017 2016 (In thousands)Other income (expense), net$305,746 $(16,213) $60,650Other income, net in 2018 includes: $124.2 million of net unrealized gains related to certain equity investments that were adjusted to fair value inaccordance with ASU No. 2016-01, which was adopted on January 1, 2018; $120.6 million in gains related to the sales of Dictionary.com, Electus, Felix andCityGrid; $30.4 million of interest income; $27.9 million in realized gains related to the sale of certain equity investments; and $5.3 million in net foreigncurrency exchange gains due primarily to the strengthening of the dollar relative to the British Pound.Other 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; $15.4 million expense related to the extinguishment of the 6.75% MTCH Senior Notes and repricing of the MTCH Term Loan; $13.0 millionmark-to-market charge principally pertaining to a subsidiary denominated equity award held by a non-employee; $12.2 million in other-than-temporaryimpairment charges related to certain investments; $1.2 million expense related to the write-off of deferred financing costs associated with the repayment ofthe 4.875% Senior Notes; $34.9 million in realized gains related to the sale of certain investments; and $11.4 million of interest income.Other income, net in 2016 includes: $37.5 million and $12.0 million in realized gains related to the sales of ShoeBuy and PriceRunner, respectively;$34.4 million in net foreign currency exchange gains due primarily to the strengthening of the dollar relative to the British Pound and Euro; $5.1 million ofinterest income; $3.6 million gain related to the sale of certain equity investments; $12.1 million non-cash charge related to the write-off of a proportionateshare of original issue discount and deferred financing costs associated with the repayment of $440 million of the MTCH Term Loan; $10.7 million in other-than-temporary impairment charges related to certain investments; $3.8 million loss related to the sale of ASKfm; $3.6 million loss on the 4.75% and 4.875%Senior Note redemptions and repurchases; and $2.5 million mark-to-market charge principally pertaining to a subsidiary denominated equity award held by anon-employee.NOTE 18—TRANSACTION AND INTEGRATION RELATED COSTS IN CONNECTION WITH THE COMBINATIONDuring the years ended December 31, 2018 and 2017, the Company incurred $3.6 million and $44.1 million, respectively, in costs related to theCombination (including severance, retention, transaction and integration related costs), as well as deferred revenue write-offs of $5.5 million and $7.8million, respectively. During the years ended December 31, 2018 and 2017, the130Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Company also incurred $70.6 million and $122.1 million, respectively, in stock-based compensation expense related to the modification of previouslyissued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awardsin the Combination, and the acceleration of certain converted equity awards resulting from the termination of Angie's List employees in connection with theCombination.See "Note 4—Business Combination" for additional information on the Combination.A summary of the costs incurred, payments made and the related accrual is presented below. Years Ended December 31, 2018 2017 (In thousands)Transaction and integration related costs$3,584 $44,101Stock-based compensation expense70,645 122,066Total$74,229 $166,167 December 31, 2018 2017 (In thousands)Accrual as of January 1$8,480 $—Costs incurred3,584 44,101Payments made(12,064) (35,621)Accrual as of December 31$— $8,480The costs are allocated as follows in the accompanying consolidated statement of operations: Year Ended December 31, 2018 Integration RelatedCosts Stock-basedCompensationExpense Total (In thousands)Cost of revenue$— $— $—Selling and marketing expense— 2,161 2,161General and administrative expense3,584 61,010 64,594Product development expense— 7,474 7,474Total$3,584 $70,645 $74,229 Year Ended December 31, 2017 Transaction andIntegration RelatedCosts Stock-basedCompensationExpense Total (In thousands)Cost of revenue$— $— $—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 $166,167131Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 19—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, 2018 and 2017 and for the years ended December 31,2018, 2017 and 2016 for: IAC, on a standalone basis; the combined guarantor subsidiaries of IAC; the combined non-guarantor subsidiaries of IAC; and IACon a consolidated basis.Balance sheet at December 31, 2018: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Cash and cash equivalents$1,018,082 $— $1,113,550 $— $2,131,632Marketable securities98,299 — 25,366 — 123,665Accounts receivable, net of allowance and reserves— 99,970 179,219 — 279,189Other current assets27,349 29,222 171,682 — 228,253Intercompany receivables— 1,423,456 — (1,423,456) —Property and equipment, net of accumulateddepreciation and amortization6,526 163,281 148,993 — 318,800Goodwill— 412,009 2,314,850 — 2,726,859Intangible assets, net of accumulated amortization— 43,914 587,508 — 631,422Investment in subsidiaries1,897,699 214,519 — (2,112,218) —Other non-current assets274,789 94,290 251,315 (185,629) 434,765Total assets$3,322,744 $2,480,661 $4,792,483 $(3,721,303) $6,874,585 Current portion of long-term debt$— $— $13,750 $— $13,750Accounts payable, trade1,304 36,293 37,310 — 74,907Other current liabilities41,721 95,405 657,775 — 794,901Long-term debt, net34,262 — 2,211,286 — 2,245,548Income taxes payable15 1,707 35,862 — 37,584Intercompany liabilities402,056 — 1,021,400 (1,423,456) —Other long-term liabilities261 18,181 257,594 (185,629) 90,407Redeemable noncontrolling interests— — 65,687 — 65,687Shareholders' equity (deficit)2,843,125 2,329,075 (216,857) (2,112,218) 2,843,125Noncontrolling interests— — 708,676 — 708,676Total liabilities and shareholders' equity$3,322,744 $2,480,661 $4,792,483 $(3,721,303) $6,874,585132Table of ContentsIAC/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 allowance and reserves31 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 subsidiaries2,077,898 554,998 — (2,632,896) —Other non-current assets170,073 87,306 79,688 (132,435) 204,632Total assets$2,890,606 $2,114,868 $4,296,370 $(3,434,034) $5,867,810 Current portion of long-term debt$— $— $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 liabilities390,827 — 277,876 (668,703) —Other long-term liabilities511 18,613 186,610 (132,435) 73,299Redeemable noncontrolling interests— — 42,867 — 42,867Shareholders' equity2,430,028 1,976,131 656,765 (2,632,896) 2,430,028Noncontrolling interests— — 516,795 — 516,795Total liabilities and shareholders' equity$2,890,606 $2,114,868 $4,296,370 $(3,434,034) $5,867,810133Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of operations for the year ended December 31, 2018: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Revenue$— $850,475 $3,412,795 $(378) $4,262,892Operating costs and expenses: Cost of revenue (exclusive of depreciationshown separately below)195 262,912 648,330 (291) 911,146Selling and marketing expense977 313,769 1,204,844 (150) 1,519,440General and administrative expense141,727 49,563 582,720 69 774,079Product development expense2,003 56,431 250,901 (6) 309,329Depreciation1,203 12,497 61,660 — 75,360Amortization of intangibles— 29,437 78,962 — 108,399Total operating costs and expenses146,105 724,609 2,827,417 (378) 3,697,753Operating (loss) income(146,105) 125,866 585,378 — 565,139Equity in earnings of unconsolidated affiliates731,834 20,083 — (751,917) —Interest expense(1,700) — (107,627) — (109,327)Other (expense) income, net (a)(18,834) 503,261 199,757 (378,438) 305,746Earnings before income taxes565,195 649,210 677,508 (1,130,355) 761,558Income tax benefit (provision)61,766 (56,612) (8,965) — (3,811)Net earnings626,961 592,598 668,543 (1,130,355) 757,747Net earnings attributable to noncontrollinginterests— — (130,786) — (130,786)Net earnings attributable to IAC shareholders$626,961 $592,598 $537,757 $(1,130,355) $626,961Comprehensive income attributable to IACshareholders$601,683 $601,232 $515,766 $(1,116,998) $601,683____________________(a) During the year ended December 31, 2018, foreign cash of $396.2 million was repatriated to the U.S, of which $25.2 million was between non-guarantor subsidiaries.134Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of operations for the year ended December 31, 2017: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Revenue$— $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 affiliates419,149 20,755 — (439,904) —Interest expense(20,339) — (84,956) — (105,295)Other (expense) income, net(30,787) 28,434 (13,860) — (16,213)Earnings before income taxes262,391 140,920 103,551 (439,904) 66,958Income tax benefit (provision)42,533 (119,957) 368,474 — 291,050Net earnings304,924 20,963 472,025 (439,904) 358,008Net earnings attributable to noncontrollinginterests— — (53,084) — (53,084)Net earnings attributable to IAC shareholders$304,924 $20,963 $418,941 $(439,904) $304,924Comprehensive income attributable to IACshareholders$367,370 $7,629 $498,032 $(505,661) $367,370135Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of operations for the year ended December 31, 2016: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Revenue$— $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) $(76,431)136Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of cash flows for the year ended December 31, 2018: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IACConsolidated (In thousands)Net cash (used in) provided by operating activities$(38,737) $583,498 $822,227 $(378,860) $988,128Cash flows from investing activities: Acquisitions, net of cash acquired(4,142) (50,530) (9,824) — (64,496)Capital expenditures(5,274) (1,396) (78,964) — (85,634)Proceeds from maturities and sales of marketable debt securities298,600 — 35,000 — 333,600Purchases of marketable debt securities(390,005) — (59,671) — (449,676)Net proceeds from the sale of businesses and investments408 87,254 49,057 — 136,719Purchases of investments(39,180) — (13,800) — (52,980)Other, net(5,000) 7,451 6,576 — 9,027Net cash (used in) provided by investing activities(144,593) 42,779 (71,626) — (173,440)Cash flows from financing activities: Repurchases of IAC debt(363) — — — (363)Proceeds from issuance of Match Group debt— — 260,000 — 260,000Principal payments on ANGI Homeservices Term Loan— — (13,750) — (13,750)Debt issuance costs— — (5,449) — (5,449)Purchase of IAC treasury stock(82,891) — — — (82,891)Purchase of Match Group treasury stock— — (133,455) — (133,455)Proceeds from the exercise of IAC stock options41,700 — — — 41,700Proceeds from the exercise of Match Group and ANGI Homeservices stockoptions— — 4,705 — 4,705Withholding taxes paid on behalf of IAC employees on net settled stock-basedawards(18,982) — — — (18,982)Withholding taxes paid on behalf of Match Group and ANGI Homeservicesemployees on net settled stock-based awards— — (237,564) — (237,564)Dividends paid to Match Group noncontrolling interests— — (105,126) — (105,126) Purchase of noncontrolling interests— — (16,063) — (16,063)Acquisition-related contingent consideration payments— — (185) — (185)Intercompany673,308 (625,338) (426,830) 378,860 —Other, net2,674 (939) (7,110) — (5,375)Net cash provided by (used in) financing activities615,446 (626,277) (680,827) 378,860 (312,798)Total cash provided432,116 — 69,774 — 501,890Effect of exchange rate changes on cash, cash equivalents, and restricted cash327 — (2,214) — (1,887)Net increase in cash, cash equivalents, and restricted cash432,443 — 67,560 — 500,003Cash, cash equivalents, and restricted cash at beginning of period585,639 — 1,048,043 — 1,633,682Cash, cash equivalents, and restricted cash at end of period$1,018,082 $— $1,115,603 $— $2,133,685137Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of cash flows for the year ended December 31, 2017: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries IAC Consolidated (In thousands)Net cash (used in) provided by operating activities$(52,582) $131,700 $337,581 $416,699Cash flows from investing activities: Acquisitions, net of cash acquired— (2,550) (144,003) (146,553)Capital expenditures(337) (1,169) (74,017) (75,523)Proceeds from maturities and sales of marketable debt securities114,350 — — 114,350Purchases of marketable debt securities(29,891) — — (29,891)Net proceeds from the sale of businesses and investments1,266 — 184,512 185,778Purchases of investments— — (9,106) (9,106)Other, net— 1,944 1,050 2,994Net cash provided by (used in) investing activities85,388 (1,775) (41,564) 42,049Cash flows from financing activities: Proceeds from issuance of IAC debt— — 517,500 517,500Repurchases of 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 — — 82,397Proceeds from the exercise of Match Group and ANGI Homeservices stockoptions— — 61,095 61,095Withholding taxes paid on behalf of IAC employees on net settled stock-basedawards(93,832) — — (93,832)Withholding taxes paid on behalf of Match Group and ANGI Homeservicesemployees on net settled stock-based awards— — (264,323) (264,323)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)Intercompany416,396 (129,925) (286,471) — Other, net251 — (5,251) (5,000)Net cash used in financing activities(21,026) (129,925) (45,918) (196,869)Total cash provided11,780 — 250,099 261,879Effect of exchange rate changes on cash, cash equivalents, and restricted cash75 — 11,529 11,604Net increase in cash, cash equivalents, and restricted cash11,855 — 261,628 273,483Cash, cash equivalents, and restricted cash at beginning of period573,784 — 786,415 1,360,199Cash, cash equivalents, and restricted cash at end of period$585,639 $— $1,048,043 $1,633,682138Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)Statement of cash flows for the year ended December 31, 2016: IAC GuarantorSubsidiaries Non-GuarantorSubsidiaries Eliminations IAC Consolidated (In thousands)Net cash (used in) provided by operating activities$(62,686) $128,503 $278,421 $— $344,238Cash flows from investing activities: Acquisitions, net of cash acquired— — (18,403) — (18,403)Capital expenditures(479) (5,792) (71,768) — (78,039)Proceeds from maturities and sales of marketabledebt securities252,369 — — — 252,369Purchases of marketable debt securities(313,943) — — — (313,943)Investments in time deposits— — (87,500) — (87,500)Proceeds from maturities of time deposits— — 87,500 — 87,500Net proceeds from the sale of businesses andinvestments73,843 1,779 96,606 — 172,228Purchases of investments— — (12,565) — (12,565)Intercompany(155,104) — — 155,104 —Other, net126 910 10,179 — 11,215Net cash (used in) provided by investing activities(143,188) (3,103) 4,049 155,104 12,862Cash flows from financing activities: Repurchases of 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 — — — 25,821Proceeds from the exercise of Match Group stockoptions— — 39,378 — 39,378Withholding taxes paid on behalf of IAC employeeson net settled stock-based awards(26,716) — — — (26,716)Withholding 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)Intercompany122,965 (122,965) 155,104 (155,104) —Other, net(313) (2,084) (308) — (2,705)Net cash (used in) provided by financing activities(315,000) (125,400) 103,364 (155,104) (492,140)Total cash (used) provided(520,874) — 385,834 — (135,040)Effect of exchange rate changes on cash, cashequivalents, and restricted cash— — (6,434) — (6,434)Net (decrease) increase in cash, cash equivalents,and restricted cash(520,874) — 379,400 — (141,474)Cash, cash equivalents, and restricted cash atbeginning of period1,094,658 — 407,015 — 1,501,673Cash, cash equivalents, and restricted cash at end ofperiod$573,784 $— $786,415 $— $1,360,199139Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 20—QUARTERLY RESULTS (UNAUDITED) Quarter EndedMarch 31 (a) Quarter EndedJune 30 (b) Quarter EndedSeptember 30 (c) Quarter EndedDecember 31(d) (In thousands, except per share data)Year Ended December 31, 2018 Revenue$995,075 $1,059,122 $1,104,592 $1,104,103Cost of revenue201,962 218,224 237,238 253,722Operating income89,950 168,437 172,832 133,920Net earnings87,839 280,854 171,577 217,477Net earnings attributable to IAC shareholders71,082 218,353 145,774 191,752Per share information attributable to IAC shareholders: Basic earnings per share(g)$0.86 $2.61 $1.75 $2.29 Diluted earnings per share(g)$0.71 $2.32 $1.49 $2.04 Quarter EndedMarch 31 Quarter EndedJune 30 Quarter EndedSeptember 30(e) Quarter EndedDecember 31(f) (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(g)$0.34 $0.84 $2.22 $0.40 Diluted earnings per share(g)$0.29 $0.70 $1.79 $0.37_______________________________________________________________________________(a) The first quarter of 2018 includes after-tax stock-based compensation expense of $14.6 million related to the modification of previously issued HomeAdvisor equity awardsand previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination, and the acceleration of certainconverted equity awards resulting from the termination of Angie's List employees in connection with the Combination, as well as after-tax costs of $4.1 million related to theCombination (including $2.8 million of deferred revenue write-offs).(b) The second quarter of 2018 includes:i.after-tax stock-based compensation expense of $12.8 million related to the modification of previously issued HomeAdvisor equity awards and previously issuedAngie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination, and the acceleration of certain convertedequity awards resulting from the termination of Angie's List employees in connection with the Combination, as well as after-tax costs of $2.0 million related to theCombination (including $1.8 million of deferred revenue write-offs).ii.after-tax realized and unrealized gains of $133.3 million related to the sale of a certain equity investment.(c) The third quarter of 2018 includes after-tax stock-based compensation expense of $12.3 million related to the modification of previously issued HomeAdvisor equity awardsand previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination.(d) The fourth quarter of 2018 includes:i.after-tax stock-based compensation expense of $14.4 million related to the modification of previously issued HomeAdvisor equity awards and previously issuedAngie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination.ii.combined after-tax gains of $92.5 million related to the sales of Dictionary.com, Electus, Felix and CityGrid.iii.after-tax impairment charges related to indefinite-lived intangible assets of $21.3 million.140Table of ContentsIAC/INTERACTIVECORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(e) The third quarter of 2017 includes:i.after-tax stock-based compensation expense of $60.9 million related to the modification of previously issued HomeAdvisor vested awards, which were convertedinto 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.ii.a reduction to the income tax provision of $257.0 million related to excess tax benefits generated by the exercise, purchase and settlement of stock-based awards.(f) The fourth quarter of 2017 includes after-tax stock-based compensation expense of $15.8 million related to the modification of previously issued HomeAdvisor unvestedawards, which were converted into ANGI Homeservices equity awards, the expense related to previously issued Angie's List equity awards and the acceleration of certainAngie'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).(g) 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.NOTE 21—SUBSEQUENT EVENTS (UNAUDITED)On February 11, 2019, the Company and Google amended the services agreement, effective as of April 1, 2020. The amendment extends theexpiration date of the agreement to March 31, 2023; provided that beginning September 2020 and each September thereafter, either party may, afterdiscussion with the other party, terminate the services agreement, effective on September 30 of the year following the year such notice is given. TheCompany believes that the amended agreement, taken as a whole, is comparable to the Company’s previously existing agreement with Google.On February 15, 2019, MTCH completed a private offering of $350 million aggregate principal amount of its 5.625% Senior Notes due 2029. Aportion of the proceeds from these notes were used to repay outstanding borrowings under the MTCH Credit Facility and to pay expenses associated with theoffering; the remaining proceeds will be used for general corporate purposes.141Item 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, 2018. 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, 2018, the Company's internal control over financial reporting is effective. Theeffectiveness of our internal control over financial reporting as of December 31, 2018 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, 2018 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, 2018.142Report 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, 2018, 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, 2018, 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, 2018 and 2017, 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, 2018, and the related notes and the financial statementschedule listed in the Index at Item 15(a), and our report dated March 1, 2019 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, 2019143Item 9B. Other InformationNot applicable.144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 2019 Annual Meeting of Stockholders (the "2019 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 2019 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 2019 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 2019 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 2019 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 2019 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 2019 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 2019 Proxy Statement and is incorporatedherein by reference.145PART 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, 2018 and 2017.Consolidated Statement of Operations for the Years Ended December 31, 2018, 2017 and 2016.Consolidated Statement of Comprehensive Operations for the Years Ended December 31, 2018, 2017 and 2016.Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 2018, 2017 and 2016.Consolidated Statement of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016.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.146(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.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, 2017.3.5 Certificate of Designations of Series D Cumulative Preferred Stock. Exhibit 3.5 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018.4.1 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. Exhibit 4.2 to the Registrant's Annual Report on Form 10-Kfor the fiscal year ended December 31, 2017.4.3 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 for 6.375% Senior Notes, dated June 1, 2016, between MatchGroup, Inc. and Computershare 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 for 5.00% Senior Notes, 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, 2017.4.6 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, 2017.10.1 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 2018 Stock and Annual Incentive Plan.(1) Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on June 29, 2018.14710.5 Form of Terms and Conditions for Stock Options granted under theIAC/InterActiveCorp 2018 Stock and Annual Incentive Plan.(1)(2) 10.6 Form of Terms and Conditions for Restricted Stock Units grantedunder the IAC/InterActiveCorp 2018 Stock and Annual Incentive Plan.(1)(2) 10.7 IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(1) Exhibit 10.1 to the Registrant's Quarterly Report on Form10-Q for the fiscal quarter ended June 30, 2013.10.8 Form of Terms and Conditions for Stock Options granted under theIAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(1) Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.10.9 Form of Terms and Conditions for Restricted Stock Units grantedunder the IAC/InterActiveCorp 2013 Stock and Annual Incentive Plan.(1) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.10.10 IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1) Annex F to the Registrant's Definitive Proxy Statement, filedon July 10, 2008.10.11 Form of Terms and Conditions for Stock Options granted under theIAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.10.12 Form of Terms and Conditions for Restricted Stock Units grantedunder the IAC/InterActiveCorp 2008 Stock and Annual Incentive Plan.(1) Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.10.13 IAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(1) Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.10.14 Form of Terms and Conditions for Stock Options granted under theIAC/InterActiveCorp 2005 Stock and Annual Incentive Plan.(1) Exhibit 10.1 to the Registrant's Quarterly Report onForm 10-Q for the fiscal quarter ended March 31, 2008.10.15 Summary of Non-Employee Director Compensation Arrangements.(1) Exhibit 10.2 to the Registrant's Quarterly Report onForm 10-Q for the fiscal quarter ended March 31, 2009.10.16 2011 IAC/InterActiveCorp Deferred Compensation Plan for Non-Employee Directors.(1) Exhibit 10.1 to the Registrant's Quarterly Report onForm 10-Q for the fiscal quarter ended March 31, 2011.10.17 Equity and Bonus Compensation Arrangement, dated as of August 24,1995, between Barry Diller and the Registrant. Exhibit 10.26 to the Registrant's Annual Report on Form 10-Kfor the fiscal year ended December 31, 1996.10.18 Employment Agreement between Joseph Levin and the Registrant,dated as of November 21, 2017.(1) Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on November 22, 2017.10.19 Second Amended and Restated Employment Agreement betweenVictor A. Kaufman and the Registrant, dated as of March 15, 2012.(1) Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012.10.20 Employment Agreement between Glenn H. Schiffman and theRegistrant, dated as of April 7, 2016.(1) Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2016.10.21 Employment Agreement between Mark Stein and the Registrant, datedas of June 28, 2018.(1) Exhibit 10.2 to the Registrant's Current Report on Form 8-K,filed on June 29, 2018.10.22 Employment Agreement between Gregg Winiarski and the Registrant,dated as of February 26, 2010.(1) Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.10.23 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, 2015.14810.24 Second Amended and Restated Credit Agreement, dated as ofNovember 5, 2018, by and among IAC Group, LLC, the Lenders fromtime to time party thereto and JPMorgan Chase Bank, N.A., asAdministrative Agent. Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on November 9, 2018.10.25 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, 2015.10.26 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, 2016.10.27 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, 2017.10.28 Amendment No. 5, dated as of December 7, 2018, 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 and as further amended August 14,2017, among Match Group, Inc., as Borrower, the Lenders partythereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and theother parties thereto. Exhibit 10.1 to the Registrant's Current Report on Form 8-K,filed on December 13, 2018.10.29 Amended and Restated Credit Agreement, dated as of November 5,2018, by and among ANGI Homeservices Inc., the Lenders from time totime party thereto and JPMorgan Chase Bank, N.A., as AdministrativeAgent. Exhibit 10.2 to the Registrant's Current Report on Form 8-K,filed on November 9, 2018.10.30 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, 2015.10.31 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, 2015.10.32 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, 2016.10.33 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, 2015.10.34 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, 2015.10.35 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, 2015.10.36 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, 2017.10.37 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, 2017.14910.38 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, 2017.10.39 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, 2017.10.40 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, 2018.(2) 23.1 Consent of Ernst & Young LLP.(2) 31.1 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.(2) 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.(2) 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.(2) 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 (2) 101.SCH XBRL Taxonomy Extension Schema (2) 101.CAL XBRL Taxonomy Extension Calculation (2) 101.DEF XBRL Taxonomy Extension Definition (2) 101.LAB XBRL Taxonomy Extension Labels (2) 101.PRE XBRL Taxonomy Extension Presentation (2) _______________________________________________________________________________(1)Reflects management contracts and management and director compensatory plans.(2)Filed herewith.(3)Certain portions of this document have been omitted pursuant to a confidential treatment request.(4)Furnished herewith.150SIGNATURESPursuant 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, 2019 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, 2019: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 151Schedule IIIAC/INTERACTIVECORP AND SUBSIDIARIESVALUATION AND QUALIFYING ACCOUNTSDescriptionBalance atBeginningof Period Charges toEarnings Charges toOther Accounts Deductions Balance atEnd of Period (In thousands)2018 Allowance for doubtful accounts and revenue reserves$11,489 $48,445(a) $(573) $(40,501)(d) $18,860Deferred tax valuation allowance132,598 (20,746)(b) 4,001(c) — 115,853Other reserves2,544 7,7342017 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(e) 6,284(f) — 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)(g) (1,475)(h) — 88,170Other reserves2,801 2,822_________________________________________________________(a)Additions to the allowance for doubtful accounts are charged to expense. Additions to the revenue reserves are charged against revenue.(b)Amount is primarily related to a decrease in foreign tax credits subject to a valuation allowance and the realization of previously unbenefited capital losses, partially offset byan increase in state net operating losses and foreign interest deduction carryforwards.(c)Amount is primarily related to acquired federal and state NOLs, partially offset by currency translation adjustments on foreign NOLs.(d)Write-off of fully reserved accounts receivable.(e)Amount is due primarily to the establishment of foreign NOLs related to an acquisition.(f)Amount is primarily related to acquired state NOLs, acquired foreign tax credits and currency translation adjustments on foreign NOLs.(g)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.(h)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.152Exhibit 10.5Terms and Conditions for Stock Options Granted Under theIAC/InterActiveCorp 2018 Stock and Annual Incentive PlanOverviewThese Terms and Conditions apply to the grant to you by IAC/InterActiveCorp (“IAC” or the “Company”) pursuant to Section 5 of theIAC/InterActiveCorp 2018 Stock and Annual Incentive Plan (the “Plan”) of the right and option (the “Stock Options”) to purchase the number of shares ofcommon stock of the Company, par value $0.001 per share (the “Common Stock”), set forth in your award notice (the “Award Notice” and together with theseTerms and Conditions, the “Award Agreement”) at the exercise price per share set forth in the Award Notice. he Stock Options shall be Nonqualified Options.Unless earlier terminated pursuant to the terms of your Award Agreement or the Plan, the Stock Options shall expire on the ten year anniversary of yourAward Date (the “Expiration Date”).All capitalized terms used herein, to the extent not defined, shall have the meanings set forth in the Plan.Continuous ServiceIn order for your Stock Options to vest, you must be continuously employed by IAC or one of its Subsidiaries or Affiliates (excluding, for purposesof the Stock Options, Expedia, Inc. and its subsidiaries) during the Restriction Period (as defined below). Nothing in this Award Agreement or the Plan shallconfer upon you any right to continue in the employ or service of IAC or any of its Subsidiaries or Affiliates or interfere in any way with their rights toterminate your employment or service at any time.VestingSubject to this Award Agreement and the Plan, your Stock Options shall vest and become exercisable (such period prior to vesting is the “RestrictionPeriod”) as set forth in your Award Notice.Method of Exercise of the Stock Options and Payment of the Exercise PriceThe portion of your Stock Options that is vested may be exercised by delivering to the Company or the agent selected by IAC to administer the Plan(the “Agent”) a written (including by way of electronic means) notice stating the number of whole shares to be purchased pursuant to this Award Agreement,accompanied by payment of the full purchase price of the shares of Common Stock to be purchased. Your Stock Options may not be exercised at any onetime as to fewer than 100 shares (or such number of shares as to which the Stock Options are then exercisable if less than 100). Fractional share interests shallbe disregarded except they may be accumulated.The exercise price of the Stock Options shall be paid: (i) in cash, by certified check or bank draft payable to the order of the Company or by way ofsuch other instrument as the Company may accept from time to time; (ii) by exchange of shares of unrestricted Common Stock of the Company alreadyowned by you and having an aggregate Fair Market Value equal to the aggregate purchase price (which amount shall be equal to the product of the exerciseprice multiplied by the number of shares of Common Stock in respect of which the Stock Options are being exercised); provided, that you represent andwarrant to the Company that you hold the shares of Common Stock free and clear of liens and encumbrances; (iii) by delivering, along with a properlyexecuted exercise notice to the Company, a copy of irrevocable instructions to a broker to deliver promptly to the Company the aggregate exercise price andthe amount of any applicable federal, state, local and/or foreign withholding taxes required to be withheld by the Company; provided, however, that suchexercise must be implemented solely under a program or arrangement established and approved by the Company with a brokerage firm selected by theCompany; or (iv) by any other procedure approved by the Committee, or by a combination of the foregoing.Termination of EmploymentThe treatment of your Stock Options upon the termination of your employment is set forth in this Award Agreement and the Plan. Unless otherwiseprovided in this Award Agreement or the Plan, upon any Termination of Employment for any reason, any and all of your unvested Stock Options will beforfeited and canceled in their entirety. For the avoidance of doubt, a transfer of employment among the Company and its Subsidiaries and Affiliates, withoutany break in service, is not a Termination of Employment. Except as set forth below, upon a Termination of Employment, that portion of the Stock Options, ifany, which is exercisable at the time of such Termination of Employment may be exercised prior to the first to occur of: (a) the 90th day after suchTermination of Employment or (b) the Expiration Date and will thereafter be forfeited and canceled.If: (i) your employment is terminated by IAC or any of its Subsidiaries or Affiliates for Cause (or if you resign in anticipation of being terminated byIAC or any of its Subsidiaries or Affiliates for Cause) or (ii) if following any Termination of Employment for any reason, IAC becomes aware that during thetwo (2) years prior to such Termination of Employment there was an event or circumstance that constituted fraud (financial or otherwise) or that would havebeen grounds for termination for Cause that caused or is reasonably likely to cause meaningful damage (economic, reputational or otherwise) to IAC and/orany of its Affiliates (the “Underlying Event”), then: (a) all of your Stock Options (whether or not vested) shall be forfeited and canceled in their entirety and(b) if any portion of your Stock Options were exercised after the Underlying Event, then IAC shall be entitled to recover from you at any time within two (2)years after such exercise(s), and you shall pay over to IAC, any gain realized as a result of such exercise(s). This remedy shall be without prejudice to, orwaiver of, any other remedies IAC and/or its Affiliates may have in such event.In the event of a Termination of Employment due to your death, that portion of the Stock Options, if any, which is exercisable at the time of deathmay be exercised by your estate or by a person who acquired the right to exercise such Stock Options by bequest or inheritance or otherwise by reason ofyour death at any time prior to the first to occur of: (a) the first anniversary of the date of death or (b) the Expiration Date and will thereafter be forfeited andcanceled. In the event of a Termination of Employment due to your Disability or Retirement, that portion of the Stock Options, if any, which is exercisable atthe time of such Termination of Employment for Disability or Retirement may be exercised by you or your guardian or legal representative at any time priorto the first to occur of: (a) the first anniversary of such Termination of Employment or (b) the Expiration Date and will thereafter be forfeited and canceled.Taxes and WithholdingNo later than the date as of which an amount in respect of the Stock Options first becomes includible in your gross income for federal, state, local orforeign income or employment or other tax purposes, you shall pay to the Company or make arrangements satisfactory to the Committee regarding paymentof any federal, state, local and/or foreign taxes of any kind required by law to be withheld with respect to such amount and the Company shall, to the extentpermitted or required by law, have the right to deduct from any payment of any kind otherwise due to you (either directly or indirectly through its agent),federal, state, local and foreign taxes of any kind required by law to be withheld. Notwithstanding the foregoing, the Company shall be entitled to hold theshares issuable to you upon the exercise of your Stock Options (or the related proceeds) until the Company or the Agent has received from you: (i) a dulyexecuted Form W-9 or W-8, as applicable and (ii) payment for any federal, state, local and/or foreign taxes of any kind required by law to be withheld withrespect to such Stock Options. Payment for any federal, state, local and/or foreign taxes of any kind may be made in the same manner as payment for theexercise price (as described above).Adjustment in the Event of Change in Stock; Change in ControlAdjustment in the Event of Change in Stock. In the event of a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization,extraordinary dividend of cash or other property, share combination, or recapitalization or similar event affecting the capital structure of IAC (each, a “ShareChange”), the Committee or the Board shall make such substitutions or adjustments as it deems appropriate and equitable to the number and kind of shares ofCommon Stock subject to your Stock Options and/or the exercise price per share. In the event of a merger, consolidation, acquisition of property or shares,stock rights offering, liquidation, Disaffiliation, or similar event affecting IAC or any of its Subsidiaries (each, a “Corporate Transaction”), the Committee orthe Board may, in its discretion, make such substitutions or adjustments as it deems appropriate and equitable to the number and kind of shares of CommonStock subject to your Stock Options and/or the exercise price per share. The determination of the Committee regarding any such adjustments will be final andconclusive and need not be the same for all Stock Option award recipients.Change in Control. “Change in Control” is defined as set forth in the Plan. The vesting of your Stock Options will not be accelerated upon a Changein Control of IAC. However (and except as otherwise provided in this Award Agreement or the Plan), in the event of a termination of your employment byIAC or any of its Subsidiaries or Affiliates without Cause or your resignation during the (2) year period following a Change in Control of IAC, then upon theoccurrence of such event, 100% of your unvested Stock Options shall automatically vest.In addition, following a Termination of Employment under these circumstances, your Stock Options may be exercised through the later of: (i) thelast date on which the Stock Options would be exercisable in the absence of a Change in Control and (ii) the earlier of: (A) the first anniversary of the Changein Control and (B) the Expiration Date and will thereafter be forfeited and canceled. For the avoidance of doubt, the Disaffiliation of the Subsidiary, Affiliateor division of IAC by which you are employed or for which you are performing services at the time of such sale or other disposition by IAC shall beconsidered a Termination of Employment (not a Change in Control) and shall be governed by the applicable provisions of this Award Agreement and thePlan; provided, that the Committee or the Board may deem it appropriate to make an equitable adjustment to your Stock Options in such case.“Good Reason” means (i) “Good Reason” as defined in any Individual Agreement or Award Agreement to which you are a party, or (ii) if there is nosuch Individual Agreement or if it does not define Good Reason, without your prior written consent: (A) a material reduction in your rate of annual basesalary from the rate of annual base salary in effect for you immediately prior to the Change in Control, (B) a relocation of your principal place of businessmore than 35 miles from the city in which your principal place of business was located immediately prior to the Change in Control or (C) a material anddemonstrable adverse change in the nature and scope of your duties from those in effect immediately prior to the Change in Control. In order to invoke aTermination of Employment for Good Reason, you must provide written notice to the Company of the existence of one or more of the conditions described inclauses (A) through (C) within 90 days following your knowledge of the initial existence of such condition(s), and the Company shall have 30 daysfollowing receipt of such written notice (the “Cure Period”) during which it may remedy the condition. In the event that the Company fails to remedy thecondition constituting Good Reason during the Cure Period, you must terminate employment, if at all, within 90 days following the Cure Period in order forsuch Termination of Employment to constitute a Termination of Employment for Good Reason.The Disaffiliation of the business or subsidiary of IAC by which you are employed or for which you are performing services at the time of such saleor other disposition by IAC shall be considered a Termination of Employment (not a Change in Control of IAC) and shall be governed by the applicableprovisions of the Plan and the provision set forth under the caption “Termination of Employment” above; provided, however, that the Committee or theBoard may deem it appropriate to make an equitable adjustment to the number of Stock your Options and the number and kind of shares of Common Stockunderlying your Stock Options.Non-Transferability of Stock OptionsYour Stock Options are non-transferable (including by way of sale, assignment, exchange, encumbrance, pledge, hedge or otherwise) by you otherthan by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, and your Stock Options may be exercised, during yourlifetime, only by you or by your guardian or legal representative or any transferee described above.No Rights as a StockholderNeither you nor any transferee of your Stock Options shall have rights as a stockholder (including the right to vote the shares underlying your StockOptions and the right to receive dividends) with respect to any shares covered by such Stock Options until you or your transferee: (i) has given written noticeof exercise, (ii) if requested, has given the representation described in Section 14(a) of the Plan and (iii) has paid in full for the shares issuable upon exercise.Payment of Transfer Taxes, Fees and Other ExpensesThe Company agrees to pay any and all original issue taxes and stock transfer taxes that may be imposed on the issuance of shares acquired pursuantto exercise of your Stock Options, together with any and all other fees and expenses necessarily incurred by the Company in connection therewith. Notwithstanding the foregoing, you shall be solely responsible for any other taxes (including, without limitation, federal, state, local orforeign income taxes, social security, Medicare and/or other similar taxes and/or estate or excise taxes) that may be payable as a result of your participation inthe Plan or as a result of the exercise of your Stock Options and/or the sale, disposition or transfer of any shares of Common Stock acquired upon the exerciseof your Stock Options.Other RestrictionsThe exercise of your Stock Options shall be subject to the requirement that, if at any time the Committee shall determine that: (i) the listing,registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law or (ii) theconsent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise or the delivery orpurchase of shares pursuant thereto, then in any such event, the exercise shall not be effective unless such listing, registration, qualification, consent orapproval shall have been effected or obtained free of any conditions not acceptable to the Committee.Conflicts and InterpretationIn the event of any conflict between these Terms and Conditions and the Plan, the Plan shall control; provided, that an action or provision that ispermissive under the terms of the Plan, and required under these Terms and Conditions, shall not be deemed a conflict and these Terms and Conditions shallcontrol. In the event of any ambiguity in these Terms and Conditions, or any matters as to which these Terms and Conditions are silent, the Plan shall governincluding, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to: (i) interpret the Plan, (ii) prescribe,amend and rescind rules and regulations relating to the Plan and (iii) make all other determinations deemed necessary or advisable for the administration ofthe Plan. In the event of any conflict between your Award Notice (or any other information given to you directly or indirectly through the Agent (includinginformation posted on the stock plan administration database maintained by the Agent)) and IAC’s books and records, or (ii) ambiguity in the Award Notice(or any other information given to you directly or indirectly through the Agent (including information posted on the stock plan administration databasemaintained by the Agent)), IAC’s books and records shall control.AmendmentIAC may modify, amend or waive the terms of your Stock Options, prospectively or retroactively, but no such modification, amendment or waivershall materially impair your rights without your consent, except as required by applicable law, NASDAQ or stock exchange rules, tax rules or accountingrules. The waiver by either party of compliance with any provision of this Award Agreement shall not operate or be construed as a waiver of any otherprovision hereof.Data ProtectionThe acceptance of your Stock Options constitutes your authorization of the release from time to time to IAC or any of its Subsidiaries or Affiliatesand to the Agent (together, the “Relevant Companies”) of any and all personal or professional data that is necessary or desirable for the administration ofyour Stock Options and/or the Plan (the “Relevant Information”). Without limiting the above, this authorization permits your employing company to collect,process, register and transfer to the Relevant Companies all Relevant Information (including any professional and personal data that may be useful ornecessary for the purposes of the administration of your Stock Options and/or the Plan and/or to implement or structure any further grants of equity awards (ifany)). The acceptance of your Stock Options also constitutes your authorization of the transfer of the Relevant Information to any jurisdiction in which IAC,your employing company or the Agent considers appropriate. You shall have access to, and the right to change, the Relevant Information, which will only beused in accordance with applicable law.1Exhibit 10.6Terms and Conditions for Restricted Stock Units Granted Under theIAC/InterActiveCorp 2018 Stock and Annual Incentive Plan Overview These Terms and Conditions apply to your award of restricted stock units (the “Award”) granted pursuant to Section 7 of the IAC/InterActiveCorp2018 Stock and Annual Incentive Plan (the “Plan”). You were notified of your Award by way of an award notice (the “Award Notice”). ALL CAPITALIZED TERMS USED HEREIN, TO THE EXTENT NOT DEFINED, SHALL HAVE THE MEANINGS SET FORTH IN Plan. Continuous Service In order for your Award to vest, you must be continuously employed by IAC or any of its Subsidiaries or Affiliates during the Restriction Period (asdefined below). Nothing in your Award Notice, these Terms and Conditions or the Plan shall confer upon you any right to continue in the employ or serviceof IAC or any of its Subsidiaries or Affiliates or interfere in any way with their rights to terminate your employment or service at any time.VestingSubject to these Terms and Conditions and the Plan, the restricted stock units (“RSUs”) in respect of your Award shall vest and no longer be subjectto any restriction (such period during which such restriction applies is the “Restriction Period”) as specified in your Award Notice.Termination of EmploymentExcept as set forth in your Award Notice, employment agreement (if applicable) or below, upon any termination of your employment with IAC orany of its Subsidiaries or Affiliates (excluding, for purposes of the RSUs, Expedia, Inc. and its subsidiaries) during the Restriction Period for any reason(including, for the avoidance of doubt, due to your death or Disability) any unvested portion of your Award shall be forfeited and canceled in its entiretyeffective immediately upon such event. If (i) your employment is terminated for Cause or if you resign in anticipation of being terminated for Cause or (ii) if following any termination ofyour employment for any reason, IAC becomes aware that during the two (2) years prior to such termination of employment there was an event orcircumstance that constituted fraud (financial or otherwise) or would have been grounds for termination for Cause that caused or is reasonably likely to causemeaningful damage (economic, reputational or otherwise) to IAC and/or any of its Affiliates (the “Underlying Event”) (and which would not have beencurable upon notice), then (a) your Award (whether or not vested) shall be forfeited and canceled in its entirety and (b) if your Award vested after theUnderlying Event, then IAC shall be entitled to recover from you at any time within two (2) years after such vesting, and you shall pay over to IAC, anyamounts realized as a result of such vesting. This remedy shall be without prejudice to, or waiver of, any other remedies IAC and/or its Subsidiaries and/or itsAffiliates may have in such event.SettlementSubject to your satisfaction of the tax obligations described immediately below under “Taxes and Withholding,” as soon as practicable after anyRSUs in respect of your Award have vested and are no longer subject to the Restriction Period, such RSUs shall be settled. For each RSU settled, IAC shallpay, or cause to be paid, to you an amount of cash equal to the Fair Market Value of one share of Common Stock for each RSU vesting. Notwithstanding theforegoing, IAC shall be entitled to hold the shares or cash issuable to you upon settlement of all RSUs that have vested until IAC or the agent selected by IACto administer the Plan (the “Agent”) has received from you: (i) a duly executed Form W-9 or W-8, as applicable or (ii) payment for any federal, state, local orforeign taxes of any kind required by law to be withheld with respect to such RSUs.Taxes and WithholdingNo later than the date as of which an amount in respect of any RSUs first becomes includible in your gross income for federal, state, local or foreignincome or employment or other tax purposes, IAC or its Subsidiaries and/or Affiliates shall, unless prohibited by law, have the right to deduct any federal,state, local or foreign taxes of any kind required by law to be withheld with respect to such amount due to you, including deducting such amount from thedelivery of shares or cash issued upon settlement of the RSUs that gives rise to the withholding requirement. In the event shares are deducted to cover taxwithholdings, the number of shares withheld shall generally have a Fair Market Value equal to the aggregate amount of IAC’s withholding obligation. If theevent that any such deduction and/or withholding is prohibited by law, you shall, prior to or contemporaneously with the vesting or your RSUs, pay to IAC,or make arrangements satisfactory to IAC regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld withrespect to such amount.Adjustment in the Event of Change in Stock; Change in ControlAdjustment in the Event of Change in Stock. In the event of a stock dividend, stock split, reverse stock split, separation, spinoff, reorganization,extraordinary dividend of cash or other property, share combination, or recapitalization or similar event affecting the capital structure of IAC (each, a “ShareChange”), the Committee or the Board shall, in its sole discretion, make such substitutions or adjustments as it deems appropriate and equitable to thenumber of RSUs underlying your Award and the number and kind of shares of Common Stock underlying such RSUs. In the event of a merger, consolidation,acquisition of property or shares, stock rights offering, liquidation, Disaffiliation, or similar event affecting IAC or any of its Subsidiaries (each, a “CorporateTransaction”), the Committee or the Board may, in its sole discretion, make such substitutions or adjustments as it deems appropriate and equitable to thenumber of RSUs underlying your Award and the number and kind of shares of Common Stock underlying such RSUs. The determination of the Committeeregarding any such adjustments will be final and conclusive and need not be the same for all RSU award recipients.Change in Control. “Change in Control” is defined as set forth in the Plan. The vesting of your Award will not be accelerated upon a Change inControl of IAC. However (and except as otherwise provided in this Award Agreement or the Plan), in the event of a termination of your employment by IACor any of its Subsidiaries or Affiliates without Cause or your resignation during the (2) year period following a Change in Control of IAC, then upon theoccurrence of such event, 100% of your Award shall vest in one lump sum installment as of the date of such event. The Disaffiliation of the business orsubsidiary of IAC by which you are employed or for which you are performing services at the time of such sale or other disposition by IAC shall beconsidered a Termination of Employment (not a Change in Control of IAC) and shall be governed by the applicable provisions of the Plan and the provisionset forth under the caption “Termination of Employment” above; provided, however, that the Committee or the Board may deem it appropriate to make anequitable adjustment to the number of RSUs and the number and kind of shares of Common Stock underlying the RSUs underlying your Award.Non-Transferability of the RSUsUntil such time as your RSUs are ultimately settled, they shall not be transferable by you by means of sale, assignment, exchange, encumbrance,pledge, hedge or otherwise.No Rights as a StockholderExcept as otherwise specifically provided in the Plan, unless and until your RSUs are settled, you shall not be entitled to any rights of a stockholderwith respect to the RSUs (including the right to vote the shares underlying your RSUs and the right to receive dividends).Other RestrictionsThe RSUs shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration or qualification of theshares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of anygovernment regulatory body, is necessary or desirable as a condition of (or in connection with) the delivery of shares, then in any such event, the award ofRSUs shall not be effective unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions notacceptable to the Committee.Conflicts and InterpretationIn the event of any conflict between these Terms and Conditions and the Plan, the Plan shall control; provided, that an action or provision that ispermissive under the terms of the Plan, and required under these Terms and Conditions, shall not be deemed a conflict and these Terms and Conditions shallcontrol. In the event of any ambiguity in these Terms and Conditions, or any matters as to which these Terms and Conditions are silent, the Plan shall governincluding, without limitation, the provisions thereof pursuant to which the Committee has the power, among others, to: (i) interpret the Plan, (ii) prescribe,amend and rescind rules and regulations relating to the Plan and (iii) make all other determinations deemed necessary or advisable for the administration ofthe Plan. In the event of any conflict between your Award Notice (or any other information given to you directly or indirectly through the Agent (includinginformation posted on the stock plan administration database maintained by the Agent)) and IAC’s books and records, or (ii) ambiguity in the Award Notice(or any other information given to you directly or indirectly through the Agent (including information posted on the stock plan administration databasemaintained by the Agent)), IAC’s books and records shall control.AmendmentIAC may modify, amend or waive the terms of your RSUs, prospectively or retroactively, but no such modification, amendment or waiver shallmaterially impair your rights without your consent, except as required by applicable law, NASDAQ or stock exchange rules, tax rules or accounting rules.Data ProtectionThe acceptance of your RSUs constitutes your authorization of the release from time to time to IAC or any of its Subsidiaries or Affiliates and to theAgent (together, the “Relevant Companies”) of any and all personal or professional data that is necessary or desirable for the administration of your RSUsand/or the Plan (the “Relevant Information”). Without limiting the above, this authorization permits your employing company to collect, process, registerand transfer to the Relevant Companies all Relevant Information (including any professional and personal data that may be useful or necessary for thepurposes of the administration of your RSUs and/or the Plan and/or to implement or structure any further grants of equity awards (if any)). The acceptance ofyour RSUs also constitutes your authorization of the transfer of the Relevant Information to any jurisdiction in which IAC, your employing company or theAgent considers appropriate. You shall have access to, and the right to change, the Relevant Information, which will only be used in accordance withapplicable law.Section 409A of the CodeYour Award is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Codeof 1986, as amended, and the rules and regulations issued thereunder (“Section 409A”). Notwithstanding the foregoing, to the extent your Award is subject toSection 409A, to the maximum extent permitted, your Award shall be interpreted and administered to be in compliance therewith. Accordingly, to the extentrequired to avoid accelerated taxation and/or tax penalties under Section 409A: if (i) any amounts or benefits payable in respect of your Award are payableupon a termination of employment and (ii) you are a “Specified Employee” (as defined under Section 409A) as of the date of your termination ofemployment, then such amounts or benefits (if any) shall be paid or provided to you in a single lump sum on the earlier of: (x) the first day of the seventhmonth following your termination of employment or (y) your death. In no event shall IAC be required to pay you any “gross-up” or other payment withrespect to any taxes or penalties imposed under Section 409A with respect to any amounts or benefits paid to you in respect of your Award.1Exhibit 21.1IAC/InterActiveCorp Subsidiaries(As of December 31, 2018)Entity Jurisdiction of Formation 24apps GmbH Austria8831-8833 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 IndianaANGI Homeservices Inc. DelawareAngie’s List, Inc. DelawareApalon Apps LLC Republic of BelarusAPN, LLC DelawareApplications Partner, LLC DelawareAsk Applications, Inc. DelawareBlueCrew, Inc. DelawareBlueCrew, LLC DelawareBuzz Technologies, Inc. WashingtonCH Pacific, LLC DelawareComedy 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 DelawareDiamond Dogs, LLC DelawareEpic Enterprises LLC New JerseyEureka SG Pte. Ltd. SingaporeEureka Taiwan TaiwanEureka, Inc. JapanExec, Inc. DelawareFalcon Holdings II, LLC Delaware1Exhibit 21.1Entity Jurisdiction of FormationFive Star Matchmaking Information Technology (Beijing) Co., Ltd. People’s Republic of ChinaFriendScout24 GmbH GermanyGood Hang, LLC DelawareHABC Assets, LLC DelawareHandy Inventory, LLC DelawareHandy Platform Limited IrelandHandy Technologies, Inc. DelawareHandyBook Canada ULC British ColumbiaHinge, Inc. 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 WalesHomeAdvisor 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. DelawareIAC FinanceCo, Inc. DelawareIAC Group, LLC DelawareIAC Publishing Holding Limited Partnership IrelandIAC Publishing, LLC DelawareIAC Search & Media (Canada) Inc. Canada2Exhibit 21.1Entity Jurisdiction of FormationIAC 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. DelawareInflight Entertainment, 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 DelawareiTranslate GmbH GermanyLife123, Inc. DelawareLivestream Inc. DelawareLivestream Limited England and WalesLivestream LLC New YorkM8 Singlesnet LLC DelawareMash Dating, LLC DelawareMassive Media Europe NV BelgiumMassive Media Limited England and WalesMassive Media Match NV BelgiumMatch Group Europe Limited England and WalesMatch Group, Inc. Delaware3Exhibit 21.1Entity Jurisdiction of FormationMatch 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 DelawareMhelpdesk, 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 Wales4Exhibit 21.1Entity Jurisdiction of FormationMyHammer AG GermanyMyHammer Holding AG GermanyNeu.de GmbH GermanyNexus Dating Limited England and WalesNRelate LLC DelawareOportuna I, 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 FrancePronto, LLC DelawarePublishing Partner, LLC DelawareSearch 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. DelawareSpeedDate.com, LLC DelawareSpotlight Studios, LLC DelawareStage Four, LLC DelawareStarnet Interactive, Inc. DelawareStream Team, LLC DelawareStyleclick Chicago, Inc. DelawareStyleclick, Inc. DelawareStyleclick.com Enterprises Inc. CaliforniaTargeted Media Solutions LLC DelawareTDB Holdings, Inc. DelawareTelTech Systems, Inc. DelawareThe Daily Beast Company LLC DelawareThe IAC Foundation, Inc. DelawareTinder Development, LLC DelawareTinder, LLC Delaware5Exhibit 21.1Entity Jurisdiction of FormationTMC Realty, L.L.C. DelawareTPR/Tutor Holdings, LLC DelawareTravaux.com S.à r.l. FranceUSA Video Distribution LLC DelawareUSANi LLC DelawareUSANi Sub LLC DelawareVHX Corporation DelawareVimeo FinanceCo, LLC DelawareVimeo Technologies Private Limited IndiaVimeo, Inc. DelawareWanderspot LLC WashingtonWe are Mop! Limited England and WalesWerkspot BV Netherlands6Exhibit 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. 333-146940(3) Form S-8, No. 333-154875(4) Form S-8, No. 333-174538(5) Form S-8, No. 333-192186(6) Form S-3, No. 333-222643(7) Form S-8, No. 333-226745of our reports dated March 1, 2019, 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, 2018./s/ ERNST & YOUNG LLPNew York, New YorkMarch 1, 2019Exhibit 31.1CertificationI, Barry Diller, certify that:1.I have reviewed this report on Form 10-K for the fiscal year ended December 31, 2018 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, 2019 /s/ BARRY DILLER Barry DillerChairman and Senior ExecutiveExhibit 31.2CertificationI, Joseph Levin, certify that:1.I have reviewed this report on Form 10-K for the fiscal year ended December 31, 2018 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, 2019 /s/ JOSEPH LEVIN Joseph LevinChief Executive OfficerExhibit 31.3CertificationI, Glenn H. Schiffman, certify that:1.I have reviewed this report on Form 10-K for the fiscal year ended December 31, 2018 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, 2019 /s/ GLENN H. SCHIFFMAN Glenn H. SchiffmanExecutive Vice President and Chief Financial OfficerExhibit 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, 2018 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, 2019 /s/ BARRY DILLER Barry DillerChairman and Senior ExecutiveExhibit 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, 2018 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, 2019 /s/ JOSEPH LEVIN Joseph LevinChief Executive OfficerExhibit 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, 2018 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, 2019 /s/ GLENN H. SCHIFFMAN Glenn H. SchiffmanExecutive Vice President and Chief Financial Officer

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