As filed with the Securities and Exchange Commission on October 16, 2015.
(1) Includes additional shares that the underwriters have an option to purchase.
(2) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. The securities may not be sold until the Registration Statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
This is an initial public offering of common stock by Match Group, Inc. The estimated initial public offering price is between $ and $ per share.
We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "MTCH."
Following this offering, we will have three classes of authorized common stock: common stock, Class B common stock and Class C common stock. The rights of the holders of the shares of common stock, Class B common stock and Class C common stock are generally identical, except with respect to voting and conversion. Each holder of common stock is entitled to one vote per share. Each holder of Class B common stock is entitled to ten votes per share and each share of Class B common stock is convertible at any time at the election of the holder into one share of common stock. Holders of Class C common stock are not entitled to any votes per share except as (and then only to the extent) otherwise required by the laws of the State of Delaware, in which case holders of Class C common stock will be entitled to one-hundredth (1/100) of a vote on such matters for each share of Class C common stock held. There will be no outstanding shares of Class C common stock upon completion of this offering. Holders of our common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law. IAC/InterActiveCorp, or IAC, which is our parent company, will own all of the shares of outstanding Class B common stock, representing approximately % of our total outstanding shares of our capital stock, and approximately % of the total voting power of our outstanding capital stock upon completion of this offering (or approximately % of our total outstanding shares of capital stock and approximately % of the total voting power of our outstanding capital stock, if the underwriters exercise in full their option to purchase additional shares of our common stock in this offering). As a result of IAC's ownership of all of our Class B common stock following this offering, we will be a "controlled company" under the Marketplace Rules of the NASDAQ Stock Market.
Match Group, Inc. is offering the shares to be sold in this offering. Match Group, Inc. currently intends to pay $ of the net proceeds of this offering to IAC immediately upon completion of the offering as repayment of indebtedness owed to IAC and/or as a dividend to IAC declared prior to the completion of this offering and to use the remainder of the net proceeds for general corporate purposes.
We are an "emerging growth company" under the federal securities laws and, as such, will be subject to reduced public company reporting requirements.
Investing in our common stock involves risks. See "Risk factors," beginning on page 15.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
(1) Assumes no exercise of the underwriters' option to purchase additional shares of our common stock described below.
(2) See "Underwriting" for additional disclosure regarding underwriting discounts, commissions and estimated offering expenses.
We have granted the underwriters an option for a period of 30 days to purchase from us up to additional shares of our common stock at the initial public offering price, less the underwriting discounts and commissions. See "Underwriting."
The underwriters expect to deliver the shares of common stock against payment in New York, New York on , 2015.
You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. Neither we nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: Neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to "we," "our," "us," "Match Group," "the Company," and "our company" refer to Match Group, Inc. and its combined subsidiaries.
In this prospectus, references to "North America" refer to the United States and Canada; references to "Western Europe" refer to Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom; references to "other selected countries" refer to Argentina, Australia, Brazil, Chile, China, Colombia, Costa Rica, Czech Republic, Greece, Hong Kong SAR, Hungary, Iceland, India, Indonesia, Israel, Japan, South Korea, Kuwait, Malaysia, Mexico, New Zealand, Philippines, Poland, Romania, the Russian Federation, Singapore, South Africa, Thailand, Turkey, Ukraine, United Arab Emirates and Vietnam; references to "monthly active users," or MAU, means users who logged in through our mobile or web applications in the last 28 days as of the date of measurement (reported MAU is the sum total of MAUs of each of our individual brands, and users active on multiple brands are counted in the MAU of each brand); and references to "paid members" means users with a paid membership at that time. In this prospectus, information regarding MAU and paid members as of the quarter ended September 30, 2015, as well as related growth rate information, includes/reflects MAU and paid members of Plentyoffish Media Inc. Except as discussed in the immediately preceding sentence, users and paid members of acquired companies are included in MAU and paid member information from and after the date of acquisition.
References to our "certificate of incorporation" refer to our Amended and Restated Certificate of Incorporation and references to our "bylaws" refer to our Amended and Restated By-laws, as each will be in effect upon the completion of this offering.
We have made rounding adjustments to some of the figures in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them.
This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
This prospectus contains industry, market and competitive position data that is based on industry publications and studies conducted by independent third parties that we believe to be reliable sources, including survey data reported from a July 31, 2015 survey administered by Research Now on our behalf. References in this prospectus to the size of our target users and addressable market are based on population data from the World Bank, marital status information from the United Nations, internet penetration rates from the Economist Intelligence Unit and percentage of singles data obtained from Research Now. Where we make projections involving growth rates of the single population, we assume the single population in each country grows in line with the projected growth rate of the country's total population. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same source, unless otherwise expressly stated or the context otherwise requires. The market data and industry forecasts that we have included in this prospectus have not been expertized. Forward-looking information obtained from third-party sources is subject to the same qualifications and the uncertainties regarding the other forward-looking statements in this prospectus. See "Risk factors" and "Cautionary note regarding forward-looking statements."
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to purchase our common stock in this offering. You should read the entire prospectus carefully, including the section titled "Risk factors," before making an investment decision.
Establishing a romantic connection is a fundamental human need. Whether it's a good date, a meaningful relationship or an enduring marriage, romantic connectivity lifts the human spirit. Our mission is to increase romantic connectivity worldwide.
Match Group is the world's leading provider of dating products. We operate a portfolio of over 45 brands, including Match, OkCupid, Tinder, Meetic, Twoo, OurTime and FriendScout24, each designed to increase our users' likelihood of finding a romantic connection. Through our portfolio of trusted brands, we provide tailored products to meet the varying preferences of our users. In addition, we have agreed to acquire Plentyoffish Media Inc. See "Proposed Acquisition of PlentyOfFish." We currently offer our dating products in 38 languages across more than 190 countries, and we had approximately 59 million monthly active users, or MAU, and approximately 4.7 million paid members, using our dating products as of the quarter ended September 30, 2015.
Our target market includes all adults in North America, Western Europe and other select countries around the world who are not in a committed relationship and who have access to the internet, which, based on a survey administered by Research Now in July 2015, we estimate at approximately 511 million people. Consumer preferences within this population vary significantly, influenced in part by demographics, geography, religion and sensibility. As a result, the market for dating products is fragmented, and no single product has been able to effectively serve the dating category as a whole.
Given wide ranging consumer preferences, we approach the category with a brand portfolio strategy, through which we attempt to offer dating products that collectively appeal to the broadest spectrum of consumers. We believe that this approach maximizes our ability to capture additional users, as demonstrated by our MAU and paid member count compound annual growth rates between the quarter ended September 30, 2011, and the quarter ended September 30, 2015 of 63% and 23%, respectively. We increasingly apply a centralized discipline to learnings, best practices and technologies across our brands in order to increase growth, reduce costs and maximize profitability. This approach allows us to quickly introduce new products and features, optimize marketing strategies, reduce operating costs and more effectively deploy talent across our organization.
rates than do those users who access our products on desktop. According to data obtained from mobile analytics firm AppAnnie, during the three months ended June 30, 2015, we operated four of the top five revenue grossing dating applications across the Apple App Store and Google Play Store in North America, and three of the top five worldwide, in each case, pro forma for the acquisition of PlentyOfFish.
Substantially all of our dating revenue is derived directly from our users. The significant majority of that revenue comes from recurring membership fees, which typically provide unlimited access to a bundle of features for a specific period of time, and the balance from à la carte features, where users pay a fee for a specific action or event. Each of our brands offers a combination of free and paid features targeted to its unique community. On a brand-by-brand basis, our monetization decisions seek to optimize user growth, revenue and the vibrancy and productivity of the relevant community of users. In addition to direct revenue from our users, we generate revenue from online advertisers who pay to reach our large audiences.
In addition to our dating business, we also operate a non-dating business in the education industry through our ownership of The Princeton Review. The Princeton Review provides a variety of test preparation, academic tutoring and college counseling services.
Our revenue increased from $713.4 million in 2012 to $803.1 million in 2013 and then to $888.3 million in 2014, representing year-over-year increases of 13% and 11%, respectively. In 2012, 2013 and 2014, we generated Adjusted EBITDA of $236.5 million, $271.2 million, and $273.4 million, respectively, operating income of $186.6 million, $221.3 million and $228.6 million, respectively, and net earnings of $90.3 million, $126.6 million and $148.4 million, respectively. See "Selected historical combined financial and other information" for a description of how we define Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income.
Connecting with people and fostering relationships are critical needs that influence everyone's happiness. As a result, the dating market presents a significant opportunity for Match Group. We consider our addressable market to be all adults in North America, Western Europe and other select countries around the world who are not in committed relationships and have access to the internet, which, based on a survey administered by Research Now in July 2015, we estimate at approximately 511 million people.
In countries with developed economies such as the United States, our addressable market has been expanding due to the aging population, increasing internet use among older adults and growth in singles as a percent of the total population. In countries with emerging economies, such as India and China, growth in the addressable market is driven by similar factors, most notably pronounced growth in internet access. Overall, our addressable market is expected to grow from approximately 511 million people to approximately 672 million people by 2019, assuming the single population in each country grows in line with the projected growth rate of the country's total population.
Prior to the proliferation of computers and mobile devices, human connections traditionally were limited by social circles, geography and time. Today, the adoption of the internet and mobile technology has significantly expanded the ways in which people can build relationships, create new interactions and develop romantic connections.
Expanded options: Dating products provide users access to a large number of like-minded people they otherwise would not have a chance to meet.
Efficiency: The search and matching features, as well as the profile information available on dating products, allow users to filter a large number of options in a short period of time, increasing the likelihood that users will make a connection with someone.
More comfort and control: Compared to the traditional ways that people meet, dating products provide an environment that makes the process of reaching out to new people less uncomfortable. This leads to many people who would otherwise be passive participants in the dating process taking a more active role.
Convenience: The nature of the internet and the proliferation of mobile devices allow users to connect with new people at any time of the day, regardless of where they are.
Brand recognition: Brand is very important. Users generally associate strong dating brands with a higher likelihood of success and a higher level of security.
Successful experiences: Demonstrated success of other users attracts new users through word-of-mouth recommendations. Successful experiences also drive repeat usage.
Community identification: Users typically look for dating products that offer a community with which the user most strongly associates. By selecting a dating product that is focused on a particular demographic, religion, geography or intent (for example, casual dating or more serious relationships), users can increase the likelihood that they will make a connection with someone with whom they identify.
Product features and user experience: Users tend to gravitate towards dating products that offer features and user experiences that resonate with them, such as question-based matching algorithms, location-based features, offline events or searching capabilities. User experience is also driven by the type of user interface (for example, swiping versus scrolling), a particular mix of free and paid features, ease of use and security. Users expect every interaction with a dating product to be seamless, intuitive and secure.
Strong brand recognition: A strong brand is one of the primary factors people consider when choosing a dating product. Brands drive organic traffic, significantly affect ranking in search engines and app stores and increase the efficiency of paid marketing. Strong nationally recognized brands in the dating category traditionally take many years to build. According to data obtained from Research Now, four of the top five dating brands by unaided awareness in North America are owned by us, and 89% of singles in North America recognize at least one of our brands when shown a list of dating brands, in each case, pro forma for the acquisition of PlentyOfFish.
of the top five brands in North America measured in terms of unaided awareness, and we believe that this scale is one of the big competitive advantages for our principal brands.
Multi-brand approach to customer acquisition: We have more brands than any other participant in our category. Our multi-brand approach allows us to provide dating products that appeal to a wide spectrum of users. By positioning what we believe to be the most relevant brand to each user segment, we are able to achieve greater reach at lower overall customer acquisition costs. Additionally, we are increasingly placing advertisements for our products within our other products. When such an advertisement is successful and a user of one of our products becomes a user of another of our products, the second product has acquired a new customer for no incremental cost. Because the second product would otherwise have had to engage in its own marketing efforts to acquire the customer, we are able to decrease the average cost of customer acquisition across our entire portfolio. During the six months ended June 30, 2015, our Match brand and affinity brands in North America generated approximately 11% of new registrations via this type of cross-promotion.
Scale-driven customer acquisition competency: We efficiently utilize online and offline advertising to increase brand awareness and drive new user registrations. Our long history and significant scale has allowed us to develop analytical and operational approaches that we believe are more sophisticated than any of our single brands would be able to develop as a standalone company. We believe that no one else in the category approaches the scale of our paid customer acquisition efforts.
Monetization expertise: On a brand-by-brand basis, we continually test and customize our offerings to determine which features to offer for a fee and which features to offer for free. Over the course of our operating history, these tests have helped us develop significant expertise in maximizing revenue while maintaining a brand's ability to attract new users and maintain a vibrant and active community of users. We believe that our approach to monetization is more sophisticated than any of our single brands would have been able to develop on its own.
Ability to monetize through advertising: Given the significant size and diversity of our user base, advertisers could reach approximately 59 million MAU across our brands as of the quarter ended September 30, 2015. We offer advertisers the ability to customize their advertisements based on analytics we collect about user interests and behavior. We believe that our scale and analytics-driven marketing make us more attractive to advertisers. Our products' target markets also provide advertisers with access to several highly coveted demographic groups, including the millenial generation that our Tinder product has penetrated effectively.
Commitment to product development: Each of our brands has a robust product roadmap. Product development and innovation are generally brand-specific and significant resources are devoted to constant improvements of our various products. Accordingly, we have multiple product development teams working at any given time on a variety of features at a breadth that, we believe, could not be replicated by any of our single brands as standalone entities.
Shared learning: While maintaining each brand's unique character, we facilitate knowledge and experience sharing across our portfolio in the areas of customer acquisition, monetization and product development. While each brand generally is responsible for its own progress in these areas, the ability for each to quickly leverage the successes of other brands and avoid their failures, substantially increases the success rates for each brand in each of these key drivers of business performance.
devote resources to developing new dating products and believe our industry expertise and significant cash flow provide a unique ability to succeed in this endeavor.
Identifying opportunistic acquisitions: We have developed a core competency for identifying, acquiring, integrating and scaling businesses. Since January 2009, we have invested approximately $1,284.0 million to acquire 25 new brands for our dating portfolio, including OkCupid, Meetic, Twoo and PlentyOfFish.
Focus on product development: We devote substantial resources to developing new features and functionalities for our products. We believe there are meaningful improvements that can be made to the efficacy and appeal of products in our category, both through existing and emerging technologies. Increasing product efficacy and appeal are two of the major drivers of increased category adoption.
Become even more mobile: We are increasingly concentrated on mobile development. During the six months ended June 30, 2015, 68% of our new registrations were from a mobile device. We are currently allocating resources to more rapidly increase our mobile development, which we believe represents a significant growth opportunity for our business.
Improve customer acquisition efforts: We continue to focus on building our traditional paid acquisition channels, including offline media, with the intent to reach new customers, increase the demand for dating products and drive repeat usage. Additionally, we are developing our expertise in paid mobile acquisition and digital video channels. Finally, we are focused on expanding the virality of our brands and maintaining a high rank in app stores. We believe we have the ability to expand our marketing reach over time.
Drive advertising revenue: Generating advertising revenue has historically not been a principal focus for us. As a result, we believe our advertising revenue is substantially below what we should be able to achieve. Part of our strategy is to meaningfully increase the sell-through at our Tinder brand, which is currently below 2% of available ad inventory, and to meaningfully increase the percentage of ad inventory on our other brands sold on a direct basis, which currently is below 2% of total ad inventory sold. We believe that there is meaningful upside to our current revenue levels if we achieve these objectives.
Dynamically monetize our brands: We will continue to optimize pricing and the bundle of free and paid offerings for each brand. We also expect to continue to develop new features that will both improve the user experience and increase the number of people willing to pay for the use of our products. We believe that most of our products have the opportunity to increase both the percentage of users who are paid members and the amount that those users pay us over time.
Continue to expand our portfolio: In the past, we have successfully completed acquisitions such as OkCupid, Meetic, and Twoo, as well as launched Tinder and OurTime. Each acquisition or new product launch has resulted in increased adoption levels either within a geography or a demographic. We intend to continue to pursue strategic opportunities in existing and new markets globally, and expect that additional growth will be generated through these pursuits.
Leverage our portfolio: We believe we are only beginning to realize the benefits that ownership of multiple brands brings to our company. We will continue to optimize our operations across brands to reduce both fixed and variable costs, increase success rates in product development and customer acquisition, and accelerate speed to market.
sharing data to leverage product and marketing successes across our businesses rapidly for competitive advantage.
We are currently a wholly-owned subsidiary of IAC/InterActiveCorp. Upon completion of this offering, IAC will own all of the shares of our outstanding Class B common stock, representing approximately % of our total outstanding shares of capital stock and approximately % of the total voting power of our outstanding capital stock (or approximately % of our total outstanding shares of capital stock and approximately % of the total voting power of our outstanding capital stock, if the underwriters exercise in full their option to purchase additional shares of our common stock in this offering).
We intend to enter into various agreements with IAC for administrative and other services, including a master transaction agreement, an employee matters agreement, a tax sharing agreement, a services agreement and an investor rights agreement. For more information regarding these agreements, see "Certain relationships and related party transactions."
On July 13, 2015, we entered into a stock purchase agreement to acquire all of the outstanding equity interests in Plentyoffish Media Inc., or PlentyOfFish, for aggregate consideration of $575.0 million, subject to a customary post-closing adjustment based on, among other things, the amount of working capital in the business at the closing date.
We currently anticipate that the acquisition of PlentyOfFish will close in the fourth quarter of 2015, although there can be no assurance that the acquisition will close in a timely manner or at all.
the date on which we have issued more than $1.0 billion of non-convertible debt during the prior three-year period.
not provide an auditor attestation of our internal control over financial reporting.
The JOBS Act also permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies, and exempts an emerging growth company such as us from Sections 14A(a) and (b) of the Securities Exchange Act of 1934, or the Exchange Act, which require companies to hold shareholder advisory votes on executive compensation and golden parachute compensation.
We have elected to adopt the reduced disclosure requirements described above for purposes of the registration statement of which this prospectus is a part. In addition, for so long as we qualify as an emerging growth company, we expect to take advantage of certain of the reduced reporting and other requirements of the JOBS Act with respect to the periodic reports we will file with the Securities and Exchange Commission, or the SEC, and proxy statements that we use to solicit proxies from our stockholders.
We have elected to not take advantage of the extended transition period that allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies, which means that the financial statements included in this prospectus, as well as financial statements we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.
We were incorporated in the State of Delaware on February 12, 2009. Our principal executive offices are located at 8300 Douglas Avenue, Dallas, Texas, 75225, and our telephone number is (214) 576-9332. Our website address is . Information contained on, or accessible through, our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference.
Shares of common stock offered by us shares.
Option to purchase additional shares of common stock shares.
Common stock shares of common stock (or shares if the underwriters exercise their option to purchase additional shares of our common stock in full).
Class B common stock shares of Class B common stock.
Class C common stock No shares of Class C common stock.
Common stock voting rights One vote per share, representing, in the aggregate, approximately % of the combined voting power of our capital stock outstanding after this offering (or % if the underwriters exercise in full their option to purchase additional shares of our common stock).
Class B common stock voting rights Ten votes per share, representing, in the aggregate, approximately % of the combined voting power of our capital stock outstanding after this offering (or % if the underwriters exercise in full their option to purchase additional shares of our common stock).
Class C common stock voting rights No votes per share, except as (and then only to the extent) otherwise required by the laws of the State of Delaware, in which case one-hundredth (1/100) of a vote per share.
Use of proceeds Assuming an initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, we estimate that the net proceeds to us from the sale of our common stock in this offering will be $ (or $ if the underwriters exercise in full their option to purchase additional shares of our common stock), after deducting underwriting discounts and commissions and estimated offering expenses.
We currently intend to pay $ of the net proceeds of this offering to IAC immediately upon completion of the offering as repayment of indebtedness owed to IAC and/or as a dividend to IAC declared prior to the completion of this offering and to use the remainder for general corporate purposes.
Dividends Other than the dividend to IAC described under "Use of proceeds," we do not expect to pay cash dividends on our capital stock in the foreseeable future. Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business. Any future determination to pay dividends on our capital stock will be made by our board of directors and will depend upon our results of operations, financial condition, capital requirements, business strategy, regulatory and contractual restrictions, general economic conditions and other factors that our board of directors deems relevant. See "Dividend policy."
Directed share program At our request, the underwriters have reserved for sale, at the initial public offering price, up to % of the shares of common stock offered by this prospectus for sale to our employees and directors and those of IAC. These sales will be made by an affiliate of , an underwriter of this offering, through a directed share program. If these persons purchase reserved shares it will reduce the number of shares of common stock available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of common stock offered by this prospectus. See "Underwriting—Directed share plan."
Listing We have applied to list our common stock on the NASDAQ Global Select Market under the trading symbol "MTCH."
Risk factors Investing in our common stock involves risks. See "Risk factors," beginning on page 14, for a discussion of certain factors that you should carefully consider before making an investment decision.
shares of our common stock which are issuable to IAC as reimbursement for compensation expenses related to IAC equity awards held by our employees. See "Certain relationships and related party transactions—Employee matters agreement" and "Management's discussion and analysis of financial condition and results of operations—Critical accounting policies Stock-based compensation."
Prior to the offering, the equity awards that relate to our common stock or the common stock of certain of our subsidiaries are settlable in shares of IAC common stock. Upon completion of the offering, the options that relate to our common stock will be exercisable for shares of our common stock, and the equity awards that relate to our subsidiaries will be settlable, at IAC's election, in shares of IAC common stock or in shares of our common stock. See "Management's discussion and analysis of financial condition and results of operations—Critical accounting policies—Stock-based compensation."
the filing of a certificate of amendment, which will occur immediately prior to the consummation of this offering, to, among other things, (i) authorize the creation of our Class B common stock and our Class C common stock and (ii) amend and redesignate our common stock outstanding immediately prior to the consummation of this offering as Class B common stock.
The following summary historical combined financial information as of December 31, 2013 and 2014 and for the years ended December 31, 2012, 2013 and 2014 has been derived from our audited combined financial statements included elsewhere in this prospectus. The following summary historical combined financial information as of June 30, 2015 and for the six months ended June 30, 2014 and 2015 has been derived from our unaudited interim combined financial statements included elsewhere in this prospectus. The unaudited interim combined financial statements have been prepared on the same basis as our audited combined financial statements and, in the opinion of our management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of this information. Our historical results are not necessarily indicative of the results to be expected for any future period, and results for any interim period are not necessarily indicative of the results to be expected for the full year. The following unaudited pro forma combined financial information presents Match Group's consolidated balance sheet and statement of operations after giving effect to the PlentyOfFish acquisition. The financial data for the twelve-month period ending June 30, 2015 is derived by adding the financial data from the unaudited pro forma combined statement of operations for the six months ended June 30, 2015 with the unaudited pro forma combined statement of operations for the year ended December 31, 2014 and then deducting the financial data from the unaudited pro forma combined statement of operations for the six months ended June 30, 2014. The pro forma information under combined statement of operations information gives effect to the PlentyOfFish acquisition as if it had occurred on January 1, 2014. The information under combined balance sheet information gives effect to the PlentyOfFish acquisition as if it had occurred on June 30, 2015.
Our historical combined financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of IAC. The combined financial statements reflect the historical financial position, results of operations and cash flows of the businesses that now make up Match Group, Inc. since their respective dates of acquisition by IAC and the allocation to us of certain IAC corporate expenses relating to us and our businesses based on the historical financial statements and accounting records of IAC. In the opinion of our management, the assumptions underlying our historical combined financial statements, including the basis on which the expenses have been allocated from IAC, are reasonable. However, the allocations may not reflect the expenses that we may have incurred as an independent, stand-alone company for the periods presented. Our historical combined financial statements may not reflect what our actual financial position, results of operation and cash flows would have been if we had been an independent, stand-alone company for the periods presented. For the purposes of our financial statements, our income taxes have been computed on an as-if standalone, separate tax return basis.
"Unaudited pro forma combined financial statements", including the notes thereto, appearing elsewhere in this prospectus.
(1) In considering the financial performance of the business, management and our chief operating decision maker analyze the primary financial performance measure of Adjusted EBITDA. Adjusted EBITDA is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements. For a reconciliation of Adjusted EBITDA to operating income for our historical results, see "Selected historical combined financial and other information."
underlying operating performance of the business, including the exclusion of restructuring costs and the addback of the write-off of deferred revenue arising from purchase accounting. Presented below is the calculation of Pro forma Adjusted EBITDA as per the Credit Agreement.
(3) We are currently in the process of an ongoing streamlining and partial consolidation of the technology and network systems and infrastructures of a number of our businesses, including Match, OurTime and Meetic. The goal of this project is to modernize, optimize and improve the scalability and cost effectiveness of these systems and infrastructures and to increase our ability to deploy product changes more rapidly across devices and product lines.
(4) Generally accepted accounting principles ("GAAP") require the historical deferred revenue balance of acquired businesses to be recorded at fair value following the acquisition. The adjustment to fair value reduces the balance of deferred revenue. Therefore, following an acquisition, GAAP reported revenue and operating income is reduced. This adjustment, which is non-cash in nature and primarily relates to the acquisition of The Princeton Review and FriendScout24, reflects the reduction in operating income arising from the acquisition related adjustment to deferred revenue.
(1) "Direct Revenue" is revenue that is directly received from an end user of our products.
(2) "Indirect Revenue" is revenue that is not received directly from an end user of our products, substantially all of which is currently advertising revenue.
(3) "Average PMC" is calculated by summing the number of paid members, or paid member count (PMC), at the end of each day in the relevant measurement period and dividing it by the number of calendar days in that period.
(4) "ARPPU" or Average Revenue per Paying User, is Direct Revenue in the relevant measurement period divided by the Average PMC in such period divided by the number of calendar days in such period.
Investing in our common stock involves risks. In addition to the other information contained in this prospectus, you should carefully consider the following risks before deciding to purchase shares of our common stock in this offering. The occurrence of any of the following risks might cause you to lose all or a part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to "Cautionary note regarding forward-looking statements" for more information regarding forward-looking statements.
The limited operating history of our newer dating brands and products makes it difficult to evaluate our current business and future prospects.
We seek to tailor each of our dating brands and products to meet the preferences of specific communities of users. Building a given brand or product is generally an iterative process that occurs over a meaningful period of time and involves considerable resources and expenditures. Although certain of our newer brands and products have experienced significant growth over relatively short periods of time, you cannot necessarily rely on the historical growth rates of these brands and products as an indication of future growth rates for our newer brands and products generally. We have encountered, and may continue to encounter, risks and difficulties as we build our newer brands and products. The failure to successfully address these risks and difficulties could adversely affect our business, financial condition and results of operations.
The dating industry is competitive, with low switching costs and a consistent stream of new products and entrants, and innovation by our competitors may disrupt our business.
The dating industry is competitive, with a consistent stream of new products and entrants. Some of our competitors may enjoy better competitive positions in certain geographical regions or user demographics that we currently serve or may serve in the future. These advantages could enable these competitors to offer products that are more appealing to users and potential users than our products or to respond more quickly and/or cost-effectively than us to new or changing opportunities.
In addition, within the dating industry generally, costs for consumers to switch between products are low, and consumers have a propensity to try new approaches to connecting with people. As a result, new products, entrants and business models are likely to continue to emerge. It is possible that a new product could gain rapid scale at the expense of existing brands through harnessing a new technology or distribution channel, creating a new approach to connecting people or some other means. If we are not able to compete effectively against our current or future competitors and products that may emerge, the size and level of engagement of our user base may decrease, which could have an adverse effect on our business, financial condition and results of operations.
Each of our dating products monetizes users at different rates. If a meaningful migration of our user base from our higher monetizing dating products to our lower monetizing dating products were to occur, it could adversely affect our business, financial condition and results of operations.
to our less profitable brands, our business, financial condition and results of operations could be adversely affected.
Our growth and profitability rely, in part, on our ability to attract and retain users through cost-effective marketing efforts. Any failure in these efforts could adversely affect our business, financial condition and results of operations.
Attracting and retaining users for our dating products involve considerable expenditures for online and offline marketing. Historically, we have had to increase our marketing expenditures over time in order to attract and retain users and sustain our growth.
Evolving consumer behavior can affect the availability of profitable marketing opportunities. For example, as traditional television viewership declines and as consumers spend more time on mobile devices rather than desktop computers, the reach of many of our traditional advertising channels is contracting. Similarly, as consumers communicate less via e-mail and more via text messaging and other virtual means, the reach of e-mail campaigns designed to attract new and repeat users (and retain current users) for our dating products is adversely impacted. To continue to reach potential users and grow our businesses, we must identify and devote more of our overall marketing expenditures to newer advertising channels, such as mobile and online video platforms as well as targeted campaigns in which we communicate directly with potential, former and current users via new virtual means. Generally, the opportunities in and sophistication of newer advertising channels are relatively undeveloped and unproven, and there can be no assurance that we will be able to continue to appropriately manage and fine-tune our marketing efforts in response to these and other trends in the advertising industry. Any failure to do so could adversely affect our business, financial condition and results of operations.
Communicating with our users via email is critical to our success, and any erosion in our ability to communicate in this fashion that is not sufficiently replaced by other means could adversely affect our business, financial condition and results of operations.
As consumer habits evolve in the era of smart phones and messaging/social networking apps, usage of email, particularly among our younger users, has declined. In addition, deliverability restrictions imposed by third party email providers could limit or prevent our ability to send emails to our users. One of our primary means of communicating with our users and keeping them engaged with our products is via email. Our ability to communicate via email enables us to keep our users updated on activity with respect to their profile, present or suggest new or interesting users from the community, invite them to offline events and present discount and free trial offers, among other things. Any erosion in our ability to communicate successfully with our users via email could have an adverse impact on user experience and the rate at which non-paying users become paid members.
While we continually work to find new means of communicating and connecting with our members (for example, through push notifications), there is no assurance that such alternative means of communication will be as effective as email has been. Any failure to develop or take advantage of new means of communication could have an adverse effect on our business, financial condition and results of operations.
Our quarterly results or operating metrics could fluctuate significantly, which could cause the trading price of our common stock to decline.
general economic conditions in either domestic or international markets.
The occurrence of any one of these factors, as well as other factors, or the cumulative effect of the occurrence of one or more of such factors could cause our quarterly results and operating metrics to fluctuate significantly. As a result, quarterly comparisons of results and operating metrics may not be meaningful.
In addition, the variability and unpredictability of our quarterly results or operating metrics could result in our failure to meet our expectations, or those of any of our investors or of analysts that cover our company, with respect to revenues or other operating results for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our common stock could fall substantially.
Foreign currency exchange rate fluctuations could adversely affect our results of operations.
We operate in various international markets, primarily in various jurisdictions within the European Union. During fiscal year 2014 and the six months ended June 30, 2015, 35% and 31% of our total revenues, respectively, were international revenues. Our primary exposure to foreign currency exchange risk relates to investments in foreign subsidiaries that transact business in a functional currency other than the U.S. dollar, primarily the Euro.
As foreign currency exchange rates fluctuate, the translation of our international results into U.S. dollars affects the period-over-period comparability of our U.S dollar-denominated operating results. For example, the average Euro to U.S. dollar exchange rate was 18% lower in the first half of 2015 than it was in the first half of 2014, which significantly reduced our revenue. Our total revenue, dating revenue and international dating revenue for the six months ended June 30, 2015, as compared to the six months period ended June 30, 2014, would have increased approximately 21%, 11% and 13%, respectively, as compared to the reported increases of 15% and 5% and a decrease of 5%, respectively, had foreign currency exchange rates remained constant during such period.
Historically, we have not hedged any foreign currency exposures. Our international operations' continued growth and expansion into new countries increases our exposure to foreign exchange rate fluctuations. These fluctuations could have a significant impact on our future results of operations.
Distribution and use of our dating products depends, in significant part, on a variety of third party publishers, platforms and mobile app stores. If these third parties limit, prohibit or otherwise interfere with the distribution or use of our dating products in any material way, it could adversely affect our business, financial condition and results of operations.
We market and distribute our dating products (including related mobile applications) through a variety of third party publishers and distribution channels. Our ability to market our brands on any given property or channel is subject to the policies of the relevant third party. Certain publishers and channels have, from time to time, limited or prohibited advertisements for dating products for a variety of reasons, including as a result of poor behavior by other industry participants. There is no assurance that we will not be limited or prohibited from using certain current or prospective marketing channels in the future. If this were to happen in the case of a significant marketing channel and/or for a significant period of time, our business, financial condition and results of operations could be adversely affected.
Additionally, our mobile applications are increasingly accessed through the Apple App Store and the Google Play Store. Both Apple and Google have broad discretion to change their respective terms and conditions applicable to the distribution of our applications, and to interpret their respective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability to distribute our applications through their stores. There is no assurance that Apple or Google will not limit or eliminate or otherwise interfere with the distribution of our applications. If either or both of them did so, our business, financial condition and results of operations could be adversely affected.
Lastly, in the case of Tinder, users currently register for (and log in to) the application exclusively through their Facebook profiles. Facebook has broad discretion to change its terms and conditions applicable to the use of its platform in this manner and to interpret its terms and conditions in ways that could limit, eliminate or otherwise interfere with our ability to use Facebook in this manner and if Facebook did so, our business, financial condition and results of operations could be adversely affected.
As the distribution of our dating products through app stores increases, in order to maintain our profit margins, we may need to offset increasing app store fees by decreasing traditional marketing expenditures, increasing user volume or monetization per user or by engaging in other efforts to increase revenue or decrease costs generally, or our business, financial condition and results of operations could be adversely affected.
As our user base continues to shift to mobile solutions, we increasingly rely on the Apple App Store and the Google Play Store to distribute our mobile applications and related in-app products. While our mobile applications are generally free to download from these stores, we offer our users the opportunity to purchase paid memberships and certain à la carte features through these applications. We determine the prices at which these memberships and features are sold and, in exchange for facilitating the purchase of these memberships and features through these applications to users who download our applications from these stores, we pay Apple and Google, as applicable, a share (currently 30%) of the revenue we receive from these transactions. As the distribution of our dating products through app stores increases, we may need to offset these increased app store fees by decreasing traditional marketing expenditures as a percentage of revenue, increasing user volume or monetization per user, or by engaging in other efforts to increase revenue or decrease costs generally, or our business, financial condition and results of operations could be adversely affected.
Our success depends, in part, on the integrity of our systems and infrastructures and on our ability to enhance, expand and adapt these systems and infrastructures in a timely and cost-effective manner.
In order for us to succeed, our systems and infrastructures must perform well on a consistent basis. From time to time, we may experience system interruptions that make some or all of our systems or data unavailable and prevent our products from functioning properly for our users; any such interruption could arise for any number of reasons. Further, our systems and infrastructures are vulnerable to damage from fire, power loss, telecommunications failures and similar events. While we have backup systems in place for certain aspects of our operations, our systems and infrastructures are not fully redundant, disaster recovery planning is not sufficient for all eventualities and our property and business interruption insurance coverage may not be adequate to compensate us fully for any losses that we may suffer. Any interruptions or outages, regardless of the cause, could negatively impact our users' experiences with our products, tarnish our brands' reputation and decrease demand for our products, any or all of which could adversely affect our business, financial condition and results of operations.
We also continually work to expand and enhance the efficiency and scalability of our technology and network systems to improve the experience of our users, accommodate substantial increases in the volume of traffic to our various dating products and to keep up with changes in technology and user preference. Any failure to do so in a timely and cost-effective manner could adversely affect our users' experience with our various products and thereby negatively impact the demand for our products, and could increase our costs, either of which could adversely affect our business, financial condition and results of operations.
We are currently undertaking a significant and complex update to the technology relating to some of our businesses, and failure to complete this project in a timely and effective manner could adversely affect our business.
We are currently in the process of an ongoing consolidation and streamlining of the technology and network systems and infrastructures of a number of our businesses, including Match, OurTime and Meetic. The goal of this project is to modernize, optimize and improve the scalability and cost-effectiveness of these systems and infrastructures and to increase our ability to deploy product changes more rapidly across devices and product lines. We have budgeted significant human and financial resources for these efforts and if we experience delays, inefficiencies or operational failures, we will incur additional costs, which would adversely affect our profitability. Moreover, these efforts may not be successful generally, may not be completed in a timely or cost-effective manner, may not result in the cost savings or other benefits we anticipate and may disrupt operations, any or all of which could adversely affect our business, financial condition and results of operations.
We may not be able to protect our systems and infrastructures from cyber attacks and may be adversely affected by cyber attacks experienced by third parties.
We are frequently under attack by perpetrators of random or targeted malicious technology-related events, such as cyber attacks, computer viruses, worms or other destructive or disruptive software or distributed denial of service attacks. While we have invested heavily in the protection of our systems and infrastructures and in related training, there can be no assurance that our efforts will prevent significant breaches in our systems or other such events from occurring. Any cyber or similar attack we are unable to protect ourselves against could damage our systems and infrastructure, prevent us from providing our products, erode our reputation and brands and/or be costly to remedy.
business may result in a loss of consumer confidence generally, which could make users less likely to use or continue to use our products. The occurrence of any of these events could have an adverse effect on our business, financial condition and results of operations.
Our success depends, in part, on the integrity of third party systems and infrastructures.
We rely on third parties, primarily data center service providers, as well as third party computer systems, broadband and other communications systems and service providers, in connection with the provision of our products generally, as well as to facilitate and process certain transactions with our users. We have no control over any of these third parties or their operations.
Problems experienced by third party data center service providers upon whom we rely, the telecommunications network providers with whom they contract or with the systems through which telecommunications providers allocate capacity among their customers could also adversely affect us. Any changes in service levels at our data centers or any interruptions, outages or delays in our systems or those of our third party providers, or deterioration in the performance of these systems, could impair our ability to provide our products or process transactions with our users, which would adversely impact our business, financial condition and results of operations.
If the security of personal and confidential user information that we maintain and store is breached or otherwise accessed by unauthorized persons, it may be costly to mitigate the impact of such an event and our reputation could be harmed.
We receive, process, store and transmit a significant amount of personal user and other confidential information and enable our users to share their personal information with each other. In some cases, we retain third party vendors to store this information. We continuously develop and maintain systems to protect the security, integrity and confidentiality of this information, but cannot guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. If any such event were to occur, we may not be able to remedy the event, and we may have to expend significant capital and resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring. If a breach of our security (or the security of our vendors and partners) occurs, the perception of the effectiveness of our security measures and our reputation may be harmed, we could lose current and potential users and the recognition of our various brands and their competitive positions could be diminished, any or all of which could adversely affect our business, financial condition and results of operations.
Unauthorized access of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.
Security breaches or other unauthorized access to, or the use or transmission of, personal user information could result in a variety of claims against us, including privacy-related claims. There are numerous laws in the countries in which we operate regarding privacy and the storage, sharing, use, processing, disclosure and protection of this kind of information, the scope of which are changing, inconsistent and conflicting and subject to differing interpretations. For example, the European Commission has proposed and is currently debating comprehensive privacy and data protection reforms in the European Union, certain developing countries in which we do business are currently considering adopting privacy and data protection laws and regulations, and legislative proposals concerning privacy and the protection of user information are often pending before the U.S. Congress and various U.S. state legislatures.
that we have violated applicable laws or codes of conduct or that we will be able to successfully defend against such claims.
Any failure or perceived failure by us (or the third parties with whom we have contracted to store such information) to comply with applicable privacy laws, privacy policies or privacy-related contractual obligations or any compromise of security that results in unauthorized access to personal information may result in governmental enforcement actions, significant fines, litigation, claims of breach of contract and indemnity by third parties and adverse publicity. In the case of such an event, our reputation may be harmed, we could lose current and potential users and the competitive positions of our various brands could be diminished, any or all of which could adversely affect our business, financial condition and results of operations.
We are subject to a number of risks related to credit card payments, including data security breaches and fraud that we or third parties experience or additional regulation, any of which could adversely affect our business, financial condition and results of operations.
We accept payment from our users primarily through credit card transactions and certain online payment service providers. The ability to access credit card information on a real time-basis without having to proactively reach out to the consumer each time we process an auto-renewal payment or a payment for the purchase of a premium feature on any of our dating products is critical to our success.
When we or a third party experiences a data security breach involving credit card information, affected cardholders will often cancel their credit cards. In the case of a breach experienced by a third party, the more sizable the third party's customer base and the greater the number of credit card accounts impacted, the more likely it is that our users would be impacted by such a breach. To the extent our users are ever affected by such a breach experienced by us or a third party, affected users would need to be contacted to obtain new credit card information and process any pending transactions. It is likely that we would not be able to reach all affected users, and even if we could, some users' new credit card information may not be obtained and some pending transactions may not be processed, which could adversely affect our business, financial condition and results of operations.
Even if our users are not directly impacted by a given data security breach, they may lose confidence in the ability of service providers to protect their personal information generally, which could cause them to stop using their credit cards online and choose alternative payment methods that are not as convenient for us or restrict our ability to process payments without significant user effort.
Additionally, if we fail to adequately prevent fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures and significantly higher credit card-related costs, any of which could adversely affect our business, financial condition and results of operations.
Finally, the passage or adoption of any legislation or regulation affecting the ability of service providers to periodically charge consumers for recurring membership payments may adversely affect our business, financial condition and results of operations.
Inappropriate actions by certain of our users could be attributed to us and damage our brands' reputation, which in turn could adversely affect our business.
policies. These safeguards may not be sufficient to avoid harm to our reputation and brands, especially if such hostile, offensive or inappropriate use is well-publicized.
In addition, it is possible that a user of our products could be physically, financially, emotionally or otherwise harmed by an individual that such user met through the use of one of our products. If one or more of our users suffers or alleges to have suffered any such harm, we could experience negative publicity or legal action that could damage our reputation and our brands. Similar events affecting users of our competitors' dating products could result in negative publicity for the dating industry generally, which could in turn negatively affect our business. Concerns about such harms and the use of dating products and social networking platforms for illegal conduct, such as romance scams and financial fraud, could produce future legislation or other governmental action that could require changes to our dating products, restrict or impose additional costs upon the conduct of our business generally or cause users to abandon our dating products.
We may fail to adequately protect our intellectual property rights or may be accused of infringing the intellectual property rights of third parties.
We rely heavily upon our trademarks and related domain names and logos to market our brands and to build and maintain brand loyalty and recognition, as well as upon trade secrets. We also rely, to a lesser extent, upon patented and patent-pending proprietary technologies relating to matching process systems and related features and products.
We also rely on a combination of laws, and contractual restrictions with employees, customers, suppliers, affiliates and others, to establish and protect our various intellectual property rights. For example, we have generally registered and continue to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed and used, and reserve, register and renew domain names as we deem appropriate. Effective trademark protection may not be available or may not be sought in every country in which our products are made available and contractual disputes may affect the use of marks governed by private contract. Similarly, not every variation of a domain name may be available or be registered, even if available.
We also generally seek to apply for patents or for other similar statutory protections as and if we deem appropriate, based on then-current facts and circumstances, and will continue to do so in the future. No assurances can be given that any patent application we have filed or will file will result in a patent being issued, or that any existing or future patents will afford adequate protection against competitors and similar technologies. In addition, no assurances can be given that third parties will not create new products or methods that achieve similar results without infringing upon patents we own.
Despite these measures, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise or third parties could copy or otherwise obtain and use our intellectual property without authorization. The occurrence of any of these events could result in the erosion of our brands and limit our ability to market our brands using our various domain names, as well as impede our ability to effectively compete against competitors with similar technologies, any of which could adversely affect our business, financial condition and results of operations.
From time to time, we have been subject to legal proceedings and claims, including claims of alleged infringement of trademarks, copyrights, patents and other intellectual property rights held by third parties. In addition, litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets or to determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business, financial condition and results of operations.
We operate in various international markets, including certain markets in which we have limited experience. As a result, we face additional risks in connection with certain of our international operations.
Our brands are available in over 190 countries. Our international revenue represented 35% and 31% of our total revenue for the fiscal year ended December 31, 2014 and six months ended June 30, 2015, respectively.
trade sanctions, political unrest, terrorism, war and epidemics or the threat of any of these events.
The occurrence of any or all of the events described above could adversely affect our international operations, which could in turn adversely affect our business, financial condition and results of operations.
We may experience operational and financial risks in connection with acquisitions.
successfully manage acquisition-related strain on our management, operations and financial resources and those of the various brands in our portfolio.
Furthermore, we may not be successful in addressing other challenges encountered in connection with our acquisitions. The anticipated benefits of one or more of our acquisitions may not be realized or the value of goodwill and other intangible assets acquired could be impacted by one or more continuing unfavorable events or trends, which could result in significant impairment charges. The occurrence of any these events could have an adverse effect on our business, financial condition and results of operations.
We will incur some increased costs and devote substantial management time as a result of operating as a public company.
We expect that the obligations of being a public company, including public reporting and investor relations obligations, will require new expenditures, place new demands on our management and will require the hiring of additional personnel. While IAC will continue to provide us with certain corporate and shared services related to corporate functions for a period of time for negotiated fees, we also expect that we will need to implement additional systems and hire additional personnel to adequately function as a public company. We cannot precisely predict the amount and timing of these significant expenditures. See "—Risks related to our ongoing relationship with IAC—The services that IAC will provide to us following the initial public offering may not be sufficient to meet our needs, and we may have difficulty finding replacement services or be required to pay increased costs to replace these services if we no longer receive these services from IAC."
We may not realize the potential benefits from our initial public offering.
enhancing our market recognition with investors.
We may not achieve the anticipated benefits from our initial public offering for a variety of reasons. For example, the process of operating as an independent public company may distract our management from focusing on our business and strategic priorities. In addition, although we will have direct access to the debt and equity capital markets following the offering, we may not be able to issue debt or equity on terms acceptable to us or at all. The availability of tradable shares of our common stock for use as consideration for acquisitions also will not ensure that we will be able to successfully pursue acquisitions or that the acquisitions will be successful. We also may not fully realize the anticipated benefits from our initial public offering if any of the matters identified as risks in this "Risk factors" section were to occur. If we do not realize the anticipated benefits from our initial public offering for any reason, our business may be adversely affected.
We are subject to litigation and adverse outcomes in such litigation could have an adverse effect on our financial condition.
We are, and from time to time may become, subject to litigation and various legal proceedings, including litigation and proceedings related to intellectual property matters and privacy and consumer protection laws, that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations. The defense of these actions may be both time consuming and expensive. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we may establish reserves and/or disclose the relevant litigation claims or legal proceedings, as and when required or appropriate. These assessments and estimates are based on information available to management at the time of such assessment or estimation and involve a significant amount of judgment. As a result, actual outcomes or losses could differ materially from those envisioned by our current assessments and estimates. Our failure to successfully defend or settle any of these litigations or legal proceedings could result in liability that, to the extent not covered by our insurance, could have an adverse effect on our business, financial condition and results of operations.
IAC controls our company and will have the ability to control the direction of our business.
the number of shares available for issuance under our equity incentive plans for our prospective and existing employees.
may also discourage transactions involving a change of control of our company, including transactions in which you as a holder of our common stock might otherwise receive a premium for your shares. Furthermore, after the expiration of the 180-day lock-up period, IAC generally has the right at any time to sell or otherwise dispose of the shares of our capital stock that it owns, including the ability to transfer a controlling interest in us to a third party, without your approval and without providing for a purchase of your shares. See "Shares eligible for future sale."
Even if IAC owns shares of Class B common stock representing less than a majority of the total voting power of our outstanding capital stock, so long as IAC retains shares representing a significant percentage of our total voting power, IAC will have the ability to substantially influence these significant corporate activities.
In addition, pursuant to the investor rights agreement we will enter into with IAC, IAC has the right to maintain its level of ownership in our Company to the extent we issue additional shares of our capital stock in the future and, pursuant to the employee matters agreement we will enter into with IAC, IAC may receive payment for certain compensation expenses through receipt of additional shares of our stock. For a more complete summary of our agreements with IAC, see "Certain relationships and related party transactions."
Until such time as IAC no longer controls or has the ability to substantially influence us, we will continue to face the risks described in this "Risk factors" section relating to IAC's control of us and the potential conflicts of interest between IAC and us.
Our certificate of incorporation could prevent us from benefiting from corporate opportunities that might otherwise have been available to us.
Our certificate of incorporation will include a "corporate opportunity" provision in which we renounce any interests or expectancy in corporate opportunities which become known to (i) any of our directors or officers who are also officers, directors, employees or other affiliates of IAC or its affiliates (except that we and our subsidiaries shall not be deemed affiliates of IAC or its affiliates for the purposes of the foregoing) or (ii) IAC itself, and which relate to the business of IAC or may constitute a corporate opportunity for both IAC and us. Generally, neither IAC nor our officers or directors who are also officers or directors of IAC will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such person pursues or acquires any corporate opportunity for the account of IAC, directs or transfers such corporate opportunity to IAC, or does not communicate information regarding such corporate opportunity to us. The corporate opportunity provision may exacerbate conflicts of interest between IAC and us because the provision effectively permits one of our directors or officers who also serves as an officer or director of IAC to choose to direct a corporate opportunity to IAC instead of to us.
IAC's interests may conflict with our interests and the interests of our stockholders. Conflicts of interest between IAC and us could be resolved in a manner unfavorable to us and our public stockholders.
the intercompany services and agreements between IAC and us.
Potential conflicts of interest could also arise if we decide to enter into any new commercial arrangements with IAC in the future or in connection with IAC's desire to enter into new commercial arrangements with third parties.
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable to us than if we were dealing with an unaffiliated party. While we are controlled by IAC, we may not have the leverage to negotiate amendments to these agreements, if required, on terms as favorable to us as those we would negotiate with an unaffiliated third party.
Our historical and pro forma combined financial information may not be representative of the results we would have achieved as a public company and may not be a reliable indicator of our future results.
The historical and pro forma combined financial information that we have included in this prospectus may not necessarily reflect what our financial position, results of operations or cash flows would have been had we been a public company during the periods presented or those that we will achieve in the future. Our combined financial statements reflect the historical financial position, results of operations and cash flows of our various businesses since their respective dates of acquisition by IAC and the allocation to us by IAC of expenses for certain functions based on various methodologies. We have not adjusted our historical and pro forma combined financial information to reflect changes that will occur in our cost structure, financing and operations as a result of our transition to becoming a public company, including anticipated increased costs associated with public company reporting and other obligations. Accordingly, our historical and pro forma combined financial information may not necessarily be indicative of what our financial position, results of operations or cash flows will be in the future.
We will be a "controlled company" as defined in the NASDAQ rules, and will rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.
that we have a nominating/governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities.
Accordingly, for so long as we are a "controlled company," you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Marketplace Rules.
In order to preserve the ability of IAC to distribute its shares of our capital stock on a tax-free basis, we may be prevented from pursuing opportunities to raise capital, to effectuate acquisitions or to provide equity incentives to our employees, which could hurt our ability to grow.
Under current laws, IAC must retain beneficial ownership of at least 80% of the total voting power and 80% of each class of nonvoting capital stock, if any is outstanding, in order to effect a tax-free distribution of our shares held by IAC to its stockholders. IAC has advised us that it does not have any present intention or plans to undertake such a tax-free distribution. However, IAC currently intends to use its majority voting interest to retain its ability to engage in such a transaction. This intention may cause IAC to not support transactions we wish to pursue that involve issuing shares of our common stock, including for capital raising purposes, as consideration for an acquisition or as equity incentives to our employees. The inability to pursue such transactions, if it occurs, may adversely affect our company. See "—IAC controls our company and will have the ability to control the direction of our business" and "—IAC's interests may conflict with our interests and the interests of our stockholders. Conflicts of interest between IAC and us could be resolved in a manner unfavorable to us and our public stockholders."
Our agreements with IAC will require us to indemnify IAC for certain tax liabilities and may limit our ability to engage in desirable strategic or capital raising transactions, including following any distribution by IAC of our capital stock to its stockholders.
In connection with the offering, we will enter into a tax sharing agreement with IAC. Under the tax sharing agreement, we generally will be responsible and will be required to indemnify IAC for (i) all taxes imposed with respect to any consolidated, combined or unitary tax return of IAC or one of its subsidiaries that includes us or any of our subsidiaries to the extent attributable to us or any of our subsidiaries, as determined under the tax sharing agreement, and (ii) all taxes imposed with respect to any consolidated, combined, unitary or separate tax returns of us or any of our subsidiaries. To the extent IAC failed to pay taxes imposed with respect to any consolidated, combined or unitary tax return of IAC or one of its subsidiaries that includes us or any of our subsidiaries, the relevant taxing authority could seek to collect such taxes (including taxes for which IAC is responsible under the tax sharing agreement) from us or our subsidiaries.
Section 368(a)(1)(D) and/or Section 355 of the Internal Revenue Code of 1986, as amended, or the Code, to the extent that the failure to so qualify is attributable to (i) a breach of the relevant representations and covenants made by us in the tax sharing agreement or any representation letter provided in support of any tax opinion or ruling obtained by IAC with respect to the U.S. federal income tax treatment of such spin-off, or (ii) an acquisition of our equity securities.
To preserve the tax-free treatment of any potential future spin-off by IAC of its interest in us, and in addition to our indemnity obligation described above, the tax sharing agreement will restrict us, for the two-year period following any such spin-off, except in specific circumstances, from: (i) entering into any transaction pursuant to which all or a portion of shares of our stock would be acquired, whether by merger or otherwise, (ii) issuing equity securities beyond certain thresholds, (iii) repurchasing our shares other than in certain open-market transactions, (iv) ceasing to actively conduct our businesses or (v) taking or failing to take any other action that prevents the distribution and related transactions from qualifying as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Section 368(a)(1)(D) and/or Section 355 of the Code.
The indemnity obligations and other limitations could have an adverse effect on our business, financial condition and results of operations. For a more complete description of the tax sharing agreement, see "Certain relationships and related party transactions—Tax sharing agreement."
Future sales or distributions of our shares by IAC could depress our common stock price.
After this offering, and subject to the lock-up period described below, IAC will have the right to sell or distribute to its stockholders all or a portion of our Class B common stock that it holds. Although as of the date of this prospectus IAC has advised us that it does not have any present intention or plans to undertake such a sale or distribution, sales by IAC in the public market or distributions to its stockholders of substantial amounts of our stock in the form of common stock or Class B common stock, or the filing by IAC of a registration statement relating to a substantial amount of our stock, could depress the price of our common stock.
In addition, IAC will have the right, subject to certain conditions, to require us to file registration statements covering the sale of its shares or to include its shares in other registration statements that we may file. In the event IAC exercises its registration rights and sells all or a portion of its shares of our capital stock, the price of our common stock could decline. See "Shares eligible for future sale—Registration rights."
The services that IAC will provide to us following the initial public offering may not be sufficient to meet our needs, which may result in increased costs and otherwise adversely affect our business.
Prior to completion of this offering, IAC has provided to us significant corporate and shared services related to corporate functions such as executive oversight, risk management, information technology, accounting, audit, legal, investor relations, tax, treasury and other services. Following this offering, we expect IAC to continue to provide many of these services for a fee provided in the services agreement described in "Certain relationships and related party transactions." IAC will not be obligated to provide these services in a manner that differs from the nature of the service today, and thus we may not be able to modify these services in a manner desirable to us as a stand-alone public company. Further, if we no longer receive these services from IAC, we may not be able to perform these services ourselves, or to find appropriate third-party arrangements at a reasonable cost, and the cost may be higher than that charged by IAC.
The multi class structure of our capital stock has the effect of concentrating voting control with holders of our Class B common stock and limiting your ability to influence corporate matters.
Our Class B common stock has ten votes per share, our common stock, which is being offered by us in this initial public offering, has one vote per share and our Class C common stock does not have any voting rights except as required by the laws of the State of Delaware, in which case, our Class C common stock will have one-hundredth vote per share. When this offering is completed, IAC, as holder of all of our outstanding Class B common stock, will beneficially own shares representing % of the total voting power of our outstanding capital stock (or % of the total voting power of our outstanding capital stock if the underwriters exercise in full their option to purchase additional shares of our common stock). There will be no shares of our Class C common stock outstanding immediately following this offering. Due to the ten-to-one voting ratio between our Class B common stock and common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our capital stock, even when the outstanding shares of Class B common stock represent a small minority of our equity, and such voting control will be concentrated with IAC. This concentrated control will significantly limit your ability to influence corporate matters.
The difference in the voting rights of our common stock and our Class B common stock may harm the value and liquidity of our common stock.
The holders of Class B common stock will be entitled to ten votes per share and the holders of our common stock will be entitled to one vote per share. The difference in the voting rights of our common stock and Class B common stock could harm the value of our common stock to the extent that any investor or potential future purchaser of our common stock ascribes value to the right of the holders of our Class B common stock to ten votes per share. The existence of two classes of common stock with voting rights could result in less liquidity for either class of stock than if there were only one class of our common stock. See "Description of capital stock" for descriptions of our common stock and our Class B common stock and the rights associated with each.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock outstanding prior to this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate substantial dilution of $ in net tangible book value per share from the price you paid (calculated based on the assumed initial public offering price of $ per share, which represents the midpoint of the estimated offering price range set forth on the cover of this prospectus). For additional information about the dilution that you will experience immediately after this offering, see "Dilution."
There has been no prior public market for our common stock, the price of our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price of our common stock was determined through negotiation between us and the underwriters. This price does not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of our common stock following this offering. In addition, the market price of our common stock following this offering may be highly volatile and could be subject to wide fluctuations in response to various factors, many of which are beyond our control.
general economic conditions and slow or negative growth in any of our significant markets.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.
Future sales, or the perception of future sales, of our common stock may depress the price of our common stock.
IAC. The perception that these sales might occur could depress the market price of common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. See "—Future sales or distributions of our shares by IAC could depress our common stock price."
Upon completion of this offering, we will have shares of common stock ( shares if the underwriters exercise in full their option to purchase additional shares of our common stock), shares of Class B common stock and no shares of Class C common stock outstanding. The shares of common stock offered in this offering will be freely tradable without restriction under the Securities Act of 1933, or the Securities Act, except for any shares of common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. We will grant registration rights to IAC with respect to shares of our common stock and Class B common stock. Any shares registered pursuant to the registration rights agreement described in "Certain relationships and related party transactions" will be freely tradable in the public market following a 180-day lock-up period as described below.
In connection with this offering, we, certain of our directors and executive officers and IAC will each agree to enter into a lock-up agreement and thereby be subject to a lock-up period, meaning that they and their permitted transferees will not be permitted to sell any of the shares of our capital stock for 180 days after the date of this prospectus, subject to certain exceptions without the prior consent of J.P. Morgan Securities LLC and Allen & Company LLC. Although we have been advised that there is no present intention to do so, the representatives at the underwriters may, in their sole discretion and without notice, release all or any portion of the shares from the restrictions in any of the lock-up agreements described above. See "Underwriting."
Also, in the future, we may issue our securities in connection with investments or acquisitions. The amount of shares of our capital stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding shares of our common stock.
An active trading market for our common stock may never develop or be sustained.
We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "MTCH". However, we cannot assure you that an active trading market for our common stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our common stock will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of our common stock when desired or the prices that you may obtain for your shares.
In making your investment decision, you should understand that we and the underwriters have not authorized any other party to provide you with information concerning us or this offering, you should not rely on information in public media that is published by third parties and you should rely only on statements made in this prospectus in determining whether to purchase our shares.
result, you should carefully evaluate all of the information in this prospectus and rely only on the information contained in this prospectus in determining whether to purchase our shares of common stock.
We do not expect to declare any dividends in the foreseeable future.
other factors deemed relevant by our board of directors.
We are not obligated to pay dividends on our common stock, Class B common stock or Class C common stock. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.
Provisions in our certificate of incorporation and bylaws or Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.
provide that the board of directors is expressly authorized to make, alter or repeal our bylaws.
Any provision of our certificate of incorporation, our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
This prospectus contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our business, financial condition and results of operations. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
other factors discussed elsewhere in this prospectus.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this prospectus. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which new factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We do not undertake to update these forward-looking statements, except as required by law.
We estimate that our net proceeds from this offering will be approximately $ (or $ if the underwriters exercise in full their option to purchase additional shares of our common stock), based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) and less underwriting discounts and commissions and estimated offering expenses payable by us.
We currently intend to pay $ of our net proceeds from this offering to IAC immediately upon completion of the offering as repayment of indebtedness owed to IAC and/or as a dividend to IAC declared prior to the completion of this offering and to use the remainder of our net proceeds from this offering for general corporate purposes.
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and less underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of one million shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by $ , assuming that the initial public offering price remains the same and less underwriting discounts and commissions and estimated offering expenses payable by us.
We are not obligated to pay dividends on our common stock, our Class B common stock or our Class C common stock.
As a Delaware corporation, we will be subject to certain restrictions on dividends under the Delaware General Corporation Law, or the DGCL. Generally, a Delaware corporation may only pay dividends either out of "surplus" or out of the current or the immediately preceding year's net profits. Surplus is defined as the excess, if any, at any given time, of the total assets of a corporation over its total liabilities and statutory capital. The value of a corporation's assets can be measured in a number of ways and may not necessarily equal their book value.
on an as adjusted basis after giving effect to this offering of shares of our common stock at an assumed initial public offering price of $ per share, the midpoint of the price range on the cover page of this prospectus, and the application of the net proceeds therefrom. See "Use of proceeds."
You should read the following table in together with "Selected historical combined financial and other information," and "Management's discussion and analysis of financial condition and results of operations" and our combined financial statements and related notes appearing elsewhere in this prospectus.
(1) A $1.00 increase (decrease) in the assumed initial public offering price of $ per share (the midpoint of the price range on the cover page of this prospectus) would increase (decrease) each of cash and cash equivalents, total shareholders equity and total capitalization by $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and less the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters' option to purchase additional shares of our common stock is exercised in full, the as adjusted amount of each of cash and cash equivalents, total shareholders equity and total capitalization would increase by approximately $ , and less underwriting discounts and commissions and estimated expenses payable by us.
(2) Long-term debt—related party consists of $79.0 million in notes payable in three installments of $26.3 million each due on September 1, 2021, 2023 and 2026, a €53 million ($59.3 million at June 30, 2015) note due December 15, 2021 and a $47.0 million note due December 15, 2021, all of which will be repaid in connection with this offering. We and certain of our domestic subsidiaries are also guarantors of IAC's senior notes and credit facility. Prior to the closing of the offering, we will no longer be a restricted subsidiary of IAC for purposes of its debt facilities, nor will we guarantee any debt of IAC. See "Management's discussion and analysis of financial condition and results of operations—Liquidity and capital resources."
(3) See "Description of indebtedness."
If you invest in our common stock, your ownership interest will be diluted to the extent that the initial public offering price per share of our common stock exceeds the tangible book value per share of our common stock immediately following this offering. Tangible book value per share of common stock is equal to our total stockholders' equity, less intangible assets, divided by the number of shares of common stock and Class B common stock outstanding. There will be no outstanding shares of Class C common stock upon completion of this offering. The tangible book value of our common stock and Class B common stock as of June 30, 2015 was $ , or $ per share.
After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share (the midpoint of the price range on the cover page of this prospectus), and less underwriting discounts and commissions and estimated offering expenses payable by us, the as adjusted net tangible book value of our common stock and Class B common stock at June 30, 2015 would have been approximately $ , or $ per share. Therefore, this offering will result in an immediate increase of $ in the tangible book value per share of our common stock and Class B common stock to existing stockholders and an immediate dilution of $ in the tangible book value per share of our common stock to investors purchasing shares in this offering.
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) as adjusted net tangible book value per share after this offering by $ per share and increase (decrease) the dilution to new investors by $ per share, in each case assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and less underwriting discounts and commissions and estimated offering expenses payable by us.
price range on the cover page of this prospectus), less underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters' option to purchase additional shares of common stock is exercised in full, the number of shares held by existing stockholders after this offering would be reduced to % of the total number of shares outstanding after this offering, and the number of shares held by new investors would increase to shares, or % of the total number of shares outstanding after this offering.
The following selected historical combined financial information as of December 31, 2013 and 2014, and for each of the years in the three year period ended December 31, 2014, has been derived from our audited combined financial statements included elsewhere in this prospectus. The following selected historical combined financial information as of June 30, 2015, and for the six months ended June 30, 2014 and 2015, has been derived from our unaudited interim combined financial statements included elsewhere in this prospectus. The unaudited interim combined financial statements have been prepared on the same basis as our audited combined financial statements and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of this information. Our historical results are not necessarily indicative of the results to be expected for any future period, and results for any interim period are not necessarily indicative of the results to be expected for the full year.
Our historical combined financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of IAC. The combined financial statements reflect the historical financial position, results of operations and cash flows of our businesses since their respective dates of acquisition by IAC and the allocation to us of certain IAC corporate expenses relating to us based on the historical financial statements and accounting records of IAC. In the opinion of our management, the assumptions underlying our historical combined financial statements, including the basis on which the expenses have been allocated from IAC, are reasonable. However, the allocations may not reflect the expenses that we may have incurred as an independent, stand-alone company for the periods presented. Our historical combined financial statements may not reflect what our actual financial position, results of operation and cash flows would have been if we had been an independent, stand-alone company for the periods presented. For the purposes of our financial statements, income taxes have been computed for us on an as if stand-alone, separate tax return basis.
The information presented below should be read in conjunction with the information under "Management's discussion and analysis of financial condition and results of operations" and our audited and unaudited combined financial statements, including the notes thereto, appearing elsewhere in this prospectus.
(2) In considering the financial performance of the business, management and our chief operating decision maker analyze the primary financial performance measure of Adjusted EBITDA. Adjusted EBITDA is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of (i) amortization of intangible assets and impairments of goodwill and intangible assets and (ii) gains and losses recognized on changes in the fair value of contingent consideration arrangements.
We believe Adjusted EBITDA is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole. We exclude the above items from Adjusted EBITDA because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced.
Adjusted EBITDA has limitations as an analytical tool. It is not a presentation made in accordance with U.S. generally accepted accounting principles, or GAAP, is not a measure of financial condition or liquidity and should not be considered as an alternative to operating income or net income determined in accordance with GAAP. Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider Adjusted EBITDA in isolation from, or as a substitute analysis for, our results of operations as determined in accordance with GAAP. See "Management's discussion and analysis of financial condition and results of operations—Principles of financial reporting."
(3) "Average PMC" is calculated by summing the number of paid members, or paid member count ("PMC"), at the end of each day in the relevant measurement period and dividing it by the number of calendar days in that period.
The unaudited pro forma combined statement of operations for the year ended December 31, 2014 and six months ended June 30, 2014 and 2015 presents the acquisition of PlentyOfFish and this offering as if each had been completed as of January 1, 2014. The unaudited pro forma combined balance sheet as of June 30, 2015 presents the acquisition and this offering as if each had been completed as of June 30, 2015. The pro forma adjustments give effect to the following: (1) the acquisition of PlentyOfFish and (2) this offering and the use of the net proceeds therefrom, as described below.
The unaudited pro forma combined financial statements were prepared using, and should be read in conjunction with: (i) the historical combined financial statements of Match Group, Inc. and Subsidiaries for the year ended December 31, 2014 and the six months ended June 30, 2014 and 2015 and (ii) the historical consolidated financial statements of Plentyoffish Media Inc. and Subsidiaries for the year ended December 31, 2014 and the six months ended June 30, 2014 and 2015. The following unaudited pro forma combined financial statements should be read in conjunction with "Management's discussion and analysis of financial condition and results of operations."
The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information and management believes such assumptions are reasonable.
These unaudited pro forma combined financial statements are for informational purposes and are not necessarily indicative of our results of operations or financial condition had the acquisition of PlentyOfFish and the offering been completed on the dates assumed. In addition, they may not reflect the results of operations or financial condition that would have resulted had we been operating as an independent publicly-traded company during such periods. These unaudited pro forma combined financial statements are not necessarily indicative of our future results of operations or financial condition.
Prior to completion of this offering, IAC has provided to us significant corporate and shared services related to corporate functions, such as executive oversight, risk management, information technology, accounting, audit, legal, investor relations, tax, treasury and other services. Following this offering, we expect IAC to continue to provide many of these services for a fee pursuant to the services agreement described in "Certain relationships and related party transactions." While we expect to incur additional expenses as a public company, including pursuant to the services agreement with IAC, we do not expect these expenses to materially affect our overall profitability or impede our growth prospects. No additional amounts have been included in the pro forma financial statements for the incremental expenses that we expect to incur as a public company.
On July 13, 2015, we entered into a stock purchase agreement to acquire all of the outstanding equity interests in PlentyOfFish for aggregate consideration of $575.0 million, subject to a customary post-closing adjustment based on, among other things, the amount of working capital in the business at the closing date. The acquisition price will be allocated to the fair value of the assets acquired and liabilities assumed.
The fair value of the assets acquired and liabilities assumed are based upon preliminary estimates. Accordingly, the purchase price allocation and pro forma adjustments are subject to further adjustments as additional information becomes available and additional analyses are performed, and each further adjustment may be material.
This offering consists of the issuance of shares of common stock in exchange for net proceeds of approximately $ , based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) and less underwriting discounts and commissions and estimated offering expenses payable by us.
We currently intend to pay $ of our net proceeds from this offering to IAC immediately upon completion of the offering as repayment of indebtedness owed to IAC and/or as a dividend to IAC declared prior to the completion of this offering and to use the remainder of our net proceeds from this offering for general corporate purposes. See "Use of proceeds."
Derived from the historical unaudited balance sheets as of June 30, 2015 for Match Group and PlentyOfFish.
See notes to unaudited pro forma combined financial statements.
Derived from the historical unaudited statements of operations for the six months ended June 30, 2015 for Match Group and PlentyOfFish.