People Inc

The Company reports Adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles (“GAAP”). This measure is our primary segment measure of profitability and among the metrics by which we evaluate the performance of our businesses, and our internal budgets are based and may also impact management compensation. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. The Company endeavors to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure, which we discuss below.

Definition of Non-GAAP Measure

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

Non-Cash Expenses That Are Excluded from Our Non-GAAP Measure

Stock-based compensation expense consists of expense associated with awards that were granted under various IAC stock and annual incentive plans that are denominated in IAC common shares and expense related to awards denominated in the equity of certain subsidiaries of the Company. These expenses are not paid in cash and we view the economic costs of stock-based awards to be the dilution to our share base; the related shares are included in our fully diluted shares outstanding for GAAP earnings per share using the treasury stock method. The Company currently settles all stock-based awards on a net basis; IAC remits the required tax-withholding on behalf of employees for net-settled awards from its current funds.

Depreciationis a non-cash expense relating to our buildings, equipment, leasehold improvements and capitalized software and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.

Amortization of intangible assets and impairments of goodwill and intangible assetsare non-cash expenses related primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as advertiser relationships, licensee relationships, trade names, content, technology, customer lists and user base, and professional relationships, are valued and amortized over their estimated lives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairments of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.

Gains and losses recognized on changes in the fair value of contingent consideration arrangements are accounting adjustments to report liabilities for the portion of the purchase price of acquisitions, if applicable, that is contingent upon the financial performance and/or operating targets of the acquired company at fair value that are recognized in “General and administrative expense” in the statement of operations. These adjustments can be highly variable and are excluded from our assessment of performance because they are considered non-operational in nature and, therefore, are not indicative of current or future performance or the ongoing cost of doing business.

The following tables reconcile operating income (loss) to Adjusted EBITDA for the Company’s reportable segments and net (loss) earnings attributable to IAC shareholders:

(a) Corporate reflects the reversal of $49.8 million of previously recognized stock-based compensation expense related to the forfeiture of our former CEO’s restricted stock award pursuant to the Employment Transition Agreement, partially offset by $14.9 million of stock-based compensation expense related to the transfer of 5.0 million Class B shares of Angi held by the Company, prior to the Distribution, to Mr. Levin, pursuant to the Employment Transition Agreement.

(b) Other comprises unallocated corporate expenses.

(c) Includes a gain of $36.2 million related to the termination of a lease for certain unoccupied office space, which otherwise would have expired in 2032.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Financial Position

The Company’s international cash can be repatriated without significant tax consequences.

For a detailed description of interest rate swaps and long-term debt, see “Note 3—Long-term Debt” in the accompanying notes to the financial statements included in “Item 1. Consolidated Financial Statements.”

Cash Flow Information

In summary, IAC’s cash flows are as follows:

Net cash provided by operating activities attributable to continuing operations consists of net earnings (loss) adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include the unrealized losses (gains) on the investment in MGM, deferred income taxes, amortization of intangibles, net gain on lease terminations, net loss (gain) on sales of investments and businesses (including unrealized losses on investments), stock-based compensation expense, depreciation, non-cash lease expense (including ROU impairments) and unrealized decrease in the estimated fair value of a warrant.

Adjustments to net loss from continuing operations consist primarily of an unrealized loss on the investment in MGM of $324.3 million, amortization of intangibles of $23.5 million, depreciation of $11.9 million, non-cash lease expense (including ROU impairments) of $9.0 million and net loss on sales investments and businesses (including unrealized losses on investments) of $7.5 million, partially offset by deferred income taxes of $80.6 million, net gain on lease terminations of $36.0 million and stock-based compensation expense of $20.4 million. The decrease from changes in working capital includes decreases in accounts payable and other liabilities of $48.2 million, a decrease in operating lease liabilities of $34.3 million and an increase in other assets of $32.4 million, partially offset by a decrease in accounts receivable of $79.0 million and an increase in deferred revenue of $22.6 million. The decrease in accounts payable and other liabilities is due primarily to a decrease in accrued employee compensation, due primarily to payment of 2024 bonuses in 2025, a decrease in accrued payroll due to timing of payments and a decrease at DDM due to severance payments, and a decrease in accrued traffic acquisition costs and related payables at Search, partially offset by an increase in a liability related to the settlement of a legal matter. The decrease in operating lease liabilities is due to cash payments on leases, including $26.1 million related to the termination of a lease for certain unoccupied office space at DDM described under “Contractual Obligations” below, net of interest accretion. The increase in other assets is due primarily to a receivable related to insurance coverage for the aforementioned legal matter. The decrease in accounts receivable is due primarily to a decrease in revenue in the first quarter of 2025 relative to the fourth quarter of 2024 at DDM. The increase in deferred revenue is due primarily to timing of annual subscription renewals at Care.com.

Net cash used in investing activities attributable to continuing operations includes a cash distribution of $386.6 million related to the Distribution and capital expenditures of $4.7 million, partially offset by net proceeds from the sales of investments and businesses of $10.1 million and proceeds from the sale of a portion of the retirement investment fund of $5.2 million at DDM.

Net cash used in financing activities attributable to continuing operations includes the repurchase of 3.9 million shares of common stock, on a settlement date basis, for $179.4 million at an average price of $45.71 per share, withholding taxes paid on behalf of employees for stock-based awards that were net settled of $45.2 million and principal payments on DDM Term Loans of $8.8 million.

Adjustments to net earnings from continuing operations consist primarily of an unrealized gain on the investment in MGM of $163.8 million and net gain on sales of businesses and investments (including unrealized losses on investments) of $25.9 million primarily related to the sale of assets at Mosaic Group in February 2024, partially offset by deferred taxes of $39.8 million, amortization of intangibles of $36.7 million, stock-based compensation expense of $19.5 million, depreciation of $12.7 million, non-cash lease expense of $10.4 million and an unrealized decrease in the estimated fair value of a warrant of $10.2 million. The increase from changes in working capital includes a decrease in accounts receivable of $81.8 million, a decrease in other assets of $31.2 million, an increase in deferred revenue of $17.7 million and an increase in income taxes payable and receivable of $5.8 million, partially offset by decreases in accounts payable and other liabilities of $72.1 million and operating lease liabilities of $13.2 million. The decrease in accounts receivable is due primarily to a decrease in revenue in the first quarter of 2024 relative to the fourth quarter of 2023 at DDM and a decrease at Mosaic Group due to cash receipts prior to the sale of its assets. The decrease in other assets is due primarily to receipt of pre-acquisition income tax refunds at DDM and a decrease in prepaid hosting services at DDM and Corporate. The increase in deferred revenue is due primarily to timing of annual subscription renewals at Care.com. The increase in income taxes payable and receivable is due to income tax accruals in excess of payments, primarily due to the sale of assets of Mosaic Group. The decrease in accounts payable and other liabilities is due primarily to decreases in accrued employee compensation, due primarily to payment of 2023 bonuses in 2024 and a decrease in accrued payroll due to timing of payments, and accrued traffic acquisition costs and related payables at Search and DDM. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion.

Net cash provided by investing activities attributable to continuing operations includes net proceeds from the sales of businesses and investments of $159.7 million, including $155 million from the sale of assets of Mosaic Group, maturities of marketable debt securities of $137.5 million and net proceeds from the sales of assets of $12.7 million, principally from the sale of an aircraft at DDM, partially offset by $123.1 million for the purchases of marketable debt securities and capital expenditures of $2.9 million.

Net cash used in financing activities attributable to continuing operations includes withholding taxes paid on behalf of employees for stock-based awards that were net settled of $8.2 million and principal payments on DDM Term Loans of $7.5 million.

Discontinued Operations

Net cash used in and provided by discontinued operations of $29.6 million and $1.0 million, respectively, for the three months ended March 31, 2025 and 2024, respectively, relates to the operations of Angi. The Company does not expect significant cash flows from discontinued operations following the Distribution.

Liquidity and Capital Resources

Investment in MGM

At March 31, 2025, the Company owns 64.7 million common shares of MGM. Based on the number of MGM common shares outstanding at March 31, 2025, the Company owns 23.1% of MGM.

Investment in Turo

At March 31, 2025, IAC’s ownership percentage in Turo is approximately 32%.

Share Repurchase Authorizations and Activity

During the three months ended March 31, 2025, IAC repurchased 3.9 million shares of its common stock, on a trade date basis, at $45.71 per share, or $179.4 million in aggregate, consisting of the remaining 3.7 million shares of its existing stock repurchase authorization from June 2020 (the “2020 Share Authorization”) and 0.2 million shares of its new stock repurchase authorization of 10 million shares, which was approved by the board of directors of IAC on March 16, 2025 (the “2025 Share Authorization”). From April 1, 2025 through May 2, 2025, IAC repurchased 0.6 million shares of its common stock, on a trade date basis, at $36.55, or $20.6 million in aggregate. At May 2, 2025, IAC has 9.2 million shares remaining in the 2025 Share Authorization.

IAC may repurchase shares pursuant to its repurchase authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, price and future outlook.

Contractual Obligations

At March 31, 2025, there were no material changes to the Company’s contractual obligations disclosures as of December 31, 2024, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. As previously disclosed, during the first quarter of 2025, DDM entered into an agreement that terminated its lease for certain unoccupied office space, which otherwise would have expired in 2032, for a total payment of $43.1 million, consisting of equal payments paid in January and April 2025. The Company recorded a gain on the lease termination of $36.2 million for the three months ended March 31, 2025, which is reflected in “General and administrative expense” in the statement of operations. The termination of this lease reduces future fixed lease payments by $101.7 million.

Capital Expenditures

The Company anticipates that it will need to make capital expenditures in connection with the development and expansion of its operations. The Company’s 2025 capital expenditures are expected to be higher than its 2024 capital expenditures of $15.0 million by approximately 30% to 40%, due primarily to an increase related to capitalized software at DDM.

Liquidity Assessment

On a consolidated basis, the Company generated positive cash flows from operating activities of $0.1 million for the three months ended March 31, 2025; excluding the positive cash flows from operating activities of $16.6 million generated by DDM, the Company generated negative cash flows from operating activities of $16.6 million.

At March 31, 2025, the Company’s consolidated cash and cash equivalents were $1.2 billion, of which $242.6 million was held by DDM. The Company’s consolidated debt of approximately $1.5 billion is the liability of DDM.

The Amended DDM Credit Agreement contains covenants that would limit DDM’s ability to pay dividends, incur incremental secured indebtedness, make distributions or certain investments in the event a default has occurred or if DDM’s consolidated net leverage ratio exceeds 4.0 to 1.0, subject to certain available amounts, all as defined in the Amended DDM Credit Agreement. DDM did not exceed this ratio for the test period ended March 31, 2025. The Amended DDM Credit Agreement also permits IAC to, among other things, contribute cash to DDM, which has in the past and may in the future provide, among other things, additional liquidity to ensure that DDM does not exceed certain consolidated net leverage ratios for any test period, as defined in the Amended DDM Credit Agreement. In connection with these capital contributions, DDM may make distributions to the Company in amounts not to exceed these capital contributions, provided that no default has occurred and is continuing. No quarterly contributions have been made to DDM since September 2024, which DDM distributed to the Company in October 2024; therefore, there were no pending contributions or distributions outstanding as of March 31, 2025. See “Note 3—Long-term Debt” in the accompanying notes to the financial statements included in “Item 1. Consolidated Financial Statements” for additional information.

The Company’s liquidity could be negatively affected by a decrease in demand for its products and services due to adverse market or macroeconomic conditions or other factors.

The Company believes DDM’s existing cash, cash equivalents and expected positive cash flows from operations, and the Company’s existing cash and cash equivalents and expected positive cash flows from operations, excluding DDM, will be sufficient to fund their respective normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes on behalf of employees for net-settled stock-based awards and investing and other commitments for the next twelve months, and thereafter for the foreseeable future. The Company may need to raise additional capital through future debt or equity financing to refinance its existing capital structure and make acquisitions and investments. Additional financing may not be available on terms favorable to the Company, or at all, and may also be impacted by any disruptions or volatility in the financial markets. The indebtedness at DDM could further limit the Company’s ability to raise additional financing.