IAC 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 acquisition, the identifiable definite-lived intangible assets of the acquired company 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 earnings (loss) attributable to IAC shareholders:

(a) Other comprises unallocated corporate expenses.

(b) 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 our former CEO, pursuant to the Employment Transition Agreement.

(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.

All of the Company’s long-term debt are liabilities of People Inc. 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 (used in) provided by operating activities attributable to continuing operations consists of net loss adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include the amortization of intangibles, stock-based compensation expense, net gain on lease terminations, net loss (gain) on sales of investments and businesses (including unrealized losses on investments), depreciation, non-cash lease expense (including ROU impairments), deferred income taxes, unrealized losses on the investment in MGM and unrealized increase in the estimated fair value of a warrant.

Adjustments to net loss from continuing operations consist primarily of amortization of intangibles of $46.9 million, depreciation of $19.9 million, net loss on sales of investments and a business (including unrealized losses on investments) of $18.8 million, non-cash lease expense (including ROU impairments) of $17.6 million and an unrealized loss on the investment in MGM of $16.8 million, partially offset by net gain on lease terminations of $36.1 million and deferred income taxes of $18.7 million. The decrease from changes in working capital includes a decrease in accounts payable and other liabilities of $69.6 million, a decrease in operating lease liabilities of $64.4 million and an increase in other assets of $22.6 million, partially offset by a decrease in accounts receivable of $93.6 million and an increase in deferred revenue of $7.6 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 and severance payments at People Inc., a decrease in accrued traffic acquisition costs and related payables at Search and a payment in connection with the resolution of certain legal matters at Care.com, partially offset by an increase in a liability related to the resolution of a certain legal matter at Corporate. The decrease in operating lease liabilities is due to cash payments on leases, including $43.1 million related to the termination of a lease for certain unoccupied office space at People Inc. described under “Contractual Obligations” below, net of interest accretion. The increase in other assets is due primarily to receivables related to insurance coverage for the aforementioned legal matters, partially offset by a decrease in prepaid hosting services at People Inc. and Search. The decrease in accounts receivable is due primarily to a decrease in revenue in the second quarter of 2025 relative to the fourth quarter of 2024 at People Inc., Search and Care.com, combined with improved collections at Care.com. The increase in deferred revenue is due primarily to timing of annual subscription renewals at Care.com, partially offset by a decrease in deferred revenue at People Inc. due primarily to the timing of shipments of certain magazine titles.

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 $9.1 million, partially offset by net proceeds from the sales of investments of $9.9 million and proceeds from the sale of a portion of the retirement investment fund of $8.5 million at People Inc.

Net cash used in financing activities attributable to continuing operations includes principal payments on the Term Loans of $1.4 billion and debt issuance costs to third parties and deferred financing costs of $9.9 million, partially offset by net proceeds from lenders from the Term Loans refinancing of $991.5 million and proceeds from the issuance of the 2032 Notes of $400.0 million in connection with refinancing transactions described below. Net cash used in financing activities attributable to continuing operations also includes the repurchase of 4.5 million shares of common stock, on a settlement date basis, for $200.0 million at an average price of $44.56 per share, and withholding taxes paid on behalf of employees for stock-based awards that were net settled of $54.7 million.

Adjustments to net loss from continuing operations consist primarily of amortization of intangibles of $73.4 million, stock-based compensation expense of $39.9 million, depreciation of $21.8 million, non-cash lease expense of $19.8 million and an unrealized loss on the investment in MGM of $15.5 million, partially offset by a net gain on sales of businesses and investments (including unrealized losses on investments) of $28.2 million primarily related to the sale of assets at Mosaic Group in February 2024 and an unrealized increase in the estimated fair value of a warrant of $20.4 million. The increase from changes in working capital includes a decrease in accounts receivable of $57.5 million, a decrease in other assets of $43.6 million and an increase in deferred revenue of $7.3 million, partially offset by decreases in accounts payable and other liabilities of $51.1 million and operating lease liabilities of $25.9 million. The decrease in accounts receivable is due primarily to a decrease in revenue in the second quarter of 2024 relative to the fourth quarter of 2023 at People Inc. and Search, 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 a receipt of pre-acquisition income tax refunds at People Inc. and a decrease in prepaid hosting services at People Inc. and Corporate. The increase in deferred revenue is due primarily to timing of annual subscription renewals at Care.com. The decrease in accounts payable and other liabilities is due primarily to a decrease in accrued employee compensation, due primarily to payment of 2023 bonuses in 2024, a decrease in accrued traffic acquisition costs and related payables at Search and People Inc. and a decrease in accounts payable at Care.com due to timing of payments and at Mosaic Group due to payments prior to the sale of its assets. 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 maturities of marketable debt securities of $262.5 million, net proceeds from the sales of businesses and investments of $162.2 million, including $155 million from the sale of assets of Mosaic Group, and net proceeds from the sales of assets of $12.8 million, principally from the sale of an aircraft at People Inc., and net collections on notes receivable of $10.1 million, partially offset by $197.1 million for the purchases of marketable debt securities and capital expenditures of $6.4 million.

Net cash used in financing activities attributable to continuing operations includes principal payments on the Term Loans of $15.0 million and withholding taxes paid on behalf of employees for stock-based awards that were net settled of $8.9 million.

Discontinued Operations

Net cash used in and provided by discontinued operations of $29.6 million and $40.5 million, respectively, for the six months ended June 30, 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

Financing Arrangements

On May 14, 2025, People Inc. entered into Amendment No. 2, which replaced $288.8 million of the then outstanding Term Loan A with $350 million of the Term Loan A-1 and provided for the new Revolving Facility of $150 million, which replaced the then existing revolving credit facility. On June 16, 2025, People Inc. completed the refinancing and replacement of its then outstanding $1.18 billion Term Loan B-1 with a combination of $700 million of the Term Loan B-2 and $400 million of the 2032 Notes. On June 16, 2025, People Inc. also entered into the Indenture, which governs the 2032 Notes, and Amendment No. 3, which governs the new Term Loan A-1, Term Loan B-2 and Revolving Facility. In addition to extending the maturity dates of People Inc.’s debt, the refinancing transactions resulted in a net decrease in debt of $21.3 million, which was funded by cash on hand.

Prior to the effectiveness of Amendment No. 2 and Amendment No. 3, Term Loan A bore interest at an adjusted term secured overnight financing rate (“SOFR”) plus an applicable margin depending on People Inc.’s most recently reported consolidated net leverage ratio, each as defined in the governing agreements. The adjustment to SOFR was fixed at 0.10% under Amendment No. 1, and such adjustment was removed upon the execution of Amendment No. 2. At June 30, 2025, the Term Loan A-1 bore interest at SOFR plus 2.00%, or 6.31%, and the Term Loan B-2 bore interest at SOFR, subject to a minimum of 0.50%, plus 3.50%, or 7.82%. The applicable margin for Term Loan B-2 was unchanged under the governing agreements.

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

Investment in MGM

At June 30, 2025, the Company owns 64.7 million common shares of MGM. Based on the number of MGM common shares outstanding at June 30, 2025, the Company owns 23.8% of MGM.

Investment in Turo

At June 30, 2025, IAC’s ownership percentage in Turo is approximately 33%.

Share Repurchase Authorizations and Activity

During the six months ended June 30, 2025, IAC repurchased 4.5 million shares of its common stock, on a trade date basis, at $44.56 per share, or $200.0 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 0.8 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”). At August 1, 2025, IAC has 9.2 million shares remaining in the 2025 Share Authorization.

Share repurchases can be made 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 June 30, 2025, there were no material changes to the Company’s contractual obligations disclosures as of December 31, 2024 included on Form 8-K filed with the Securities and Exchange Commission on June 12, 2025. As previously disclosed, during the first quarter of 2025, People Inc. entered into an agreement to terminate 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 in the first quarter of 2025, which is reflected in “General and administrative expense” in the statement of operations. The termination of this lease reduced 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 People Inc.

Liquidity Assessment

On a consolidated basis, the Company generated negative cash flows from operating activities of $2.7 million for the six months ended June 30, 2025; excluding the positive cash flows from operating activities of $9.9 million generated by People Inc., the Company generated negative cash flows from operating activities of $12.6 million.

At June 30, 2025, the Company’s consolidated cash and cash equivalents were $1.1 billion, of which $262.7 million was held by People Inc. The Company may not be able to freely access People Inc.’s cash due to the provisions of the People Inc. debt agreements.

The Company’s consolidated debt of approximately $1.45 billion is the liability of People Inc. The governing agreements of the debt at People Inc. contain covenants that would limit People Inc.’s ability to pay dividends, incur incremental secured indebtedness or make distributions or certain investments in the event a default has occurred or if People Inc.’s consolidated net leverage ratio exceeds 4.0 to 1.0, subject to certain available amounts, all as defined in the governing agreements. People Inc.’s consolidated net leverage ratio was less than 4.0 to 1.0 for the test period ended June 30, 2025. The governing agreements also permit, among other things, IAC to contribute cash to People Inc., which the Company has in the past and may in the future, to provide, among other things, additional liquidity to improve People Inc.’s consolidated net leverage ratios for any test period. In connection with these capital contributions, People Inc. may make distributions to the Company in amounts not to exceed these capital contributions, provided that no default has occurred and is continuing. In June 2025, the Company contributed $80 million to People Inc., which People Inc. subsequently distributed to the Company in July 2025. This contribution resulted in an improvement to People Inc.’s consolidated net leverage ratio that enabled People Inc. to reduce the interest rate on the Term Loan A-1 and the commitment fee on the Revolving Facility. 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 People Inc.’s existing cash, cash equivalents and expected positive cash flows from operations, and the Company’s existing cash and cash equivalents, excluding People Inc., 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 People Inc. could further limit the Company’s ability to raise additional financing.