As filed with the Securities and Exchange Commission on November 8, 2022

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2022

Or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________to__________

Commission File No. 001-38220

Angi Inc.

(Exact name of Registrant as specified in its charter)

Delaware	82-1204801
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3601 Walnut Street, Denver, CO 80205

(Address of Registrant’s principal executive offices)

(303) 963-7200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of exchange on which registered
Class A Common Stock, par value $0.001	ANGI	The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒    No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒

As of November 4, 2022, the following shares of the Registrant’s common stock were outstanding:

Class A Common Stock	82,452,237
Class B Common Stock	422,019,247
Class C Common Stock	—
Total outstanding Common Stock	504,471,484

TABLE OF CONTENTS

		Page Number
PART I
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheet	3
	Consolidated Statement of Operations	4
	Consolidated Statement of Comprehensive Operations	5
	Consolidated Statement of Shareholders’ Equity	6
	Consolidated Statement of Cash Flows	8
	Note 1—The Company and Summary of Significant Accounting Policies	9
	Note 2—Income Taxes	11
	Note 3—Financial Instruments and Fair Value Measurements	13
	Note 4—Long-term Debt	14
	Note 5—Accumulated Other Comprehensive (Loss) Income	15
	Note 6—(Loss) Earnings Per Share	15
	Note 7—Segment Information	17
	Note 8—Consolidated Financial Statement Details	20
	Note 9—Contingencies	22
	Note 10—Related Party Transactions with IAC	23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39
PART II
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 6.	Exhibits	43
	Signatures	44

2

PART I

FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements

ANGI INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

	September 30, 2022		December 31, 2021
	(In thousands, except par value amounts)
ASSETS
Cash and cash equivalents	$	328,795	$	428,136
Accounts receivable, net of reserves of $50,790 and $36,360, respectively	102,947		84,387
Other current assets	80,678		70,548
Total current assets	512,420		583,071
Capitalized software, leasehold improvements and equipment, net	167,302		118,267
Goodwill	903,134		916,039
Intangible assets, net	179,989		193,826
Deferred income taxes	136,694		122,693
Other non-current assets, net	68,620		76,245
TOTAL ASSETS	$	1,968,159	$	2,010,141
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Accounts payable	$	50,354	$	38,860
Deferred revenue	55,224		53,834
Accrued expenses and other current liabilities	194,472		183,815
Total current liabilities	300,050		276,509
Long-term debt, net	495,098		494,552
Deferred income taxes	1,660		1,883
Other long-term liabilities	82,868		91,670
Commitments and contingencies
SHAREHOLDERS’ EQUITY:
Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 101,749 and 99,745 shares, respectively, and outstanding 81,538 and 80,578, respectively	102		100
Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 422,019 and 422,019 shares issued and outstanding	422		422
Class C common stock, $0.001 par value; authorized 1,500,000 shares; no shares issued and outstanding	—		—
Additional paid-in capital	1,393,214		1,350,457
Accumulated deficit	(136,731)		(61,629)
Accumulated other comprehensive (loss) income	(5,212)		3,309
Treasury stock, 20,211 and 19,167 shares, respectively	(166,184)		(158,040)
Total Angi Inc. shareholders’ equity	1,085,611		1,134,619
Noncontrolling interests	2,872		10,908
Total shareholders’ equity	1,088,483		1,145,527
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,968,159	$	2,010,141

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

3

ANGI INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands, except per share data)
Revenue	$	498,036	$	461,565	$	1,449,977	$	1,269,582
Cost of revenue (exclusive of depreciation shown separately below)	109,057		99,467		335,826		222,999
Gross profit	388,979		362,098		1,114,151		1,046,583
Operating costs and expenses:
Selling and marketing expense	234,397		237,755		711,357		682,626
General and administrative expense	128,260		103,086		357,541		298,734
Product development expense	15,816		17,675		54,629		54,474
Depreciation	17,759		14,701		45,112		45,728
Amortization of intangibles	3,805		3,854		11,413		12,616
Total operating costs and expenses	400,037		377,071		1,180,052		1,094,178
Operating loss	(11,058)		(14,973)		(65,901)		(47,595)
Interest expense	(5,030)		(6,032)		(15,078)		(18,463)
Other expense, net	(2,296)		(479)		(4,437)		(1,882)
Loss before income taxes	(18,384)		(21,484)		(85,416)		(67,940)
Income tax benefit	945		4,791		10,693		23,209
Net loss	(17,439)		(16,693)		(74,723)		(44,731)
Net earnings attributable to noncontrolling interests	(40)		(302)		(379)		(626)
Net loss attributable to Angi Inc. shareholders	$	(17,479)	$	(16,995)	$	(75,102)	$	(45,357)
Per share information attributable to Angi Inc. shareholders:
Basic loss per share	$	(0.03)	$	(0.03)	$	(0.15)	$	(0.09)
Diluted loss per share	$	(0.03)	$	(0.03)	$	(0.15)	$	(0.09)
Stock-based compensation expense by function:
Selling and marketing expense	$	1,544	$	1,256	$	4,674	$	3,138
General and administrative expense	8,755		5,836		27,052		13,330
Product development expense	2,077		1,721		7,052		3,922
Total stock-based compensation expense	$	12,376	$	8,813	$	38,778	$	20,390

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

4

ANGI INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)
Net loss	$	(17,439)	$	(16,693)	$	(74,723)	$	(44,731)
Other comprehensive (loss) income:
Change in foreign currency translation adjustment	(5,129)		(1,353)		(9,100)		722
Comprehensive loss	(22,568)		(18,046)		(83,823)		(44,009)
Components of comprehensive loss (income) attributable to noncontrolling interests:
Net earnings attributable to noncontrolling interests	(40)		(302)		(379)		(626)
Change in foreign currency translation adjustment attributable to noncontrolling interests	310		313		579		(426)
Comprehensive loss (income) attributable to noncontrolling interests	270		11		200		(1,052)
Comprehensive loss attributable to Angi Inc. shareholders	$	(22,298)	$	(18,035)	$	(83,623)	$	(45,061)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

5

ANGI INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Three and Nine Months Ended September 30, 2022

(Unaudited)

				Angi Inc. Shareholders’ Equity
				Class A Common Stock $0.001 Par Value			Class B Convertible Common Stock $0.001 Par Value			Class C Common Stock $0.001 Par Value											Total Angi Inc. Shareholders' Equity
																	Accumulated Other Comprehensive (Loss) Income								Total Shareholders' Equity
	Redeemable Noncontrolling Interests												Additional Paid-in Capital		Accumulated Deficit				Treasury Stock				Noncontrolling Interests
				$		Shares	$		Shares	$		Shares
			(In thousands)
Balance as of June 30, 2022	$	—		$	101	100,897	$	422	422,019	$	—	—	$	1,374,200	$	(119,251)	$	(393)	$	(166,184)	$	1,088,895	$	10,977	$	1,099,872
Net (loss) earnings	—			—		—	—		—	—		—	—		(17,479)		—		—		(17,479)		40		(17,439)
Other comprehensive loss	—			—		—	—		—	—		—	—		—		(4,819)		—		(4,819)		(310)		(5,129)
Stock-based compensation expense	—			—		—	—		—	—		—	13,304		—		—		—		13,304		—		13,304
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			1		853	—		—	—		—	(2,121)		—		—		—		(2,120)		—		(2,120)
Adjustment to noncontrolling interests resulting from the reorganization of a foreign subsidiary	—			—		—	—		—	—		—	7,835		—		—		—		7,835		(7,835)		—
Other	—			—		—	—		—	—		—	(4)		(1)		—		—		(5)		—		(5)
Balance as of September 30, 2022	$	—		$	102	101,750	$	422	422,019	$	—	—	$	1,393,214	$	(136,731)	$	(5,212)	$	(166,184)	$	1,085,611	$	2,872	$	1,088,483
Balance as of December 31, 2021	$	—		$	100	99,745	$	422	422,019	$	—	—	$	1,350,457	$	(61,629)	$	3,309	$	(158,040)	$	1,134,619	$	10,908	$	1,145,527
Net (loss) earnings	—			—		—	—		—	—		—	—		(75,102)		—		—		(75,102)		378		(74,724)
Other comprehensive loss	—			—		—	—		—	—		—	—		—		(8,521)		—		(8,521)		(579)		(9,100)
Stock-based compensation expense	—			—		—	—		—	—		—	40,971		—		—		—		40,971		—		40,971
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			2		2,005	—		—	—		—	(6,045)		—		—		—		(6,043)		—		(6,043)
Purchase of treasury stock	—			—		—	—		—	—		—	—		—		—		(8,144)		(8,144)		—		(8,144)
Adjustment to noncontrolling interests resulting from the reorganization of a foreign subsidiary	—			—		—	—		—	—		—	7,835		—		—		—		7,835		(7,835)		—
Other	—			—		—	—		—	—		—	(4)		—		—		—		(4)		—		(4)
Balance as of September 30, 2022	$	—		$	102	101,750	$	422	422,019	$	—	—	$	1,393,214	$	(136,731)	$	(5,212)	$	(166,184)	$	1,085,611	$	2,872	$	1,088,483

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

6

ANGI INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Three and Nine Months Ended September 30, 2021

(Unaudited)

				Class A Common Stock $0.001 Par Value			Class B Convertible Common Stock $0.001 Par Value			Class C Common Stock $0.001 Par Value											Total Angi Inc. Shareholders' Equity
																	Accumulated Other Comprehensive Income								Total Shareholders' Equity
	Redeemable Noncontrolling Interests												Additional Paid-in Capital		(Accumulated Deficit) Retained Earnings				Treasury Stock				Noncontrolling Interests
				$		Shares	$		Shares	$		Shares
			(In thousands)
Balance as of June 30, 2021	$	4,536		$	99	99,111	$	422	421,977	$	—	—	$	1,338,208	$	(18,613)	$	5,973	$	(127,718)	$	1,198,371	$	11,054	$	1,209,425
Net earnings (loss)	61			—		—	—		—	—		—	—		(16,995)		—		—		(16,995)		241		(16,754)
Other comprehensive loss	(73)			—		—	—		—	—		—	—		—		(1,040)		—		(1,040)		(240)		(1,280)
Stock-based compensation expense	—			—		—	—		—	—		—	8,817		—		—		—		8,817		—		8,817
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			—		139	—		—	—		—	(1,066)		—		—		—		(1,066)		—		(1,066)
Issuance of common stock to IAC Inc. pursuant to the employee matters agreement	—			—		3	—		42	—		—	—		—		—		—		—		—		—
Purchase of treasury stock	—			—		—	—		—	—		—	—		—		—		(29,766)		(29,766)		—		(29,766)
Purchase of noncontrolling interests	—			—		—	—		—	—		—	—		—		—		—		—		(160)		(160)
Other	—			—		—	—		—	—		—	(410)		—		—		—		(410)		—		(410)
Balance as of September 30, 2021	$	4,524		$	99	99,253	$	422	422,019	$	—	—	$	1,345,549	$	(35,608)	$	4,933	$	(157,484)	$	1,157,911	$	10,895	$	1,168,806
Balance as of December 31, 2020	$	26,364		$	94	94,238	$	422	421,862	$	—	—	$	1,379,469	$	9,749	$	4,637	$	(122,081)	$	1,272,290	$	10,567	$	1,282,857
Net (loss) earnings	49			—		—	—		—	—		—	—		(45,357)		—		—		(45,357)		577		(44,780)
Other comprehensive income	515			—		—	—		—	—		—	—		—		296		—		296		(89)		207
Stock-based compensation expense	—			—		—	—		—	—		—	22,836		—		—		—		22,836		—		22,836
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			2		2,427	—		—	—		—	(55,809)		—		—		—		(55,807)		—		(55,807)
Issuance of common stock to IAC Inc. pursuant to the employee matters agreement	—			3		2,588	—		157	—		—	(3)		—		—		—		—		—		—
Purchase of treasury stock	—			—		—	—		—	—		—	—		—		—		(35,403)		(35,403)		—		(35,403)
Purchase of redeemable noncontrolling interests	(22,938)			—		—	—		—	—		—	—		—		—		—		—		(160)		(160)
Adjustment of redeemable noncontrolling interests to fair value	534			—		—	—		—	—		—	(534)		—		—		—		(534)		—		(534)
Other	—			—		—	—		—	—		—	(410)		—		—		—		(410)		—		(410)
Balance as of September 30, 2021	$	4,524		$	99	99,253	$	422	422,019	$	—	—	$	1,345,549	$	(35,608)	$	4,933	$	(157,484)	$	1,157,911	$	10,895	$	1,168,806

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

7

ANGI INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2022		2021
	(In thousands)
Cash flows from operating activities:
Net loss	$	(74,723)	$	(44,731)
Adjustments to reconcile net loss to net cash provided by operating activities:
Provision for credit losses	82,216		66,081
Stock-based compensation expense	38,778		20,390
Depreciation	45,112		45,728
Amortization of intangibles	11,413		12,616
Deferred income taxes	(13,950)		(25,435)
Foreign currency transaction loss	6,520		983
Impairment of long-lived and right-of-use assets	2,343		12,280
Non-cash lease expense	9,793		9,587
Revenue reserves	5,560		6,392
Other adjustments, net	(793)		3,243
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable	(102,562)		(106,234)
Other assets	(10,014)		(3,342)
Accounts payable and other liabilities	21,283		35,706
Operating lease liabilities	(13,229)		(12,435)
Income taxes payable and receivable	2,014		499
Deferred revenue	1,597		4,560
Net cash provided by operating activities	11,358		25,888
Cash flows from investing activities:
Acquisitions, net of cash acquired	—		(25,357)
Capital expenditures	(95,521)		(52,056)
Proceeds from maturities of marketable debt securities	—		50,000
Net proceeds from the sale of a business	—		750
Proceeds from sale of fixed assets	224		—
Net cash used in investing activities	(95,297)		(26,663)
Cash flows from financing activities:
Principal payments on Term Loan	—		(220,000)
Purchase of treasury stock	(8,144)		(35,403)
Withholding taxes paid on behalf of employees on net settled stock-based awards	(5,587)		(56,135)
Purchase of noncontrolling interests	—		(23,508)
Net cash used in financing activities	(13,731)		(335,046)
Total cash used	(97,670)		(335,821)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(2,079)		373
Net decrease in cash and cash equivalents and restricted cash	(99,749)		(335,448)
Cash and cash equivalents and restricted cash at beginning of period	429,485		813,561
Cash and cash equivalents and restricted cash at end of period	$	329,736	$	478,113

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

8

ANGI INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Angi Inc. (“Angi,” the “Company,” “we,” “our,” or “us”) connects quality home service professionals with consumers across more than 500 different categories, from repairing and remodeling homes to cleaning and landscaping. Over 237,000 domestic service professionals actively sought consumer matches, completed jobs, or advertised work through Angi platforms during the three months ended September 30, 2022. Additionally, consumers turned to at least one of our brands to find a service professional for approximately 30 million projects during the twelve months ended September 30, 2022.

The Company has two operating segments: (i) North America (United States and Canada), which includes Angi Ads, Angi Leads, and Angi Services; and (ii) Europe. In March 2021, the Company rebranded its North American brands which operate as follows: Angi Ads operates under the Angi brand, Angi Leads operates primarily under the HomeAdvisor, powered by Angi brand, and Angi Services operates primarily under the Handy and Angi Roofing brands.

As used herein, “Angi,” the “Company,” “we,” “our,” “us,” and similar terms refer to Angi Inc. and its subsidiaries (unless the context requires otherwise).

At September 30, 2022, IAC Inc., formerly known as IAC/InterActiveCorp (“IAC”) owned 84.3% and 98.2% of the economic interest and voting interest, respectively, of the Company.

Basis of Presentation and Consolidation

The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. See “Note 10—Related Party Transactions with IAC” for information on transactions between Angi and IAC.

The Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings. For the purpose of these financial statements, income taxes have been computed on an as if standalone, separate return basis. Any differences between taxes currently payable to or receivable from IAC under the tax sharing agreement between the Company and IAC and the current tax provision or benefit computed on an as if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital and as financing activities within the statement of cash flows.

In management's opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company's consolidated financial position, consolidated results of operations and consolidated cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

COVID-19 Update

The impact on the Company from the COVID-19 pandemic and the measures designed to contain its spread continues to have a negative impact on our year-over-year financial performance.

As previously disclosed, the impact of COVID-19 initially resulted in a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While we experienced a rebound in service requests from mid-2020 through early 2021, service requests started to decline in May 2021 and have continued to decline during 2022 due, in part, to COVID-19 measures that were more widely in place in prior periods. Our ability to monetize service requests rebounded modestly in the second half of 2021 and the first half of 2022, however, that

9

ANGI INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

improved monetization plateaued in the third quarter of 2022 and is now in line with monetization rates experienced pre-COVID-19.

Future Outlook

The extent to which developments related to the COVID-19 pandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the continuing spread of COVID-19, the severity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and attitudes toward receiving them, materials and supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments.

Accounting Estimates

Management of the Company is required to make certain estimates, judgments, and assumptions during the preparation of its consolidated financial statements in accordance with GAAP. These estimates, judgments, and assumptions impact the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

On an ongoing basis, the Company evaluates its estimates and judgments, including those related to: the fair values of cash equivalents and marketable debt securities; the carrying value of accounts receivable, including the determination of the allowance for credit losses and the determination of revenue reserves; the determination of the customer relationship period for certain costs to obtain a contract with a customer; the carrying value of right-of-use assets (“ROU assets”); the useful lives and recoverability of definite-lived intangible assets and capitalized software, leasehold improvements, and equipment; the recoverability of goodwill and indefinite-lived intangible assets; unrecognized tax benefits; the valuation allowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets, and other factors that the Company considers relevant.

General Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers and in the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company’s disaggregated revenue disclosures are presented in “Note 7—Segment Information.”

Deferred Revenue

Deferred revenue consists of payments that are received or are contractually due in advance of the Company’s performance obligation. The Company’s deferred revenue is reported on a contract-by-contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the remaining term of the applicable subscription period or expected completion of its performance obligation is one year or less. At December 31, 2021, the current and non-current deferred revenue balances were $53.8 million and $0.1 million, respectively, and during the nine months ended September 30, 2022, the Company recognized $51.9 million of revenue that was included in the deferred revenue balance as of December 31, 2021. At December 31, 2020, the current and non-current deferred revenue balances were $54.7 million and $0.2 million, respectively, and during the nine months ended September 30, 2021, the Company recognized $52.3 million of revenue that was included in the deferred revenue balance as of December 31, 2020.

The current and non-current deferred revenue balances at September 30, 2022 are $55.2 million and less than $0.1 million, respectively. Non-current deferred revenue is included in “Other long-term liabilities” in the accompanying consolidated balance sheet.

Practical Expedients and Exemptions

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As permitted under the practical expedient available under Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which the Company has the right to invoice for services performed.

Commissions Paid to Employees Pursuant to Sales Incentive Programs

The Company has determined that commissions paid to employees pursuant to certain sales incentive programs meet the requirements to be capitalized as the incremental costs to obtain a contract with a customer. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods. Capitalized commissions paid to employees pursuant to these sales incentive programs are amortized over the estimated customer relationship period and are included in “Selling and marketing expense” in the accompanying statement of operations. The Company calculates the anticipated customer relationship period as the average customer life, which is based on historical data.

For sales incentive programs where the anticipated customer relationship period is one year or less, the Company has elected the practical expedient to expense the commissions as incurred.

Assets Recognized from the Costs to Obtain a Contract with a Customer

The Company uses a portfolio approach to assess the accounting treatment of the incremental costs to obtain a contract with a customer. The Company recognizes an asset for these costs if we expect to recover those costs. To the extent that these costs are capitalized, the resultant asset is amortized on a systematic basis consistent with the pattern of the transfer of the services to which the asset relates. The current contract assets are $47.2 million and $38.0 million at September 30, 2022 and December 31, 2021, respectively. The non-current assets are $0.8 million and $1.1 million at September 30, 2022 and December 31, 2021, respectively. The current and non-current capitalized costs to obtain a contract with a customer are included in “Other current assets” and “Other non-current assets” in the accompanying balance sheet.

Recent Accounting Pronouncements

There are no recently issued accounting pronouncements adopted or that have not yet been adopted by the Company that are expected to have a material effect on the results of operations, financial condition, or cash flows of the Company.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2—INCOME TAXES

The Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings. In all periods presented, the income tax benefit and/or provision has been computed for the Company on an as if standalone, separate return basis and payments to and refunds from IAC for the Company’s share of IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying consolidated statement of cash flows. The tax sharing agreement between the Company and IAC governs the parties’ respective rights, responsibilities and obligations with respect to tax matters, including responsibility for taxes attributable to the Company, entitlement to refunds, allocation of tax attributes and other matters and, therefore, ultimately governs the amount payable to or receivable from IAC with respect to income taxes. Any differences between taxes currently payable to or receivable from IAC under the tax sharing agreement and the current tax provision or benefit computed on an as if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital in the consolidated statement of shareholders’ equity and financing activities within the consolidated statement of cash flows.

At the end of each interim period, the Company estimates the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or unrecognized tax benefits is recognized in the interim period in which the change occurs.

The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the Company’s tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision or benefit in the quarter in which the change occurs. Included in the income tax benefit for the three months ended September 30, 2022 is a provision of $1.2 million due to a lower estimated annual effective tax rate from that applied to the second quarter’s year to date ordinary loss from continuing operations. The lower estimated annual effective tax rate was primarily due to unrecognized state tax losses.

For the three and nine months ended September 30, 2022, the Company recorded an income tax benefit of $0.9 million and $10.7 million, which represents an effective income tax rate of 5% and 13%, respectively. For the three months ended September 30, 2022, the effective income tax rate is lower than the statutory rate of 21% due primarily to tax shortfalls generated by the exercise and vesting for stock-based awards and provisions related to a change in the annual expected effective income tax rate. For the nine months ended September 30, 2022, the effective income tax rate is lower than the statutory rate of 21% due primarily to tax shortfalls generated by the exercise and vesting for stock-based awards and nondeductible stock-based compensation expense. For the three and nine months ended September 30, 2021, the Company recorded an income tax benefit of $4.8 million and $23.2 million, which represents an effective income tax rate of 22% and 34%, respectively. For the three months ended September 30, 2021, the effective income tax rate is higher than the statutory rate of 21% due primarily to benefits related to a change in annual expected income tax rate, partially offset by foreign income taxed at different tax rates. For the nine months ended September 30, 2021, the effective income tax rate is higher than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards, partially offset by foreign income taxed at different tax rates.

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Accruals for interest are not material and there are currently no accruals for penalties.

The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax as a result of previously filed separate company and consolidated tax returns with IAC. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service (“IRS”) has substantially completed its audit of IAC’s federal income tax returns for the years ended December 31, 2013 through 2019, which includes the operations of the Company. The statutes of limitations for the years 2013 through 2019 have been extended to December 31, 2023. Returns filed in various other jurisdictions are open to examination for various tax years beginning with 2014. Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from examination of prior year tax returns. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustment. Although management currently believes changes in unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

At September 30, 2022 and December 31, 2021, the Company has unrecognized tax benefits of $7.1 million and $6.3 million, respectively; all of which are for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at September 30, 2022 are subsequently recognized, the income tax provision would be reduced by $6.8 million. The comparable amount as of December 31, 2021 is $6.0 million. The Company believes it is reasonably possible that its unrecognized tax benefits could decrease by $1.9 million by September 30, 2023 due to settlements, all of which would reduce the income tax provision.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience. At September 30, 2022, the Company has a U.S. gross deferred tax asset of $225.7 million that the Company expects to fully utilize on a more likely than not basis. Of this amount, $50.6 million will be utilized upon the future reversal of deferred tax liabilities and the remaining net deferred tax asset of $175.1 million will be utilized based on forecasts of future taxable income. The Company’s most significant net deferred tax asset relates to U.S. federal net operating loss (“NOL”) carryforwards of $124.7 million. The Company expects to generate sufficient future taxable income of at least $593.8 million prior to the expiration of these NOLs, the majority of which expire between 2030 and 2037, and a portion of which never expire, to fully realize this deferred tax asset.

NOTE 3—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Marketable Debt Securities

The Company did not hold any available-for-sale marketable debt securities at September 30, 2022 and December 31, 2021.

Fair Value Measurements

The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:

•Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.

•Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company’s Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.

•Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.

The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:

	September 30, 2022
	Quoted Market Prices for Identical Assets in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	204,538	$	—	$	—	$	204,538