EFTA01378020.pdf

accordance with GAAP. This information should be read in conjunction with our combined financial statements and related notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for a full year or any future period. Urn months ended Mn 31, Jun 30, tin 30, Doc 31, Mar 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sop 30, 2013 2013 2013 2013 2014 2014 2014 2014 2015 2016 2015 (In thousands) Revenue $192,555 $197468 $204.521 $208,545 $209.785 $211,906 $227581 $238.996 $235,089 $248.817 $268.971 Operating costs and expenses Cost c4 revenue (exclusive of depreciation storm separately beksv) 20.164 20.827 21.700 23,254 24.145 24487 33447 37.945 38,953 44.529 47.636 Setting and ins Nee ng expense 92460 77.729 82 997 68.684 101,577 83,014 66.645 63.871 111.965 88.181 89.698 General and adminstrative expense 26,592 24,980 22.046 20.023 23,273 28,054 23,024 43.539 29.738 45.584 45,981 Product development expense 10.529 10,038 10682 11,724 12,479 11,633 12,502 13,124 10451 17,478 10811 Depreciate) 4,706 4,838 5,043 5,615 5,7/8 5,570 5,774 8,425 7,045 6,622 6,137 Arrolization of .'tangibles 4.540 5,105 3.153 4327 1,837 1.683 3,321 4554 3,877 5 901 4,352 Total operate? costs and expenses 158.991 143.517 145621 133.627 189.089 154,441 164.713 171.458 208.029 208.295 210.615 Operating income 5 33.554 5 53.951 $ 58.900 S 74,918 5 43,696 5 57.465 5 67 868 5 67.538 5 27,040 S io,sn $ 58,356 The following table reconciles Adjusted EBITDA to operating Income for each of the eleven quarters ended September 30. 2015. Three months ended Mar Jun Sep Doc Mar Jun Dec Jun Sep 31, 30, 30, 31, 31, 30, Sep 30, 31, Mar 31, 30, 30, 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 (In thousands) Operating income 13.564 S 53,951 58SCO $ 74,918 $ 40.696 5 57.465 62868 567,538 $ 27,040 $ 40,522 S*356 Stour-based compensation expense 4,152 418 3,283 4,375 4,997 5,809 5,804 4241 6,299 11626 13,057 Depreciation 4.706 4.838 5.043 5.615 5,778 5.570 5,774 8.425 7,045 6,622 6,137 Amoneation of alangibles 4,540 5105 3,153 4.327 1,837 1,683 3,321 4.554 3.877 5.901 4.352 Acquisition-related contingent consideration fair valve actustrnents 1,458 4.249 632 (5.936) (27) 728 (14.282) 669 (11611) (1.223) 755 Actuated EDITDA $ 48.420 63561 $ 71.011 83,239 $ 53,281 71,255 $ 63.485 85.427 Si 33,250 $63,448 $ 82,657 84 Table of enntent5 The following table sets forth our key Dating metrics for each of the eleven quarters ended September 30, 2015. Three months ended Mr 31, Jun 30, Sep 30, Dec 31, Mar 31, Jun 30, Sop 30, Dec 31, Mn 31, Jun 30, Sep 30, 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 (in thousands, except SAPPY) Direct Revenue North Amerce 5118,872 $122778 $127097 $124,962 S 127,011 S 130,210 S 134325 S 134.382 5 138,522 5 146,830 148,728 international 62.367 63.318 65.754 68.901 60.341 68.276 87,741 68.241 83,364 86.602 75.773 Total Direct Revenue 181,239 186 096 192,851 193,883 190352 198,486 202666 202623 201686 213.432 224,501 Indirect Revenue 7,622 8 225 8.218 10063 8,680 9.081 9.341 9,829 8,261 9.518 10.630 Total Dating Revenue $188861 194 321 201,069 $ 203,946 $ 205,032 207,567 211,407 $ 212 452 210,147 222.950 235,131 Average PMC. North America 2,062 2,152 2,208 2,254 2,358 2,373 2,457 2 429 2,563 2,699 2676 International 967 992 1,043 1.078 1686 1,074 1,101 1 127 1.179 1,366 1,491 Total 3.029 3.144 3.251 3,332 3,442 3,447 3,558 3 556 3,732 4,065 4.167 ARPPU North America 5 064 $ 063 0.63 S 060 S 060 S 060$ 059 S. 060 5 060 S 0 60 $ 060 freernational 012 $ 070 S 0.69 S 069 S 0.71 0.70 S 067 S 066 S 0.60 S 0.54 S 055 Total $ 066 065 $ 064 S 0.63 S 0.63 $ 063 S 062 S 062 S 060 S 058 S 0.59 Quarterly trends Quarterly Direct Revenue has generally increased sequentially, driven by growth in Average PMC in most periods, partially offset by sequential decreases in ARPPU in a number of periods. ARPPU decreases in sequential quarters are driven largely by mix shifts to lower monetizing brands. In the three months ended March 31. 2015. June 30. 2015 and September 30. 2015. foreign exchange movements meaningfully affected International Direct Revenue and total Direct Revenue growth. But for the significant effects of foreign exchange. International Direct Revenue and total Direct Dating Revenue in the three months ended March 31. 2015 would have also sequentially increased. Our advertising spend is typically higher during the first quarter of a fiscal year. and lower during the fourth quarter. This mix is driven by the seasonally low cost of advertising during the first quarter, coupled with the seasonally high demand for our products at such time, and the seasonally high cost of advertising in the fourth quarter coupled with the seasonally low demand for our products at such time. Adjusted EBITDA is generally increasing sequentially and on a year on year basis, but is impacted by the aforementioned selling and marketing trends, which drive lower or sometimes negative, year on year Adjusted EBTIDA growth in the first quarter of the fiscal year. Increased investment in Non-dating driven by the acquisition of The Princeton Review also negatively impacted Adjusted EBITDA beginning with the three months ended September 30, 2014 through the second quarter of 2015. Non-dating reported positive Adjusted EBITDA for the first time in the third quarter of 2015, which is its seasonally strongest quarter. Liquidity and capital resources The following table summarizes our total cash and cash equivalents as at December 31, 2012, 2013 and 2014 and September 30, 2014 and 2015 as well as our operating, investing and financing activities for the years ended December 31, 2012, 2013 and 2014 and the nine months ended September 30. 2014 and imp:Vara,. sec.gov ledger date'l 575189010I0474691500643112226458^-lahrtaf I I 920139:27:17 Alit) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075180 CONFIDENTIAL SONY GM_00221364 EFTA01378020