EFTA01378009.pdf

Table of contents Membership revenue is presented net of credits and credit card chargebacks. Revenue recognition occurs ratably over the terms of the applicable membership term, which primarily range from one to sac months. beginning when there is persuasive evidence of an arrangement, delivery has occurred (access has been granted), the fees are fixed or determinable and collection is reasonably assured. Members pay in advance, primarily by using a credit card, and, subject to certain conditions identified in our terms and conditions, all purchases are final and nonrefundable. Fees collected in advance for memberships are deferred and recognized as revenue using the straight-line method over the terms of the applicable membership period. Dating deferred revenue was 5116.5 million. 5117.9 million and 5135.6 million at December 31, 2013 and 2014 and September 30. 2015, respectively. we also eam Dating revenue from online advertising, the purchase of a la carte features and offline events. Online advertising revenue is recognized every time an advertisement is displayed. Revenue from the purchase of a la carte features is recognized based on usage. Revenue and the related expenses associated with offline events are recognized when each event occurs. A substantial majority of our pro tonna revenue for the nine months ended September 30, 2015 was derived from the following brands within our Dating segment: Match. Meetic, OurTime, OkCupid. Plenty0fFish and Tinder. Non-dating revenue consists primarily of fees received for in-person and online test preparation classes, access to online test preparation materials and individual tutoring services. Fees from classes and access to online materials are recognized over the period of the course and the period of the online access, respectively. Tutoring fees are generally collected in the form of membership fees that entitle the member to a certain number of tutoring sessions over a certain period of time. These fees are recognized over the term of the membership based on usage. Non-dating deferred revenue was 53.5 million, $18.0 million and 521.5 million at December 31. 2013 and 2014 and September 30. 2015. respectively. Cost of revenue Cost of revenue consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in data center and customer care functions. in-app purchase fees, content acquisition costs, credit card processing fees, hosting lees. and data center rent, energy and bandwidth costs. In-app purchase fees are monies paid to Apple and Google for distribution and the facilitating of in-app purchase of product features. Content acquisition cost consists principally of payments made to tutors at The Princeton Review. Selling and marketing expense Selling and marketing expense consists primarily of advertising expenditures and compensation (including stock-based compensation) and other employee- related costs for personnel engaged in sales, and sales support functions. Advertising and promotional spend includes online marketing, including fees paid to search engines, offline marketing, which is primarily television advertising and partner-related payments to those who direct traffic to our brands. We plan to continue to expand sales and marketing efforts to attract new users, retain existing users and increase sales to both new and existing users. General and administrative expense General and administrative expense consists pcimanly of compensation (Including stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax and human resources, facilities costs and fees for professional services. Product development expense Product development expense consists primarily of compensation (including stock-based compensation) and other employee-related costs that are not capitalized for personnel engaged in the design, development. testing and enhancement of product offerings and related technology. 68 Table of Contents Results of operations The following table sets forth our combined statement of operations information for the years ended December 31. 2012. 2013 and 2014 and the nine months ended September 30, 2014 and 2015: Nine months ended Years ended December 31, September 30, 2012 2013 2014 2014 2015 (In thousands) Revenue S 713,449 S 803,089 S 888,268 649,272 752.857 Operating costs and expenses: Cost of revenue (exclusive of depreciation) 72.794 85.945 120,024 82.079 131,118 Selling and marketing expense 304,597 321,870 335,107 271,236 260,844 General and administrative expense 76,711 93,641 117,890 74.351 121.303 Product development expense 38,921 42.973 49,738 36.614 50,740 Depreciation 16,341 20.202 25,547 17,122 19,804 Amortization of intangibles 17,455 17,125 11,395 6,841 14,130 Total operating costs and expenses 526,819 581,756 659,701 488,243 626,939 Operating income 186,630 721,333 228.567 161.029 125,918 Interest expense-related party (29,489) (34.307) (25,541) (23,214) (6,879) Other (expense) income. net (7.428) 217 12,610 8.628 8,341 Earnings before income taxes 149,713 187,243 215,636 146,443 127,380 Income tax provision (59,432) (60,616) (67,277) (46,434) (42,632) helpl vdc.v. sec.gov'An:lives daW1575189,00010474691500643112226458^-talfintiI 19,2013 911:17 AIM CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0075169 CONFIDENTIAL SONY GM_00221353 EFTA01378009