INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXESThe 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 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.

U.S. and foreign (loss) earnings before income taxes and noncontrolling interests are as follows:

	Years Ended December 31,
	2021		2020		2019
	(In thousands)
U.S.	$	(88,777)	$	(10,913)	$	39,821
Foreign	(13,730)		(8,415)		(6,175)
Total	$	(102,507)	$	(19,328)	$	33,646

The components of the income tax (benefit) provision are as follows:

	Years Ended December 31,
	2021		2020		2019
	(In thousands)
Current income tax provision:
Federal	$	36	$	(306)	$	(43)
State	3,008		1,408		819
Foreign	1,249		(992)		806
Current income tax provision	4,293		110		1,582
Deferred income tax benefit
Federal	(29,889)		(5,163)		(3,416)
State	(8,712)		(6,249)		517
Foreign	2,295		(3,866)		(351)
Deferred income tax benefit	(36,306)		(15,278)		(3,250)
Income tax benefit	$	(32,013)	$	(15,168)	$	(1,668)

The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.

	December 31,
	2021		2020
	(In thousands)
Deferred tax assets:
Net operating loss (“NOL”) carryforwards	$	212,315	$	182,449
Long-term lease liabilities	26,182		29,314
Stock-based compensation	5,390		18,955
Other	35,384		28,637
Total deferred tax assets	279,271		259,355
Less valuation allowance	(66,626)		(77,076)
Net deferred tax assets	212,645		182,279
Deferred tax liabilities:
Intangible assets	(46,591)		(47,858)
Capitalized software, leasehold improvements and equipment	(18,624)		(16,152)
Right-of-use assets	(17,270)		(21,496)
Capitalized costs to obtain a contract with a customer	(9,263)		(12,233)
Other	(87)		(90)
Total deferred tax liabilities	(91,835)		(97,829)
Net deferred tax assets	$	120,810	$	84,450

The portion of the December 31, 2021 deferred tax assets that will be payable to IAC pursuant to the tax sharing agreement, upon realization, is $93.9 million.

At December 31, 2021, the Company has federal and state NOLs of $592.9 million and $479.2 million, respectively, available to offset future income. Of these federal NOLs, $220.7 million can be carried forward indefinitely and $372.2 million, if not utilized, will expire at various times between 2030 and 2037. The state NOLs, if not utilized, will expire at various times primarily between 2025 and 2041. Federal and state NOLs of $327.5 million and $226.6 million, respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable state law. At December 31, 2021, the Company has foreign NOLs of $358.0 million available to offset future income. Of these foreign NOLs, $314.3 million can be carried forward indefinitely and $43.7 million, if not utilized, will expire at various times between 2022 and 2039. During 2021, the Company recognized tax benefits related to NOLs of $44.0 million.

At December 31, 2021, the Company has tax credit carryforwards of $19.9 million relating to federal and state tax credits for research activities. Of these credit carryforwards, $0.8 million can be carried forward indefinitely and $19.1 million, if not utilized, will expire between 2024 and 2041.

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 December 31, 2021, the Company has a U.S. gross deferred tax asset of $210.7 million that the Company expects to fully utilize on a more likely than not basis.

During 2021, the Company’s valuation allowance decreased by $10.5 million primarily due to a decrease in state and foreign NOLs and currency translation adjustments on foreign NOLs. At December 31, 2021, the Company has a valuation

allowance of $66.6 million related to the portion of NOLs and other items for which it is more likely than not that the tax benefit will not be realized.

A reconciliation of the income tax benefit to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:

	Years Ended December 31,
	2021		2020		2019
	(In thousands)
Income tax (benefit) provision at the federal statutory rate of 21%	$	(21,527)	$	(4,058)	$	7,066
State income taxes, net of effect of federal tax benefit	(1,379)		1,641		2,693
Stock-based compensation	(10,331)		(2,914)		(12,768)
Unbenefited losses	4,481		2,899		1,523
Change in judgement on beginning of the year valuation allowance	(4,165)		(3,544)		—
Research credit	(2,431)		(2,494)		(3,308)
Deferred tax adjustment for enacted changes in tax law and rates	768		(5,244)		502
Net adjustment related to the reconciliation of income tax provision accruals to tax returns	335		(743)		448
Other, net	2,236		(711)		2,176
Income tax benefit	$	(32,013)	$	(15,168)	$	(1,668)

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows:

	December 31,
	2021		2020		2019
	(In thousands)
Balance at January 1	$	5,268	$	4,025	$	2,356
Additions based on tax positions related to the current year	1,317		1,676		1,325
Additions for tax positions of prior years	264		423		344
Reductions for tax positions of prior years	(91)		—		—
Settlements	(460)		(856)		—
Balance at December 31	$	6,298	$	5,268	$	4,025

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At December 31, 2021, accruals for interest are not material and there are no accruals for penalties. At December 31, 2020, there are no accruals for interest and 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 2017, and has begun its audit of the years December 31, 2018 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 2009. 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 December 31, 2021 and 2020, the Company has unrecognized tax benefits, including interest, of $6.3 million and $5.3 million respectively; all of which are for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at December 31, 2021 are subsequently recognized, the income tax provision would be reduced by $6.0 million. The comparable amount as of December 31, 2020 is $5.1 million.

At December 31, 2021, all of the Company’s international cash can be repatriated without any significant tax consequences.