EFTA01378017

effective income tax rate was lower than the statutory rate of 35% due primarily to non-taxable contingent consideration fair value adjustments and non- taxable foreign currency exchange gains. At December 31. 2013 and 2014. we had unrecognized tax benefits, including interest. of $12.4 million and $12.1 milkm, respectively. Included in unrecognized tax benefits at December 31, 2013 and 2014, is approximately $0.5 million and $0.7 million, respectively, for tax positions included in MC's consolidated tax return filings. Unrecognized tax benefits. including interest. for the year ended December 31, 2014 decreased by $0.3 million due principally to foreign statute expirations. If unrecognized tax benefits at December 31. 2014 are subsequently recognized. $11.8 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 20131s $12.0 million. We believe that it is reasonably possible that its unrecognized tax benefits could decrease by approximately $1.2 million by December 31, 2015, primarily due to expirations of statutes of limitations. 79 Tat1e of Contents Results of operations for the years ended December 31, 2012 and 2013 Revenue Years ended December 31, % change 2012 2013 Direct Revenue: (dollars In thousands, except ARPPU) North America $ 454,996 493,729 8.5% International 233,531 260.340 11.5% Total Direct Revenue 688,527 754.069 9.5% Indirect Revenue 24.922 34.128 36.9% Total Dating Revenue 713,449 788,197 10.5% Non-dating Revenue 14,892 NA Total Revenue $ 713,449 $ 803.089 12.6% Percentage of Total Revenue: Direct Revenue: North America 63.8% 61.5% International 32.7% 32.4% Total Direct Revenue 96.5% 93.9% Indirect Revenue 3.5% 4.2% Total Dating Revenue 100.0% 98.1% Non-dating Revenue —% 1.9% Total Revenue 100.0% 100.0% Average PMC. North America 1.920 2,169 13.0% International 876 1 020 16 6% Total 2.796 3.181 14.1% ARPPU. North America 065 $ 0.62 (3.7)% International 073 $ 070 (4.1)% Total 067 $ 0.65 (3.7)% Revenue increased $89.6 million. or 12.6%. in 2013 versus 2012. North Amenca Direct Revenue increased by $38.7 million, or 8.5%. in 2013 versus 2012. driven by 13.0% growth in Average PMC. partially offset by a 3.7% decline in ARPPU. Average PMC growth was driven by growth in new users. as well as an increase in beginning PMC, partially offset by mix shift to brands where a lower percentage of users become paid members. ARPPU decreased due to mix shifts to lower rate brands as well as a decline in mix-adjusted rates. International Direct Revenue grew by $26.8 million, or 11.5%. in 2013 versus 2012. driven by 16.6% growth in Average PMC. partially offset by a 4.1% decline in ARPPU. Average PMC growth was driven by the acquisition of Twoo as well as new user growth. partially offset by mix shift to brands where a lower 80 Table of Contents percentage of users become paid members. ARPPU decreased due to mix shifts to lower rate brands as well as a decline in mix-adjusted rates. Non-dating revenue was $14.9 million in 2013 due to the contribution of Tutor.com (now The Princeton Review), which was acquired December 14. 2012. Cost of revenue (exclusive of depreciation) Imp: www.sec.gov An:lives eds.,' daW1575189,000104746915006431 12226458^-talfinti I 1,9,2013 911:17 AIM CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0075177 SONY GM_00221361 EFTA01378017