IAC INC. Page 1 of 18
IAC REPORTS Q1 2024
Dotdash Meredith announced strategic partnership and licensing agreement with OpenAI
Dotdash Meredith Digital revenue growth of 13%
Total IAC Q1 operating loss improves $76 million to $59 million
Total IAC Q1 Adjusted EBITDA improves $34 million to $43 million
NEW YORK- May 7, 2024-IAC (NASDAQ: IAC) released its first quarter results today and separately posted a letter to shareholders from IAC CEO Joey Levin on the Investor Relations section of its website at ir.iac.com.
IAC SUMMARY RESULTS
($ in millions except per share amounts)
Q1 2024 | Q1 2023 | Growth | ||
Revenue | $ 929.7 | $ | 1,084.3 | -14% |
Operating loss | (59.2) | (135.6) | 56% | |
Unrealized gain on investment in MGM Resorts International | 163.8 | 704.8 | -77% | |
Net earnings | 45.0 | 417.8 | -89% | |
Diluted earnings per share | 0.51 | 4.57 | -89% | |
Adjusted EBITDA | 43.0 | 9.1 | 372% |
See reconciliations of GAAP to non-GAAP measures beginning on page 13.
Q1 2024 HIGHLIGHTS
- Dotdash Meredith announced a strategic partnership and licensing agreement with OpenAI, pursuant to which attributed Dotdash Meredith content will appear in ChatGPT responses. Dotdash Meredith's content will be used to improve OpenAI's large language models, and OpenAI will partner with Dotdash Meredith to enhance Dotdash Meredith's D/Cipher intent- targeting advertising solution.
- Digital revenue increased 13% to $209 million, accelerating from 9% growth in Q4 2023, more than offsetting 10% Print revenue declines to produce the first quarter of total Dotdash Meredith revenue growth since the Meredith acquisition.
- Operating loss of $21 million decreased $90 million year-over-year driven primarily by Adjusted EBITDA increasing $53 million to $30 million (Digital Adjusted EBITDA increased 51% and Other Q1 2023 losses included $45 million related to a non-cash lease impairment) and $25 million lower depreciation (Q1 2023 included $25 million related to the aforementioned non-cash lease impairment).
- Angi Inc. revenue was $305 million, down 14% year-over-year driven by declines across the Domestic business from the heightened focus on profitability and customer experience, partially offset by 18% International growth.
- Operating income increased $14 million to $3 million and Adjusted EBITDA increased 21% to $36 million.
- On April 8, 2024, Angi Inc. announced the appointment of Angi President Jeff Kip to CEO, succeeding Joey Levin. Joey Levin, CEO of IAC, will continue as Chairman of the Angi Board of Directors.
- Emerging & Other revenue decreased 34% year-over-year to $127 million, operating income decreased $20 million to a loss of $8 million and Adjusted EBITDA decreased $20 million to a loss of $4 million.
- Q1 2024 revenue reflects the sale of Roofing on November 1, 2023 and the sale of assets of Mosaic Group on February 15, 2024.
- Q1 2024 operating loss and Adjusted EBITDA reflect $16 million in severance and transaction-related costs at Mosaic Group related to the sale of the assets of the business.
- IAC holds 64.7 million shares of MGM Resorts International ("MGM"), which was purchased for $1.3 billion in 2020 and 2022 and is worth $2.7 billion as of May 3, 2024. Net earnings (loss) and diluted earnings (loss) per share reflect changes in MGM's share price as unrealized gains and losses and, as a result, can be very volatile, which reduces their ability to be effective measures to assess operating performance.
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DISCUSSION OF FINANCIAL AND OPERATING RESULTS
($ in millions, rounding differences may occur) | Q1 2024 | Q1 2023 | Growth | |||
Revenue | ||||||
Dotdash Meredith | $ | 390.5 | $ | 387.6 | 1% | |
Angi Inc. | 305.4 | 355.5 | -14% | |||
Search | 108.5 | 152.5 | -29% | |||
Emerging & Other | 126.5 | 192.4 | -34% | |||
Intersegment eliminations | (1.3) | (3.7) | 66% | |||
Total Revenue | $ | 929.7 | $ | 1,084.3 | -14% | |
Operating (loss) income | ||||||
Dotdash Meredith | $ | (20.8) | $ | (111.2) | 81% | |
Angi Inc. | 2.7 | (10.9) | NM | |||
Search | 4.4 | 10.8 | -60% | |||
Emerging & Other | (8.0) | 11.9 | NM | |||
Corporate | (37.4) | (36.1) | -4% | |||
Total Operating loss | $ | (59.2) | $ | (135.6) | 56% | |
Adjusted EBITDA | ||||||
Dotdash Meredith | $ | 30.2 | $ | (23.1) | NM | |
Angi Inc. | 36.0 | 29.7 | 21% | |||
Search | 4.4 | 10.8 | -59% | |||
Emerging & Other | (4.2) | 15.6 | NM | |||
Corporate | (23.3) | (23.8) | 2% | |||
Total Adjusted EBITDA | $ | 43.0 | $ | 9.1 | 372% | |
Note: On November 1, 2023, Angi Inc. completed the sale of Total Home Roofing, LLC ("Roofing") to a non-public third party and has reflected it as a discontinued operation in its standalone financial statements; Angi Inc. financial information for prior periods has been recast to conform to this presentation. Roofing does not meet the threshold to be reflected as a discontinued operation at the IAC level.
During Q4 2023, IAC moved Roofing to Emerging & Other and prior period financial information has been recast to conform to this presentation. As a result, Angi Inc.'s revenue, operating income (loss) and Adjusted EBITDA in IAC's financial results conform to the corresponding amounts in Angi Inc.'s standalone financial statements.
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Dotdash Meredith
Revenue
($ in millions, rounding differences may occur) | Q1 2024 | Q1 2023 | Growth | ||
Revenue | |||||
Digital | $ | 209.3 | $ | 184.8 | 13% |
185.9 | 207.0 | -10% | |||
Intersegment eliminations | (4.7) | (4.2) | -11% | ||
Total | $ | 390.5 | $ | 387.6 | 1% |
- Revenue of $390.5 million increased 1% year-over-year reflecting:
- 13% Digital revenue growth (improving from 9% growth in Q4 2023) reflecting:
- Advertising revenue increasing 19%, accelerating from 4% growth in Q4 2023, driven by:
- Higher premium sold advertising revenue driven primarily by the Beauty, Technology and Health and Pharmaceutical categories
- Higher programmatic advertising revenue due to higher programmatic growth rates and 8% growth in Core Sessions
- Performance marketing revenue increasing 3% driven by 18% affiliate commerce growth, partially offset by revenue declines from services, concentrated primarily in the Finance category
- Licensing and other revenue increasing 9% due primarily to improved performance from content syndication partners
- 10% Print revenue declines driven primarily by the ongoing migration of audience and advertising spend from Print to Digital
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Operating (Loss) Income and Adjusted EBITDA
($ in millions, rounding differences may occur) | Q1 2024 | Q1 2023 | Growth | ||
Operating (loss) income | |||||
Digital | $ | (0.2) | $ | (17.9) | 99% |
(5.1) | (5.8) | 11% | |||
Other | (15.5) | (87.6) | 82% | ||
Total | $ | (20.8) | $ | (111.2) | 81% |
Adjusted EBITDA | |||||
Digital | $ | 37.0 | $ | 24.4 | 51% |
2.9 | 11.3 | -74% | |||
Other | (9.7) | (58.9) | 84% | ||
Total | $ | 30.2 | $ | (23.1) | NM |
- Operating loss of $20.8 million decreased $90.4 million reflecting:
- Digital operating loss decreased $17.7 million to $0.2 million reflecting:
- Adjusted EBITDA increasing 51% to $37.0 million due to higher revenue and continued operating leverage (51% incremental Adjusted EBITDA margins in Q1 2024)
- $5.3 million lower amortization of intangibles
- Print operating loss decreased 11% to $5.1 million reflecting:
- $9.2 million lower amortization of intangibles
- Adjusted EBITDA decreasing 74% to $2.9 million due to revenue declines, partially offset by lower operating expenses
- Other operating loss decreased 82% to $15.5 million reflecting:
- Adjusted EBITDA loss decreasing 84% to $9.7 million due primarily to a $44.7 million non-cash lease impairment in Q1 2023 related to certain unoccupied leased office space
- $24.3 million lower depreciation due primarily to a $25.3 million impairment incurred in Q1 2023 related to leasehold improvements, furniture and equipment associated with the aforementioned non-cash lease impairment
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Angi Inc.
Please refer to the Angi Inc. Q1 2024 earnings release for further detail.
Search
- Revenue decreased 29% to $108.5 million reflecting:
- A 32% decrease at Ask Media Group due to a reduction in marketing driving fewer visitors to ad- supported search and content websites
- An 8% decrease at Desktop (legacy desktop search software business)
- Operating income and Adjusted EBITDA both decreased $6.4 million to $4.4 million driven by lower revenue and a revenue mix shift to lower-margin channels due, in part, to the wind down of the Desktop direct-to-consumer business
Emerging & Other
- Revenue decreased 34% to $126.5 million reflecting:
- The sale of Roofing on November 1, 2023 ($38.4 million included in Q1 2023)
- Mosaic Group revenue decreasing $22.6 million to $17.9 million as a result of the sale of the assets of the business on February 15, 2024
- Care.com revenue decreasing 2% to $92.5 million
- 9% growth from Vivian Health
- Operating loss was $8.0 million compared to income of $11.9 million in Q1 2023 reflecting:
- Adjusted EBITDA loss of $4.2 million compared to income of $15.6 million in Q1 2023 reflecting:
- $16.5 million in severance and transaction-related costs at Mosaic Group related to the sale of the assets of the business
- Lower profits from Care.com due primarily to the lower revenue and increased marketing and compensation costs
- $0.7 million lower amortization of intangibles due primarily to Care.com
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Corporate
Operating loss increased $1.3 million to $37.4 million due to $1.1 million higher stock-based compensation expense and $0.7 million higher depreciation, partially offset by a $0.5 million lower Adjusted EBITDA loss.
Income Taxes
The Company recorded an income tax provision of $54.7 million in Q1 2024 for an effective tax rate of 55%, which is higher than the statutory rate due primarily to the nondeductible portion of the goodwill in the sale of assets of Mosaic Group, partially offset by the realization of a capital loss. The Company recorded an income tax provision of $139.5 million in Q1 2023 for an effective tax rate of 25%, which is higher than the statutory rate due primarily to state taxes and nondeductible compensation expense, partially offset by research credits.
Free Cash Flow
For the three months ended March 31, 2024, net cash provided by operating activities was $64.1 million, a $38.9 million increase year-over-year. Free Cash Flow increased $45.0 million to $48.3 million due primarily to higher Adjusted EBITDA and lower capital expenditures.
Three Months Ended March 31,
($ in millions, rounding differences may occur) | 2024 | 2023 | ||
Net cash provided by operating activities | $ | 64.1 | $ | 25.2 |
Capital expenditures | (15.7) | (21.9) | ||
Free cash flow | $ | 48.3 | $ | 3.3 |
CONFERENCE CALL
IAC and Angi Inc. will host a conference call to answer questions regarding their first quarter results on Wednesday, May 8, 2024, at 8:30 a.m. Eastern Time. This conference call will include the disclosure of certain information, including forward- looking information, which may be material to an investor's understanding of IAC and Angi Inc.'s business. The conference call will be open to the public at ir.iac.comor ir.angi.com.
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2024:
- IAC had 86.1 million common and Class B common shares outstanding.
- The Company had $1.6 billion in cash and cash equivalents and marketable securities of which IAC held $1.0 billion, Dotdash Meredith, Inc. held $269 million, and Angi Inc. held $363 million.
- The Company had $2.0 billion in long-term debt, of which Dotdash Meredith, Inc. held $1.5 billion and ANGI Group, LLC (a subsidiary of Angi Inc.) held $500 million.
- IAC's economic interest in Angi Inc. was 84.3% and IAC's voting interest was 98.2%. IAC held 424.6 million shares of Angi Inc.
- IAC owned 64.7 million shares of MGM.
Dotdash Meredith Inc. has a $150 million revolving credit facility, which had no borrowings as of March 31, 2024 and currently has no borrowings.
During the fourth quarter of 2023, Angi Inc. announced its intent to utilize the remaining 14.0 million shares in its stock repurchase authorization. Between February 10, 2024 and May 3, 2024, Angi Inc. repurchased 3.2 million common shares for an aggregate of $7.1 million (average price of $2.23). As of May 3, 2024, Angi Inc. had 4.7 million shares remaining in its stock repurchase authorization.
At March 31, 2024, IAC had 3.7 million shares remaining in its stock repurchase authorization.
Pursuant to these authorizations, share repurchases can be made over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, price and future outlook.
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OPERATING METRICS
($ in millions; rounding differences may occur)
Q1 2024 | Q1 2023 | Growth | |||
Dotdash Meredith | |||||
Revenue | |||||
Advertising revenue | $ | 132.9 | $ | 111.8 | 19% |
Performance marketing revenue | 51.5 | 50.1 | 3% | ||
Licensing and other revenue | 24.9 | 22.9 | 9% | ||
Total Digital Revenue | $ | 209.3 | $ | 184.8 | 13% |
Print Revenue | 185.9 | 207.0 | -10% | ||
Intersegment eliminations | (4.7) | (4.2) | 11% | ||
Total Revenue | $ | 390.5 | $ | 387.6 | 1% |
Digital metrics | |||||
Total Sessions (in millions) | 2,750 | 2,842 | -3% | ||
Core Sessions (in millions) | 2,273 | 2,102 | 8% | ||
Angi Inc. | |||||
Revenue | |||||
Ads and Leads | $ | 249.6 | $ | 293.5 | -15% |
Services | 20.5 | 32.1 | -36% | ||
Total Domestic | $ | 270.0 | $ | 325.6 | -17% |
International | 35.4 | 29.9 | 18% | ||
Total Revenue | $ | 305.4 | $ | 355.5 | -14% |
Pro Forma Services Net Revenue | -28% | ||||
$ | 20.5 | $ | 28.4 | ||
Total Pro Forma Angi Inc. Net Revenue | $ | 305.4 | $ | 351.8 | -13% |
Metrics | |||||
Service Requests (in thousands) | 4,126 | 6,004 | -31% | ||
Monetized Transactions (in thousands) | 5,511 | 6,451 | -15% | ||
Monetized Transactions per Service Request | 1.34 | 1.07 | 24% | ||
Transacting Service Professionals (in thousands) | 192 | 206 | -7% | ||
Search | |||||
Revenue | |||||
Ask Media Group | $ | 90.0 | $ | 132.4 | -32% |
Desktop | 18.5 | 20.0 | -8% | ||
Total Revenue | $ | 108.5 | $ | 152.5 | -29% |
Emerging & Other | |||||
Care.com Revenue | $ | 92.5 | $ | 94.5 | -2% |
See metric definitions on page 16
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DILUTIVE SECURITIES
IAC has various dilutive securities. The table below details these securities as well as potential dilution at various stock prices (shares in millions; rounding differences may occur).
Avg | ||||
Shares | Exercise | |||
Price | ||||
Share Price | ||||
Absolute Shares as of 05/03/24 | 83.1 | |||
Restricted stock, RSUs and non-publicly | ||||
traded subsidiary denominated equity | 5.3 | |||
awards | ||||
Options | 2.5 | $ | 14.26 | |
Total Dilution | ||||
% Dilution | ||||
Total Diluted Shares Outstanding |
As of | Dilution at: | ||||||
05/03/24 | |||||||
$ 55.07 | $ | 60.00 | $ | 65.00 | $ 70.00 | $ | 75.00 |
83.1 | 83.1 | 83.1 | 83.1 | 83.1 | |||
0.6 | 0.6 | 0.6 | 0.6 | 0.6 | |||
0.5 | 0.5 | 0.5 | 0.5 | 0.5 | |||
1.1 | 1.1 | 1.1 | 1.1 | 1.1 | |||
1.3 % | 1.3 % | 1.3 % | 1.3 % | 1.3 % | |||
84.2 | 84.2 | 84.2 | 84.2 | 84.2 | |||
The dilutive securities presentation is calculated using the methods and assumptions described below, which are different from those used for GAAP dilution, which is calculated based on the treasury stock method. In addition, the number of absolute shares excludes 3 million shares of restricted stock because this award was unvested as of May 3, 2024.
The Company currently settles all equity awards on a net basis; therefore, the dilutive effect is presented as the net number of shares expected to be issued upon vesting or exercise, and in the case of options, assuming no proceeds are received by the Company. Any required withholding taxes are paid in cash by the Company on behalf of the employees. In addition, the estimated income tax benefit from the tax deduction received upon the vesting or exercise of these awards is assumed to be used to repurchase IAC shares. Assuming all awards were exercised or vested on May 3, 2024, withholding taxes paid by the Company on behalf of the employees upon net settlement would have been $108.7 million (of which approximately 65% would be payable for awards currently vested and those vesting on or before March 31, 2025), assuming a stock price of $55.07 and a 50% withholding rate. The table above assumes no change in the fair value estimate of the non-publicly traded subsidiary denominated equity awards from the values used at March 31, 2024. The number of shares ultimately needed to settle these awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant subsidiary. In addition, the number of shares required to settle these awards will be impacted by movement in the stock price of IAC.
Angi Inc. Equity Awards and the Treatment of the Related Dilutive Effect
Certain Angi Inc. equity awards can be settled either in IAC or Angi Inc. common shares at IAC's election. For purposes of the dilution calculation above, these awards are assumed to be settled in shares of Angi Inc. common stock; therefore, no dilution from these awards is included.
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GAAP FINANCIAL STATEMENTS | |||||
IAC CONSOLIDATED STATEMENT OF OPERATIONS | |||||
($ in thousands except per share data) | |||||
Three Months Ended March 31, | |||||
2024 | 2023 | ||||
Revenue | $ | 929,680 | $ | 1,084,271 | |
Operating costs and expenses: | |||||
Cost of revenue (exclusive of depreciation shown separately below) | 271,964 | 342,929 | |||
Selling and marketing expense | 343,925 | 403,297 | |||
General and administrative expense | 212,669 | 273,076 | |||
Product development expense | 86,999 | 84,787 | |||
Depreciation | 36,573 | 61,172 | |||
Amortization of intangibles | 36,728 | 54,606 | |||
Total operating costs and expenses | 988,858 | 1,219,867 | |||
Operating loss | (59,178) | (135,596) | |||
Interest expense | (39,718) | (38,172) | |||
Unrealized gain on investment in MGM Resorts International | 163,751 | 704,840 | |||
Other income, net | 34,805 | 23,749 | |||
Earnings before income taxes | 99,660 | 554,821 | |||
Income tax provision | (54,688) | (139,502) | |||
Net earnings | 44,972 | 415,319 | |||
Net loss attributable to noncontrolling interests | 59 | 2,456 | |||
Net earnings attributable to IAC shareholders | $ | 45,031 | $ | 417,775 | |
Per share information attributable to IAC Common Stock and Class B common stock shareholders: | |||||
Basic earnings per share | $ | 0.52 | $ | 4.72 | |
Diluted earnings per share | $ | 0.51 | $ | 4.57 | |
Stock-based compensation expense by function: | |||||
Cost of revenue | $ | 493 | $ | 19 | |
Selling and marketing expense | 1,641 | 1,743 | |||
General and administrative expense | 24,954 | 22,844 | |||
Product development expense | 1,819 | 4,335 | |||
Total stock-based compensation expense | $ | 28,907 | $ | 28,941 | |
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IAC Inc. published this content on 07 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 May 2024 20:11:07 UTC.
