IAC(IAC) - 2024 Q2 - Quarterly Results

IAC Q2 2024 Results Overview Q2 2024 Financial Highlights IAC reported a 15% year-over-year revenue decline to $949.5 million in Q2 2024, yet achieved significant operational improvement with a 78% narrower operating loss and 24% Adjusted EBITDA growth IAC Q2 2024 Summary Results | Metric | Q2 2024 ($M) | Q2 2023 ($M) | Growth | | :--- | :--- | :--- | :--- | | Revenue | $949.5 | $1,111.6 | -15% | | Operating loss | $(12.0) | $(55.5) | 78% | | Net loss | $(142.2) | $(89.0) | -60% | | Diluted loss per share | $(1.71) | $(1.07) | -60% | | Adjusted EBITDA | $87.3 | $70.2 | 24% | - Dotdash Meredith's Digital revenue grew 12% to $238 million, marking the second consecutive quarter of double-digit growth, with total operating income turning positive at $18 million, a $36 million improvement year-over-year[3] - Angi Inc. showed strong profitability improvement, with operating income reaching $9 million (up $25 million YoY) and Adjusted EBITDA growing 115% to $42 million[3] - The Emerging & Other segment's revenue decreased by 38%, largely due to the sales of Roofing in November 2023 and Mosaic Group in February 2024, with revenue down only 1% YoY excluding these divestitures[4] - For the first six months of 2024, Free Cash Flow significantly increased by $97 million to $117 million[5] Consolidated Financial and Operating Results IAC's Q2 2024 consolidated revenue decreased 15% to $949.5 million, primarily due to Search and Emerging & Other, yet operating loss improved 78% and Adjusted EBITDA grew 24% Q2 2024 Revenue by Segment ($ in millions) | Segment | Q2 2024 ($M) | Q2 2023 ($M) | Growth | | :--- | :--- | :--- | :--- | | Dotdash Meredith | $425.2 | $414.0 | 3% | | Angi Inc. | $315.1 | $351.6 | -10% | | Search | $101.8 | $177.0 | -43% | | Emerging & Other | $107.5 | $172.4 | -38% | | Total Revenue | $949.5 | $1,111.6 | -15% | Q2 2024 Operating Income (Loss) by Segment ($ in millions) | Segment | Q2 2024 ($M) | Q2 2023 ($M) | Change | | :--- | :--- | :--- | :--- | | Dotdash Meredith | $18.3 | $(17.8) | NM | | Angi Inc. | $9.2 | $(15.4) | NM | | Search | $4.6 | $14.0 | -67% | | Emerging & Other | $(6.4) | $2.1 | NM | | Corporate | $(37.7) | $(38.3) | 2% | | Total Operating Loss | $(12.0) | $(55.5) | 78% | Q2 2024 Adjusted EBITDA by Segment ($ in millions) | Segment | Q2 2024 ($M) | Q2 2023 ($M) | Growth | | :--- | :--- | :--- | :--- | | Dotdash Meredith | $66.4 | $54.1 | 23% | | Angi Inc. | $42.2 | $19.6 | 115% | | Search | $4.6 | $14.0 | -67% | | Emerging & Other | $(3.8) | $5.0 | NM | | Corporate | $(22.2) | $(22.5) | 1% | | Total Adjusted EBITDA | $87.3 | $70.2 | 24% | Segment Performance Analysis Dotdash Meredith Dotdash Meredith's total revenue grew 3% to $425.2 million, driven by 12% Digital revenue growth, with profitability significantly improving to $18.3 million operating income and $66.4 million Adjusted EBITDA Dotdash Meredith Revenue Breakdown Q2 2024 ($ in millions) | Revenue Stream | Q2 2024 ($M) | Q2 2023 ($M) | Growth | | :--- | :--- | :--- | :--- | | Digital | $238.1 | $212.0 | 12% | | Print | $191.7 | $206.8 | -7% | | Total | $425.2 | $414.0 | 3% | - Digital revenue growth was driven by: Advertising (up 16%), with higher programmatic rates and 9% growth in Core Sessions; Licensing (up 19%), including a new partnership with OpenAI; and Performance Marketing (flat), where 17% affiliate commerce growth was offset by declines in services[8] - The 7% decline in Print revenue was the smallest year-over-year decline since the Meredith acquisition, indicating potential stabilization[8] Dotdash Meredith Profitability Q2 2024 ($ in millions) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | Change | | :--- | :--- | :--- | :--- | | Digital Operating Income | $26.0 | $6.1 | 330% | | Print Operating Income | $5.5 | $(0.9) | NM | | Total Operating Income | $18.3 | $(17.8) | NM | | Digital Adjusted EBITDA | $63.4 | $50.8 | 25% | | Print Adjusted EBITDA | $13.2 | $17.4 | -24% | | Total Adjusted EBITDA | $66.4 | $54.1 | 23% | Angi Inc. Angi Inc. revenue declined 10% to $315 million, driven by Domestic business, but profitability significantly improved with operating income reaching $9.2 million and Adjusted EBITDA more than doubling to $42.2 million - The company is actively repurchasing shares, buying 4.1 million shares for $8.6 million between May and August 2024, with the board approving a new 25 million share repurchase authorization[4] Angi Inc. Key Metrics Q2 2024 | Metric | Q2 2024 ($M) | Q2 2023 ($M) | Growth | | :--- | :--- | :--- | :--- | | Revenue | $315.1 | $351.6 | -10% | | Operating Income (Loss) | $9.2 | $(15.4) | NM | | Adjusted EBITDA | $42.2 | $19.6 | 115% | Search The Search segment's revenue sharply declined 43% to $101.8 million, primarily due to reduced marketing at Ask Media Group, resulting in a 67% decrease in operating income and Adjusted EBITDA to $4.6 million - Revenue decreased 43% due to a 46% drop at Ask Media Group from reduced marketing and an 11% decrease at the legacy Desktop business[11] - Operating income and Adjusted EBITDA both decreased by $9.3 million to $4.6 million, driven by lower revenue and a mix shift to lower-margin channels[11] Emerging & Other Emerging & Other revenue decreased 38% to $107.5 million due to divestitures, swinging to a $6.4 million operating loss from a prior profit, mainly due to legal accruals at Care.com - The revenue decline reflects the sale of Mosaic Group ($39.0 million in Q2 2023) and Roofing ($24.5 million in Q2 2023)[11] - Within the segment, Care.com revenue was flat at $87.7 million, while Vivian Health grew 6%[11] - The segment reported an Adjusted EBITDA loss of $3.8 million compared to income of $5.0 million in Q2 2023, primarily due to $9.5 million in legal accruals at Care.com[11] Corporate Corporate operating loss slightly improved, decreasing by $0.6 million to $37.7 million, driven by lower legal fees and reduced stock-based compensation expense - Operating loss narrowed to $37.7 million from $38.3 million in Q2 2023[6][12] - The improvement was driven by lower legal fees and a $0.6 million decrease in stock-based compensation expense[12] Financial Position and Other Items Income Taxes In Q2 2024, IAC recorded an income tax benefit of $34.6 million, resulting in an effective tax rate of 20%, slightly below the statutory rate due to various offsets - The company recorded a Q2 2024 income tax benefit of $34.6 million, for an effective tax rate of 20%[13] - The Q2 2023 income tax benefit was $24.3 million, for an effective tax rate of 21%[13] Free Cash Flow For the first six months of 2024, IAC's Free Cash Flow substantially increased by $97.1 million to $117.3 million, driven by higher Adjusted EBITDA and reduced capital expenditures Free Cash Flow (Six Months Ended June 30) | ($ in millions) | 2024 ($M) | 2023 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | $149.1 | $128.3 | | Capital expenditures | $(31.8) | $(108.1) | | Free cash flow | $117.3 | $20.1 | Liquidity and Capital Resources As of June 30, 2024, IAC maintained strong liquidity with $1.7 billion in cash and marketable securities, $2.0 billion in long-term debt, and active share repurchase programs - As of June 30, 2024, the company had $1.7 billion in cash and cash equivalents and marketable securities[17] - Total long-term debt stood at $2.0 billion, with $1.5 billion at Dotdash Meredith and $500 million at Angi Group, LLC[17] - IAC holds an 84.9% economic interest in Angi Inc. and owns 64.7 million shares of MGM[17] - Angi Inc.'s board approved a new 25 million share repurchase authorization on August 2, 2024, while IAC had 3.7 million shares remaining in its own authorization[18] Dilutive Securities This section details IAC's dilutive securities, estimating total potential dilution at 1.1 million shares or 1.3% of absolute shares as of August 2, 2024, based on a net settlement method - The analysis calculates potential dilution using a net settlement method, which differs from GAAP's treasury stock method[21][22] - At a stock price of $46.98, total potential dilution is 1.1 million shares, bringing total diluted shares outstanding to 84.2 million[21] - Certain Angi Inc. equity awards, which can be settled in either IAC or Angi shares, are assumed to be settled in Angi shares and are therefore excluded from this dilution calculation[23] Detailed Financial Statements and Reconciliations GAAP Financial Statements This section presents IAC's unaudited consolidated GAAP financial statements for Q2 2024, including Statements of Operations, Balance Sheet, and Cash Flows Consolidated Statements of Operations (Three Months Ended June 30, $ in thousands) | Metric | 2024 ($K) | 2023 ($K) | | :--- | :--- | :--- | | Revenue | $949,527 | $1,111,589 | | Total operating costs and expenses | $961,526 | $1,167,062 | | Operating loss | $(11,999) | $(55,473) | | Net loss attributable to IAC shareholders | $(142,232) | $(89,045) | | Diluted loss per share | $(1.71) | $(1.07) | - The Consolidated Balance Sheet shows total assets of $10.2 billion and total IAC shareholders' equity of $6.0 billion as of June 30, 2024[25] - The Consolidated Statement of Cash Flows for the six months ended June 30, 2024, shows net cash provided by operating activities of $149.1 million, a net increase from $128.3 million in the prior year period[26] Reconciliation of GAAP to Non-GAAP Measures This section provides detailed reconciliations of GAAP Operating Income (Loss) to non-GAAP Adjusted EBITDA for IAC's segments, detailing adjustments for stock-based compensation, depreciation, and amortization of intangibles Total IAC Reconciliation for Q2 2024 ($ in millions) | Metric | Amount ($M) | | :--- | :--- | | Operating Loss (GAAP) | $(12.0) | | Stock-based Compensation Expense | $29.1 | | Depreciation | $33.4 | | Amortization of Intangibles | $36.7 | | Adjusted EBITDA (Non-GAAP) | $87.3 | Total IAC Reconciliation for Q2 2023 ($ in millions) | Metric | Amount ($M) | | :--- | :--- | | Operating Loss (GAAP) | $(55.5) | | Stock-based Compensation Expense | $30.2 | | Depreciation | $41.3 | | Amortization of Intangibles | $54.2 | | Adjusted EBITDA (Non-GAAP) | $70.2 | Supplementary Information Principles of Financial Reporting This section outlines IAC's use of non-GAAP measures like Adjusted EBITDA and Free Cash Flow for performance evaluation, defining their calculation and the rationale for excluding non-cash expenses - Adjusted EBITDA is defined as operating income excluding stock-based compensation, depreciation, and amortization/impairment of intangibles[33] - Free Cash Flow is defined as net cash provided by operating activities, less capital expenditures, and is considered useful for representing cash generated by operating businesses[34] Operating Metric Definitions This section defines key operating metrics across IAC's segments, including revenue stream components for Dotdash Meredith, Angi Inc., Search, and Emerging & Other, alongside non-financial metrics like 'Core Sessions' and 'Service Requests' - Dotdash Meredith's 'Digital Revenue' includes Advertising, Performance Marketing, and Licensing and Other revenue, while 'Core Sessions' are defined as unique visits to its most significant owned and operated sites[39][40] - Angi Inc.'s 'Service Requests' include submitted requests for service professionals, direct contacts to professionals in the directory, and bookings for pre-priced services[42] - Search's 'Ask Media Group Revenue' is primarily generated from paid listings in response to search queries and display ads[45]