IAC(IAC) - 2025 Q2 - Quarterly Results

IAC Q2 2025 Financial Highlights Overall Performance Summary IAC's Q2 2025 revenue declined 7% to $586.9 million, yet profitability significantly improved with positive operating income and 15% Adjusted EBITDA growth, largely due to an MGM investment gain and People Inc.'s digital revenue growth Q2 2025 Financial Performance Summary | Metric | Q2 2025 | Q2 2024 | Growth | | :--- | :--- | :--- | :--- | | Revenue | $586.9M | $634.4M | -7% | | Operating income (loss) | $0.6M | ($21.5M) | NM | | Net earnings (loss) | $211.5M | ($142.2M) | NM | | Diluted earnings (loss) per share | $2.57 | ($1.71) | NM | | Adjusted EBITDA | $51.4M | $44.8M | 15% | - Dotdash Meredith has been rebranded as People Inc., leveraging its flagship brand, with Digital revenue growth accelerating to 9% in Q2 2025 from 7% in Q1 2025[2][4] - IAC's Chairman, Barry Diller, expressed a strong appetite to deploy cash for stock buybacks or strategic acquisitions, despite quiet capital allocation in the quarter[3] - IAC holds a 24% stake in MGM Resorts International, with 64.7 million shares valued at $2.3 billion as of August 1, 2025[5][14] Discussion of Financial and Operating Results Segment Performance Overview IAC's Q2 2025 segment performance was mixed, with People Inc. showing modest revenue growth and strong operating income, while other segments faced revenue declines but mostly saw Adjusted EBITDA growth Q2 2025 Segment Performance | Segment | Revenue (Q2 2025) | Revenue Growth | Operating Income (Q2 2025) | Adjusted EBITDA (Q2 2025) | Adjusted EBITDA Growth | | :--- | :--- | :--- | :--- | :--- | :--- | | People Inc. | $427.4M | 1% | $34.8M | $69.6M | 5% | | Care.com | $82.0M | -6% | $3.0M | $5.8M | 117% | | Search | $61.7M | -39% | $5.1M | $5.1M | 10% | | Emerging & Other | $15.9M | -20% | ($9.2M) | ($6.3M) | 3% | | Corporate | N/A | N/A | ($33.1M) | ($22.8M) | -1% | People Inc. People Inc. revenue grew 1% to $427.4 million, driven by a 9% increase in Digital revenue, offsetting a Print decline, with operating income surging 90% due to lower amortization People Inc. Revenue by Stream | Revenue Stream | Q2 2025 | Q2 2024 | Growth | | :--- | :--- | :--- | :--- | | Digital | $260.4M | $238.1M | 9% | | Print | $173.5M | $191.7M | -9% | | Total | $427.4M | $425.2M | 1% | - Digital revenue growth was driven by Advertising (+5%) from Health, Pharma, Tech, and Travel; Performance Marketing (+14%) fueled by 25% growth in affiliate commerce; and Licensing (+23%) benefiting from content syndication, Apple News+, and a new OpenAI partnership[8] - Digital operating income increased 46% to $38.1 million, primarily due to lower amortization expenses as certain intangible assets became fully amortized in 2024, while Digital Adjusted EBITDA declined 1% due to higher costs and investments[9] Care.com Care.com's revenue decreased 6% to $82.0 million due to declines in Consumer and Enterprise segments, yet operating income improved to $3.0 million, largely due to the absence of prior-year legal accruals - Revenue declined 6% due to a 9% decrease in Consumer revenue from lower platform subscriptions and a 4% decrease in Enterprise revenue from lower product utilization[13] - Operating income turned positive to $3.0 million, and Adjusted EBITDA grew 117% to $5.8 million, primarily due to the absence of a $9.5 million legal accrual present in Q2 2024[13] Search The Search segment's revenue sharply declined 39% to $61.7 million due to reduced traffic acquisition and desktop business declines, but operating income and Adjusted EBITDA both grew 10% through cost management - Revenue fell 39% due to a 39% decrease at Ask Media Group and a 41% decrease at the Desktop business, reflecting a strategic reduction in traffic acquisition[13] - Despite the revenue drop, operating income and Adjusted EBITDA increased by 10% to $5.1 million, attributed to lower traffic acquisition and compensation costs[13] Emerging & Other Emerging & Other segment revenue decreased 20% to $15.9 million, primarily from lower IAC Films revenue, while the operating loss widened to $9.2 million due to higher stock-based compensation - The 20% revenue decline was primarily caused by a $4.7 million decrease in IAC Films revenue, while Vivian Health revenue remained flat year-over-year, an improvement from Q1 2025[13] - Operating loss increased by $2.4 million to $9.2 million, reflecting $2.6 million higher stock-based compensation expense[13] Corporate & Other Financial Items Corporate operating loss narrowed to $33.1 million due to lower stock-based compensation, while a $307.4 million unrealized gain on the MGM investment significantly boosted pre-tax earnings, resulting in a 23% effective tax rate - Corporate operating loss decreased by $3.7 million, mainly due to $4.0 million lower stock-based compensation expense related to a forfeited award from the former CEO[14][16] - IAC's investment in MGM generated an unrealized gain of $307.4 million in Q2 2025, a significant reversal from the $179.3 million unrealized loss in Q2 2024[3][14] - The company recorded an income tax provision of $63.0 million, resulting in an effective tax rate of 23% for Q2 2025[15] Financial Position and Cash Flow Liquidity and Capital Resources As of June 30, 2025, IAC held $1.1 billion in cash, with People Inc. refinancing $1.47 billion of debt to extend maturities, and 9.2 million shares remaining for repurchase - As of June 30, 2025, the company had $1.1 billion in cash and cash equivalents and $1.45 billion in long-term debt, which is an obligation of People Inc[25] - People Inc. refinanced $1.47 billion of debt, extending maturities with new term loans and senior secured notes due in 2030 and 2032[22][25] - IAC has 9.2 million shares remaining in its share repurchase authorization as of August 1, 2025[24] Free Cash Flow IAC's Free Cash Flow for the first six months of 2025 was negative $11.8 million, a significant decrease from $53.8 million in 2024, primarily due to unfavorable working capital changes and higher capital expenditures Six Months Ended June 30 Free Cash Flow | Metric (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | ($2.7M) | $60.2M | | Capital expenditures | ($9.1M) | ($6.4M) | | Free Cash Flow | ($11.8M) | $53.8M | - The $65.6 million year-over-year decrease in Free Cash Flow was mainly driven by unfavorable working capital and higher capital expenditures, partially offset by higher Adjusted EBITDA[17] Outlook Full Year 2025 Outlook IAC projects full-year 2025 total Adjusted EBITDA between $247 million and $285 million and operating income between $82 million and $140 million, with People Inc. as the primary contributor FY 2025 Outlook ($ in millions) | FY 2025 Outlook ($ in millions) | Guidance Range | | :--- | :--- | | Adjusted EBITDA | | | People Inc. | $330 - $340 | | Care.com | $45 - $55 | | Search | $12 - $15 | | Emerging & Other | ($25) - ($15) | | Corporate | ($115) - ($110) | | Total Adjusted EBITDA | $247 - $285 | | Total Operating income | $82 - $140 | Q3 and FY 2025 Additional Observations IAC anticipates Q3 2025 People Inc. Digital revenue growth of 7%-9% with Adjusted EBITDA of $68-$73 million, while Care.com revenue is projected to decline 4%-7% - People Inc.: Q3 Digital revenue growth expected at 7%-9%; FY 2025 Digital revenue growth expected at 7%-10%[40] - Care.com: Q3 revenue expected to decline 4%-7% with Adjusted EBITDA of $6-$10 million, which includes a $3 million real estate impairment charge[40] - Search: Q3 revenue is guided to be $55-$65 million with Adjusted EBITDA of $3-$4 million[40] Detailed Financials and Supplementary Information GAAP Financial Statements IAC's GAAP financial statements show a shift to net earnings driven by the MGM investment, total assets of $7.4 billion, and a $703.8 million net decrease in cash for the first six months of 2025 due to financing and investing activities Consolidated Statement of Operations IAC's Q2 2025 revenue was $586.9 million, with operating income improving to $0.6 million, and net earnings of $210.6 million primarily driven by a $307.4 million unrealized gain on the MGM investment Consolidated Statement of Operations ($ in thousands) | ($ in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenue | $586,928 | $634,393 | | Operating income (loss) | $575 | ($21,489) | | Unrealized gain (loss) on investment in MGM | $307,437 | ($179,284) | | Net earnings (loss) from continuing operations | $210,633 | ($144,692) | | Diluted earnings (loss) per share | $2.57 | ($1.71) | Consolidated Balance Sheet As of June 30, 2025, IAC's total assets were $7.36 billion, a decrease from year-end 2024 due to the Angi Inc. spin-off, with $1.09 billion in cash and $1.41 billion in long-term debt Consolidated Balance Sheet ($ in thousands) | ($ in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $7,360,395 | $9,688,644 | | Cash and cash equivalents | $1,093,866 | $1,381,736 | | Investment in MGM | $2,225,844 | $2,242,672 | | Long-term debt, net | $1,412,332 | $1,435,007 | | Total Liabilities and Shareholders' Equity | $7,360,395 | $9,688,644 | Consolidated Statement of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $2.7 million, investing activities used $374.4 million (Angi Inc. spin-off), and financing activities used $298.7 million, resulting in a $703.8 million net decrease in cash Consolidated Statement of Cash Flows ($ in thousands) | ($ in thousands) | Six Months Ended June 30, 2025 | | :--- | :--- | | Net cash (used in) provided by operating activities | ($2,691) | | Net cash (used in) provided by investing activities | ($374,421) | | Net cash used in financing activities | ($298,694) | | Net (decrease) in cash and cash equivalents | ($703,796) | Reconciliation of GAAP to Non-GAAP Measures This section details reconciliations of operating income to Adjusted EBITDA, showing Q2 2025 total operating income of $0.6 million reconciled to Adjusted EBITDA of $51.4 million by adding back stock-based compensation, depreciation, and amortization Q2 2025 GAAP to Non-GAAP Reconciliation | Reconciliation for Q2 2025 ($ in millions) | Amount | | :--- | :--- | | Total Operating income (loss) | $0.6 | | Stock-based Compensation Expense | $19.5 | | Depreciation | $8.0 | | Amortization of Intangibles | $23.4 | | Total Adjusted EBITDA | $51.4 | Operating Metrics This section details key operating metrics, highlighting People Inc.'s 9% Digital revenue growth driven by Performance Marketing and Licensing, alongside revenue declines for Care.com and Search segments People Inc. Digital Revenue Metrics | People Inc. Revenue ($M) | Q2 2025 | Growth | | :--- | :--- | :--- | | Advertising | $161.2 | 5% | | Performance marketing | $61.1 | 14% | | Licensing and other | $38.1 | 23% | | Total Digital | $260.4 | 9% | - People Inc.'s Total Sessions decreased 5% to 2,444 million, but Core Sessions, representing its most significant sites, increased 2% to 2,202 million[27] Dilutive Securities As of August 1, 2025, IAC had 80.2 million absolute shares outstanding, with total potential dilution from equity awards estimated at 1.3 million shares, resulting in 81.5 million total diluted shares - As of August 1, 2025, total potential dilution from RSUs and options is approximately 1.3 million shares, leading to a total diluted share count of 81.5 million[30] - The company settles all equity awards on a net basis, with a cash withholding tax obligation of $72.5 million if all awards were exercised or vested on August 1, 2025[31] Supplementary Information This section defines non-GAAP measures like Adjusted EBITDA and Free Cash Flow, provides detailed operating metric definitions for key segments, and includes a Safe Harbor statement regarding forward-looking statements - Adjusted EBITDA is defined as operating income excluding stock-based compensation, depreciation, and certain acquisition-related items, serving as the company's primary segment measure of profitability[47][48] - Free Cash Flow is defined as net cash from operating activities less capital expenditures, representing the cash generated by operating businesses[49] - The report contains a Safe Harbor statement outlining numerous risks and uncertainties that could cause actual results to differ from forward-looking statements, including competition from generative AI, unstable market conditions, and debt-related risks[64]