IAC(IAC) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements This section presents IAC's unaudited consolidated financial statements for Q2 2023, including key financial statements and detailed notes on accounting policies and segment data Consolidated Balance Sheet Consolidated Balance Sheet Summary (as of June 30, 2023) | Balance Sheet Item | June 30, 2023 (In thousands) | December 31, 2022 (In thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,326,988 | $1,417,390 | | Investment in MGM Resorts International | $2,842,661 | $2,170,182 | | Total current assets | $2,198,407 | $2,561,135 | | Total assets | $10,549,090 | $10,393,635 | | Liabilities & Equity | | | | Total current liabilities | $1,034,194 | $1,079,988 | | Long-term debt, net | $2,006,456 | $2,019,759 | | Total IAC shareholders' equity | $6,116,708 | $5,931,614 | | Total liabilities and shareholders' equity | $10,549,090 | $10,393,635 | Consolidated Statement of Operations Consolidated Statement of Operations Summary | Metric (In thousands, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,111,589 | $1,362,581 | $2,195,860 | $2,687,926 | | Operating loss | $(55,473) | $(166,140) | $(191,069) | $(274,954) | | Unrealized (loss) gain on MGM investment | $(32,362) | $(825,305) | $672,478 | $(1,012,635) | | Net (loss) earnings attributable to IAC | $(89,045) | $(869,130) | $328,730 | $(1,104,928) | | Diluted (loss) earnings per share | $(1.07) | $(10.02) | $3.64 | $(12.73) | Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows Summary (Six Months Ended June 30) | Cash Flow Activity (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $128,254 | $(7,905) | | Net cash used in investing activities | $(27,200) | $(225,265) | | Net cash used in financing activities | $(193,352) | $(63,792) | | Net decrease in cash and cash equivalents | $(90,574) | $(301,163) | Notes to Consolidated Financial Statements The notes provide critical details supporting financial statements, including revenue concentration, restructuring charges, MGM investment valuation, long-term debt composition, and segment performance - Revenue from Google represented 18% of total revenue for the three months and 17% for the six months ended June 30, 2023[38] - Dotdash Meredith incurred net restructuring charges of $0.2 million for both the three and six months ended June 30, 2023, a significant reduction from $13.7 million and $36.1 million in the respective prior-year periods[162] - The company's investment in MGM Resorts International had a fair value of $2.84 billion as of June 30, 2023, representing 18.3% ownership. A significant unrealized pre-tax gain of $672.5 million was recognized in the first six months of 2023, compared to a loss of $1.0 billion in the same period of 2022[55] - Total long-term debt stood at $2.01 billion as of June 30, 2023, primarily consisting of Dotdash Meredith Term Loans ($1.56 billion) and ANGI Group Senior Notes ($500 million)[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance, liquidity, and capital resources, highlighting a Q2 2023 revenue decline but improved operating loss and Adjusted EBITDA due to specific segment performance and prior-year adjustments Results of Operations This section analyzes Q2 2023 operational results, showing an 18% revenue decrease driven by Dotdash Meredith and Angi Inc., but an improved operating loss and 88% increase in Adjusted EBITDA Q2 2023 vs Q2 2022 Revenue by Segment (In thousands) | Segment | Q2 2023 Revenue | Q2 2022 Revenue | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Dotdash Meredith | $413,998 | $489,524 | $(75,526) | (15)% | | Angi Inc. | $375,068 | $515,782 | $(140,714) | (27)% | | Search | $177,036 | $198,183 | $(21,147) | (11)% | | Emerging & Other | $147,903 | $161,089 | $(13,186) | (8)% | | Total | $1,111,589 | $1,362,581 | $(250,992) | (18)% | - The 27% revenue decline at Angi Inc. was driven by a 72% decrease in Services revenue, partly due to a change to net revenue reporting, and a 14% decline in Ads and Leads revenue from fewer monetized transactions[168] Q2 2023 vs Q2 2022 Adjusted EBITDA by Segment (In thousands) | Segment | Q2 2023 Adj. EBITDA | Q2 2022 Adj. EBITDA | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Dotdash Meredith | $54,092 | $39,167 | $14,925 | 38% | | Angi Inc. | $18,289 | $9,689 | $8,600 | 89% | | Search | $13,982 | $26,317 | $(12,335) | (47)% | | Emerging & Other | $6,309 | $(17,060) | $23,369 | NM | | Total | $70,186 | $37,397 | $32,789 | 88% | - Operating loss improved by $110.7 million to a loss of $55.5 million in Q2 2023, primarily due to the absence of an $86.7 million goodwill impairment at Mosaic Group that was recorded in Q2 2022[189] Financial Position, Liquidity and Capital Resources As of June 30, 2023, IAC maintained strong liquidity with $1.4 billion in cash and marketable securities, generating $128.3 million from operations and engaging in share repurchases and strategic investments Financial Position Summary (as of June 30, 2023) | Item (In thousands) | Amount | | :--- | :--- | | Total cash and cash equivalents and marketable securities | $1,442,547 | | Total long-term debt, net | $2,006,456 | - For the first six months of 2023, IAC repurchased 3.2 million shares of its common stock for $165.6 million[226][234] - In April 2023, the company invested an additional $103.6 million in Turo, a peer-to-peer car sharing marketplace[225][233] - IAC contributed a total of $280 million to Dotdash Meredith in H1 2023 to ensure compliance with debt covenants, with most of the funds subsequently distributed back to IAC[243] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section outlines IAC's primary market risks, including equity price risk from its MGM investment and interest rate risk from variable-rate debt, with mitigation strategies discussed - The investment in MGM was valued at $2.8 billion at quarter-end, constituting approximately 27% of the company's total assets. A $2.00 change in MGM's share price would impact IAC's pre-tax earnings by $129.4 million[248] - IAC has $1.6 billion in variable-rate debt at Dotdash Meredith. A 100 basis point change in the interest rate would alter annual interest expense by $12.1 million, net of the impact from interest rate swaps[249][251] - In March 2023, Dotdash Meredith entered into interest rate swaps on a notional amount of $350 million to convert a portion of its variable-rate Term Loan B to a fixed rate, mitigating exposure to rising interest rates[250] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The company's management concluded that its disclosure controls and procedures were effective as of the end of the period covered by the report[254] - There were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[255] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section updates on ongoing shareholder litigation concerning the 2020 Match Group separation, currently under appeal, which the company vigorously defends - The company provides an update on the ongoing shareholder litigation concerning the Match Group separation. Following an appeal of the case's dismissal, the Delaware Supreme Court has requested supplemental briefing from the parties[259] Item 1A. Risk Factors This section refers to detailed risk factors from prior filings, cautioning that these and other unknown risks could materially impact the company's business and financial condition - The report incorporates by reference the risk factors previously disclosed in its 2022 Form 10-K and Q1 2023 Form 10-Q, advising that these could materially impact the company's business and financial condition[263] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2023, IAC repurchased 1.47 million shares for $75.4 million, with 3.69 million shares remaining available under its repurchase plan Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2023 | 999,402 | $49.81 | | May 2023 | 472,400 | $52.88 | | June 2023 | 0 | $0.00 | | Total | 1,471,802 | $50.80 | Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 arrangements during Q2 2023 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2023[267] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including executive certifications and interactive data files - A list of documents filed as exhibits to the report is provided, including officer certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[270]