8-K: IAC Considers Angi Spin-Off Amidst Mixed Q3 Results

IAC is considering spinning off its stake in Angi Inc. while reporting a 16% revenue decrease and a 7% Adjusted EBITDA increase for Q3 2024.

Summary

• IAC's Q3 2024 results show a mixed performance with a 16% decrease in revenue to $938.7 million compared to $1,111.3 million in Q3 2023.
• Operating income improved significantly by $49 million, reaching $16.3 million, compared to a loss of $32.7 million in the same quarter last year.
• Adjusted EBITDA increased by 7% to $107.4 million from $100.4 million year-over-year.
• The company reported a net loss of $243.7 million, an improvement from the $390.5 million loss in Q3 2023.
• Diluted loss per share improved to $2.93 from $4.72 year-over-year.
• Dotdash Meredith Digital revenue grew by 16% to $246 million, marking the third consecutive quarter of double-digit growth, while print revenue declined by 6% to $199 million.
• Angi Inc.'s operating income increased by $16 million to $8 million, and Adjusted EBITDA increased by 27% to $35 million.
• Emerging & Other segment's operating income increased by $13 million to $13 million, and Adjusted EBITDA increased by 23% to $16 million.
• For the nine months ended September 30, 2024, net cash provided by operating activities increased by $102 million to $244 million, and Free Cash Flow increased by $181 million to $197 million.
• IAC holds 64.7 million shares of MGM Resorts International, valued at $2.4 billion as of November 8, 2024.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While there are positive aspects like improved profitability and digital growth, the overall revenue decline and net loss temper the positive outlook. The potential spin-off of Angi Inc. adds uncertainty.

Positives

• Operating income improved significantly, moving from a loss to a profit of $16.3 million.
• Adjusted EBITDA saw a 7% increase, indicating improved profitability.
• Dotdash Meredith's digital revenue continues to show strong growth with a 16% increase.
• Angi Inc. showed significant improvement in both operating income and Adjusted EBITDA.
• Free cash flow increased substantially by $181 million.
• The Emerging & Other segment showed improved profitability driven by The Daily Beast and Vivian Health.

Negatives

• Overall revenue decreased by 16% year-over-year.
• The company reported a net loss of $243.7 million, although this is an improvement from the previous year.
• Search revenue decreased by 47% due to a decline at Ask Media Group.
• Emerging & Other revenue decreased by 36% due to the sale of Mosaic Group and Roofing.
• Print revenue at Dotdash Meredith declined by 6%.

Risks

• The potential spin-off of Angi Inc. introduces uncertainty regarding the future structure and performance of both entities.
• The volatility of the investment in MGM Resorts International can significantly impact net earnings.
• The decline in search revenue and print revenue poses challenges for future growth.
• The company faces risks related to competition, cyberattacks, and data security breaches.
• The company's indebtedness could impact its ability to operate its business.

Future Outlook

The company is considering a spin-off of Angi Inc. and will continue to focus on growing its digital businesses. The conference call on November 12, 2024, will include forward-looking information.

Management Comments

• Joey Levin, the Chief Executive Officer of IAC, posted a letter to shareholders on the Investor Relations section of its website.

Industry Context

The results reflect the ongoing shift from print to digital media, with Dotdash Meredith's digital growth contrasting with the decline in its print revenue. The potential spin-off of Angi Inc. is a strategic move that could impact the competitive landscape in the home services sector.

Comparison to Industry Standards

• Dotdash Meredith's 16% digital revenue growth is strong compared to traditional media companies struggling with digital transitions, but it is important to compare this to other digital-first publishers like BuzzFeed or Vox Media.
• Angi Inc.'s 27% Adjusted EBITDA growth is a positive sign, but it needs to be compared to other home services platforms like HomeAdvisor or Thumbtack to assess its competitive position.
• The 16% overall revenue decline is concerning and needs to be benchmarked against peers in the internet and media sectors, such as Expedia or Match Group, to understand if this is an industry-wide trend or specific to IAC.
• The improvement in operating income and Adjusted EBITDA is a positive sign, but the company's net loss still needs to be compared to industry averages to determine if it is on track for profitability.

Stakeholder Impact

• Shareholders may be impacted by the potential spin-off of Angi Inc. and the volatility of the MGM investment.
• Employees may be affected by the restructuring and strategic changes within the company.
• Customers of Dotdash Meredith will see continued investment in digital content.
• Professionals on the Angi platform may see changes due to the potential spin-off.

Next Steps

• IAC and Angi Inc. will host a conference call on November 12, 2024, to discuss the results.
• The company will continue to evaluate the potential spin-off of Angi Inc.
• The company will report Care.com as a separate reportable segment beginning in Q4 2024.

Key Dates

Keywords

IAC, Angi Inc., Dotdash Meredith, Adjusted EBITDA, Spin-off, Revenue, Operating Income, Digital Revenue, Free Cash Flow, MGM Resorts International