8-K: IAC Q3: Digital Growth & AI Deal Amidst Revenue Dip

IAC reports mixed Q3 2025 results with People Inc. digital revenue growth and a new Microsoft AI deal, offset by overall revenue and Adjusted EBITDA declines.

Summary

• Total revenue for Q3 2025 was $589.8 million, an 8% decrease compared to Q3 2024's $642.0 million.
• Operating loss for Q3 2025 was $20.4 million, a significant shift from an operating income of $8.1 million in Q3 2024.
• Net loss for Q3 2025 was $21.9 million, an improvement from a net loss of $243.7 million in Q3 2024, primarily due to an unrealized gain on the MGM investment.
• Diluted loss per share was $0.27 in Q3 2025, compared to $2.93 in Q3 2024.
• Adjusted EBITDA for Q3 2025 was $29.1 million, a 59% decrease from $71.6 million in Q3 2024.
• The company repurchased 2.8 million common shares for an aggregate of $100 million between August 6, 2025, and October 31, 2025.
• Year-to-date through October 31, 2025, the company repurchased 7.3 million common shares for an aggregate of $300 million.
• People Inc. Digital revenue increased 9% to $269 million, driven by Performance marketing and Licensing growth.
• People Inc. signed an AI licensing deal with Microsoft to partner on Microsoft's Publisher Content Marketplace.
• On October 1, 2025, People Inc. acquired Feedfeed, a social-first food media publisher and influencer network.
• Care.com revenue decreased 5% to $90.8 million, with Consumer revenue down 4% (an improvement from a 9% decline in Q2 2025) but Enterprise revenue down 6%.
• Search revenue decreased 41% to $51.9 million, primarily due to changes in Google's algorithm and policy updates.
• Emerging & Other segment's operating loss included $21 million of legal fees and settlement expenses for litigation that concluded in Q3 related to a legacy business.
• IAC holds 64.7 million shares of MGM Resorts International, representing a 24% stake, valued at $2.1 billion as of October 31, 2025.
• Free Cash Flow for the nine months ended September 30, 2025, was $13.5 million, a $101.0 million decrease from the prior year period.
• The company recorded a $32.6 million adverse jury verdict in Q3 2025 related to a 2015 real estate transaction.

Sentiment

Score: 4

Explanation: While People Inc. Digital shows strong growth and strategic moves like the Microsoft AI deal and Feedfeed acquisition are positive, the overall company revenue and Adjusted EBITDA declined significantly. Free cash flow also saw a substantial drop. Share buybacks demonstrate confidence but do not fully offset the operational challenges in other segments and the adverse legal verdict.

Positives

• People Inc. Digital revenue grew 9% to $269 million, demonstrating strong performance in a key segment.
• People Inc. secured an AI licensing deal with Microsoft, positioning it as a premier publisher for AI content monetization.
• The acquisition of Feedfeed by People Inc. expands its social food audience and advertising capabilities, offering a proven social model for expansion.
• The company repurchased 2.8 million common shares for $100 million in Q3, and $300 million year-to-date, reflecting confidence in its businesses and strategy.
• Care.com's Consumer revenue decline improved to 4% in Q3 2025 from 9% in Q2 2025, indicating a stabilizing trend.
• The net loss significantly improved to $21.9 million in Q3 2025 from $243.7 million in Q3 2024, largely due to an unrealized gain on the MGM investment.
• Prospective legal costs related to a concluded legacy litigation are expected to be negligible, reducing future financial uncertainty in that area.
• People Inc. provided positive FY 2025 Operating Income guidance of $180-$200 million and Adjusted EBITDA guidance of $325-$340 million.

Negatives

• Total revenue decreased 8% year-over-year to $589.8 million in Q3 2025.
• The company reported an operating loss of $20.4 million in Q3 2025, compared to an operating income of $8.1 million in Q3 2024.
• Adjusted EBITDA declined significantly by 59% to $29.1 million in Q3 2025 from $71.6 million in Q3 2024.
• Free Cash Flow for the nine months ended September 30, 2025, decreased by $101.0 million to $13.5 million.
• Search revenue plummeted 41% due to frequent changes to Google's algorithm and policy updates.
• Print revenue at People Inc. declined 15% due to ongoing portfolio optimization and audience migration to digital.
• Care.com's Enterprise revenue decreased 6%, reflecting employer budget tightening.
• The company incurred a $32.6 million adverse jury verdict in Q3 2025 related to a 2015 real estate transaction.
• Severance-related costs of $15 million at People Inc. and $1 million at Care.com were recognized due to headcount reductions.
• Emerging & Other segment's operating loss increased due to $21 million in legal fees and settlement expenses for legacy litigation.

Risks

• Ability to compete with generative artificial intelligence (AI) technology and disruption across marketing and publishing driven by AI-enabled search features, including Google AI Overviews.
• Unstable market and economic conditions, particularly those adversely impacting advertising spending levels and consumer confidence and spending behavior, as well as geopolitical conflicts.
• Ability to market products and services in a successful and cost-effective manner.
• The display prominence of links to websites offering products and services in search results.
• Changes in the relationship with (or policies implemented by) Google.
• The failure or delay of the markets and industries in which businesses operate to migrate online and the continued growth and acceptance of online products and services.
• Ability to develop and monetize versions of products and services for mobile and other digital devices.
• Ability of the Digital business to successfully expand the digital reach of its portfolio of publishing brands.
• Ability to market, distribute, and monetize products and services through search engines, digital app stores, advertising networks, and social media platforms.
• Risks related to the Print business including declining revenue, increases in paper and postage costs, reliance on a single supplier to print magazines, and potential increases in pension plan obligations.
• Ability to establish and maintain relationships with quality and trustworthy caregivers for Care.com.
• Ability to access, collect, use, and protect the personal data of users and subscribers.
• Ability to engage directly with users, subscribers, consumers, and caregivers on a timely basis.
• The ability of the Chairman and Senior Executive and certain members of his family to exercise significant influence over the composition of the board of directors, matters subject to stockholder approval, and operations.
• Risks related to liquidity and indebtedness, including the impact of indebtedness on the ability to operate the business, generate sufficient cash to service indebtedness, and interest rate risk.
• Inability to freely access the cash of People Inc. and its subsidiaries.
• Dilution with respect to investments in IAC.
• Ability to compete effectively in various markets.
• Ability to build, maintain, and/or enhance various brands.
• Ability to protect systems, technology, and infrastructure from cyberattacks.
• The occurrence of data security breaches and/or fraud.
• Increased liabilities and costs related to the processing, storage, use, and disclosure of personal and confidential user information.
• The integrity, quality, efficiency, and scalability of systems, technology, and infrastructure.
• Changes in key personnel and risks related to leadership transitions.
• Changes to the capital deployment strategy.

Future Outlook

The company projects full year 2025 Adjusted EBITDA to be between $234 million and $258 million. For People Inc., FY 2025 Operating Income is guided to be $180-$200 million and Adjusted EBITDA $325-$340 million. In Q4 2025, People Inc. Digital revenue is expected to grow 7%-10%, while Print revenue is anticipated to decline 20%-25%. Care.com expects Q4 revenue declines of 7%-9%, with Enterprise headwinds persisting. Search revenue for Q4 is projected to be $35-$45 million, and Emerging & Other revenue around $16 million. Legal fees and settlement expenses for the concluded legacy litigation are expected to be negligible prospectively.

Management Comments

• "IAC's third quarter was solid as we focus on the heart of our future: People Inc., the largest digital and print publisher in the U.S., and our investment in MGM, a leader in global entertainment and gaming. Both possess unlimited potential with scale and cultural resonance."
• "People Inc. continues to outperform with eight consecutive quarters of Digital growth, a new Microsoft AI licensing deal, and its recent Feedfeed acquisition."
• "MGM is demonstrating strong digital and international growth while positioning itself for rebound in its exceptional Las Vegas assets."
• "Reflecting our confidence in these businesses and our strategy, we once again bought back shares in IAC this quarter, allocating capital to the companies we know best."

Industry Context

The results reflect broader industry trends, including the ongoing migration of audience and advertising spend from print to digital, which continues to impact People Inc.'s Print segment. The significant decline in Search revenue highlights the disruptive impact of frequent changes to Google's algorithm and the increasing prominence of AI-enabled search features like Google AI Overviews on digital publishing and marketing. The new Microsoft AI licensing deal for People Inc. indicates a growing trend of publishers seeking new monetization avenues for their content in the evolving AI landscape. Additionally, Care.com's Enterprise segment is experiencing headwinds due to employer budget tightening, a common challenge in the current economic climate.

Comparison to Industry Standards

• MGM Resorts International is noted to be trading at less than a 3x Implied EV/Adjusted EBITDA Multiple, as reported on its Q3 2025 Earnings Call, suggesting it is undervalued compared to its market position.
• People Inc. is positioned as the largest digital and print publisher in the U.S., indicating a leading market share within its sector.

Management Changes

Legal Proceedings

• The Emerging & Other segment incurred $21 million in legal fees and settlement expenses for litigation related to a legacy business that concluded in Q3 2025, with prospective costs expected to be negligible.
• An adverse jury verdict on October 24, 2025, resulted in a $32.6 million expense related to a gain recorded in 2015 associated with a real estate transaction.

Stakeholder Impact

• Shareholders are impacted by the significant share repurchase program ($300 million YTD), which can increase per-share value, but also by the overall decline in revenue and Adjusted EBITDA.
• Employees are affected by headcount reductions, particularly at People Inc. ($15 million in severance costs) and Care.com ($1 million in severance costs), indicating workforce restructuring.
• Customers and users of People Inc. may benefit from expanded digital offerings and content through the Feedfeed acquisition and the Microsoft AI licensing deal.
• Customers of Care.com's Enterprise segment are experiencing headwinds due to employer budget tightening, potentially impacting service utilization.
• Creditors of People Inc. are subject to the company's $1.45 billion long-term debt, though the net consolidated leverage ratio remains below 4.0x, providing financial flexibility.

Next Steps

• Host a conference call on November 4, 2025, at 8:30 a.m. Eastern Time to discuss Q3 results and provide further insights.
• Continue to focus on the growth and strategic development of People Inc. and the investment in MGM Resorts International.
• Evaluate investment opportunities and potentially diverge from stated outlooks to create long-term value.
• Manage capital deployment strategy, including potential future share repurchases under the remaining 6.4 million share authorization.

Key Dates

Recommendation

While IAC's overall financial performance for Q3 2025 shows significant declines in revenue and Adjusted EBITDA, there are strategic positives. People Inc.'s digital segment is growing, securing an AI licensing deal with Microsoft, and expanding through acquisition. The company's substantial share repurchase program signals management's confidence and commitment to shareholder value. However, the broader economic headwinds, particularly impacting the Search and Care.com Enterprise segments, coupled with a notable adverse legal verdict and a sharp decline in free cash flow, present considerable challenges. The long-term potential of People Inc. and the MGM stake are compelling, but the near-term operational struggles and market uncertainties warrant a cautious "hold" stance, awaiting clearer signs of a turnaround in the underperforming segments and sustained improvement in overall profitability and cash generation.

Keywords

IAC, People Inc., MGM Resorts International, Q3 Earnings, Digital Publishing, AI Licensing, Share Repurchase, Financial Results, Media, Internet, Technology, Advertising, Performance Marketing, Google AI Overviews, Care.com