IAC Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Angi Spin: Contemplating spin of Angi due to business strength, profitability, cash flow, improved consumer experience. Benefits include standalone public market presence, liquid currency, tax efficiency, and IAC focus. Jobs done well is a driving obsession, and Angi is on track for revenue growth and profitability.
• DDM Performance: Strong Q3 digital revenue with ad revenue growth, licensing strength, but October challenges from election and advertiser caution. D/Cipher using OpenAI to expand supply and demand addressability, with programmatic stack optimized post-Meredith combination.
• Care Business: Scale in care services, potential in underpenetrated segments (senior, pet care), enterprise trends in employer-provided care. New CEO Brad Wilson focusing on product innovation and conversion improvement.
• D/Cipher: Utilizing OpenAI to map inventory and transact with incremental websites, aiming to increase addressable demand in digital advertising through product investment.
• Cost Reduction Post-Angi Spin: Active analysis of corporate costs, evaluating which costs stay with IAC or transfer to Angi post-spin, focusing on growth efficiency.

Segment Performance

• Angi: Jobs done well rate grew ~30% in last year, pro-retentions improved, homeowner NPS up ~60% YoY. Unit economics reengineered, paid channel profit grew ~30% in Q3. Impact of FCC order on revenue, expecting Q1 2025 revenue down similar to Q4 2024, then stair-step up in 2026. Profit expected to hold in 2025.
• Dotdash Meredith (DDM): Q3 digital revenue grew 16%, led by 26% ad revenue growth (core sessions up 14%), licensing up 17%. October digital revenue growth softer due to election and advertiser caution, guided Q4 digital revenue mid to high single digits. Baseline 10% digital revenue growth for 2025 driven by traffic and monetization.
• Care: ~$365M revenue, ~$45M adjusted EBITDA last 12 months. Potential in childcare, senior care, pet care; enterprise trends in care services (e.g., employer-provided care) as tailwind. Product innovation with AI/machine learning to improve matches.

Guidance

• Angi: Expect Q1 2025 revenue down similar to Q4 2024, then stair-step up and grow in 2026. Profit expected to hold in 2025.
• DDM: 10% digital revenue growth baseline for 2025, driven by traffic and monetization. Q4 digital revenue guided mid to high single digits due to October challenges.
• Care: Potential growth from enterprise trends and product innovation in care segments (e.g., senior care products upcoming).

Risks

• FCC Order Impact: Volatility in first half of 2025 due to FCC TCPA order, impact on third-party channels, expected revenue bump down in Q1 2025.
• Macro Environment: October digital advertising slowdown broader than expected, advertiser caution and consumer distractions affecting revenue.
• IP Protection: Concerns about AI overviews impacting traffic and compensation, need to protect intellectual property if traffic-to-content isn't compensated.

Question and Answer

Q: Cory Carpenter with JP Morgan asks about why now on exploring Angi spin and SEC 101 consent rule impact.

A: Joey Levin and Jeff Kipp respond that Angi is strong, profitable, and cash-flow positive, with improved consumer experience. FCC order in 2025 expected to impact third-party channels, with Angi uniquely positioned to benefit, expecting revenue down in Q1 2025 but growth in 2026.

Q: Jason Helfstein with Oppenheimer asks about unlocking Angi growth and MGM stock tax treatment.

A: Joey Levin highlights focus on customer experience as key to unlocking growth, Chris Halpin discusses MGM stock basis and tax treatment if sold, noting NOLs to offset gains.

Q: John Blackledge with TD Cowen asks about DDM revenue drivers and 2025 guidance.

A: Joey Levin details Q3 DDM revenue growth, Q4 guidance due to October challenges, and 10% digital revenue growth baseline for 2025.

Q: Eric Sheridan with Goldman Sachs asks about Care segment and capital allocation.

A: Joey Levin discusses Care's scale, potential in care segments, and capital allocation focus on high-bar M&A opportunities. Chris Halpin elaborates on DDM programmatic stack and D/Cipher integration.

Q: Ross Sandler with Barclays asks about D/Cipher and off-DDM inventory opportunity.

A: Joey Levin and Chris Halpin explain D/Cipher's use of OpenAI to expand supply and demand, and roadmap to address third-party inventory and demand channels.

Q: Tom Champion with Piper Sandler asks about Ads Pro and Leads Pro unification and jobs done well.

A: Jeff Kipp explains unification to improve commercial efficiency and jobs done well, with test showing better performance.

Q: Unidentified Analyst asks about corporate cost reduction post-Angi spin and macro digital advertising environment.

A: Joey Levin and Chris Halpin discuss active cost analysis and stable consumer environment with some vertical slowdowns.

Q: Youssef Squali with Truist asks about data licensing deals and Angi spin timing.

A: Joey Levin talks about licensing term sheets and ongoing IP protection, while Chris Halpin details OpenAI deal impact. Joey Levin explains spin timing as tactical and legal process.

Q: Yugal Arouninan with Citigroup asks about AI query impact and IP protection.

A: Joey Levin discusses minimal AI query impact on DDM, expecting penetration growth, and importance of IP protection if traffic isn't compensated.

Q: Nick Jones with JMP Securities asks about Angi monetized transactions and M&A learnings.

A: Jeff Kipp explains monetized transactions trends and growth outlook, while Joey Levin discusses M&A learnings focusing on strategic edge and past Meredith acquisition lessons.