IAC Inc. Q3 FY2025 earnings call

• People Inc.: Strong Q3 with 8 consecutive quarters of digital revenue growth. Relies on iconic brands, scaled audiences, and superior execution. Has diversified revenue sources including licensing and performance marketing. Off-platform audience growth is significant, with off-platform audiences accelerating 66% year-over-year. Acquired Feedfeed, an influencer network, to enhance off-platform monetization. Partnered with Microsoft as a launch partner of its publisher content marketplace and has deals with OpenAI for content use.
• MGM: Dominant position in Las Vegas with 9 resorts, 40,000 hotel rooms, and unique infrastructure. Ownership at 24%, with plans to increase ownership through direct purchases and stock buybacks. Revenue rebounded from pandemic lows, and digital operations are profitable.
• Capital Allocation: Purchased $300 million of IAC shares year-to-date, focusing on divesting noncore holdings, rationalizing overhead, and being opportunistic with share repurchases and MGM investments.

People Inc.: In Q3, achieved 9% digital revenue growth, which was at the top end of the previous guidance range. Profitability was strong with $72 million of digital EBITDA and 27% margins. Print division saw a 10% decline in adjusted EBITDA with a 15% revenue decline. Off-platform revenue was a bright spot, growing at 16% and accounting for over 1/3 of the quarter's revenue. MGM: Revenue rebounded from pandemic lows, digital operations scaled to profitability, and bought back 45% of its shares. Despite this, MGM share prices declined 29% since 2022, and much of MGM's other assets trade at less than 3x EBITDA.

• People Inc. expects 7%-10% digital revenue growth in Q4. Full-year adjusted EBITDA guidance is $325M-$340M, excluding $15M severance and $41M lease gains.
• Care segment expects 7%-9% revenue decline in Q4, with full-year adjusted EBITDA guidance $45M-$50M due to enterprise business slowdown.
• Continue share repurchases and focus on MGM and People Inc. as core segments, with plans to divest noncore holdings.

• Impact of declining traffic from Google Search on revenue.
• Legal expenses related to Google ad tech litigation, with expected spend of ~$4 million in Q3 and ongoing.
• Macro-economic pressures affecting Care's enterprise business.
• Volatility in MGM's stock price and market perception leading to undervaluation.

Q: How to think about IAC separating from MGM's performance and onetime expenses cleanup?

A: Barry Diller stated IAC is primarily People Inc. and MGM, and acquisitions in line with publishing content are possible. Christopher Halpin mentioned one-timers were cleaned up with no large ongoing charges expected at People, though Google litigation spend is ongoing but justified by potential damages.

Q: Latest thoughts on People Inc.'s business state and AI deal updates?

A: Neil Vogel mentioned strong ad market energy, Feedfeed acquisition for off-platform monetization, and partnerships with Microsoft and OpenAI. Christopher Halpin detailed the Google ad tech litigation background and expected damages recovery.

Q: Macro environment impact on IAC businesses in Q4?

A: Barry Diller said macro is good at middle/upper end, poor at lower end. Christopher Halpin noted performance marketing is strong, but Care's enterprise side is affected by corporate belt tightening. Neil Vogel added ad market is solid, with travel being exceptionally strong.

Q: Capital allocation and M&A outlook?

A: Barry Diller said they are opportunistic with share repurchases in IAC and MGM, and not pursuing overpriced acquisitions. Christopher Halpin mentioned $100M buyback in Q3 and focus on core segments.

Q: Building blocks of growth for People Inc. and off-platform margin impact?

A: Neil Vogel said Q4 expected to be solid despite session challenges, with off-platform growth and new initiatives. Christopher Halpin stated incremental digital EBITDA margins on off-platform are neutral to slightly accretive to aggregate margins.

Q: Outlook on People Inc. growth relative to industry and Open Web display?

A: Neil Vogel said People Inc. is not seeing 30% decline in Open Web display, confident in share growth due to strong brands and new initiatives.

Q: Corporate costs trajectory and strategic asset exit?

A: Christopher Halpin said corporate overhead run rate is expected to be mid-80s range next year with cost rationalization. Barry Diller stated noncore assets other than MGM and People Inc. will be divested with good prices, timing around 3-6 months.

Q: Run rate savings from RIF and off-platform distribution expansion?

A: Christopher Halpin said ~$60M run rate savings, half reinvested in high ROI activities. Neil Vogel discussed off-platform distribution through influencer networks and brand-powered content on social platforms.

Q: Microsoft deal details and prospects for new deals?

A: Neil Vogel said Microsoft deal is a pay-per-use marketplace, confidential on terms, and expects more deals in the future.

Q: Google Search traffic decline and steps to control traffic?

A: Neil Vogel said Google Search traffic has declined from 60%+ to 24%, and they are using various methods like own emails, Google Discover, direct traffic, etc., to maintain sessions.

Q: Stage of businesses launched from People's content and brands?

A: Barry Diller said inversion ideas are ongoing, with new products like shows potentially launched quarter-by-quarter, leveraging content and brands.