IAC Inc.

Welcome to the IAC first quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After introductory remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Christopher Halpin, COO and CFO. Please go ahead.

Thank you. Good morning, everyone. Christopher Halpin here, and welcome to the IAC first quarter earnings call. Joining me today is Neil Vogel, CEO of DotDash Meredith, or as we will refer to it today on the call, DDM. IAC has published two presentations on the investor relations section of our website today. a new investor presentation, and a Q1 earnings call presentation. On this call, we will be reviewing the latter, which comprises a few key slides from the longer investor presentation. I'll begin with some introductory remarks that will reference that earnings call presentation and then open it up to Q&A. Before we get to that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities law. These forward-looking statements may include statements related to our outlook, strategy, and future performance and are based on our current expectations and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent annual report on Form 10-K and in the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. We'll also discuss certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our earnings release, investor presentations, our public filings with the SEC, and again to the investor relations section of our website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now that we've covered that, I want to say thank you for joining us on this call as we commence this next chapter in IAC's history. As an overarching comment, I want to say Q1 was a solid start to the year. To echo our Chairman Barry Diller's published comments, IAC is back to doing what we do best. Angie is officially on its own, our businesses are executing with focus and effort, and we are deploying capital, including into the company we know best, ourselves. through the repurchase of 4.5 million shares. We've also increased our share repurchase authorization by 10 million shares. The macroeconomic outlook is uncertain, but we are reaffirming full-year 2025 adjusted EBITDA guidance across all of IAC. Turning to the Q1 earnings call presentation, you'll see on page three the businesses and assets that comprise IAC today. These include four leaders in large and growing categories. And in Q1, we had a truly productive quarter executing on a number of fronts. On March 31st, we completed the full spin of Angie to shareholders, representing the 10th independent company IAC has created. With the spin, Joey Levin transitioned from IAC CEO to Angie Executive Chairman, where he's working with CEO Jeff Kipp to drive Angie to be the industry leader in home services. Our company's executed strongly. DDM grew digital revenues 7% in the quarter and increased EBITDA 46%. That's excluding a one-time lease gain. That lease gain, however, represents a different type of win, as we were able to terminate a long-term lease for two floors at DDM's New York headquarters for $43 million in cash payments, representing about three times saved cash flow and generating a $36 million book gain. Care keeps making progress through its single-minded focus on improving its product to drive better customer experience, conversion, and retention. MGM reported solid earnings last week, and in the words of CEO Bill Hornbuckle, is, quote, well-prepared for the rest of 2025. Turo, the leading car-sharing service, has withdrawn its plans for an IPO and is fully focused on driving growth and seizing on the opportunities in front of it. Vivian is implementing AI into its products and processes in truly innovative ways, which, combined with the 2 million clinicians on its platform, has the opportunity to potentially fundamentally change health care staffing. At Search, we renewed our contract with Google, and the business is showing signs of stability after a challenging couple of years. And the Daily Beast grew revenue 72% while achieving profitability. At corporate, we've taken steps to rationalize our cost structure. Additionally, During the quarter, we also reached agreement in principle to settle the match separation litigation with IAC only needing to contribute $200,000 beyond our insurance coverage. But despite all this progress, turning to page four, our shares are still trading for less than the value of our 23% stake in MGM and the $900 million of cash at IAC parent. Importantly, and as a reminder, we have 800 million NNOLs that essentially would offset the taxable gain presently on our MGM stake. So, as you can see on the right, our collection of wholly owned businesses, as well as our 32% preferred equity stake in Turo, and our unencumbered headquarters building, are trading at an implied value of negative $100 million. We obviously think this represents a massive value disconnect. And turning to the next page, we're working every day on a strategy to create equity value and shrink that discount. The first piece of the strategy is obvious. Continue to execute and drive growth across the businesses. Neil will talk today about everything he and his team are doing to seize on DDM's opportunities as the largest digital publisher. Care, Vivian, Search, and the Daily Beast Management are similarly improving their product content and technology to accelerate their revenue and profitability. And in the case of Care and the Beast, we brought in new leaders who've re-energized those companies. And then we're also the largest shareholder with active board members at MGM and Turo, helping those industry leaders seize on their market opportunities. The second prong is capital allocation. Our chairman, Barry Diller, said last quarter that, after working through the challenges of the past few years, capital allocation is front of mind. As an initial step, we completed the buyback of 4.5 million shares of IACE and refreshed our authorization, as mentioned earlier. We've demonstrated our conviction in our own stock, underscoring the deep value we see in our businesses, and we will continue to actively evaluate share buybacks going forward. To the right, M&A is a key element of IAC's DNA and success. In Rush Farsht, our head of M&A and strategy is driving an active effort to find investment opportunities both through our existing companies and in new platforms. More on that in a second. And then finally, as we said two quarters ago, we will continue to pursue strategic divestitures of our smaller holdings should they arise, freeing up capital and simplifying IAC where attractive. The final area is major catalysts. Significant events to crystallize value have always been part of the IAC playbook. Spinning Angie was a key step in our strategy last quarter. Looking forward, we can't say what such catalysts may be, but we will be fearless in pursuing them if we believe they will benefit our shareholders. Regarding M&A, we included the next slide to present an overview of how we are approaching capital deployment, our foundation, our interests, and our advantages. A number of us have been active in capital investment throughout our careers and fundamentally believe we have real advantages through our permanent forever capital and ability to invest at any stage of a company. We've always been unique in the marketplace for capital, given our structure, deep industry experience, flexibility, and operational know-how, and these strengths continue to serve us well. We're actively pursuing acquisitions and investments, small and large, and hope to be discussing new additions to IAC. The final slide summarizes our guidance, bringing us back to a discussion of the macroenvironment. We've been following trends actively across DDM and CARE, as well as garnering insights from our other companies and holdings. Consumer spending through DDM's performance marketing has been solid, clearly bucking the weak consumer confidence numbers we've all seen. That may represent consumers pulling forward spend ahead of tariff impacts, or it may represent real solidity. It's too early to tell. At Care, we've seen early signs of consumer pressure around the edges through ebbing conversion, but not yet any material moves. On the DDM advertising front, we've been closely watching the trends given the news flow, but premium demand has remained generally stable. Strength in pharma, tech, and beauty has helped to offset weakness in areas like food and beverage. One element we are thankful for in our advertising base is that Timu, Sheehan, or the de minimis exemption players have never been direct advertisers on our platforms. Programmatic pricing, conversely, has definitely softened, essentially running flat year over year after being up for much of the year. We're analyzing the disconnect between direct revenues on one hand and programmatic on the other to see which provides better insights on the forward trends in advertiser demand, but right now it's too early to say. In some, we'd say we are carefully monitoring the macroeconomic environment for signs of either stability or weakness among consumers and brands, and we're thinking carefully about discretionary spend in that context. Against that backdrop, we're reaffirming our adjusted EBITDA guidance for the year for each of our companies with the core assumption of no significant recession. That assumption derives from what we are seeing in our businesses and but we know we are living in unpredictable times. All we can control is our focus and execution. With that, let's go to Q&A. Operator, can we please have the first question?

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using your speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Our first question comes from Jason Holstein from Oppenheim. Please go ahead.