IAC : Reports Q3 2023 Results

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IAC REPORTS Q3 2023

Q3 operating loss improves 74% to $33 million

Q3 Adjusted EBITDA improves 83% to $100 million

NEW YORK- November 7, 2023-IAC (NASDAQ: IAC) released its third quarter results today and separately posted a letter to shareholders from IAC CEO Joey Levin on the Investor Relations section of its website at ir.iac.com.

IAC SUMMARY RESULTS

($ in millions except per share amounts)

		Q3 2023		Q3 2022	Growth
	Revenue	$ 1,111.3	$	1,300.9	-15%
	Operating loss	(32.7)		(124.7)	74%
	Unrealized (loss) gain on investment in MGM Resorts International	(463.4)		42.5	NM
	Net loss	(390.5)		(63.8)	-512%
	Diluted loss per share	(4.72)		(0.74)	-536%
	Adjusted EBITDA	100.4		54.8	83%

See reconciliations of GAAP to non-GAAP measures beginning on page 13.

Q3 2023 HIGHLIGHTS

• Dotdash Meredith Digital revenue was $212 million (down 4% year-over-year) and Print revenue was $211 million (down 16% year-over-year), with each representing the best year-over-year performance since Q1 2022.

• 1. Operating loss of $4 million improved $92 million year-over-year and Adjusted EBITDA increased 119% to $68 million (Q3 2022 included $19 million in restructuring charges and transaction-relatedexpenses).
• Angi Inc. revenue was $372 million, reflecting the impact of the change to net revenue recognition for Services, which took effect January 1, 2023. On a pro forma net basis, revenue decreased 14% in Q3 2023 reflecting declines across the Domestic business driven by a focus on profitability and customer experience, partially offset by 25% International growth.
• 1. Operating loss decreased 9% to $10 million and Adjusted EBITDA increased 13% to $26 million.

• 1. On November 1, 2023, Angi Inc. completed the sale of Total Home Roofing, LLC to a non-public third party.
• Emerging & Other revenue decreased 12% year-over-year to $158 million, operating income increased $4 million to $3 million and Adjusted EBITDA increased $13 million to $15 million. Q3 revenue reflects:
• 1. The sale of Bluecrew on November 9, 2022, which was included in the prior year period results.

• 1. 40% growth from Vivian Health and 4% growth from Care.com.
• IAC holds 64.7 million shares of MGM Resorts International ("MGM"). IAC's Net loss and Diluted loss per share reflect increases or decreases in MGM's share price as unrealized gains and losses. As a result, Net earnings (loss) and Diluted earnings (loss) per share can be very volatile, which reduces their ability to be effective measures to assess operating performance. IAC's stake in MGM was purchased for $1.3 billion in 2020 and 2022 and is worth $2.5 billion as of November 3, 2023.

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DISCUSSION OF FINANCIAL AND OPERATING RESULTS

($ in millions, rounding differences may occur)		Q3 2023		Q3 2022	Growth
Revenue
Dotdash Meredith	$	417.5	$	467.1	-11%
Angi Inc.		371.8		498.0	-25%
Search		166.1		156.7	6%
Emerging & Other		158.4		180.8	-12%
Intersegment eliminations		(2.4)		(1.8)	-39%
Total Revenue	$	1,111.3	$	1,300.9	-15%
Operating (loss) income
Dotdash Meredith	$	(3.6)	$	(95.5)	96%
Angi Inc.		(10.1)		(11.1)	9%
Search		12.0		19.1	-37%
Emerging & Other		2.9		(1.6)	NM
Corporate		(33.9)		(35.6)	5%
Total Operating loss	$	(32.7)	$	(124.7)	74%
Adjusted EBITDA
Dotdash Meredith	$	68.3	$	31.2	119%
Angi Inc.		25.9		22.9	13%
Search		12.0		19.1	-37%
Emerging & Other		15.0		2.4	517%
Corporate		(20.8)		(20.8)	0%
Total Adjusted EBITDA	$	100.4	$	54.8	83%

Note: On November 1, 2023, Angi Inc. completed the sale of Total Home Roofing, LLC to a non-public third party. As it does not meet the threshold to be reflected as a discontinued operation at the IAC level, the historical results of the Angi Roofing segment will be reflected in the Emerging & Other segment effective as of the date of the closing of the sale. For purposes of Angi's financial reporting, such results will be treated as a discontinued operation effective as of the date of the closing of the sale.

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Dotdash Meredith

Revenue

	Q3 2023	Q3 2022	Growth
($ in millions; rounding differences may occur)
Digital	$	212.1	$	220.7	-4%
Print		211.3		251.5	-16%
Intersegment eliminations		(5.9)		(5.1)	-14%
Total	$	417.5	$	467.1	-11%

• Revenue decreased 11% to $417.5 million reflecting:

1. 4% Digital declines reflecting:
2. • Advertising revenue declining 12%, an improvement from 16% declines in Q2 2023 driven by:
   • • Lower premium sold advertising
     • Lower programmatic advertising revenue due to lower traffic, particularly on Entertainment and certain partner sites
   • Performance marketing revenue increasing 22% (accelerating from 12% growth in Q2 2023) driven by 49% affiliate commerce growth, partially offset by performance marketing revenue declines concentrated primarily in the Finance and Health categories
   • Licensing revenue declining 7% due primarily to lower royalties earned from retail partners

1. 16% Print declines driven by the planned reduction in the circulation of certain publications

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Operating Income (Loss) and Adjusted EBITDA

($ in millions; rounding differences may occur)	Q3 2023	Q3 2022	Growth
Operating Income (Loss)
Digital	$	1.5	$	(104.4)	NM
Print		2.0		27.3	-93%
Other		(7.0)		(18.4)	62%
Total	$	(3.6)	$	(95.5)	96%
Adjusted EBITDA
Digital	$	51.8	$	22.6	129%
Print		19.3		23.1	-17%
Other		(2.8)		(14.5)	80%
Total	$	68.3	$	31.2	119%

• Operating loss of $3.6 million compared to a loss of $95.5 million in Q3 2022 reflecting:

1. Digital operating income of $1.5 million compared to a loss of $104.4 million in Q3 2022 reflecting:
2. • Adjusted EBITDA increasing 129% to $51.8 million due to lower operating expenses and $15.0 million of restructuring charges and transaction-related expenses incurred in Q3 2022
   • $73.0 million lower amortization of intangibles due to assets acquired in the Meredith acquisition

1. Print operating income decreased $25.3 million to $2.0 million reflecting:
2. • Adjusted EBITDA decreasing 17% to $19.3 million driven by revenue declines, partially offset by lower operating expenses due to the reduced circulation of certain publications and $1.9 million of restructuring charges and transaction-related expenses incurred in Q3 2022
   • $16.2 million higher amortization of intangibles due to fair value adjustments in Q3 2022 related to intangible assets acquired in the Meredith acquisition
   • $5.3 million higher depreciation due to fair value adjustments in Q3 2022 related to fixed assets acquired in the Meredith acquisition

1. Other operating loss decreased $11.3 million to $7.0 million reflecting:
2. • Adjusted EBITDA loss decreasing $11.7 million to $2.8 million due primarily to an $8.0 million reversal of certain indemnification liabilities established for tax contingencies in

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connection with the acquisition of Meredith and $1.6 million of restructuring charges and transaction-related expenses incurred in Q3 2022

• $3.4 million lower depreciation

Angi Inc.

Please refer to the Angi Inc. Q3 2023 earnings release for further detail.

Search

• Revenue increased 6% to $166.1 million reflecting:

1. A 9% increase at Ask Media Group due primarily to higher marketing from affiliate partners driving higher visitors to ad-supported search and content websites

• 1. A 15% decrease at Desktop (legacy desktop search software business)
• Operating income and Adjusted EBITDA decreased 37% to $12.0 million driven primarily by a revenue mix shift to lower-margin channels due in part to the wind down of the Desktop direct-to-consumer business

Emerging & Other

• Revenue decreased 12% to $158.4 million reflecting:

• 1. The sale of Bluecrew on November 9, 2022, which was included in the prior year period results
  1. Lower Mosaic Group revenue
  1. $4.9 million lower IAC Films revenue
  1. 40% growth from Vivian Health
  1. Care.com revenue increasing 4% to $101.6 million
• Operating income was $2.9 million compared to a loss of $1.6 million in Q3 2022 reflecting:
• 1. Adjusted EBITDA increasing $12.5 million to $15.0 million due primarily to:

• The sale of Bluecrew (which had losses in the prior year period) and higher profits at Mosaic Group and Care.com

1. $1.5 million lower amortization of intangibles due primarily to Care.com

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1. A $9.0 million goodwill impairment at Mosaic Group as a result of the projected reduction in future revenue and profits from the business and lower trading multiples of a selected peer group of companies

Corporate

Operating loss decreased $1.7 million to $33.9 million due primarily to $0.9 million lower stock-based compensation expense and $0.7 million lower depreciation.

Income Taxes

The Company recorded an income tax benefit of $118.8 million in Q3 2023 for an effective tax rate of 23%, which is higher than the statutory rate due primarily to state taxes. The Company recorded an income tax benefit of $26.1 million in Q3 2022 for an effective tax rate of 28%, which is higher than the statutory rate due primarily to the realization of a capital loss.

Free Cash Flow

For the nine months ended September 30, 2023, net cash provided by operating activities was $142.6 million, a $244.7 million increase year-over-year. Free Cash Flow increased $231.0 million to $16.1 million due primarily to favorable working capital and higher Adjusted EBITDA, partially offset by higher capital expenditures (reflecting $80.3 million in 2023 for the purchase of the land under the IAC headquarters, partially offset by $59.4 million lower capital expenditures at Angi).

($ in millions, rounding differences may occur)		Nine Months Ended September 30,
	2023		2022
Net cash provided by (used in) operating activities	$	142.6	$	(102.1)
Capital expenditures		(126.6)		(112.8)
Free Cash Flow	$	16.1	$	(214.9)

CONFERENCE CALL

IAC and Angi Inc. will host a conference call to answer questions regarding their third quarter results on Wednesday, November 8, 2023, at 8:30 a.m. Eastern Time. This conference call will include the disclosure of certain information, including forward- looking information, which may be material to an investor's understanding of IAC's and Angi Inc.'s businesses. The conference call will be open to the public at ir.iac.com and ir.angi.com.

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LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2023:

• IAC had 85.8 million common and Class B common shares outstanding.
• The Company had $1.4 billion in cash and cash equivalents and marketable securities, of which IAC held $793 million, Dotdash Meredith, Inc. held $266 million and Angi Inc. held $367 million.
• The Company had $2.0 billion in long-term debt, including the current portion, of which Dotdash Meredith, Inc. held $1.5 billion and ANGI Group, LLC (a subsidiary of Angi Inc.) held $500 million.
• IAC's economic interest in Angi Inc. was 83.8% and IAC's voting interest was 98.1%. IAC held 424.6 million shares of Angi Inc.
• IAC owned 64.7 million shares of MGM.

Dotdash Meredith, Inc. has a $150 million revolving credit facility, which had no borrowings as of September 30, 2023, and currently has no borrowings.

As of September 30, 2023:

• IAC had 3.7 million shares remaining in its stock repurchase authorization.
• Angi Inc. had 14.0 million shares remaining in its stock repurchase authorization.

Pursuant to these authorizations, share repurchases can be made over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.

As of the date of this release, Angi Inc. intends to put in place a share repurchase plan with the intent of utilizing the full 14.0 million shares remaining in its stock repurchase authorization. The plan will be subject to price and volume limitations.

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OPERATING METRICS
(rounding differences may occur)
		Q3 2023	Q3 2022		Growth
Dotdash Meredith
Revenue ($ in millions)
Advertising revenue	$	131.2	$	148.3	-12%
Performance marketing revenue		56.4		46.1	22%
Licensing and other revenue		24.4		26.4		-7%
Total Digital Revenue	$	212.1	$	220.7	-4%
Print Revenue		211.3		251.5	-16%
Intersegment eliminations		(5.9)		(5.1)		-14%
Total Revenue	$	417.5	$	467.1	-11%
Digital Metrics
Total Sessions		2,575		2,883	-11%
Core Sessions		2,024		1,922	5%
Angi Inc.
Revenue ($ in millions)
Ads and Leads	$	292.0	$	345.5	-15%
Services		30.0		105.9	-72%
Roofing		21.4		26.0	-18%
Intersegment eliminations		(0.8)		(2.8)		72%
Total Domestic	$	342.6	$	474.6	-28%
International		29.3		23.4		25%
Total Revenue	$	371.8	$	498.0	-25%
Pro Forma Services Net Revenue	$	30.0	$	41.1	-27%
Total Pro Forma Angi Inc. Net Revenue	$	371.8	$	433.3	-14%
Metrics
Service Requests (in thousands)		6,065		7,901	-23%
Monetized Transactions (in thousands)		7,355		7,779	-5%
Transacting Service Professionals (in thousands)		202		245	-17%
Search
Revenue ($ in millions)
Ask Media Group	$	147.4	$	134.7	9%
Desktop		18.7		22.0		-15%
Total Revenue	$	166.1	$	156.7	6%
Emerging & Other
Care.com Revenue ($ in millions)	$	101.6	$	97.2	4%

See metric definitions on page 17

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DILUTIVE SECURITIES

IAC has various dilutive securities. The table below details these securities as well as potential dilution at various stock prices (shares in millions; rounding differences may occur).

			Avg.
			Exercise		As of		Dilution at:
	Shares		Price	11/3/23
Share Price				$44.80	$45.00	$50.00	$55.00	$60.00
Absolute Shares as of 11/3/23	82.9			82.9	82.9	82.9	82.9	82.9
Restricted stock, RSUs and non-publicy traded subsidiary
denominated equity awards	5.4			0.6	0.6	0.6	0.6	0.6
Options	2.7	$14.27		0.5	0.5	0.5	0.5	0.5
Total Dilution				1.1	1.1	1.1	1.1	1.1
% Dilution				1.3%	1.3%	1.4%	1.4%	1.4%
Total Diluted Shares Outstanding				84.0	84.0	84.0	84.0	84.0

The dilutive securities presentation is calculated using the methods and assumptions described below, which are different from those used for GAAP dilution, which is calculated based on the treasury stock method. In addition, the number of absolute shares excludes 3 million shares of restricted stock because this award was unvested as of November 3, 2023.

The Company currently settles all equity awards on a net basis; therefore, the dilutive effect is presented as the net number of shares expected to be issued upon vesting or exercise, and in the case of options, assuming no proceeds are received by the Company. Any required withholding taxes are paid in cash by the Company on behalf of the employees. In addition, the estimated income tax benefit from the tax deduction received upon the vesting or exercise of these awards is assumed to be used to repurchase IAC shares. Assuming all awards were settled on November 3, 2023, withholding taxes paid by the Company on behalf of the employees upon net settlement would have been $93.9 million (of which approximately 60% would be payable for awards currently vested and those scheduled to vest on or before September 30, 2024) assuming a stock price of $44.80 and a 50% withholding rate. The table above assumes no change in the fair value estimate of the non-publicly traded subsidiary denominated equity awards from the values used at September 30, 2023. The number of shares ultimately needed to settle these awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant subsidiary. In addition, the number of shares required to settle these awards will be impacted by movement in the stock price of IAC.

Angi Inc. Equity Awards and the Treatment of the Related Dilutive Effect

Certain Angi Inc. equity awards can be settled either in IAC or Angi Inc. common shares at IAC's election. For the purposes of the dilution calculation above, these awards are assumed to be settled in shares of Angi Inc. common stock; therefore, no dilution from these awards is included.

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GAAP FINANCIAL STATEMENTS

IAC CONSOLIDATED STATEMENT OF OPERATIONS ($ in thousands except per share data)

Three Months Ended September 30,

20232022

Nine Months Ended September 30,

20232022

Revenue	$	1,111,341	$	1,300,901	$	3,307,201	$	3,988,827
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below)		342,353		451,245			1,038,360		1,495,355
Selling and marketing expense		407,355		486,832			1,224,606		1,482,769
General and administrative expense		210,507		263,733			701,749		762,063
Product development expense		79,714		75,427			250,899		240,623
Depreciation		33,776		27,567			136,231		86,855
Amortization of intangibles		61,373		120,777			170,162		234,048
Goodwill impairment		9,000		-			9,000		86,748
Total operating costs and expenses		1,144,078		1,425,581			3,531,007		4,388,461
Operating loss		(32,737)		(124,680)			(223,806)		(399,634)
Interest expense		(40,157)		(29,433)			(117,406)		(74,862)
Unrealized (loss) gain on investment in MGM Resorts International		(463,421)		42,523			209,057		(970,112)
Other income (expense), net		25,455		19,678			60,189		(63,048)
Loss before income taxes		(510,860)		(91,912)			(71,966)		(1,507,656)
Income tax benefit		118,838		26,065			3,633		325,517
Net loss		(392,022)		(65,847)			(68,333)		(1,182,139)
Net loss attributable to noncontrolling interests		1,484		2,024			6,525		13,388
Net loss attributable to IAC shareholders	$	(390,538)	$	(63,823)	$	(61,808)	$	(1,168,751)
Per share information attributable to IAC Common Stock and Class B common stock shareholders:
Basic loss per share	$	(4.72)	$	(0.74)	$	(0.74)	$	(13.51)
Diluted loss per share	$	(4.72)	$	(0.74)	$	(0.74)	$	(13.51)
Stock-based compensation expense by function:
Cost of revenue	$	553	$	(31)	$	1,105	$	23
Selling and marketing expense		2,552		2,315			6,493		6,264
General and administrative expense		22,849		24,860			69,733		74,791
Product development expense		3,008		3,973			10,765		11,382
Total stock-based compensation expense	$	28,962	$	31,117	$	88,096	$	92,460