IAC/InterActiveCorp : Q4 2021 Shareholder Letter

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IAC Q4 2021 Shareholder Letter

February 15, 2022

Dear Shareholders,

We started 2021 with a plan to pare down and rebuild IAC, as we've done many times before. The spinoff of Vimeo in the second quarter of 2021 completed the paring (usually the easier part), and the rebuilding took a large step forward at the end of the year with Dotdash's $2.7 billion acquisition of Meredith, creating what may be our largest producer of free cash flow for a while. We enter 2022 with five considerable businesses (or investments therein) capable of meaningfully impacting IAC's near-term future - Dotdash Meredith, Angi, Care, MGM, and Turo.

Each of these businesses is a clear leader in a large category and can generate profit while pursuing

a new opportunity to change the trajectory of the industry in which it competes - not a bad starting five. I say can generate profit because not all are generating profit at the moment, but we believe each has a clear ability to do so, which provides us with the confidence to continue investing as well as important downside protection if access to capital becomes scarcer. For Dotdash Meredith, successful migration from a print-heavy legacy to a digital-centric future can create an enduring publishing platform for yet another generation. At Angi, the Services business combined with Angi Key membership can take much of the hassle out of home ownership. At Care, instant

booking and a ubiquitous enterprise product could not only transform access to family care, but

also enable broader participation in the workforce. At MGM, a growing footprint of digital products could expand its business far beyond the walls of its properties. And at Turo, the largest car sharing platform in the world could change not just the way people vacation or travel, but the way we think about automobile ownership entirely. Of course, not every business will realize all its lofty ambitions, but IAC's position with these five pillars creates a terrific foundation.

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Core to our strategy, as always, is to create options for IAC. Big businesses can create big options, but small businesses can, well, also create big options. People often forget that many of IAC's biggest businesses began their tenure in the IAC family in their infancy (Angi, Match, Vimeo, Dotdash, Tinder, and many others). Allocation of capital to smaller businesses has always been a consistent part of our philosophy, particularly when the price of acquiring larger growing businesses does not reflect the risk of execution.

When we consider acquisitions or investments, one of the questions we ask ourselves is, how long until we'll know whether the investment worked? Acquisitions, especially those costing hundreds of millions or even billions of dollars, historically reduced the time of uncertainty and increased the odds of success for acquirers entering new lines of business - often meaningfully. With the Meredith acquisition, we ought to know by the second year whether the acquisition was a winner. Rapidly growing businesses, however, have evolved over the past few years to require such a significant upfront capital premium that a business case may not be proven for up to ten years - not materially different than the time required to build a business from scratch. So we started earlier - building from nothing or acquiring businesses in their infancy, where we can dedicate much more capital to growing the business than capital to buying out other shareholders. Our youngest businesses still have much to prove, but a couple - Vivian and Bluecrew - have begun to exhibit early markers of strength, and we'll dedicate an outsized portion of this letter to explaining why we believe they have a chance to contribute to IAC's long-term future.

First, however, we ought to report on our two largest businesses, Dotdash Meredith and Angi, where we are currently making significant investments.

Dotdash Meredith

In the Meredith acquisition, Dotdash bought a significant digital asset shrouded in print, an arrangement we've quickly inverted. We will no longer govern ongoing print decisions by whether an advertiser is willing to advertise, but by whether a reader is willing to purchase. While we converted some titles to 100% digital last week and reduced the print frequency of others, the remaining print titles will have a better, richer product - higher quality paper, a thicker book, and

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a true subscription-worthy experience. For our brands' fans who want exceptional editorial and beautiful images printed on high-quality glossy pages, we will provide a delightful product at an appropriate price. Long-term, we believe a reader-first approach leads to better outcomes for both readers and advertisers, but this change to reader-centricdecision-making may present the biggest cultural shift in the new Dotdash Meredith organization. So far, the change has met a welcome embrace from customers and employees, notwithstanding meaningful organizational adjustments such as reduced circulation and replacing print jobs with digital.

Online content and feature improvement at Meredith has begun. We removed stale articles from

each site's corpus, followed by investment in design, user experience, non-invasive advertisements, and creating new, perpetually fresh digital content to accompany digital-first stories. We expect to experience the usual initial audience declines we have seen in other acquisitions as we cull libraries to keep the best content, followed by sustained gains over the longer term as we deliver the most competitively robust experience on the topics we cover. Until then, we'll be cooking and sampling recipes in our dozens of test kitchens, testing new gadgets in our tens of thousands of square feet of labs, and growing plants in our gardens - taking photos and

videos, and building our database throughout.

We expect this foundational work to continue throughout 2022, as we target reaching Digital revenue growth goals (15-20%year-over-year) towards the end of 2022 and $450 million of 2023 Digital Adjusted EBITDA.

Angi

For Angi, the final quarter of 2021 was relatively uneventful amidst a year of monumental change: new leadership, new brand, and significant investment in a new line of business. The new CEO, Oisin Hanrahan, has put the homeowner experience first; the new brand, Angi, now comprises an increasing majority of revenue as we continue to transition homeowners and service professionals from the legacy brands; and the new line of business, Angi Services, reached a run-rate of $450 million of annual revenues. The only meaningful news to report at the beginning of 2022 is that execution continues on track. Awareness remains impressive for a brand at this stage. Services revenue is still growing nicely, up 116% year-over-year in Q4 2021, and, importantly,

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demonstrating an ability to preserve contribution margins as it scales, giving us confidence to invest more as we expand the offering, improve fulfillment, and increase customer satisfaction.

The key to driving the Services business forward is fulfillment rate (that is, how often a user who completes our checkout ultimately gets the job done). The type of job (simple, low variability jobs fulfill at higher rates), the preparedness of the homeowner (how often customers cancel), and depth of supply of service professionals (how quickly and reliably Angi can schedule) all impact fulfillment. Category-specific product features have led to more accurate job scoping and pricing

and we've reinvested margins to attract a higher quantity and quality of pro. For example, in the

painting category, Angi increased pro compensation and job prices to competitive levels painters were willing to accept, gave pros more time to complete jobs, and refined qualifications so that only the right caliber of pros are selected for jobs. The changes improved both fulfillment and cancellation rates by 10 points, customer satisfaction ratings by over 10% and service professional retention by over 20%.

An increasingly reliable fulfillment rate means more customers turn to our platform first more often - that's the definition of winning in consumer Internet.

Two Small (and Growing) Businesses in Big Categories

Match Group began as a relatively small acquisition for IAC (~$50 million) in 1999. Vimeo started as an internal tool at College Humor. Angi began as ServiceMagic, acquired in 2004 when it was doing $25 million of annual revenue. The common thread amongst these stories is one of small beginnings in large addressable markets ultimately delivering significant value. Key to our approach to capital allocation throughout our history has been nurturing small businesses in categories undergoing digitally enabled transitions. The labor market, especially for temporary jobs, is one of those categories, and a big one.

The first wave of technology in the jobs category - horizontal job boards - empowered employers and employees with tools to search and sort near-infinite lists of available jobs and potential candidates. As has been the case across many categories of the Internet, breadth eventually gave way to depth, and vertically-focused products delivered more relevant features because each side of the marketplace (candidates and employers in this case) could provide more accurate

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information to identify a good fit. Eventually, just as we've seen in dating and home services, matching replaces searching. The narrower the job category, the better the software's ability to match job seeker with job hirer. Tailored solutions for hiring everything from web developers to oil rig workers have all emerged in recent years and have attracted significant capital at substantial valuations. Our first two projects in this area, Bluecrew and Vivian, are focused on light industrial jobs and healthcare staffing, respectively.

Temporary staffing represents a $400 billion global TAM, with Bluecrew focused initially on the

~$35 billion U.S. light industrial segment. Bluecrew's primary customer base includes businesses

that require a flexible workforce in warehousing, logistics, food service, or events to fulfill variable demand for their products and services. Matchmaking in this segment has historically been inefficient for both workers and employers, relying on staffing agencies using static files and telephones to hire, with little to no data on a worker's qualifications. With Bluecrew, workplaces post job assignments and workers secure shifts at the touch of a button in the Bluecrew app. Candidates access the platform for free, and employers pay a premium to employ Bluecrew's W- 2 workers. Workers benefit from consistent work and W-2 employment classification, while

workplaces achieve high job fill rates with qualified candidates and less hassle. Performance and

reviews are transparently tracked, measured, and used to inform the ongoing matching of workers to workplaces. At scale, companies can leverage an hourly workforce-as-a-service for in-person labor, and workers can work the hours and shifts they want, in the locations they need, without starting an onerous process from scratch with every new employer. And the larger we grow, the better we can work to represent the interests of the worker.

Bluecrew is still young and consuming capital, but something seems to be working - by the end of Q1, it will have fulfilled more than 1 million job shifts in its short life. Revenue grew 85% year-over-year in the second half of the year, with active workplaces up 90% and active workers up 100%.

Vivian's healthcare opportunity is even bigger: over $1 trillion is spent on healthcare labor in the United States (including $25 billion on temp labor) making it the largest employment sector in the country. Focused initially on the ~$10 billion US travel nursing segment, Vivian quickly established itself as a market leader, now facilitating ~15% of job placements in a fragmented