IAC’s Angi, Dotdash Segments Showing Turnaround Signs

While IAC’s IAC fourth-quarter 2022 results came in below our expectations, there were a few positives that likely will lead the firm back to solid organic top-line growth and increased profitability. First, Angi’s results indicated that a network effect may be developing with improved service request conversions and monetization. In addition, Dotdash Meredith is now well positioned to benefit from the acceleration in digital ad spending, which we expect will be during the second half of this year. Further, we were pleased with IAC management’s commitment to focus on cost efficiency and an increase in profitability. The team has executed well and made any necessary adjustments historically, and we expect the same to occur during the next 12-24 months. We are maintaining our $135 fair value estimate.

Total revenue increased to $1.25 billion, up 7.5% year over year, mainly due to revenue from the acquisition of Meredith in late 2021 but partially offset by a significant decline in demand for ads on Ask Media Group’s properties within the search business segment. Angi revenue increased only 7% as the pent-up demand experienced in 2021 dissipated. The purchase of Meredith pushed Dotdash Meredith revenue up 89% year over year. Weak Ask Media revenue pushed search revenue down 45%. Revenue from the emerging and other segment declined 16% as the sale of Bluecrew last year and lower revenue from IAC Films more than offset growth in Care.com and Vivian Health.

Operating loss increased to $75.1 million from $69.4 million last year due to higher stock-based compensation, depreciation, and amortization brought on by the Meredith acquisition. Goodwill impairment related to Angi’s acquisition of Total Home Roofing in 2021 also contributed to higher operating losses. Excluding those items, adjusted EBITDA increased to $99.7 million from only $3.7 million in 2021.