IAC's Recent Spin Of ANGI Sharpens Focus

Forbes

07-05-2025

(Photo Illustration by Piotr Swat/SOPA Images/LightRocket via Getty Images) SOPA Images/LightRocket via Getty Images
On May 5, 2025, IAC Inc. (NASDAQ: IAC, $34.09; Market Capitalization: $2.7 billion) reported 1Q25 results. IAC's performance marked a transitional yet strategically active quarter, reflecting both operational progress and macro-driven challenges. The company completed the spin-off of Angi Inc., sharpened its focus on core assets, and reinforced shareholder value through significant share repurchases. Dotdash Meredith (DDM) continued to outperform peers with resilient digital growth, strong brand engagement, and promising innovation in contextual ad tech, despite softer programmatic trends. Care.com faced headwinds from weaker consumer subscriptions but is undergoing a product and pricing overhaul to reignite growth. The Search segment showed early signs of stabilization, while Emerging & Other segment benefited from The Daily Beast's turnaround. Management reaffirmed its full-year guidance, citing stable premium ad demand and disciplined cost control, while remaining cautious amid economic uncertainty and evolving digital advertising dynamics.
IAC Price Performance Spin-Off Details and Top 5 Shareholders Spin-Off Research
Total revenue declined 8.6% YoY to $570.5 million (-29.5% vs consensus). The Search segment saw a steep 35.2% YoY drop, mainly due to reduced visitors to ad-supported search and content websites. Emerging & Other revenue fell 46.2% YoY, due to the Mosaic Group asset sale. Care.com declined 3.9% YoY due to a lower subscriptions impacting consumer revenue, partly offset by enterprise revenue growth from increase in backup care utilization. DDM showed a modest 0.7% YoY growth driven by increased revenue from the digital segment, offset by a decline in revenue in the print segment.
Adjusted EBITDA rose sharply by 825.5% YoY to $50.9 million, beating consensus by 276.2%, with margins improving 804bps to 8.9%, mainly due to Dotdash Meredith's strong digital segment and a $36.0 million lease termination gain. The Emerging & Other segment also reduced losses significantly, aided by the absence of prior-year's severance and transaction costs. Operating profit stood at $35.8 million, versus a $63.4 million loss last year, driven by a $64.0 million improvement in Dotdash Meredith's operating income. However, the company posted a net loss of $216.8 million (vs. $45.0 million profit in 1Q24), primarily due to a $324.3 million unrealized loss on its MGM investment. Diluted loss per share stood at $2.64 (1Q24: gain of $0.51 per share).
For FY25, IAC expects Adj. EBITDA in the range of $240.0-295.0 million and total operating income to be around $75.0-150.0 million. For 2Q25, IAC expects DDM to grow digital revenues by 7.0-9.0% YoY with $67.0–73.0 million in EBITDA. Care.com is projected to see a 5.0- 8.0% YoY revenue decline and $3.0–5.0 million in EBITDA. Search is expected to generate $75.0–80.0 million in revenue and $4.0–5.0 million in EBITDA. Emerging & Other is forecasted to earn ~$15.0 million in revenue with EBITDA losses of $5.0–10.0 million. Earlier, on April 1, 2025, Angi Inc. and IAC Inc. started regular-way trading. ANGI opened at $15.03, made an intraday high of $15.83, and a low of $14.56, before closing at $14.70. IAC opened at $37.96, made an intraday high of $39.47, and a low of $37.76 before closing at $39.26.
On January 13, 2025, IAC announced that its Board of Directors had approved a plan to spin off its entire stake in ANGI. On February 14, 2025, IAC filed Form S-3, disclosing the deal overview and separation agreement. Subsequently, on March 10, 2025, IAC announced the record and distribution dates for the planned spin-off.
IAC's recent spin-off of ANGI sharpens its strategic focus on scalable, high-margin businesses, echoing its successful history with Match Group and Vimeo. Dotdash Meredith remains a key growth driver, leveraging premium ad rates in sectors like beauty, tech, and pharmacy. Innovations like the D/Cipher tool enhance ad targeting without cookies, boosting efficiency. Strategic partnerships with OpenAI and Apple News+ are expanding licensing and syndication revenues. This repositioning is expected to drive operational leverage and unlock shareholder value through a potential re-rating. IAC's diversified portfolio and disciplined capital allocation further strengthen its long-term investment appeal. Considering the significant upside post-recent correction, we revise our rating on IAC to BUY from HOLD, while maintaining a target price of $42.00 per share.
Key Data Spin-Off Research
Key highlights of the conference call (1Q25)
Strategic Moves & Capital Allocation • IAC completed the spin-off of Angi Inc., marking its 10th independent company creation. • Repurchased 4.5 million shares for $200 million; new 10 million share repurchase authorization approved.
• Management emphasized capital deployment flexibility, with M&A and share buybacks both active considerations.
Income Statement • Revenue declined 8.6% YoY to $570.5 million, but operating income swung to a $35.8 million profit from a $63.4 million loss.
• Net loss of $216.8 million was driven by a $324.3 million unrealized loss on MGM shares.
Segment Performance • DDM: Digital revenue grew 7.0% YoY to $224 million; print declined 7.0% to $174 million. Adjusted EBITDA surged 166.0% to $80.0 million, aided by a $36 million non cash lease termination gain. • Care.com: Revenue declined 3.9% to $88.9 million due to lower consumer subscriptions. Adjusted EBITDA fell 12.0% to $14.5 million. Product and pricing improvements are underway. • Search: Revenue dropped 35.2% to $70.3 million, driven by lower traffic acquisition at Ask Media and Desktop. Adjusted EBITDA fell 31.0%.
• Emerging & Other: Revenue fell 46.2% to $18.3 million, largely due to the Mosaic Group sale.
Margin & Cost Analysis • Gross margin improved due to lower cost of revenue and reduced amortization. • Corporate expenses declined due to a $35.0 million reversal of stock-based compensation tied to the former CEO's departure.
• Free cash flow turned negative at -$4.6 million, impacted by a $21.6 million lease termination payment and higher capex.
Product & Innovation • DDM launched the PEOPLE app and MyRecipes platform, targeting younger and food-focused audiences. • Decipher Plus, a contextual ad targeting platform, is gaining traction and expected to be a 2026 growth driver.
• AI integration is expanding across Care.com, Vivian Health, and DDM, enhancing matching, targeting, and customer service.
Guidance & Outlook • FY25 Adjusted EBITDA guidance reaffirmed at $240–$295 million. • DDM expects to grow digital revenue 7–10% for the year; Q2 guidance is 7–9%.
• Care.com and Search are expected to remain challenged in Q2 but will show signs of stabilization.
Risks & Market Dynamics • Programmatic ad pricing has softened, while premium ad demand remains stable, supported by pharma, tech, and beauty sectors. • Macroeconomic uncertainty, tariff impacts, and consumer sentiment are being closely monitored.
• Google's AI Overviews and search algorithm changes are being managed; DDM's reliance on Google traffic has dropped from 60% to ~33%.
Revenue Trend and Adjusted EBITDA vs. Margin Trend Spin-Off Research
1Q25
Total revenue fell 8.6% YoY to $570.5 million (-29.5% vs consensus). Search segment revenue decreased 35.2% YoY to $70.3 million, mainly due to reduced visitors to ad supported search and content websites. Emerging & Other segment revenue declined 46.2% YoY to $18.3 million, largely due to the decline in revenue on account of the Mosaic Group sale. Care.com revenue declined 3.9% YoY to $88.9 million, due to a decline in consumer revenue driven by lower subscriptions, offset by growth in enterprise revenue due to an increase in back-up care utilization. Dotdash Meredith segment revenue grew 0.7% YoY to $393.1 million, driven by increased revenue from the digital segment, offset by a decline in revenue in the print segment. Adjusted EBITDA increased significantly by 825.5% YoY to $50.9 million (+276.2% vs consensus), and corresponding margins improved by 804bps to 8.9%, mainly due to Dotdash Meredith's strong performance, including a $36 million lease termination gain and improved digital and print margins. Additionally, the Emerging & Other segment reduced its losses significantly, aided by the absence of prior-year severance and transaction-related costs, further contributing to the overall EBITDA growth. Operating profit of $35.8 million (-194.2% vs consensus), against an operating loss of $63.4 million, primarily due to a $64 million improvement in Dotdash Meredith's operating income driven by higher digital and print profitability, and additionally reduced losses in Emerging & Other segments further supported the turnaround. Net loss of $216.8 million (1Q24: profit of $45.0 million), primarily due to a $324.3 million unrealized loss on its investment in MGM Resorts International, reversing a $163.8 million gain in the prior year. Diluted loss per share came in at $2.64 (1Q24: $0.51 earnings per share).
1Q25 Valuation Spin-Off Research
Investment Thesis
IAC (Stub Entity)
Dotdash Media to benefit from efficient resource allocation
Dotdash Meredith, a key subsidiary of IAC, has demonstrated strong performance in the digital advertising sector driven by higher premium advertising rates from sectors like beauty, technology, pharmaceuticals, and retail. The company has seen a 30% increase in programmatic advertising rates, contributing significantly to its revenue growth. This was further aided by innovative ad targeting technologies and strategic partnerships. Dotdash Meredith launched D/Cipher, a groundbreaking intent-targeting tool that connects advertisers to consumers at key moments of intent without relying on cookies. This tool has been instrumental in driving higher engagement and better ad performance. By shedding ANGI, which has faced revenue declines, IAC can concentrate on areas like Dotdash Media with higher margins and growth potential.
Licensing and Partnerships to add high-margin revenue streams
Dotdash Meredith has strategically leveraged licensing and partnerships to enhance its revenue streams, particularly focusing on high-margin opportunities. It has entered a strategic partnership with OpenAI, which involves integrating its trusted content into ChatGPT. This includes content from iconic brands like PEOPLE, Better Homes & Gardens, FOOD & WINE, Verywell, InStyle, and Investopedia. These partnerships not only enhance revenue but also contribute to higher margins, as they involve leveraging existing content and technology infrastructure.
Care.com to grow even amid economic challenges
The broader healthcare and caregiving market has demonstrated strong growth potential. For instance, the UK care market, which shares similarities with Care.com's operational environment, reported improved occupancy levels and fee growth in 2024, with private pay fees increasing by 10%. Care.com's platform, which connects families with caregivers, is well-positioned to capitalize on the growing demand for caregiving services, driven by demographic shifts and an aging population, particularly in private pay segments, which are less susceptible to economic downturns. The resilience of the sector, even amid economic challenges, highlights the platform's potential to contribute significantly to IAC's long-term growth.
Valuation
IAC (Stub Entity)
IAC presents a compelling investment opportunity due to its diversified portfolio, strong performance in digital advertising, and strategic focus on high-margin segments. Its key subsidiary, Dotdash Meredith has benefited from higher premium advertising rates, particularly from sectors like beauty, technology, pharmaceuticals, and retail. Innovative ad targeting technologies, such as the D/Cipher tool, have enhanced ad targeting without relying on cookies, further boosting operational performance. Strategic partnerships with companies like OpenAI and syndication partners such as Apple News+ have also played a crucial role in boosting licensing and other revenue streams. Following the completed spin-off of ANGI, IAC has sharpened its strategic focus on higher-margin segments like Dotdash Meredith, enabling more efficient operations and targeted growth initiatives. This move is consistent with IAC's successful history of unlocking value through spin-offs, as demonstrated by past separations such as Match Group and Vimeo. The spin-off has begun to reposition IAC's portfolio toward more scalable and profitable businesses and is expected to contribute to a meaningful re-rating of the company's overall valuation. We compare IAC with listed companies engaged in the Internet Media and Services business such as Ziff Davis, Inc, News Corporation, Lyft, Inc, Gannett Co., Inc., and Bright Horizons Family Solutions Inc. We believe the spin-off simplified IAC's business narrative and alleviated the persistent overhang on its shares. However, considering the current volatility in the macroeconomic environment which can impact consumer spending, we ascribe a lower EV/EBITDA (x) multiple of 14.0x and EV/Sales (x) multiple of 1.5x to arrive at an average enterprise value of $3.9 billion. Further, we deduct net debt of ~$0.4 billion to arrive at an implied equity value of $3.4 billion. Our fair value for the Stub Entity stands unchanged at $42.00 per share. Considering the significant upside post-recent correction in the stock price, we revise our rating on IAC to a BUY from HOLD.
IAC Valuation Spin-Off Research
Company Description
IAC Inc. (IAC)
IAC Inc. is a diversified holding company that operates a wide range of businesses in the media, internet, and technology sectors. Founded in 1995 and headquartered in New York City, IAC (NASDAQ: IAC) has grown through numerous acquisitions and divestitures, positioning itself as a leader in the digital economy. The company operates through Dotdash Meredith, Search, Care.com, and Emerging & Other segments.