Q2 2024 IAC Inc Earnings Call
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Operator: Good day, and welcome to the IAC and ANGI second quarter 2024 earnings conference call. All participants will be in listen-only mode.
Operator: If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to hand the call to Christopher Halpin, Chief Financial Officer and COO of AIC. Please go ahead.
Speaker Change: If you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: Please note this event is being recorded.
Speaker Change: I would now like to hand the call to Christopher Halpin, Chief Financial Officer and COO of AIC. Please go ahead.
Christopher Halpin: Thank you. Good morning, everyone. Christopher Halpin here, and welcome to the IAC and Angi Inc. second quarter earnings call. Joining me today is Joey Levin, CEO of IAC and Chairman of Angi Inc., and Jeff Kip, CEO of Angi Inc. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter, which is currently available in the Investor Relations section of IAC's website. We will not be reading the shareholder letter on this call.
Speaker Change: Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter, which is currently available on the Investor Relations section of IAC's website. We will not be reading the shareholder letter on this call.
Christopher Halpin: I will shortly turn the call over to Joey to make a few brief introductory remarks, and we'll then open it up to Q&A. But before we get to that, I'd like to remind you that during this presentation, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as, we expect, we believe, we anticipate, or similar statements. These forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially from those expressed today.
Christopher Halpin: Some of these risks have been set forth in IAC's and NGINC's second quarter earnings releases and our respective filings with the SEC. 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 releases, the IAC shareholder letter, our public filings with the SEC, and again, to the investor relations section of our respective websites for all comparable gap measures and full reconciliations for all material non-gap measures. With that, I will now turn it over to Joey.
Speaker Change: I'll also refer you to our earnings releases, the IAC shareholder letter, our public filings with the SEC, and again to the investor relations section of our respective websites for all comparable GAAP measures and full reconciliations for all material non- GAAP measures .
Joey Levin: Thank you all for joining us this morning, the incredibly brilliant and resilient IAC team, any of you who are on this call today; we are incredibly grateful for the work that everyone's been doing here. This is a team of fighters, grinders, builders, and that's what we saw come through, not just really this quarter, but for the last 18 months. This is a team that figures out how to make things work and deliver for our customers.
Speaker Change: Thank you all for joining us this morning.
Speaker Change: Incredibly brilliant and resilient.
Speaker Change: IAC team, any of you who are on this call today, we are incredibly grateful for the work that everyone's been doing here. This is a team of fighters, grinders, builders, and that's what we saw come through, not just really this quarter, but for the last 18 months.
Speaker Change: This is a team that figures out how to make things work and deliver for our customers.
Joey Levin: We've been incredibly focused on delivering for viewers to give them a compelling customer experience and converting for advertisers, and we have not been distracted from those goals, and now that's really working and helping to gain share. And we really have the same story at Angie. The focus on jobs done well there to make pros and homeowners happy has been the focus, and over time, that's going to show through in a business that can grow and win share in its category.
Joey Levin: And the same is true for businesses that we are minority owners of. Bill Hornbuckle at MGM and Andre Haddad at Turo are totally customer obsessed, and we're incredibly grateful to them. IAC had, I think, a great quarter this past quarter, and we're feeling some good momentum looking forward, and so we'd love to talk about that with all of you. Let's get your questions in.
Speaker Change: And same true for businesses that we are minority owners of. Bill Hornbuckle at MGM and Andre Haddad at Turo are totally customer obsessed and we're incredibly grateful to them.
Operator: Operator, first question, please.
Operator: The first question comes from Ross Sandler of Barclays; please go ahead.
Ross Sandler: Hey guys, just maybe start with DotDash Meredith.
Ross Sandler: So the letter said you could grow 15% or better in 3Q. That looks great relative to what we've heard broadly from the digital advertising landscape thus far in earnings season. So what are you seeing right now in terms of macro trends that are allowing you to accelerate while others are kind of fading here? And then the DDM licensing line picked up a little bit quarter on quarter and year on year. So how much of a contributor to that was the recent AI licensing deals, and how should we think about that going forward?
Speaker Change: kind of fading here and then the the DDM licensing line picked up a little bit quarter on quarter and year on year So how much of a contributor to that was the recent AI licensing deals? And how should we think about that going forward? Thanks a lot
Ross Sandler: Thanks a lot.
Joey Levin: Thanks, Ross. I'll take the first one, and Chris can take the second one.
Speaker Change: Obviously digital revenue is traffic and monetization, and let's do those one at a time. The traffic side has been going very well for DDM.
Joey Levin: Obviously, digital revenue is traffic and monetization, and let's do those one at a time. The traffic side has been going very well for DDM, and that's a lot of things. Obviously, it starts with investing in content and investing in the best content, but it's also figuring out distribution. I think DDM has done a really great job of holding court within the Google and search ecosystem, notwithstanding a lot of things that are happening to change that system, but also diversifying from there. Email has been great.
Speaker Change: And that's a lot of things. Obviously, it starts with investing in content and investing in the best content. But it's also figuring out distribution, I think.
Joey Levin: Social media, we've now lapped the sort of Facebook turning off publishers event, and we now see growth in social media or opportunities for growth in social media going forward. Big platforms. Apple News, Google has a similar concept called Google Discover, video, all these things are areas where we have started to or see real upside in continuing to grow traffic.
Joey Levin: And so that's been a help in the business, and that's what led to the acceleration in the second quarter. And what we think is continued acceleration, what we're seeing as we sit here in August. On the monetization side, that's both direct premium sales, and that's also programmatic. And I think it's important to understand that, obviously, we've been, as I say, growing inventory, but a solid base of inventory has always been there or has been there for a while. And performance and performance intent, and the measurement of that performance intent, have always been there.
Speaker Change: a help in the business. And that's where what led to the acceleration in the second quarter, and what we think is continued acceleration, what we're seeing as we sit here in August .
Joey Levin: What's happening right now is we're getting the demand of advertisers to come in and start to more efficiently price it, and that's why you saw our programmatic ad rates go up substantially, and we think more than the market, and if you look at domestically, up even more. That is the result of advertisers coming in, realizing the value of that inventory, and pricing it up to the point where it continues to drive performance for them.
Speaker Change: What's happening right now is we're getting the demand of advertisers to come in and start to more efficiently price it and that's how you saw our programmatic ad rates up substantially and we think more than the market and if you look at domestic up even more.
Joey Levin: The lifting of that programmatic pricing and the lifting of the premium also feed each other because you start to have less inventory available, which means that the best stuff starts to get higher prices over time. Unknown Speaker, The licensing business also did well. I'll let Chris answer that part of the question, but we are starting to have OpenAI money in there and other licensing partners that are paying us. That grew healthy, and we still see the upside in each of those things as we look forward from here.
Speaker Change: And the lifting of the premium also feed each other because you start to have less inventory available, which means that the best stuff starts to get higher prices over time.
Speaker Change: and other licensing partners that are paying us, that grew healthy and we still see upside in each of those things as we look forward from here.
Chris: Thanks, Joey. And, Ross, with respect to... The large language model licensing deal we've announced, if you look at the digital licensing line, revenue grew 19% in the quarter, or $4.9 million in dollar growth. If you look at the prior quarter, the existing licensing business grew about 9%. So it's fair to assume about half of the dollar growth to get you up to 19% came from our open AI license. And we'd note that represents revenue earned since the partnership started in early May during the quarter.
Speaker Change: If you look at the prior quarter, the existing licensing business grew about 9%.
Chris: So there's only about 60% of a quarter of revenue captured in the second quarter and will be fully accretive going forward. So if you think about half the dollar growth and gross it up, you have insight on the fixed portion of our figure.
Speaker Change: In early May, within the quarter, so there's only about 60%.
Speaker Change: of a quarter of revenue captured in the second quarter and will be full going forward. So if you think about half the dollar growth and gross it up, you have insight on the fixed portion of our fee.
Operator: Unknown Speaker: Thanks. Thanks, Ross. Operator, next question. The next question comes from Cory Carpenter of J.P. Morgan. Please go ahead. Good morning. I had two questions for Angie. Jeff, you and Joey have been focused on improving the customer experience and profits at the expense of monetization.
Speaker Change: Thanks Ross. Operator, next question.
Operator: The next question comes from Cory Carpenter of J.P. Morgan. Please go ahead.
Speaker Change: The next question comes from Cory Carpenter of J.P. Morgan. Please go ahead.
Corey Carpenter: Good morning. I had two on Angie. Jeff, you and Joey have been focused on improving the customer experience and profits at the expense of monetization for a while now.
Jeff Kip: So I'll start. If I'm going to answer your baseball analogy, I think I'm going to take the bottom of the fourth. We're the home team, and we're on offense. I think, as you know, what Joey's been focused on and what the company continues to be focused on is getting more jobs done well. Just for reference, we define those as jobs where a homeowner who submits a job on the platform hires a pro who pays for that lead on the platform effectively, and the job gets done with a 4 or 5 rating.
Speaker Change: Just for reference, we define that as jobs where a homeowner who
Speaker Change: Submits a job on the platform, hires a pro.
Jeff Kip: So we're completely focused on that and driving the product and customer experience to give us the long-term repeat and retention required to give us long-term revenue and profit growth. If you want to get into the tactical elements, there are some pieces to this.
Jeff Kip: On the homeowner side, as I think everybody knows, our SEO has been on a downward path for a while. Losing a significant amount of ground it once had, we see that as currently getting to a stable place and turning. That's a big job and a huge opportunity for us given the amount of ground. We've seeded that's there to be reclaimed. We've been systematically improving our SEM and really been significantly driving the SEM contribution growth.
Speaker Change: We've been systematically improving our SEM and really been significantly driving the SEM contribution growth. We think we still have work to do, we think we're still in the middle innings there in terms of being able to reclaim ground and grow those jobs.
Jeff Kip: We think we still have work to do; we think we're still in the middle innings there in terms of being able to reclaim ground and grow those jobs. Finally, the other area is really third-party, where there have been the most questions around the quality of what's happening there. We think it's a little lower quality, but we'll continue to do some work there to make sure that all of our customers have a great experience.
Speaker Change: Finally, the other area is really third party, where there have been the most questions around the quality of what's happening there. We think it's a little lower quality, and we're continuing to do some work there to make sure that all of our customers have a great experience.
Jeff Kip: Which leads to the final category, which is really repeat business, which has been consistently growing over the last couple of quarters, driven by the better experience and more jobs done well. On the pro side, I think you've seen really remarkable increases in retention year over year in the last couple of quarters, that's also being driven by the focus on jobs done well. We think we still have some territory to gain there, which will contribute to long-term growth.
Jeff Kip: We've significantly optimized our sales force and see that work is stabilizing and turning back to growth in the near term. And then, finally, you know, we're working on getting online enrollment up and out in the United States. That's been an incredibly successful tool for us in Europe, and we believe it's going to help. So we're going to put all the bricks in place. The honest truth is we will be growing revenue again.
Speaker Change: We've significantly optimized our sales force.
Speaker Change: and see that work is stabilizing and turning back to growth in the near term.
Jeff Kip: It will come when we have the experience and the product in a place that we think is great. It's not going to come immediately, but we are continuing to work on that. And right now, what we are doing is growing value long term for the business, our customers, and our shareholders.
Speaker Change: The honest truth is we will be growing revenue again. It will come when we have the experience and the product in a place that we think is great.
Chris: And thanks, Cory. With respect to Angie's profitability and financial outlook for the second quarter, the growth and profit, both on a year-over-year and sequential basis, reflect the greater efficiency that we've been driving at Angie for some time. Joey started it, and Jeff is continuing it.
Speaker Change: The growth and profit, both on a year-over-year and sequential basis, reflects the greater efficiency that we've been driving at Angie for some time. Joey started it, and Jeff is continuing it.
Chris: As Jeff said, we've improved marketing efficiency by stripping out lower-value revenue streams and what, in our view, was wasted paid marketing. We've also improved matching and monetization through technology, again, improving efficiency, and that's a core theme in Jeff's strategy, as you heard. And then moreover, we've worked for some time to target higher quality professionals, and that enables us to reduce our service professional acquisition spend while also improving retention and bad debt, and we've definitely seen both manifest themselves.
Speaker Change: As Jeff said, we've improved marketing efficiency by stripping out lower value revenue streams and what in our view was wasted paid marketing. We've also improved matching and monetization through technology, again, improving efficiency and that's a core theme in Jeff's strategy, as you heard.
Speaker Change: And then moreover, we've worked for some time to target higher quality professionals.
Chris: So the investments in experience and efficiency for the business have led to our revenue declines, which you referenced, but they have also helped to significantly improve both revenue quality and margin. In Q2, in particular, there was also the benefit of some expenses that shifted from Q2 to Q3 this year. So a little bit of flattering margins there, but big picture, you know, we feel good about the margins.
Speaker Change: from Q2 to Q3 this year, so a little bit of flattering margins there, but big picture, you know, we feel good about the margins, we feel good about the profitability and expect that to continue.
Chris: We feel good about the profitability and expect that to continue. Looking forward, we've said we expect revenue declines in Q3 to be back down about 15%. That's higher than the second quarter but is more in line with the first quarter at the end of last year. It's really due to two factors. The second quarter last year was a particularly easy comp, as it was when we experienced the most pronounced impacts from shutting down certain demand channels that were producing lower quality leads.
Speaker Change: Looking forward, we've said we expect revenue declines in Q3 to be back down about 15%.
Speaker Change: That's higher than the second quarter, but is more in line with the first quarter in the end of last year It's really due to two factors
Chris: And secondly, a number of the actions that have been taken to improve the consumer experience really started in the second half of last year and early this year. So we're continuing to feel the impact there. As far as profitability in the third quarter is concerned, we're guiding north of $30 million of adjusted EBITDA, that's lower than our profit in the second quarter, due partly to the shift of expenses I mentioned before, but also targeted investments we're making in the customer experience to set us up for future growth.
Speaker Change: And then secondly, a number of the actions that have been taken to improve consumer experience really started in the second half of last year and early this year, so we're continuing to feel the impact there.
Joey Levin: And I'll just add to what Jeff and Chris said, all of which I agree with and I think was very well said. Going back to your original question, Cory, Jeff said at the bottom of the fourth, we still have work to do here, we still have work to drive the customer experience both on the homeowner side and the pro side to what we think is possible in the category and what we think is a long-term winner. And we're going to do we're going to do all that work over time.
Speaker Change: Jeff said bottom of the fourth. We still have work to do here. We still have work to drive the customer experience and the both on the homeowner side and the pro side to what we think is possible in the category and what we think is a long term winner and and we're going to do we're going to do all that work over time.
Operator: Thanks, Cory. Operator, next question.
Speaker Change: Thanks, Cory. Operator, next question.
Operator: The next question comes from Eric Sheridan of Goldman Sachs. Please go ahead.
Eric Sheridan: Thanks so much for taking the question. I wanted to come back to two of the themes you talked about in the shareholder letter. First, you know, Joey, there was discussion in here about putting your cash to work in a smart, patient manner going forward, as well as the theme of shrinking the discount that exists in the equity of IEC today. I wonder if you could expound upon that statement and how it sort of ties back to thinking about capital allocation more broadly.
Eric Sheridan: And the second part of that would be you also highlighted the stakes you have in MGM and Turo. They continue to rise in terms of percent ownership there. Any color you can give us on the pathway to either owning more of those equities over time or the path to creating or crystallizing value around those stakes. Thanks so much.
Joey Levin: Thanks, Eric. Those questions are certainly all closely intertwined. There are three things that shrink the discount that have always been true. And I think that we've always done them, but to varying degrees over time. The other two, Capital Allocation and Crystallizing Value, are certainly the harder ones to discuss because we haven't done either one of them for quite some time.
Speaker Change: Thanks Eric, those questions are certainly all closely intertwined.
Speaker Change: There's three things that shrink the discount that have always been true, and I think that we've always done but to varying degrees over time.
Speaker Change: Execution in the Companies, Smart Capital Allocation, and Crystallizing Value.
Speaker Change: All those things are certainly a focus, all those things are certainly on the table, and there will be a mix of all of them as we shrink the discount, or there will need to be a mix of all of them as we try to shrink the discount.
Speaker Change: I understand that. Now, to us, that doesn't reduce the option value of any of those crystallization events. They still exist, they still have value, but I understand that that value may not be appreciated until some of those options are exercised, so to speak.
Speaker Change: We talked a lot already about execution in our companies and in the letter and obviously that will continue.
Speaker Change: The other two, Capital Allocation and Crystallizing Value, are certainly the harder ones to discuss because we haven't done either one of them in a little bit.
Speaker Change: Our view is we are definitely looking for new opportunities in M&A. It's been the lifeblood of IAC for its entire history. It's been a great source of growth and shareholder returns and opportunity.
Speaker Change: Spins or tails or whatever are things that that remain on the table and and will be considered to shrink the discount over time
Speaker Change: Execution for basically two years was the lion's share of our focus. Now that we've got execution in a place that we feel much better about, I think the other two are getting a lot more attention.
Speaker Change: And that was evident in the last quarter, and we hope that to continue, and hope both those businesses continue to execute as well as they have.
Joey Levin: And just building on that, it was in the letter, but for those who follow, we executed our warrant in Turo on a net basis and increased our ownership to 32% without putting any incremental – expending any incremental cash. Thank you, Eric. Operator, next question.
Speaker Change: Great, thanks. Two questions. On the macro, Joey, just with renewed fears of...
Speaker Change: Could you discuss the key drivers of expected accelerating DDM digital rev growth in 3Q and then
Joey: Yeah, John , I'll let Chris do the second. I'll do the first.
Speaker Change: In our caveat
Speaker Change: The answer to your question is, we're not seeing that weakness. We are, you know, we had a really solid prime day last month at Dades Meredith on the commerce side. We've talked a lot about our view of how advertising or advertisers are viewing DDM and
Joey Levin: and a few more in that direction, and MGM, but Turo specifically, demand for travel, as far as we can see, has held strong. The one trend we have seen there, which has been, again, true for a little while, is a mixed shift towards cheaper cars, and although we haven't seen that sort of mixed shift happening at MGM yet. And so, in aggregate, it does feel healthy to us, but, like I say, we're relatively small, and so I don't know if we're indicative of the whole world in our slice of the world.
Speaker Change: And so in aggregate, it does feel healthy to us, but like I say, we're relatively small and so I don't know if we're indicative of the whole world in our slice of the world.
Joey Levin: And then, John, on DDM, I'll take Q2 margins first, just to do it. The recovery slash momentum in the broader advertising market is solid and feels to be broadening. It's definitely not a booming advertising market, but it is solid, and key categories for us like health, pharma, retail, and beauty remain strong. And then we've seen stability slash recovery in categories that we've said previously have been weak, food and beverage, home, and technology.
John: And then, John , on DDM, I'll take Q2 margins first, just to do it.
John: sort of chronologically, incremental margins did exceed our expectations in Q2.
John: A combination of a little more traffic growth than maybe we'd conservatively forecast for, and then also monetization was better. Joey talked about strength and programmatic and also momentum and premium, and that really drops to the bottom line.
John: Looking forward,
John: As Joey talked about before, you know, really traffic and monetization are strong. We're seeing solid traffic growth across the portfolio of titles that's in an acceleration.
John: Traffic from distribution sources, as Joey said. Food has been very strong and the team has done a great job re-energizing all recipes and other key properties there and we see more opportunity.
Joey: On monetization, it continues to be very solid across premium and programmatic.
Speaker Change: The recovery slash momentum in the broader advertising market
Speaker Change: is solid and feels to be broadening. It's definitely not a booming advertising market, but it is solid and key categories for us like health, pharma.
Speaker Change: Retail, beauty, remain strong, and then we've seen stability slash recovery in categories that we've said previously have been weak, food and beverage, home, and technology.
Joey Levin: So those patterns and then continued improvement in programmatic monetization, where we really feel like our advertising tech stack and our programmatic relationships are differentiated as well as our inventory, led us to guide to 15% or more revenue growth on digital and Q3 and 25% plus EBITDA growth. You know, obviously, our financial plan is back-end weighted. We've said before that roughly two-thirds of our profit comes in the second half of the year. But you know, we see momentum; we expect performance marketing to return to growth in the second half, and licensing continues to be strong. So we're heading down X.
Speaker Change: So, those patterns and then continued improvement in programmatic monetization where we really feel like our advertising tech stack and our programmatic relationships.
Speaker Change: Let us to guide
Speaker Change: You know, obviously our financial plan is back end weighted. We've said before roughly two-thirds of our profit.
Speaker Change: comes in the second half of the year.
Speaker Change: But, you know, we see momentum, we expect performance marketing to return to growth in the second half, and licensing continues to be strong, so we're head down executing.
Speaker Change: do the M&A
Speaker Change: Unknown Speaker The Press has obviously reported that you were interested in Paramount. That's true or not true.
Speaker Change: Terrell Management is still very focused on getting public. I think there's not a milestone that management or the board, I think, is either.
Joey Levin: There is a threshold to that happening, but I think it's more the markets, meaning the banks always like to offer someone a discount to buy into an IPO. And I think the discount, given the market volatility, that discount has looked to be very wide. And Turo, being in a very healthy position as a business with a very healthy balance sheet, doesn't need to accomplish that with too wide a discount. So they're waiting for a favorable environment to do that. Whether it ultimately happens, I don't know. When it ultimately happens, I don't know.
Speaker Change: The banks always like to offer someone a discount to buy into an IPO and I think the discount has given the market volatility that discount is
Speaker Change: So they're waiting for a favorable environment to do that.
Speaker Change: whether it ultimately happens, I don't know when it ultimately happens, I don't know. But there is not a a to answer your specific question, there's not a business milestone that needs to be hit in order to accomplish that. I think Terro does have the scale to be a public company I've said all along and continue to say.
Joey Levin: But there is not a, to answer your specific question, there's not a business milestone that needs to be hit in order to accomplish that. I think Turo does have the scale to be a public company. I've said all along and continue to say we're relatively indifferent to whether it's a public company or a private company. We're much more focused on how it operates as a company. And I'm not sure that an IPO has a meaningful impact on that one direction or the other. But the main thing is just the market environment and getting it off to a healthy start with the markets. On your other question, there's a lot in there. Paramount.
Speaker Change: And I'm not sure that IPO has a meaningful impact on that one direction or the other. But the main thing is just the market environment and getting it into a healthy start with the markets.
Joey Levin: We did look at that. Our chairman, as you know, has a great history with that asset. It's an iconic asset. And in a way, it is similar to our feeling about DDM, which is that content is enormously valuable, and the people who invest in and own the best content, and the best IP are in a good position and in a better position as distribution diversifies. Uhh, We do generally reject the notion that share repurchases are an essential baseline requiring explanation every 90 days, but I know it is. It does indeed.
Speaker Change: Paramount, we did look at that. Our chairman, as you know, has a great history with that asset. It's an iconic asset, and in a way, it is similar to our feeling about DDM, which is content is enormously valuable.
Speaker Change: and the people who invest in and own the best content, the best IP are in a good position and in a better position as distribution diversifies.
Speaker Change: And we think DDM, you can see now, is a beneficiary of that, notwithstanding the sort of prevailing narrative in markets.
Speaker Change: And so we like that concept. The reality is that that deal didn't work for us financially, and I think the Ellisons have put together a deal that's very hard to beat.
Speaker Change: M&A and share repurchases.
Speaker Change: We do generally reject the notion that share repurchase is an essential baseline requiring explanation every 90 days. I know it is. It does. We have explained it every 90 days for many, many years.
Joey Levin: We have explained it every 90 days for many, many years, but it is a thing that is important. It is a thing that we have not been averse to historically. We've brought back huge amounts of shares in our history, and we don't have an institutional opposition generally to share repurchases. The only thing we're averse to is the notion of share repurchases for signaling, which is, we think, a truly foolish game and not something that we've ever done.
Speaker Change: It is a thing that is important. It is a thing that we have not been averse to historically. We've brought back huge amounts of shares in our history, and we don't have an institutional opposition generally to share repurchases.
Speaker Change: The only thing we're averse to is the notion of share repurchases for singling, which is, we think, a truly foolish game and not something that we've ever done.
Joey Levin: And just to make one more point, but certainly Monday this week felt like a nice day to look at our treasury and see a heavy stockpile. All that said... Chris and I believe we are outrageously cheap, we would use some cash to buy the things we know so well, attractively, and we think we have the ability to afford both share repurchases and M&A. This is the subject of significant internal debate, and the reality is that our chairman wants to put pressure on all of us to pursue M&A.
Speaker Change: Chris and I believe we are outrageously cheap. We would use some cash to buy the things we know so well attractively and we think we have the ability to Afford both share repurchases and M&A
Chairman: This is the subject of significant internal debate, and the reality is our Chairman wants to put pressure on all of us for pursuing M&A, and
Speaker Change: to look for those new avenues for IEC that have always been an important source of growth for us and are something that we expect to be an important source of growth for us in the future.
Speaker Change: can't or won't or won't soon or won't ever. It just means that we are very focused on M&A right now.
Joey Levin: Still, as always, has been and will be true. Anything is possible as it relates to share repurchases, but that's the way that we're thinking about it. And there are, to answer your last bit, there are real opportunities in M&A right now. We're familiar with them in our own cases.
Speaker Change: So that's where we are right now, again, I think.
Speaker Change: Unknown Speaker It still, as always, has been and will be true. Anything is possible as it relates to share repurchases, but that's the way that we're thinking about it. And there are, to answer your last bit, there are real opportunities in M&A right now. I think
Operator: There are lots of companies that continue to deliver better and better results with the same or shrinking share prices, which means multiples, if you're not an AI, are generally shrinking. And I think, as far as public companies are concerned, there are a lot of opportunities that we believe are attractively priced. And the longer that trend goes, the more businesses are open to transacting at reasonable premiums to those numbers.
Speaker Change: We're familiar with it in our own cases. There are lots of companies that continue to deliver better and better results with
Speaker Change: The same or shrinking share prices, which means multiples, if you're not an AI, are generally shrinking. And I think as far as public companies, there's a lot of opportunities that we believe are attractively priced.
Speaker Change: And the longer that trend goes, the more businesses are open to transact at reasonable premiums to those numbers.
Speaker Change: opportunities in the private markets and unique opportunities, and we'll continue to look at all those. I think our generally our sweet spot has been in the $300 to $700 million range. Generally, we're focused on acquisitions of control or complete acquisitions.
Operator: Thank you, Jason. Operator, next question.
Speaker Change: Thank you, Jason. Operator, next question.
Operator: The next question comes from Youssef Squali of Truist. Please go ahead.
Operator: The next question comes from Youssef Squali of Truist. Please go ahead.
Youssef Squali: Great, thank you. I have two questions. Just as a follow-up to the prior question on M&A, it seems like in the letter you're telegraphing the possibility of maybe entering a new category historically focused on marketplaces. I'm not sure if that's... And those situations have been able to sign literally a multi-hundred million dollar, multi-year deal. Any reason why you guys would not be in that position? Thank you.
Youssef Squali: Unknown Speaker How will you get investors comfortable with the risk of veteraning to a new category at a time when the stock discount is so high? And then second, on the data licensing deal, can you maybe share with us the...
Speaker Change: Just broadly speaking, how's the pipeline for similar deals? Historically, when we've seen peers do deals like that, once OpenAI comes in, then you have a whole slew of others in the pipeline. Maybe, you know, if you can provide some...
Speaker Change: Unknown Speaker Either qualification or quantification of just how big is the opportunity in front of you for that? Some companies kind of in similar
Speaker Change: No reason why we would not be in that position to answer the last question, but we are in active conversations with a number of players for further licensing deals, and I expect we will have more deals.
Joey Levin: If you multiply the OpenAI deal times every other LLM or similar concept, you could get to very large numbers, but we don't know how the market plays out. I do say with high confidence that there will be more, and I expect that there will be many more. And I also think that one of the things that you're seeing in terms of other deals that have been announced recently is relatively tiny players doing RevShare kinds of deals, which are maybe interesting, and those kinds of deals, if they happen, wouldn't generate real earnings until, obviously, those businesses start to generate real revenue.
Joey Levin: And so you'll see these things play out over time. I think there will be some sort of cash deals. I think there will be some kind of revenue share deals, but I think it is tipping in aggregate in favor of everyone realizing that content is important, content is valuable, and content cannot be stolen or taken for free, and that payment will happen one way or another over time.
Speaker Change: sort of cash deals. I think there will be some kinds of revenue share deals, but I think it is tipping in aggregate in favor of everyone realizing.
Speaker Change: As it relates to the new categories, Youssef, this has been true.
Speaker Change: Again, for all of IAC's history, every time we've gotten into something new, it's been definitionally getting into something new. Most recently, probably, was MGM. It was in a minority way, not a majority way.
Speaker Change: When we got into MGM in the first place, people were confused by that, but we saw an opportunity. We thought it was a unique opportunity, and we seized it with a billion-dollar bet.
Joey Levin: It's a great point, and there aren't a lot of true, broad, scalable sources of truth out there, and we think we have one of the most valuable.
Unknown Attendee: Good morning, thanks for taking the questions. I guess two on DDM, you know the letter that you spoke to Joey about programmatic ad rates being up around 36% in the quarter versus, I think, prior expectations at 15 to 20. How much more growth do you see for programmatic ad rates, I guess, from here on DDM? And then another question.
Speaker Change: Unknown Attendee How much more growth do you see for programmatic ad rates I guess from here on DDM? And then another question.
Speaker Change: you know, after Pandora's performance. Thanks.
Speaker Change: That premium represents both
Speaker Change: Superior Technology Performance, but we also think it highlights or we know it highlights how performant
Speaker Change: DDM's inventory is.
Speaker Change: that given the
Speaker Change: Unknown Attendee Programmatic coming through and
Speaker Change: We're not going to give forward guidance on programmatic, but we have confidence we can outperform the market.
Speaker Change: and that aligns.
Speaker Change: Align towards where we think the puck is going, which is intent-driven, privacy-friendly, highly performant advertising.
Speaker Change: Decipher is depending on which metric a client chooses.
Speaker Change: You know, twice as performant as cookies.
Speaker Change: Thank you. Operator, next question.
Operator: The next question comes from Brent Thill of Jeffreys. Please go ahead.
Speaker Change: The next question comes from Brent Thill of Jeffreys. Please go ahead.
Unknown Attendee: Greater scale, greater compute integration of video and images in the targeting and in the performance forecasting. Great. Hey, guys, it's James on for Brent. Thanks for the questions. Can you just talk a little bit more?
Speaker Change: Great. Hey guys, it's James on for Brent. Thanks for the question. Can you just talk a little bit more about Google's latest plan to not deprecate third-party cookies and how that impacts your medium to long-term outlook for .-Meredith and your ad business more broadly? And then could you also just talk about some of the alternative identifiers in the market, like UID, and whether you're deploying those tools across your portfolio? Thank you.
Joey Levin: Sure. The punchline on Google's decision not to deprecate cookies is we think the end state is more or less the same, maybe the timeline is different, but the end state is more or less the same, which is users, or Google, rather, will offer users choice. Users, depending on how that's presented, will likely choose not to continue cookies, and the universe of audiences that are cookied will shrink. By the way, the universe of audiences that are cookied has shrunk and has been shrinking for a while.
Speaker Change: Sure.
Speaker Change: The
Speaker Change: The punchline on the Google decision not to deprecate cookies is we think the end state is more or less the same. Maybe the timeline is different, but the end state is more or less the same.
Speaker Change: which is Google will offer users choice, users, depending on how that's presented, will likely choose not to continue cookies and the universe of audience that is cookied will shrink.
Speaker Change: By the way, the universe of audiences, Cookied, has shrank and has been shrinking for a while. It shrank very dramatically when Apple turned off Cookies and made Cookies unavailable for all of iOS, which is, by the way, a very valuable audience, a more valuable part of the market. And so we think that Cookied audience continues to shrink.
Joey Levin: It shrank very dramatically when Apple turned off cookies and made cookies unavailable for all of iOS, which is, by the way, a very valuable audience, a more valuable part of the market. And so we think that the Cookied audience continues to shrink. This is one of the reasons we're so excited about DDM.
Joey Levin: What we offer advertisers is the ability to access the non-cookied audience and the ability to access that non-cookied audience with intent and with performance. What advertisers are now seeing is that we can access the rest of that audience, including the especially valuable iOS audience, that is a naturally more valuable audience, or should be a naturally more valuable audience if you just look at demographics. And that's really important. The way we do that is because we have intent.
Speaker Change: What DDM is now offering, and people are now...
Speaker Change: Seeing advertisers are now seeing is we can access the rest of that audience including the especially valuable iOS audience That that is a naturally more valuable audience or should be
Speaker Change: a naturally more valuable audience if you just look at demographics.
Joey Levin: So our content, you know, DDM's brands, but we have travel and leisure, food and wine, all recipes, we have products that we have brands, rather than that are reviewing products and recommending products based on proprietary research that we're doing on those things, like within Better Homes and Gardens. That audience has significant intent, which proves out in the case studies we do. I think we had
Speaker Change: And that's really important. The way we do that is we have intent. So our content, you know.
Speaker Change: 27 case studies showing a 2x lift in performance for these advertisers.
Operator: Thank you. Operator, next question.
Speaker Change: Thank you. Operator, next question.
Speaker Change: The next question comes from Yigal Arunian of Citigroup. Please go ahead.
Yigal Arunian: Hey, thanks. Good morning, guys. That's Angie, and I think we could just give a little bit more color on kind of what the focus is on the consumer experience improvement right now there. I understand, you know, we're in the fourth inning.
Yigal Arunian: Thanks.
Speaker Change: So I'll take it and
Speaker Change: On SEO, there's a range of execution things that we need to do.
Speaker Change: with some encouraging early indicators, but it's too early to call it. I think secondly, we have to have a...
Speaker Change: Disciplined program of producing the right content and keeping the content refreshed which
Speaker Change: and the number of matches they get significantly, and that's been part of what's driven the jobs done well rate.
Speaker Change: The next question comes from Tom Champion of Piper Sandler. Please go ahead.
Operator: Let's do one more question. Hi, good morning, guys. Joey, can you talk a little bit about engagement?
Tom Champion: ML models to drive personalization and higher time spent. Is this an opportunity for DDM? And then, Jeff, I'd just be curious to get your thoughts as the Fed cuts rates next month.
Joey Levin: When we think about DDM's growth, there is, on the traffic side certainly, it is just volume, engagement, and frequency. And different properties are at different levels of frequency and engagement. We think we have real opportunities across many of them to grow that more deeply. I mean, as you might imagine, recipes, you know, have very deep engagement.
Joey Levin: And so, I think for us, maybe the opportunity to drive frequency or scale there, and something like People Magazine would have a very significant scale and volume, and the opportunity there would be to do things like drive deeper engagement. And AI is a fantastic tool for that. We have been playing with that there. The main tool is figuring out what the next article to suggest is, and AI is much better at that than people are. And so, we are using those tools to deploy there to figure out how to drive engagement. And I think we can get real wins there on engagement.
Speaker Change: And AI is a fantastic tool for that. We have been playing with that there. The main tool is figuring out what the next article to suggest is. And AI is much better at that than people are. And so we're we we are using those tools to.
Jeff: to deploy there to figure out how to drive engagement, and I think we can get real wins there on the engagement side.
Joey Levin: By itself, a rate cut would provide homeowner demand because it would be more likely to increase the rate of home buying and thus the repairs you do to your house to sell it, and the repairs you do, the repairs and improvements you do to the house that you plan as you're moving in. The other thing it would theoretically do is it would lower the cost of home equity lines and encourage improvements. That's because it's in a vacuum.
Speaker Change: The repairs you do to your house to sell it and the repairs you do the repairs and improvements you do to the house That you plan as you're moving in The other thing it would theoretically do is it would lower the cost of home equity lines and encourage improvements
Joey Levin: It's a little bit hard to predict all the forces that are going on right now, but we have some evidence that people have shifted their own personal capital towards improvements because they can't move. The rate cut would have to be material to impact all the people out there who have two and a half percent rates and make them willing to move in terms of the value trade-off they'd make. So I think there's a little more complexity to it.
Joey Levin: But by itself, a rate cut should help consumer demand in particular and give us a tailwind there. And just to put some numbers around that, it is every time a home turns over, on average, there's $15,000 of home improvements that happen. So fewer turnovers, which is what the market has seen for a while now, means those $15,000 events aren't happening to the same degree. So you'd like to see more home turnover, but there are some natural hedges there, as Jeff alluded to, as a result of the reality that we've said for a while that I think 60% of our business is non-discretionary. So, as we always say, the locksmith, you're not waiting for the locksmith for rates to turn.
Joey Levin: I think that covers it. Thank you all for joining us. Thanks for a lot of great questions. Thanks for the support as we continue on this journey and, especially, thanks to the IAC folks on here who are making all this happen. Talk to you all next quarter.
Speaker Change: I think that covers it. Thank you all for joining us. Thanks for a lot of great questions. Thanks for the support as we continue on this journey and especially thanks to the IAC folks on here who are making all this happen. Talk to you all next quarter. Thank you.
Operator: The conference has now concluded. Thank you.