The internet holding company
IAC
posted strong second-quarter growth, driven by continued strength in its Dotdash internet publishing business. But results at its majority-owned Angi business slightly missed estimates, as the home-services firm works through a transition in its business model.
These were the first quarterly results IAC has reported (ticker: IAC) since it completed the spinout of the video tools company Vimeo (VMEO) in late May. That seems to have created a little confusion in terms of Wall Street’s forecasts for revenue. Some of the calls still include Vimeo.
For the quarter, IAC posted revenue of $829.5 million, up 26% from a year ago. Profits were $194.8 million, or $2.02 a share, largely due to a $210 million unrealized after-tax gain on the company’s 59 million-share stake in
MGM Resorts International
(MGM).
“In our first quarter following the Vimeo spin, we’re back to building,” IAC CEO Joey Levin said in a letter to shareholder. “Being small again has its benefits. Though there’s less earnings to cover the corporate overhead, smaller scale means fewer bureaucratic distractions. The natural big-company inertia toward risk avoidance reverses, and we are able to focus all our resources on expansion and taking healthy new risks.”
With the spinoffs over the past year of both Vimeo and Match.com, the biggest revenue contributor for IAC is now Angi (ANGI), a separately listed provider of home- repair services in which IAC holds an 84% stake. For the quarter, Angi had revenue of $421 million, up 12% from a year ago, and slightly below the Street consensus call for $426 million.
Angi lost 6 cents a share in the quarter, about two cents more than the Street had expected. Results reflect $9.6 million in one-time costs related to a reduction in the company’s real-estate footprint as more people work remotely.
Angi had 12% growth in its core marketplace business, including 127% growth in Angi Services, a newer business model in which services are provided at prearranged prices through third-party contractors.
Angi CEO Oisin Hanrahan noted in an interview that the company has shifted its marketing strategy to focus on the Angi brand—the company was originally called Angie’s List—while also reducing its focus on its Home Advisor brand. Both moves have had some short-term negative consequences.
Hanrahan said that due to reduced TV ad spending on Home Advisor in the quarter, that business “decayed more than expected.” IAC’s Levin said in his letter that “it’s an understatement to simply say that the impact of the brand change at Angi was more severe than we expected … we underestimated the impact of the cumulative set of changes.”
Levin noted that Angi switched its website to Angi.com from Angioslist.com—a small change that had real implications. “Because a significant amount of our customers visit our properties from search engines and these platforms take some time to recognize a new website, the number of customers arriving at our new domain through search has taken a short-term hit,” he wrote in the letter.
Angi also disclosed in its earnings announcement that it recently acquired Total Home Roofing, a general contractor that operates in multiple markets. Hanranhan says the company has proprietary tools that make it easier to estimate the costs of roofing projects. Terms of the deal weren’t disclosed.
For Dotdash, revenue was $73.3 million, up 64%. Search revenue was $183.6 million, up 40%, driven by growth in the company’s Ask Media Group, while revenue from “emerging and other” was $151.7 million, also up 40%. The company said $78 million of that was from Care.com, a provider of home health aides and other caregivers.
Dotdash has its roots in the old content site About.com, which IAC acquired from the
New York Times
for $300 million in 2012. About.com was a broad collection of user-generated sites on thousands of topics, and the quality was less than impressive.
Neil Vogel, hired in 2013 to fix the business, scrapped the old operation and created (and in some cases acquired) a collection of vertical content sites in food, finance, fashion, and other markets. The group includes sites like Verywell (a health and wellness site), Investopedia, The Spruce (home design), Serious Eats, Simply Recipes, Byrdie (beauty and makeup), Brides, MyDomaine (home décor), The Balance (personal finance), Lifewire (tech news), TripSavvy, Liquor.com, and TreeHugger (sustainability).
The obvious question for IAC is what it might spin off to shareholders next. Angi is the most obvious candidate, but Dotdash could get the same treatment at some point, a possibility Vogel says isn’t up to him.
“But for now we have capital to buy things, equity to compensate people and we’re learning to be a quarterly-based business,” he said. “And I like hanging out with Joey and Barry,” a reference to IAC CEO Joey Levin and founder Barry Diller.
In reporting results, IAC also provided its latest monthly performance update. For July, the company recorded 16% revenue growth at Angi, including 166% growth in Angi Services. Dotdash’s growth decelerated to 31%, while revenue was up 30% in Search and 31% in emerging and other.
Late in Wednesday’s regular session, IAC was off 0.3% to $134.31. Angi was up 0.7% to $11.20.
Write to Eric J. Savitz at [email protected]
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