Earnings Results: IAC begins new chapter with MGM stake, sees growing demand for Vimeo business

IAC/InterActiveCorp. embarked on a new chapter in its corporate history Monday by announcing a 12% stake in MGM Resorts International as it looks to reshape the business following the formal separation of Match Group Inc.

IAC
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was sitting on $3.9 billion in cash after Match formally broke off several weeks back, and the company opted to spend about $1 billion of it on the MGM
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stake in what Chief Financial Officer Glenn Schiffman said was a way to unlock the “hidden gem” of MGM’s nascent online-gambling business while owning a piece of the hotel operator at a perceived discount given its current valuation.

Schiffman told MarketWatch that IAC was a “classic brand with incredible potential” and said that the company’s online-gambling business could be “transformational over the next decade if not more.” In the shareholder letter announcing the deal, IAC executives said that MGM’s online gambling is “a portion of [MGM’s] revenue so small that it rounds down to zero.”

Schiffman also said that he’s “extraordinarily impressed” with the way MGM operates the rest of its business and argued that after backing out MGM’s China business, its controlled real estate investment trust, and some other assets, IAC was “getting the domestic business for free and all the online upside.”

The MGM announcement came hours before IAC reported June-quarter results and July monthly metrics that showed strong growth for the company’s Vimeo video brand as well as a rebound for ANGI Homeservices Inc.
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of which IAC has a majority economic interest.

IAC’s revenue for the June quarter rose to $726.4 million from $688.7 million a year earlier.

The company swung to a June-quarter loss per share of $1.13, whereas it recorded GAAP earnings of 16 cents a share a year prior. IAC saw adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $14.9 million, down from $55.6 million a year earlier. The company disclosed that its Ebitda consisted of a $11.2 million negative impact from separation costs related to the Match transaction and a $25 million negative impact from the endowment of its IAC Fellows program, which is aimed at helping underserved students.

Vimeo’s revenue increased 47% in the June quarter to $67.3 million as the video platform saw a 16% increase in subscribers and a 15% bump in average revenue per user. Schiffman said Vimeo was “the star of the show” for IAC given heightened interest in video communications during the pandemic.

The service offers individuals, small businesses, and enterprise customers the ability to store, edit, and create videos, as well as tools for live-streamed events. Schiffman said that Vimeo’s rising average revenue per user suggests that enterprise customers may be using the platform for more functions across the company, arguing that some businesses might start by employing Vimeo for company town halls before eventually using it for marketing and human-resources onboarding.

“We don’t think that when COVID goes away that people will retreat on their use of video,” he told MarketWatch. “Video will be in addition to other solutions.” He said that he expects that the “strong performance of Vimeo will continue” even if its not at the current “breakneck pace.”

IAC disclosed 40% revenue growth for Vimeo in the month of July.

Revenue at ANGI Homeservices rose 9% in the quarter, $375.1 million, despite declining sales in the month of April. “There’s significant resilience in the business and you saw that in the top line,” Schiffman said, as demand for home-improvement projects started recovering given that people are spending more time in their houses.

Dotdash, IAC’s media-brands business that includes Investopedia, Brides and other publications, saw revenue climb 18% to $44.6 million in the quarter. “Few publishers are able to do that in this environment,” Schiffman said, which in his view reflected IAC’s focus on “intent-driven” content that advertisers may see as more valuable.

Display advertising revenue for Dotdash turned positive in July despite declining in each month of the June quarter, which Schiffman said was indicative of how the ad marketing is “starting to come back.”

IAC shares fell about 1.6% in Monday’s session and they’ve gained roughly 3% over the past month as the S&P 500
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has risen 5.4%.