IAC Earnings: Turnaround in Angi and Growth in Ads Are on Their Way Back to IAC, as Is Profitability

We had a few major takeaways from the IAC IAC first-quarter results. First, we were pleased with Angi’s new focus on providing more options to the customers and increasing its frequency and retention rates, rather than marketing too aggressively and attaining low-revenue-generating customers or driving some potential ones away. This could return Angi to more consistent top-line growth next year. Second, the state of the digital advertising market is improving as we expected, and the firm’s Dotdash Meredith is likely to return to growth in the second half of this year. Third, while the firm continues to progress on those fronts, Turo, the car sharing marketplace platform, in which IAC increased its stake to 31%, is likely to IPO this year. Finally, management increased its adjusted EBITDA guidance for the year. We view IAC shares as attractive as they are still trading at more than a 50% discount to our $135 fair value estimate.

Angi revenue came in at $392.4 million, down 10% from last year as the firm recognizes service revenue now on a net basis. Pro-forma Angi revenue was up 1% from last year with growth in services and roofing offset by flat ads and leads revenue, which represents 75% of Angi’s total revenue. IAC’s service professional count declined, but requests matched and monetized per service professional improved, which we think likely will attract more professionals back to the platform in the second half, possibly an early indication of a network effect.

Dotdash Meredith revenue declined 23% year over year to $387.6 million driven by declines in digital and print ad revenue. IAC did see improvements in user traffic on its properties and in ad revenue in March.