IAC feels a sting from Angi rebrand in first earnings report after Vimeo spinoff

A lighter IAC/InterActiveCorp. kicked off its final chapter on Wednesday with its first earnings report following the May spin-off of Vimeo.

The company, which also includes Match Group Inc. MTCH has spawned,
-4.99%
a year ago, is now focused on conducting a rebranding at home improvement company Angi Inc. ANGI,
+0.63%
and driving further growth at Dotdash, a collection of media brands including Brides and Liquor.com.

IAC IAC,
-0.38%
posted revenue of $829.5 million in the second quarter, up from $659.0 million a year earlier. Analysts tracked by FactSet were expecting $853 million, although the consensus figure includes several estimates from before the completion of the Vimeo spin-off. Just over half of the company’s revenue came from Angi, which posted $421.0 million in sales, up from $375.1 million but below the FactSet consensus of $425 million.

IAC shares fell slightly in after-hours trading immediately following the release of the results, closing down 0.4% at $134.25. The stock is up 6.6% so far this year as the S&P 500 index SPX,
-0.46%
won 17.8%.

Angi is in the midst of a rebranding under new chief executive, Oisin Hanrahan, as the company focuses on building the Angi name in a modern twist on Angie’s List. There’s some “financial pain” involved as the company is less emphasizing the HomeAdvisor brand name and pulling back on spending there, Hanrahan told MarketWatch, but he’s optimistic about the “incredible consumer awareness” for the Angi brand, despite limited investment there. during the past years .

“[W]While we always knew the rebrand would be difficult and expensive, we underestimated the impact of the cumulative series of changes,” IAC CEO Joey Levin said in a shareholder letter. “Fortunately, that audience of seeking has begun to recover, and while we’re not fully recovered, we expect to eventually get back to where we started and beyond.”

Hanrahan said Angi has “made this an investment quarter” and wants to achieve his goal of uniting under one brand more quickly without “worries[ing] about the pain of a quarter.” While the HomeAdvisor brand has fallen faster than expected due to the lack of brand spending, he said dynamics “reinforce the decision that this is the right thing to do.”

Angi is benefiting from continued consumer investment in home improvement projects, without the “wisdom” seen in the early days of the pandemic, Hanrahan said. As people return to “some sort of normalcy,” they’re focused on a wider range of home projects beyond trendy pandemic projects like above-ground swimming pools.

In today’s housing market, people are buying homes that are “a little further out of the way than they would normally have bought,” meaning they are slightly larger and in need of more modernization, in part to support hybrid work-living arrangements, he continued. .

The company continues to see supply under pressure as some professionals struggle to find day labor, limiting the projects they can take on.

Angi acquired Total Home Roofing in early July to accelerate its roofing business growth and incorporate technology such as aerial photography into the pricing process and job licensing process. Angi reported sales growth of 16% for the month of July, up from 7% in May and June, although only the July statistic reflects contributions from the roofing acquisition.

“We will likely run the business in and around breakeven for the remainder of 2021, and the brand impact on customer acquisition will keep the year-over-year organic sales growth at reduced current levels for at least the coming months, although the small acquisition in roofing shows an improvement in the published numbers,” Levin said in the shareholder letter.

For the second quarter, Angi posted a loss of $30.3 million, or 6 cents per share, from net income of $12.7 million, or 2 cents per share, a year earlier. Analysts tracked by FactSet expected a GAAP loss of 4 cents per share. Angi repurchased 700,000 shares between May 7 and August 3 at an average price of $11.71 each, and the company still has 18.1 million shares remaining on its repurchase authorization.

IAC posted net income of $194.8 million, or $2.02 per share, while it lost $96.1 million, or $1.13 per share a year earlier. The improvement in earnings reflects an unrealized gain of $210 million after tax arising from the company’s investment in MGM Resorts International MGM,
+0.87%.
Analysts expected a GAAP loss per share of 44 cents.

IAC saw the fastest revenue growth in the second quarter from its Dotdash media business, which posted revenue of $73.3 million, up 64%.

Dotdash has a variety of brands, including Brides, The Spruce, Simply Recipes, TripSavvy, and Liquor.com, and it focuses on selling “context and intent” to advertisers rather than the public as readers typically flock to the sites come up with specific questions, such as how to fix a slow wireless router or make a cake for 10 people, according to Neil Vogel, CEO of Dotdash.

The company is benefiting from a recovery in the advertising market from the worst part of the pandemic and is seeing recovery in some of its content verticals that struggled earlier in the crisis. The travel industry “went to near zero,” but now people are interested in reading up on domestic travel ideas, Vogel said, as the Brides publication takes advantage of people trying to fit two years of weddings into one year and looking for creative ideas. ways to get around location shortages.

“Everyone wants to get married in a barn, for Instagram, with string lights,” Vogel joked.

Dotdash generates about a third of its revenue from commissions when people buy things while reading its sites and the company engages in licensing because it wants to make its own products. Several Dotdash brands sell their own rugs, pet sprays and paint, Vogel said, and while this part of the business is “financially not yet material,” he sees opportunities to translate Dotdash editors’ knowledge of consumer preferences into the kind of products that people are likely to buy.

IAC generated $183.6 million in second-quarter revenue from its search business and posted $151.7 million in revenue in its emerging and other segments, including the Care.com childcare and senior care platform. Turnover grew by 40% in both segments.

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