Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IAC Inc (IAC, Financial) reported strong digital revenue growth for Dotdash Meredith (DDM), with expectations to grow 15% or better in Q3.
- Programmatic ad rates for DDM were up 36% in the quarter, significantly outperforming the market.
- The company has seen improved marketing efficiency and higher quality revenue streams at Angi, leading to better profitability.
- IAC Inc (IAC) has active discussions for additional AI licensing deals, indicating potential for future revenue growth.
- The company is focused on smart capital allocation and exploring M&A opportunities to enhance shareholder value.
Negative Points
- Angi's revenue is expected to decline by about 15% in Q3, reflecting ongoing challenges in the business.
- SEO performance at Angi has been on a downward path, requiring significant efforts to stabilize and improve.
- The macroeconomic environment remains uncertain, which could impact various segments of IAC Inc (IAC)'s business.
- Despite improvements, Angi is still in the early stages of enhancing customer experience and job matching.
- The company faces challenges in executing share repurchases due to ongoing M&A discussions and other strategic considerations.
Q & A Highlights
Q: What are you seeing right now in terms of macro trends that are allowing Dotdash Meredith (DDM) to accelerate while others are fading? How much of a contributor to that was recent AI licensing deals?
A: (Joseph Levin, CEO) Traffic and monetization are key. Traffic has been strong due to investments in content and distribution. DDM has maintained its position within the Google ecosystem and diversified through email, social media, and other platforms. Monetization has improved with higher programmatic ad rates and premium sales. AI licensing deals have contributed to revenue growth, with OpenAI being a significant partner. (Christopher Halpin, CFO) About half of the digital licensing revenue growth came from the OpenAI deal, which started in early May.
Q: What inning would you say Angi is in regarding improving customer experience and profits? What drove the profit upside in the quarter?
A: (Jeff Kip, CEO of Angi) We're in the bottom of the fourth inning. Focus remains on getting more jobs done well, improving SEO, SEM, and third-party quality. (Christopher Halpin, CFO) Profitability improved due to greater efficiency, better matching, and targeting higher quality professionals. Some expenses shifted from Q2 to Q3, but overall, margins and profitability are expected to continue improving.
Q: Can you expand on the statement about putting cash to work and shrinking the discount in IAC's equity? Any plans for MGM and Turo stakes?
A: (Joseph Levin, CEO) Execution, smart capital allocation, and crystallizing value are key to shrinking the discount. We're looking for new M&A opportunities but remain disciplined. For MGM and Turo, we're happy with the current path and hope to continue increasing our ownership without additional cash outlay.
Q: Are you seeing any signals of macro softness across IAC's business segments? What are the key drivers of expected accelerating DDM digital revenue growth in 3Q?
A: (Joseph Levin, CEO) We're not seeing significant macro softness. Prime Day was strong, and advertising spend looks healthy. (Christopher Halpin, CFO) Traffic and monetization are strong, with solid growth in entertainment, food, and other categories. Programmatic monetization and premium sales are also performing well.
Q: Why didn't IAC repurchase stock given the improvement in DDM and Angi? What are the most attractive areas for M&A?
A: (Joseph Levin, CEO) We did look at share repurchases but are focused on M&A opportunities. We believe we can afford both share repurchases and M&A. Our Chairman wants to keep pressure on the organization to pursue M&A. There are real opportunities in the market, especially in the $300 million to $700 million range.
Q: How is the pipeline for data licensing deals? Could you share the potential size of this opportunity?
A: (Joseph Levin, CEO) We are in active discussions with multiple players and expect more deals. The market is realizing the value of content, and we believe our trusted brands will be increasingly valuable. (Christopher Halpin, CFO) Each LLM operator has a different approach, but we believe our content will be highly sought after.
Q: How much more growth do you see from programmatic ad rates at DDM? How are conversations changing after Pandora's performance with Decipher?
A: (Christopher Halpin, CFO) Programmatic rates were up 36% in Q2, and we expect to continue outperforming the market. Decipher is now in over half of our premium deals and is showing strong performance. We have 27 case studies showing significant performance improvements, and we plan to integrate Decipher into programmatic platforms.
Q: How does Google's latest plan to not deprecate third-party cookies impact your outlook for DDM? Are you deploying alternative identifiers like UID?
A: (Joseph Levin, CEO) The end state remains the same; the cookie audience will continue to shrink. DDM offers advertisers access to a non-cookie audience with high intent and performance. We believe this will be beneficial for DDM in the long term.
Q: What are the key areas of focus for improving the consumer experience at Angi? What is needed to get SEO from stabilization to driving improvements?
A: (Jeff Kip, CEO of Angi) We are focused on improving matching and driving better matches. On SEO, we have rebuilt the infrastructure and are producing the right content. We believe we have the team and technology in place to execute and improve SEO.
Q: Can you talk about engagement trends on DDM properties? Is there an opportunity to drive personalization and higher time spent?
A: (Joseph Levin, CEO) Yes, there is an opportunity. AI is a fantastic tool for driving engagement by suggesting the next article to read. We are using these tools to drive deeper engagement and frequency across our properties.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
