Earnings: IAC After The Split: Revs Up But Spin-Off Expenses Push Profits Down

imageYou can almost hear the relief from the Gehry-designed HQ as IAC (NSDQ: IACI) reports what chairman and CEO Barry Diller calls “the last quarter when the costs of our spin-offs will distort the operating performance.” Post-spin IAC posted a 10 percent increase in revenue for Q3, to $369.3 million from $335.4 million. But charges, spin-off expenses and taxes related to discontinued operations helped push IAC to a loss of $14.8 million loss, or $.11 per share, compared with a profit of $70.5 million, or $.47 per share, for Q307.
After this, Diller said in the earnings release, “our streamlined focus, virtually no debt and large cash balances should provide both long-term growth in our current businesses and allow us to pursue opportunities across the internet.” IAC ended the spin-off quarter with approximately $1.5 billion in cash and marketable securities — and only $95.8 million in long-term debt. (The spin spreadsheets are another story.) Some highlights after the jump
Media and advertising: Revenue grew only 2 percent to $193.3 million from $189.8 million the previous year but the operating profit for the business, which includes Ask.com, Dictionary.com, iWon, and Citysearch, rose 105 percent to $32.1 million from $15.7 million. That increase was driven in part by the acquisition of Dictionary.com and international improvements at Ask.com. Proprietary revenue now makes up 71.5 percent, outpacing network revenue.
Ask.com: Drilling down a little, while the search engine did better with queries internationally, that growth was offset partially by declines in U.S. queries “due to significantly lower advertising.” IAC credits the renewed Google (NSDQ: GOOG) ad deal with “improved economics” but says revenue per query would have grown without it. At the same time, IAC admits the Google deal contributed to a “sharp decline in network revenue” because other relationships had to be “de-emphasized.” Lower marketing spending helped profit grow at a faster pace.
Emerging businesses: A narrower loss for the emerging businesses — $7.4 million compared with $9.9 million in Q307. Those businesses include recently launched Daily Beast, VSL, RushmoreDrive.com, Life123.com; Shoebuy, ReserveAmerica, Pronto.com, Gifts.com, InstantAction.com, Connected Ventures, and 23.
Check back for coverage of the 11 AM call.
Side note: In case you were wondering about the way IAC defines itself post-spin, here’s the boilerplate: “IAC operates more than 35 leading and diversified Internet businesses across 40 countries… our mission is to harness the power of interactivity to make daily life easier and more productive for people all over the world.”
Earnings release | Webcast (11 AM ET)
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