IAC Turned A Profit In Q3 But Media & Advertising, Emerging Biz Revs Down Double Digits


Credit: Fortune

Another profitable quarter for IAC (NSDQ: IACI) (that’s two in a row) aided by $35 million in gains from the sale OpenTable shares and Match Europe, and by lower corporate costs compared to the spinoff numbers last year. Even without the gains, IAC still beat the Thomson First Call consensus by five cents per share — but that doesn’t make it a great quarter. Overall, revenue dropped 9 percent, while media and advertising revenue dropped 11 percent to $172 million from $193.3 million the previous year — and higher acquisition costs helped turn that into a 35 percent drop in profit, $20.8 million compared with $32.1 million.

Release | Webcast

2Q 2008 2Q 2009 Estimate
EPS $(0.11) $0.18 $0.13
Net Income $(14.8M) $21.7M
Revenue $369.3M $336.6M $335.11M

More on media and advertising: IAC attributes some of the revenue drop to a decline in revenue per query across its proprietary properties, including Ask.com — and, in turn, attributes some of that to a revamp that cut the number of clicks needs for results. At the same time, the cost per click decreased but IAC says the decline slowed down in Q3 compared to the previous quarter. Some of the drop was offset, according to the company, by growth in partners and queries for the Ask toolbar and at Dictionary.com. Expect some more color on advertising during the conference call with IAC Chairman and CEO Barry Diller at 11 a.m.

Citysearch: Results are included in media and advertising but worth a separate look following a relaunch and the acquisition of Urbanspoon. IAC blames a combination of the “difficult display advertising environment” and “transitional issues” (relaunch, integrating an new ad serving platform for Citysearch) for the decline in revenue.

Emerging businesses: Not enough Bottega Veneta ads at The Daily Beast? Revenue from emerging businesses dropped 19 percent to $40.5 million from nearly $50 million in Q308, while the unit lost nearly $9 million. Operating income before amortization dropped 37 percent — in part, because of investments in Beast and 3D gaming startup InstanceAction. The category also includes “our partnership with Ben Silverman,” along with Shoebuy, Pronto.com, CollegeHumor, Vimeo, and Life123.com.

Match: Last year’s numbers included Match Europe; this year’s didn’t following the Q2 sale to Meetic. Acquired in July, PeopleMedia added $6.4 million in revenue but also was affected by the write off of its $3.6 million. Without PeopleMedia and the Match Europe comp, Match revenue was up 5 percent; with those, it was down 13 percent. U.S. subs rose 9 percent.

Share buyback stalled: IAC bought back an additional half-million shares over the 5.1 million already disclosed but nowhere close to the 21.5 million shares in the stock repurchase authorization. The company says “discussions with a significant shareholder for the repurchase of its shares prevented IAC from repurchasing additional shares. These discussions have been terminated.”

Update: During the earnings call, Diller identified the “significant shareholder” as Liberty, saying the buyback would have been at market value.

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