IAC(US:IAC)2020-11-06 21:17Financial Performance - For the three and nine months ended September 30, 2020, ANGI was charged $1.3 million and $3.6 million, and $1.0 million and $3.7 million, respectively, by IAC for services rendered [156]. - The Company incurred allocated costs, including stock-based compensation expense, of $46.6 million and $119.0 million for the three and nine months ended September 30, 2019, respectively [148]. - The net increase in Old IAC's investment in the Company prior to the Separation was $(1,685,995) thousand for the six months ended June 30, 2020 [150]. - Revenue increased by $83.0 million, or 12%, to $788.4 million for the three months ended September 30, 2020, driven by contributions from Emerging & Other, ANGI, Vimeo, and Dotdash, partially offset by a decrease from Search [185]. - For the nine months ended September 30, 2020, revenue increased by $163.6 million, or 8%, to $2.2 billion, mainly due to contributions from Emerging & Other and ANGI, offset by a decrease from Search [187]. - The company recorded impairments of $53.2 million related to goodwill and $10.8 million related to intangible assets due to lower consumer queries and challenges in monetization [181]. - Operating loss for the same period was $128.6 million, a decrease of $142.5 million, primarily due to a goodwill impairment of $53.2 million and intangible asset impairments at Search [185]. - Operating loss for the nine months increased to $548.0 million, primarily due to a goodwill impairment of $265.2 million and intangible asset impairments at Search [187]. - Adjusted EBITDA decreased by $24.7 million to $35.2 million, attributed to reduced profits from ANGI and Search, and increased losses from Corporate and Emerging & Other [185]. - Adjusted EBITDA for the nine months decreased by $109.1 million to $41.9 million, mainly due to reduced profits from Search and ANGI, and increased losses from Corporate and Emerging & Other [187]. Revenue Breakdown - For the three months ended September 30, 2020, total revenue from Google was $132.4 million, representing 17% of the company's revenue [177]. - Revenue from the Services Agreement for the Desktop business was $35.6 million for the three months ended September 30, 2020, down from $68.0 million in the same period of 2019 [178]. - The company experienced a decline in revenue from the Services Agreement, with $118.9 million for the nine months ended September 30, 2020, compared to $234.1 million in the same period of 2019 [178]. - Marketplace Revenue includes consumer connection revenue and service professional membership subscription revenue, excluding revenue from Angie's List and other platforms [172]. - ANGI revenue increased 10% to $1.1 billion, driven by Marketplace Revenue growth of $103.4 million, or 14% [194]. - Vimeo revenue grew 44% to $75.1 million, attributed to a 22% increase in average revenue per subscriber and a 21% increase in Vimeo Ending Subscribers to nearly 1.5 million [194]. - Dotdash revenue increased 26% to $50.8 million, driven by a 70% growth in Performance Marketing Revenue and a 9% increase in Display Advertising Revenue [194]. - Search revenue decreased 22% to $145.2 million, primarily due to a 44% decline in Desktop revenue [194]. - Emerging & Other revenue surged 82% to $127.4 million, mainly due to the contribution of Care.com, acquired on February 11, 2020 [194]. Expenses and Costs - Cost of revenue for the three months ended September 30, 2020, increased 31% to $207.6 million, representing 26% of total revenue [196]. - Selling and marketing expense rose 10% to $340.5 million for the three months ended September 30, 2020, accounting for 43% of revenue [200]. - General and administrative expense increased 25% to $168.9 million for the three months ended September 30, 2020, representing 21% of revenue [204]. - General and administrative expenses increased by $99.1 million from Corporate, $24.9 million from Emerging & Other, and $15.3 million from ANGI for the nine months ended September 30, 2020 compared to the same period in 2019 [205]. - Product development expenses rose by $51.8 million (37%) for the nine months ended September 30, 2020, driven by increases from Emerging & Other ($26.4 million), Vimeo ($15.3 million), and Dotdash ($6.7 million) compared to the same period in 2019 [209]. Debt and Financing - The outstanding balance of the ANGI Term Loan as of September 30, 2020, was $237.2 million, with an interest rate of 1.66% [174]. - ANGI Group's total long-term debt as of September 30, 2020, was $715.4 million, up from $231.9 million at the end of 2019 [258]. - The Company entered into a loan agreement with Old IAC for an amount not to exceed $15.0 million for general working capital purposes [153]. - The Company issued $500 million of 3.875% Senior Notes due August 15, 2028, with proceeds intended for general corporate purposes, including potential acquisitions [174]. - Financing activities generated $4.3 billion, including $1.7 billion from Old IAC and $500 million from the issuance of ANGI Group Senior Notes [263]. Cash Flow and Liquidity - Total cash and cash equivalents for IAC (excluding ANGI) as of September 30, 2020, were $2.9 billion, significantly up from $449.2 million at the end of 2019 [258]. - Net cash provided by operating activities for the nine months ended September 30, 2020, was $168.0 million, down from $191.4 million in 2019 [259]. - Net cash used in investing activities totaled $1.8 billion for the nine months ended September 30, 2020, primarily due to a $1.0 billion investment in MGM and acquisitions related to Care.com [262]. - The company anticipates needing to raise additional capital through future debt or equity financing for acquisitions and investments [283]. - The company’s liquidity could be negatively impacted by decreased demand for products and services due to COVID-19 [283]. - The company’s existing cash and expected positive cash flows are deemed sufficient to fund normal operating requirements for the foreseeable future [283]. Impairments and Adjustments - The company recorded a goodwill impairment of $265.1 million in 2020, which significantly impacted earnings adjustments [260]. - The Search segment experienced a significant operating loss of $52.98 million for the three months ended September 30, 2020, a decrease of $81.7 million compared to the same period in 2019 [214]. - ANGI Homeservices reported a 35% decrease in Adjusted EBITDA to $38.5 million for Q3 2020, attributed to increased costs and severance expenses [222]. - Vimeo's Adjusted EBITDA improved by $11.4 million to $3.4 million, recovering from a loss of $8.0 million, driven by higher revenue despite increased compensation expenses [223]. - Dotdash's Adjusted EBITDA surged 130% to $16.2 million, primarily due to higher revenue, although offset by increased compensation expenses [224]. - Search segment's Adjusted EBITDA fell 59% to $11.9 million, reflecting a significant revenue decline, despite reduced marketing expenses [224]. - Emerging & Other segment's Adjusted EBITDA loss increased to $8.1 million, impacted by transaction-related costs from the Care.com acquisition [225]. - Corporate Adjusted EBITDA loss rose 22% to $26.7 million, mainly due to increased compensation expenses related to stock option exercises [226]. Stock and Equity - The company repurchased 7.6 million shares of its Class A common stock at an average price of $7.00 per share, totaling $53.4 million during the nine months ended September 30, 2020 [273]. - At September 30, 2020, there was $197.8 million of unrecognized compensation cost related to equity-based awards, expected to be recognized over approximately 3.1 years [215]. - The increase in stock-based compensation expense was $53.7 million for the nine months ended September 30, 2020, driven by a modification charge related to the Separation and new equity awards [217]. - ANGI's outstanding equity awards have an aggregate intrinsic value of $135.4 million, with potential withholding taxes of $67.7 million at a 50% rate [277]. Market and Economic Conditions - The United States accounted for 81% of the company's revenue for the three months ended September 30, 2020, with significant impacts from the COVID-19 pandemic [192]. - ANGI Homeservices experienced a rebound in service requests in the second quarter of 2020, exceeding pre-COVID-19 growth levels, but faced labor and material constraints in the third quarter [189]. - Vimeo saw strong revenue growth due to increased demand for video communication during the pandemic [189]. - The decline in Search revenue was driven by lower queries and monetization challenges following browser policy changes and a decrease in advertising rates due to COVID-19 impacts [194].