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IAC continues to benefit from strong results at its recent spin-offs.
The New York-based media conglomerate posted better-than-expected second-quarter revenue and earnings numbers Wednesday, boosted by the performances of Match Group Inc. MTCH, +17.28% and Angi Homeservices Inc. ANGI, -1.30% The company has an 81% stake in Match and an 87% stake in Angi.
IAC IAC, +7.69% posted revenue of $1.06 billion for the second quarter, up from $767.4 million a year earlier and ahead of the $1.02 billion FactSet consensus. The company recorded net income of $218.4 million, or $2.32 a share, up from $66.3 million, or 70 cents a share, in the year-ago quarter. Analysts had been expecting 85 cents in EPS.
Chief Financial Officer Glenn Schiffman told MarketWatch that EPS was impacted by a large gain in IAC’s “other income” category due to new accounting rules that require the company to show mark-to-market gains on investments in other companies, whereas previously IAC could hold these investments at cost.
Backing out that impact, IAC would have recorded EPS of $1.16.
Match and Angi were the biggest components of IAC’s revenue. Match, which became a standalone company back in 2015, beat top- and bottom-line estimates with its own earnings report Tuesday afternoon, prompting the largest single-day percentage gain ever for Match shares. Match generated nearly all of the company’s operating profits.
Meanwhile, Angi Homeservices was one of the company’s fastest-growing line items, with revenue up 63% form a year earlier. Angi Homeservices was formed last fall when IAC combined its HomeAdvisor platform with recently acquired Angie’s List and spun them out into a separate company.
“Each of our businesses is in the early stages of penetrating very large total addressable markets,” Schiffman said.
IAC has a history of spinning out successful companies — Expedia Inc. EXPE, -1.00% is one — and the challenge will be to find the next powerhouse. The company sees potential in Vimeo, a subscription video service that doesn’t feature ads, and Chief Executive Joey Levin said in his letter to shareholders that the product’s “small financial contribution to IAC today belies its enormous potential.”
Schiffman told MarketWatch that Vimeo is “a very different business than Netflix” as it doesn’t create content and is focused on providing tools to content creators. He thinks the company is “just scratching the surface” in the market for software services aimed at video creators.
Analyst sentiment around IAC is overwhelmingly positive. Of the 18 analysts tracked by FactSet who cover the stock, 16 have buy ratings and the other two have hold ratings.
IAC “provides investors both Match exposure and upside associated with the unwinding of the current +$2 billion discount to NAV [net asset value] embedded in the stock,” Evercore ISI analyst Anthony DiClemente wrote Wednesday, after Match’s results came out but before IAC posted its numbers. He has an in-line rating on Match’s stock but an outperform rating on IAC’s.