IAC (NASDAQ:IAC) executives said the company’s recent consolidation plan is intended to simplify its structure, reduce corporate expense and narrow what management views as a discount in the company’s share price.
Speaking at a TD Cowen fireside chat, Christopher Halpin, IAC’s chief operating officer and chief financial officer, said the late-April announcement followed earlier moves to divest non-core assets, including the sale of Care.com, which closed in the first quarter and raised about $300 million in cash.
Corporate consolidation expected to run through early 2027
Halpin said IAC expects the consolidation to generate more than $40 million in operating cash savings relative to IAC corporate expense, which had been running at about $85 million. He also said the company expects to save $20 million to $25 million of stock-based compensation on an ongoing basis.
The transition is expected to be completed by February 2027, with the second quarter of 2027 expected to be the first clean quarter reflecting the full benefit, Halpin said. He said every corporate employee has been assigned either a continuing role or a departure date. Halpin and Chief Legal Officer Kendall Handler are expected to remain through second-quarter earnings before handing off responsibilities to People Inc. Chief Executive Neil Vogel and Tim Quinn, People Inc.’s chief financial officer.
“We think it’s going to produce a leaner, faster, more efficient IAC, which will also be rebranded People Incorporated to the benefit of shareholders,” Halpin said.
Quinn said People Inc., which has about 3,600 employees, has the infrastructure to absorb the added functions, while noting that areas such as investor relations and tax will be picked up because People Inc. does not currently have those competencies in-house.
People Digital revenue grows as licensing and performance marketing offset traffic pressure
Quinn said People Inc. had another solid first quarter, with total digital revenue growing about 8%. Advertising revenue grew 1% year over year and represented a little under 60% of People Digital revenue.
Quinn said advertising reflected two opposing trends: strong performance from the premium sales team, including off-platform advertising, and continued softness in traffic to owned-and-operated websites. He described the ad market as “solid” but “not spectacular.”
Performance marketing grew in the mid-teens and accounted for about a quarter of People Digital revenue. Quinn said the business refers consumers to retailers using guides, ratings, reviews and other methods, driving more than $1.5 billion in retail sales to companies including Amazon, Walmart, Nordstrom and Wayfair. He said 25% of performance marketing revenue is now tied to non-session-based views, reflecting distribution through channels such as Apple News, Discover, email and off-platform marketing.
Licensing, about 15% of the mix, also had a strong quarter. Quinn said the licensing business includes three categories: content licensing across platforms such as Apple News, Meta, Yahoo and MSN; AI and data licensing, including deals with OpenAI, Meta and Microsoft; and product and brand licenses, including the Better Homes & Gardens license with Walmart.
AI changes traffic patterns, but off-platform audiences grow
Quinn said People Inc. began preparing for changes in media consumption after seeing an early version of ChatGPT in late 2022. The company reorganized around brand leaders responsible for creating content across magazines, websites and platforms such as YouTube, TikTok and Instagram.
Owned-and-operated website traffic declined 16% to 17% in the first quarter, and Quinn said the company expects that pressure could worsen in the second quarter. At the same time, off-platform audiences grew nearly 40% on a two-year compound annual growth basis in the first quarter.
Quinn said 60% of revenue is still derived from visits to People Inc.’s branded websites, and that portion was roughly flat to down 1% in the first quarter. The remaining 40% of revenue, derived from other sources, grew 24%.
On whether Google Search traffic will stabilize, Quinn said the answer varies by brand. Some brands, including InStyle, have very little search exposure, while others, such as recipe-related properties, remain more exposed to AI Overviews. Halpin said some brands appear to be near maximum AI Overviews frequency, while others are still moving through the transition.
Quinn said People Inc. is using AI tools to improve efficiency in content production, including topic selection, brief writing and workflows, while emphasizing that the company’s content remains human-made. He also said AI has potential applications in ad targeting, where People Inc. already commands a premium in the market.
Margins and cash flow remain in focus
People Digital’s first-quarter EBITDA came in better than expected, with about 200 basis points of margin improvement, Quinn said. He attributed the improvement primarily to licensing and off-platform advertising products, both of which carry strong margins, offsetting margin pressure from declining website traffic.
Quinn said People Inc. expects second-quarter margins to remain solid and expects full-year margins to be comparable to last year, with the possibility of modest expansion.
For the broader company, Quinn noted IAC’s EBITDA guidance of $210 million to $260 million for the year, with at least $150 million coming from People Inc. He said People Inc. has strong free cash flow characteristics and expects at least 50% of EBITDA to convert to free cash flow.
Halpin said corporate expenses include one-time costs of about $15 million this year related to severance, retention bonuses and related items, and that many employee exits are weighted toward the back half of the year.
Executives discuss MGM, Turo and Google litigation
Halpin also discussed IAC’s 26% stake in MGM Resorts, including MGM’s Osaka project in Japan. He called it an “incredible opportunity” to build the only legally licensed integrated gaming resort in Japan and said MGM has been thoughtful about hedging, local financing and tax structuring. He said investors may better appreciate the project as it approaches its expected autumn 2030 launch.
On Turo, Halpin said IAC owns 32% of the company and “very much” likes the business. He said Turo was a major pandemic winner, later faced headwinds in the rental car sector, and is now back to double-digit growth. He said the company is EBITDA and free cash flow positive.
Quinn also addressed potential litigation proceeds tied to Google’s ad tech case. He said People Inc. believes it can rely on government findings and a ruling that Google used monopolistic power to disadvantage advertisers and publishers in the ad tech market. Quinn said the debate now centers on the look-back period and damages, adding that People Inc. and its predecessors are among the largest plaintiffs in the action.
Quinn said the company has publicly discussed a potential recovery of more than $100 million, and that it could be “meaningfully more,” though the matter may take the rest of this year and into next year to resolve.
About IAC (NASDAQ:IAC)
IAC (NASDAQ: IAC) is a publicly traded holding company headquartered in New York City that builds and invests in consumer-focused internet businesses. Through its portfolio of digital media brands, online marketplaces and subscription services, IAC delivers content and connections across a range of verticals, including lifestyle, finance, home services and personal care. The company’s operations span North America and parts of Europe, where its brands reach millions of visitors each month.
In the digital publishing space, IAC’s Dotdash Meredith division develops original content and data‐driven journalism across more than a dozen specialty sites.
