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IAC Hints at Upcoming Investments, Growth in Dotdash

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IAC is beginning to see some benefits from its acquisition of Meredith Corp., while hinting that another investment is on the horizon.

The company acquired a 12 percent stake in MGM Resorts International in August 2020, a choice which executives said was made after looking for solid businesses that could emerge from COVID-19 relatively unphased. Coming out of the pandemic, IAC executives said they will be looking for a different kind of investment.

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“If the current valuation framework persists as we expect (years, not months), companies will eventually accept their new valuation reality, and IAC will have opportunities, for the first time in a while, to buy control positions in growing companies which still have something to prove,” IAC CEO Joey Levin wrote in the first quarter shareholder letter. “We’ll be able to make bets on superior business models and management teams without having to make bets on future valuation multiples.”

Asked to expand on the opportunities, Levin told analysts Tuesday that the company has a list of public companies it has been eyeing and has a preference toward public markets, rather than private companies. IAC likes marketplace businesses and will be looking for “new opportunities” with this investment, Levin said.

Dotdash, IAC’s digital publishing subsidiary, acquired Meredith Corp., whose brands include People magazine, Entertainment Weekly and InStyle, in a $2.7 billion deal that closed in December 2021. Dotdash Meredith now expects it will bring in more than $300 million of adjusted EBITDA this year, after making a few changes to the publications.

“Dotdash Meredith, the recent combination of Dotdash and Meredith, will be our biggest cashflow contributor for the next several years, and we’re beginning to see the value we imagined in the combination,” Levin said in the shareholder letter.

The company has already moved the Meredith sites to the Dotdash platform, which helps sites such as Health.com load faster and feature fewer ads and stopped the printing of seven publications and reduced the print frequency of others, which the company said allowed it to “invest in the paper quality” of the other titles and helped cut down on overall costs.

This led to taking more than $90 million of annualized costs out of the combined business, which the company says was related to “corporate overhead” as well as “rationalizing the magazine business.” This will begin to appear in the company’s second quarter results, with a larger impact by the fourth quarter.

Dotdash Meredith reported digital revenue of $216 million and print revenue of $290 million. The segment saw an operating loss of $56 million, which included $26.5 million of restructuring costs due to the acquisition of Meredith Corp. The company expects Digital revenue growth to see a 15 percent to 20 percent improvement by the end of the year.

In the first quarter, IAC reported overall revenue of $1.3 billion, up from $786 million in the first quarter of 2021. The company reported a net loss of $187.3 million, compared to a loss of $7.2 million a year ago, which IAC attributes to decreases in MGM’s share price as unrealized losses.

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