Digital media conglomerate IAC (NASDAQGS:IAC) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 8.6% year on year to $570.5 million. Its non-GAAP loss of $2.73 per share was 38.9% above analysts’ consensus estimates.
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IAC (IAC) Q1 CY2025 Highlights:
- Revenue: $570.5 million vs analyst estimates of $809.7 million (8.6% year-on-year decline, 29.5% miss)
- Adjusted EPS: -$2.73 vs analyst estimates of -$4.46 (38.9% beat)
- Adjusted EBITDA: $50.86 million vs analyst estimates of $679,250 (8.9% margin, significant beat)
- EBITDA guidance for the full year is $267.5 million at the midpoint, above analyst estimates of $250.5 million
- Operating Margin: 6.3%, up from -10.2% in the same quarter last year
- Free Cash Flow was -$4.59 million, down from $48.34 million in the same quarter last year
- Market Capitalization: $3.02 billion
StockStory’s Take
IAC’s first quarter results reflected a challenging environment for digital advertising and consumer platforms, with management attributing weaker revenue to lower traffic and a soft programmatic advertising market. CEO Christopher Halpin noted that direct premium advertising and performance marketing provided some stability, while categories like food and beverage advertising lagged. Product initiatives such as the People app launch and ongoing investments in proprietary ad tech like D/Cipher were also highlighted as key operational focal points.
Looking ahead, IAC’s management reaffirmed full-year adjusted EBITDA guidance, citing careful cost controls and an active approach to capital allocation. The team flagged macroeconomic uncertainty, with COO and CFO Christopher Halpin stating, “We are carefully monitoring the macroeconomic environment for signs of either stability or weakness among consumers and brands.” Strategic priorities include executing new product rollouts, pursuing M&A, and maintaining financial flexibility to respond to changing conditions.
Key Insights from Management’s Remarks
The quarter’s performance was shaped by macro headwinds in advertising, product innovation across media brands, and efforts to optimize cost structure. Management discussed several business-specific drivers and industry dynamics impacting IAC and its segments.
- Advertising market bifurcation: Direct premium advertising remained stable, particularly in categories like pharma, tech, and beauty, while programmatic advertising softened due to weaker demand and exit of major advertisers such as Temu and Shein.
- Product innovation focus: The company launched the People app and MyRecipes, aiming to engage younger and broader audiences. Management described these as part of a shift toward direct connections with users and advertisers, reducing reliance on external platforms like Google Search.
- D/Cipher Plus expansion: IAC is extending its proprietary contextual ad-targeting technology, D/Cipher Plus, to the broader web. The product is seeing uptake in premium deals and is expected to be a larger contributor in 2026. Jim Lawson was appointed President of D/Cipher to commercialize and scale the offering.
- Care.com platform improvements: Management highlighted ongoing upgrades to Care.com’s matching, messaging, and fulfillment features. New pricing and marketing strategies are being rolled out after the product reaches targeted improvement milestones, with growth expected to resume in 2026.
- Cost discipline and share buybacks: IAC took steps to rationalize costs at the corporate level and completed a 4.5 million share buyback, increasing its authorization for future repurchases. The separation of Angi and a focus on capital allocation were emphasized as part of ongoing value creation efforts.
Drivers of Future Performance
Management’s outlook centers on digital product innovation, premium advertising resilience, and disciplined capital allocation as key themes for the remainder of the year and beyond.
- Direct-to-consumer platform expansion: Ongoing investment in apps, events, and proprietary content platforms is aimed at deepening audience engagement and attracting advertisers less dependent on volatile programmatic channels.
- Ad tech and data-driven targeting: The rollout of D/Cipher Plus and enhancements in contextual ad targeting are expected to support future revenue, particularly as privacy regulations evolve and cookie-based targeting becomes less reliable.
- Macro and competitive risks: Management acknowledged potential headwinds from economic uncertainty, changes in advertiser sentiment, and evolving search algorithms (such as Google’s AI Overviews), which could impact site traffic and monetization.
Top Analyst Questions
- Jason Helfstein (Oppenheim): Asked about product priorities for driving 2026 revenue growth at Dotdash Meredith. Management pointed to the People app, MyRecipes, and D/Cipher Plus while flagging 2026 as a pivotal year for these initiatives.
- John Blackledge (TD Cowen): Sought clarification on Q1 advertising trends and the mix between premium and programmatic. Management noted stable premium demand but soft programmatic pricing due to lower impressions and external market factors.
- James Heaney (Jefferies): Inquired about strategic objectives for D/Cipher under new leadership. Management highlighted Jim Lawson’s role in scaling the product and its growing contribution to larger ad deals.
- Cory Carpenter (JPMorgan): Asked about the impact of Google not phasing out cookies. Management stated it had minimal impact, as D/Cipher’s contextual targeting remains performant regardless of cookie changes.
- Tom Champion (Piper Sandler): Queried progress at Care.com’s consumer business. Management described ongoing product upgrades and the plan to step up marketing after platform improvements are fully implemented.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the adoption and revenue impact of new digital product launches like D/Cipher Plus and the People app, (2) ongoing improvements to Care.com’s platform and their effect on user engagement and growth, and (3) shifts in advertising demand across premium and programmatic channels. We will also track IAC’s capital allocation decisions, including potential M&A activity and additional share repurchases.
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