Add
IACI to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| IACI > SEC Filings for IACI > Form 10-Q on 10-Nov-2008 | All Recent SEC Filings |
10-Nov-2008
Quarterly Report
Management Overview
On August 20, 2008, IAC completed its previously announced plan to separate into five publicly traded companies:
º •
º IAC, which includes:
º •
º the businesses comprising its Media & Advertising segment;
º •
º the Match and ServiceMagic segments;
º •
º the businesses comprising its Emerging Businesses segment,
including Shoebuy and ReserveAmerica, which were formerly
included in the Retailing and Ticketmaster segments,
respectively; and
º •
º certain investments in unconsolidated affiliates.
º •
º HSN, Inc. ("HSNi"), which includes HSN TV, HSN.com, and the
Cornerstone Brands, Inc. portfolio of catalogs, websites and retail
locations;
º •
º Interval Leisure Group, Inc. ("ILG"), which includes the businesses
that comprised the Interval segment;
º •
º Ticketmaster, which includes its primary domestic and international
operations as well as certain investments in unconsolidated
affiliates; and
º •
º Tree.com, Inc. ("Tree.com"), which includes the businesses that
comprised the Lending and Real Estate segments.
We refer to this transaction as the "Spin-Off". Immediately subsequent to the Spin-Off, IAC effected a one-for-two reverse stock split. All share information, unless otherwise noted, reflects the impact of the reverse stock split and is not adjusted for the relative values of the spun-off businesses.
The results of operations of HSNi, ILG, Ticketmaster and Tree.com have been classified as discontinued operations for all periods presented.
All references to "IAC," the "Company," "we," "our" or "us" in this report are to IAC/InterActiveCorp.
During the first quarter of 2008, in contemplation of the Spin-Off, IAC reorganized its then existing Retailing, Ticketmaster and Emerging Businesses reporting segments. Shoebuy and ReserveAmerica, which were previously included in the Retailing and Ticketmaster reporting segments, respectively, are now included in the Emerging Businesses segment. Information for all prior periods has been reclassified to conform with the current year segment presentation.
For a more detailed presentation of the Company's operating businesses, see the Company's annual report on Form 10-K for the year ended December 31, 2007, as amended.
Results of operations for the three and nine months ended September 30, 2008 compared to the three and nine months ended September 30, 2007:
Set forth below are the contributions made by our various segments and corporate expenses to consolidated revenue, operating (loss) income and Operating Income Before Amortization (as defined
in IAC's Principles of Financial Reporting) for the three and nine months ended September 30, 2008 and 2007 (rounding differences may occur):
Three Months Ended September 30, Nine Months Ended September 30,
2008 2007 Growth 2008 2007 Growth
(Dollars in thousands)
Revenue:
Media & Advertising $ 193,273 $ 189,824 2 % $ 595,136 $ 531,901 12 %
Match 93,540 89,109 5 % 277,358 258,111 7 %
ServiceMagic 33,799 24,591 37 % 98,618 71,453 38 %
Emerging Businesses 49,644 36,319 37 % 141,945 99,341 43 %
Inter-segment elimination (976 ) (4,482 ) 78 % (18,957 ) (7,104 ) (167 )%
Total $ 369,280 $ 335,361 10 % $ 1,094,100 $ 953,702 15 %
|
Three Months Ended September 30, Nine Months Ended September 30,
2008 2007 Growth 2008 2007 Growth
(Dollars in thousands)
Operating (Loss) Income:
Media & Advertising $ 32,106 $ 15,675 105 % $ 93,166 $ 15,484 502 %
Match 23,978 29,272 (18 )% 50,740 49,603 2 %
ServiceMagic 8,111 4,626 75 % 22,627 16,103 41 %
Emerging Businesses (7,390 ) (9,912 ) 25 % (25,829 ) (8,990 ) (187 )%
Corporate (79,443 ) (37,968 ) (109 )% (180,884 ) (116,535 ) (55 )%
Total $ (22,638 ) $ 1,693 NM $ (40,180 ) $ (44,335 ) 9 %
|
Three Months Ended September 30, Nine Months Ended September 30,
2008 2007 Growth 2008 2007 Growth
Operating Income Before Amortization:
Media & Advertising $ 38,810 $ 27,898 39 % $ 112,189 $ 56,835 97 %
Match 30,274 29,530 3 % 63,278 57,508 10 %
ServiceMagic 8,651 5,420 60 % 24,245 18,744 29 %
Emerging Businesses (6,070 ) (3,457 ) (76 )% (21,705 ) 35 NM
Corporate (41,201 ) (21,724 ) (90 )% (105,980 ) (65,713 ) (61 )%
Total $ 30,464 $ 37,667 (19 )% $ 72,027 $ 67,409 7 %
|
Refer to Note 5 to the consolidated financial statements for reconciliations by segment of Operating Income Before Amortization to Operating (Loss) Income.
Consolidated Results
Revenue
For the three months ended September 30, 2008 compared to the three months ended September 30, 2007
Revenue in 2008 increased 10% or $33.9 million from 2007 primarily as a result of revenue increases of $13.3 million from Emerging Businesses, $9.2 million from ServiceMagic, $4.4 million from Match and $3.4 million from Media & Advertising. The contribution from Emerging Businesses was driven primarily by strong revenue growth at Pronto.com and Shoebuy. The increase at ServiceMagic reflected a more active service provider network and a 41% increase in service requests driven by increased marketing efforts. Also contributing to the increased revenue was a 3% increase in average revenue per subscriber, primarily in international markets, and a 3% increase in worldwide subscribers
For the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007
Revenue in 2008 increased 15% or $140.4 million from 2007 primarily as a result of revenue increases of $63.2 million from Media & Advertising, $42.6 million from Emerging Businesses, $27.2 million from ServiceMagic and $19.2 million from Match. The growth from Media & Advertising, Emerging Businesses, ServiceMagic and Match was primarily due to the factors described above in the three month discussion.
Cost of sales
For the three months ended September 30, 2008 compared to the three months
ended September 30, 2007
Three Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Cost of sales $134,210 (5)% $140,644
As a percentage of total revenue 36% (559) bp 42%
Gross margins 64% 559 bp 58%
---------------------------------------------------------------------------
bp = basis points
|
Cost of sales consists primarily of traffic acquisition costs, compensation and other employee-related costs (including stock-based compensation) for personnel engaged in data center functions, customer acquisition costs, the cost of products sold and shipping and handling costs. Traffic acquisition costs consist of revenue share payments to partners that have distributed toolbars and/or integrated sponsored listings into their websites and similar arrangements with third parties who direct traffic to our websites.
Cost of sales in 2008 decreased $6.4 million from 2007 primarily due to a decrease of $14.6 million from Media & Advertising, partially offset by increases of $4.7 million from ServiceMagic and $3.6 million from Emerging Businesses. The decrease in cost of sales from Media & Advertising was principally due to a decrease of $14.6 million in revenue share payments to third party traffic sources. Overall revenue share payments during the quarter decreased as a direct result of a decrease in network revenue, partially offset by growth in distribution revenue included as a component of proprietary revenue at IAC Search & Media. As a percentage of revenue, traffic acquisition costs associated with network revenue generated from integrated sponsored listings are lower than traffic acquisition costs associated with distribution revenue generated from partners who redirect traffic to the Ask.com landing page. The increase in cost of sales from ServiceMagic was primarily due to an increase in customer acquisition costs as it continued to focus its spend on driving higher margin home repair and improvement requests and increasing service requests during this weak macro environment. Cost of sales from Emerging Businesses increased primarily due to an increase of $2.4 million in cost of products sold and $0.9 million in shipping and handling costs at Shoebuy.
ended September 30, 2007
Nine Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Cost of sales $398,172 2% $389,051
As a percentage of total revenue 36% (440) bp 41%
Gross margins 64% 440 bp 59%
|
Cost of sales in 2008 increased $9.1 million from 2007 primarily due to increases of $17.4 million from Emerging Businesses and $13.9 million from ServiceMagic, partially offset by decreases of $17.2 million from Media & Advertising and $4.9 million from Match. The increase in cost of sales from Emerging Businesses was primarily due to an increase of $6.9 million in cost of products sold and $2.8 million in shipping and handling costs at Shoebuy. Cost of sales from Emerging Businesses was further impacted by increased costs associated with Gifts.com and various early stage businesses not in the year ago period. Also contributing to the increase in cost of sales were increased customer acquisition costs from ServiceMagic as described above in the three month discussion. Partially offsetting these increases in cost of sales was a decrease in revenue share payments to third party traffic sources from Media & Advertising and decreased domestic customer acquisition costs from Match. The decrease in domestic acquisition costs from Match was due primarily to improved economics with certain distribution partners.
Selling and marketing expense
For the three months ended September 30, 2008 compared to the three months
ended September 30, 2007
Three Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Selling and marketing expense $102,620 26% $81,639
As a percentage of total revenue 28% 345 bp 24%
|
Selling and marketing expense consists primarily of advertising and promotional expenditures and compensation and other employee-related costs (including stock-based compensation) for personnel engaged in customer service and sales functions. Advertising and promotional expenditures include online marketing, including fees paid to search engines and distribution partners, and offline marketing, including television, print and radio advertising.
Selling and marketing expense in 2008 increased $21.0 million from 2007 primarily due to increases of $7.5 million from Emerging Businesses, $6.5 million from Match and $3.8 million from Media & Advertising. The increase in selling and marketing expense from Emerging Businesses resulted primarily from an increase of $5.6 million in online marketing from Pronto.com. Selling and marketing expense from Match increased primarily due to an increase of $4.4 million in advertising and promotional expenditures, including those associated with television advertising and online marketing related to various international marketing campaigns. Also contributing to the increase in selling and marketing expense is increased expense from Media & Advertising primarily due to an increase of $3.5 million in compensation and other employee-related costs, partially offset by reduced marketing expense. The increase in compensation and other employee-related costs is due in part to recent acquisitions not in the year ago period at IAC Search & Media and an 11% increase in average headcount at Citysearch.
ended September 30, 2007
Nine Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Selling and marketing expense $327,758 16% $283,029
As a percentage of total revenue 30% 28 bp 30%
|
Selling and marketing expense in 2008 increased $44.7 million from 2007, primarily due to increases of $21.6 million from Emerging Businesses, $15.6 million from Match and $3.9 million from ServiceMagic. The increase in selling and marketing expense from Emerging Businesses is primarily due to an increase of $17.5 million in online marketing from Pronto.com. Selling and marketing expense from Match increased primarily due to an increase of $14.9 million in advertising and promotional expenditures, including marketing costs primarily related to Chemistry.com. Also contributing to the increase in selling and marketing expense is an increase of $3.8 million in compensation and other employee-related costs from ServiceMagic primarily related to the expansion of its sales force due in part to the opening of a new call center in Kansas City in the second quarter of 2007.
General and administrative expense
For the three months ended September 30, 2008 compared to the three months
ended September 30, 2007
Three Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
General and administrative expense $110,997 71% $64,910
As a percentage of total revenue 30% 1,070 bp 19%
|
General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in finance, legal, tax, human resources and executive management functions, facilities costs and fees for professional services.
General and administrative expense in 2008 increased $46.1 million from 2007 primarily due to increases of $38.9 million from corporate and $3.8 million from Emerging Businesses. The increase from corporate is principally due to $20.8 million of expenses related to the Spin-Off and an increase of $18.3 million in non-cash compensation expense. The increase in non-cash compensation expense is primarily due to the acceleration and modification of certain equity awards associated with the Spin-Off. General and administrative expense from Emerging Businesses increased primarily due to increased operating expenses associated with various early stage businesses not in the year ago period as well as Connected Ventures.
As of September 30, 2008, there was approximately $135.1 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity based awards, which is currently expected to be recognized over a weighted average period of approximately 2.7 years.
For the nine months ended September 30, 2008 compared to the nine months
ended September 30, 2007
Nine Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
General and administrative expense $278,340 47% $189,442
As a percentage of total revenue 25% 558 bp 20%
|
General and administrative expense in 2008 increased $88.9 million from 2007 primarily due to increases of $61.2 million from corporate and $22.0 million from Emerging Businesses. The increase from corporate is principally due to $42.0 million of expenses related to the Spin-Off and an increase
of $20.1 million in non-cash compensation expense. The increase in non-cash compensation expense is primarily due to the factors described above in the three month discussion. General and administrative expense from Emerging Businesses increased primarily due to the inclusion in the prior year of an $8.2 million reimbursement of previously expensed advances related to the restructuring of our interests in a business venture as well as increased operating expenses associated with InstantAction.com, Connected Ventures, RushmoreDrive.com and various early stage businesses not in the year ago period.
Other operating expense
For the three months ended September 30, 2008 compared to the three months
ended September 30, 2007
Three Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Other operating expense $12,329 2% $12,029
As a percentage of total revenue 3% (25) bp 4%
|
Other operating expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in product development at IAC Search & Media and various emerging businesses. Other operating expense includes costs related to the design, development, testing and enhancement of technology that are not capitalized.
Other operating expense in 2008 increased $0.3 million from 2007, primarily due to an increase in compensation and other employee-related costs from Emerging Businesses.
For the nine months ended September 30, 2008 compared to the nine months
ended September 30, 2007
Nine Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Other operating expense $41,922 26% $33,177
As a percentage of total revenue 4% 35 bp 3%
|
Other operating expense in 2008 increased $8.7 million from 2007, primarily due to an increase of $6.8 million in compensation and other employee-related costs from Media & Advertising. The increase from Media & Advertising is due in part to a 9% increase in average headcount, as it continues to upgrade and enhance its search technology and products.
Depreciation
For the three and nine months ended September 30, 2008 compared to the
three and nine months ended September 30, 2007
Three Months Ended September 30, Nine Months Ended September 30,
2008 % Change 2007 2008 % Change 2007
(Dollars in thousands)
Depreciation $17,337 15% $15,107 $52,055 18% $43,954
As a percentage of 5% 19 bp 5% 5% 15 bp 5%
total revenue
|
Depreciation for the three and nine months ended September 30, 2008 increased $2.2 million and $8.1 million, respectively, primarily due to the incremental depreciation associated with capital expenditures made during 2007 and 2008, partially offset by certain fixed assets becoming fully depreciated during the period.
Operating Income Before Amortization
For the three months ended September 30, 2008 compared to the three months
ended September 30, 2007
Three Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Operating Income Before Amortization $30,464 (19)% $37,667
As a percentage of total revenue 8% (298) bp 11%
|
Operating Income Before Amortization in 2008 decreased $7.2 million from 2007 primarily due to an increase in corporate expenses of $19.5 million, partially offset by growth of $10.9 million from Media & Advertising. The decrease in Operating Income Before Amortization from corporate is principally due to $20.8 million of expenses related to the Spin-Off. This increase in corporate expenses was partially offset by lower traffic acquisition costs and higher revenue from Media & Advertising.
For the nine months ended September 30, 2008 compared to the nine months
ended September 30, 2007
Nine Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Operating Income Before Amortization $72,027 7% $67,409
As a percentage of total revenue 7% (49) bp 7%
|
Operating Income Before Amortization in 2008 increased $4.6 million from 2007 primarily due to growth of $55.4 million, $5.8 million and $5.5 million from Media & Advertising, Match and ServiceMagic, respectively. These increases in Operating Income Before Amortization were partially offset by decreases of $40.3 million from corporate and $21.7 million from Emerging Businesses. Contributing favorably to Operating Income Before Amortization is the impact of higher revenue and lower traffic acquisition costs from Media & Advertising. Partially offsetting the increases in Operating Income Before Amortization at certain segments are $42.0 million of expenses from corporate related to the Spin-Off and the favorable impact in the prior year of an $8.2 million reimbursement of previously expensed advances related to the restructuring of our interests in a business venture within Emerging Businesses, as well as increased operating expenses associated with RushmoreDrive.com, various early stage businesses not in the year ago period, InstantAction.com and Connected Ventures.
Operating (loss) income
For the three months ended September 30, 2008 compared to the three months
ended September 30, 2007
Three Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Operating (loss) income $(22,638) NM $1,693
As a percentage of total revenue (6)% NM 1%
|
The operating loss in 2008 of $22.6 million versus operating income in 2007 of $1.7 million was primarily due to the decrease of $7.2 million in Operating Income Before Amortization described above and an increase of $22.0 million in non-cash compensation expense, partially offset by a decrease of $2.9 million in amortization of non-cash marketing and a decrease of $2.0 million in amortization of intangibles. The increase in non-cash compensation expense is primarily due to the acceleration and modification of certain equity awards associated with the Spin-Off. The amortization of non-cash marketing referred to in this report consists of non-cash advertising secured from Universal Television as part of the transaction pursuant to which Vivendi Universal Entertainment, LLLP ("VUE") was created, and the subsequent transaction by which IAC sold its partnership interests in VUE.
ended September 30, 2007
Nine Months Ended September 30,
2008 % Change 2007
(Dollars in thousands)
Operating loss $(40,180) 9% $(44,335)
As a percentage of total revenue (4)% (98) bp (5)%
|
. . .
|
|