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| IACI > SEC Filings for IACI > Form 10-Q on 2-Aug-2012 | All Recent SEC Filings |
2-Aug-2012
Quarterly Report
Management Overview
IAC is a leading media and internet company comprised of more than 150 brands and products, including Match.com, Ask.com, CollegeHumor.com, and CityGrid Media. Focused in the areas of search, personals, local and media, IAC's family of websites is one of largest in the world, with nearly a billion monthly visits across more than 30 countries.
For a more detailed description of the Company's operating businesses, see the Company's annual report on Form 10-K for the year ended December 31, 2011.
Results of Operations for the three and six months ended June 30, 2012 compared to the three and six months ended June 30, 2011
Set forth below are the contributions made by our various segments and corporate operations to consolidated revenue, operating income (loss) and Operating Income Before Amortization (as defined in IAC's Principles of Financial Reporting) for the three and six months ended June 30, 2012 and 2011.
Three Months Ended June 30, Six Months Ended June 30,
2012 Growth 2011 2012 Growth 2011
(Dollars in thousands)
Revenue:
Search &
Applications $ 348,762 46 % $ 238,328 $ 691,960 47 % $ 472,179
Match 178,418 53 % 116,429 352,693 55 % 228,026
Local 84,505 5 % 80,410 161,624 7 % 151,341
Media 38,368 97 % 19,511 54,279 64 % 33,119
Other 30,629 (1 )% 30,894 60,835 (1 )% 61,419
Inter-segment
elimination (70 ) 58 % (168 ) (179 ) 62 % (467 )
Total $ 680,612 40 % $ 485,404 $ 1,321,212 40 % $ 945,617
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Three Months Ended June 30, Six Months Ended June 30,
2012 Growth 2011 2012 Growth 2011
(Dollars in thousands)
Operating Income
(Loss):
Search &
Applications $ 74,067 46 % $ 50,651 $ 147,557 49 % $ 99,272
Match 57,099 39 % 40,999 87,005 35 % 64,428
Local 11,670 25 % 9,326 15,459 2 % 15,160
Media (7,305 ) (115 )% (3,390 ) (13,974 ) (81 )% (7,708 )
Other (2,182 ) (71 )% (1,278 ) (3,896 ) (74 )% (2,243 )
Corporate (35,873 ) 6 % (38,077 ) (71,910 ) 2 % (73,342 )
Total $ 97,476 67 % $ 58,231 $ 160,241 68 % $ 95,567
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Three Months Ended June 30, Six Months Ended June 30,
2012 Growth 2011 2012 Growth 2011
(Dollars in thousands)
Operating Income Before
Amortization:
Search &
Applications $ 74,079 47 % $ 50,562 $ 147,579 48 % $ 99,462
Match 62,645 48 % 42,335 99,973 48 % 67,323
Local 11,832 21 % 9,768 15,782 (2 )% 16,069
Media (6,789 ) (106 )% (3,302 ) (13,190 ) (72 )% (7,650 )
Other (1,755 ) (80 )% (975 ) (3,153 ) (93 )% (1,631 )
Corporate (16,290 ) (9 )% (14,950 ) (31,997 ) (6 )% (30,181 )
Total $ 123,722 48 % $ 83,438 $ 214,994 50 % $ 143,392
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º Our Search & Applications segment is comprised of Websites, which includes Ask.com, Pronto and Dictionary.com, excluding downloadable applications related to the aforementioned sites; and Applications, which includes our direct to consumer applications business (B2C) and our partnership operations (B2B), as well as downloadable applications related to Ask.com and Dictionary.com.
Refer to Note 8 to the consolidated financial statements for reconciliations of Operating Income Before Amortization to operating income (loss) by reportable segment.
Consolidated Results
Revenue
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Revenue $ 680,612 $ 195,208 40 % $ 485,404
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Revenue in 2012 increased from 2011 primarily as a result of increases of $110.4 million from Search & Applications, $62.0 million from Match and $18.9 million from Media. The increase from Search & Applications reflects strong growth from both its Applications and Websites operations. The increase from Match reflects the impact of Meetic, which has been consolidated since September 1, 2011 following Match's acquisition of a controlling interest and is, therefore, not in the prior year period, as well as growth from its Core operations (consisting of Match.com in the U.S., Chemistry and People Media). The increase from Media reflects the impact of The Newsweek/Daily Beast Company ("Newsweek Daily Beast"), consolidated beginning June 1, 2012 following the Company's acquisition of a controlling interest, as well as strong growth from Electus and Vimeo.
A substantial portion of the Company's revenue is derived from online advertising. Most of the Company's online advertising revenue is attributable to a paid listing supply agreement with Google Inc. ("Google"), which expires on March 31, 2016. For the three months ended June 30, 2012 and 2011, revenue earned from Google was $335.8 million and $221.3 million, respectively. This revenue was earned by the businesses comprising the Search & Applications segment.
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Revenue $ 1,321,212 $ 375,595 40% $ 945,617
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Revenue in 2012 increased from 2011 primarily as a result of increases of $219.8 million from Search & Applications, $124.7 million from Match, $21.2 million from Media and $10.3 million from Local. The increases in revenue from Search & Applications, Match and Media are primarily due to the factors described above in the three month discussion. The increase from Local reflects growth from ServiceMagic's domestic and international operations.
For the six months ended June 30, 2012 and 2011, revenue earned from Google was $664.7 million and $436.2 million, respectively.
Cost of revenue
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Cost of revenue $236,690 $55,218 30% $181,472
As a percentage of revenue 35% (261) bp 37%
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bp = basis points
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Cost of revenue consists primarily of traffic acquisition costs. Traffic acquisition costs consist of payments made to partners who distribute our B2B customized browser-based applications, integrate our paid listings into their websites or direct traffic to our websites. These payments include amounts based on revenue share and other arrangements. Cost of revenue also includes Shoebuy's cost of products sold and shipping and handling costs, expenses associated with the operation of the Company's data centers, including compensation and other employee-related costs (including stock-based compensation) for personnel engaged in data center functions, rent, energy and bandwidth costs, and content acquisition costs.
Cost of revenue in 2012 increased from 2011 primarily due to increases of $33.0 million from Search & Applications, $16.2 million from Media and $6.1 million from Match. The increase from Search & Applications was primarily due to an increase of $34.4 million in traffic acquisition costs primarily related to the increased revenue of our B2B operations. As a percentage of revenue, traffic acquisition costs at Search & Applications decreased compared to the prior year period due to an increase in the proportion of revenue from Websites that resulted from increased online marketing. Cost of revenue from Media increased primarily due to Newsweek Daily Beast, consolidated beginning June 1, 2012, and Electus. The increase from Match is due to the acquisition of Meetic, which was not in the prior year period.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Cost of revenue $460,261 $106,071 30% $354,190
As a percentage of revenue 35% (262) bp 37%
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Selling and marketing expense
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Selling and marketing expense $213,070 $79,852 60% $133,218
As a percentage of revenue 31% 386 bp 27%
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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 sales, sales support and customer service functions. Advertising and promotional expenditures include online marketing, including fees paid to search engines and third parties that distribute our B2C downloadable applications, and offline marketing, which is primarily television advertising.
Selling and marketing expense in 2012 increased from 2011 primarily due to increases of $55.7 million from Search & Applications and $23.7 million from Match. The increase from Search & Applications is primarily due to an increase in online marketing related to Ask.com and from existing B2C downloadable applications. Selling and marketing expense at Match increased primarily due to the acquisition of Meetic, which was not in the prior year period.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Selling and marketing expense $432,908 $159,440 58% $273,468
As a percentage of revenue 33% 385 bp 29%
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Selling and marketing expense in 2012 increased from 2011 primarily due to increases of $100.1 million from Search & Applications and $55.7 million from Match. The increases from Search & Applications and Match are primarily due to the factors described above in the three month discussion.
General and administrative expense
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
General and administrative expense $92,231 $11,678 14% $80,553
As a percentage of revenue 14% (304) bp 17%
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General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in executive management, finance, legal, tax and human resources, facilities costs and fees for professional services.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
General and administrative expense $184,019 $27,175 17% $156,844
As a percentage of revenue 14% (266) bp 17%
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General and administrative expense in 2012 increased from 2011 primarily due to increases of $15.6 million from Match, $7.9 million from Media and $6.1 million from Local. The increases from Match and Media are primarily due to the factors described above in the three month discussion. Partially offsetting the increase in general and administrative expense from Match is a decrease in professional fees due, in part, to the inclusion in the prior year period of $1.1 million in transaction fees associated with the Meetic acquisition. General and administrative expense from Local increased primarily due to higher compensation and employee-related expenses at both ServiceMagic and CityGrid Media.
Product development expense
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Product development expense $23,115 $5,835 34% $17,280
As a percentage of revenue 3% (16) bp 4%
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Product development expense consists primarily of compensation and other employee-related costs (including stock-based compensation) that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and related technology.
Product development expense in 2012 increased from 2011 primarily due to increases of $3.9 million from Match and $1.1 million from Other. The increase in Match is primarily due to an increase in headcount and the acquisition of Meetic, which was not in the prior year period. The increase from Other is primarily due to increased investment in Hatch Labs.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Product development expense $46,597 $11,595 33% $35,002
As a percentage of revenue 4% (17) bp 4%
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Product development expense in 2012 increased from 2011 primarily due to increases of $8.3 million from Match and $1.9 million from Other. The increases from Match and Other are primarily due to the factors described above in the three month discussion.
Depreciation
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Depreciation expense $12,225 $(225) (2)% $12,450
As a percentage of revenue 2% (77) bp 3%
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Depreciation in 2012 decreased slightly from 2011 resulting primarily from the write-off of certain capitalized software costs at Search & Applications in 2011, partially offset by an increase in depreciation from Match, which is primarily due to the acquisition of Meetic.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Depreciation expense $24,340 $(1,549) (6)% $25,889
As a percentage of revenue 2% (90) bp 3%
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Depreciation in 2012 decreased from 2011 resulting primarily from the factors described above in the three month discussion.
Operating Income Before Amortization
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Operating Income Before Amortization $123,722 $40,284 48% $83,438
As a percentage of total revenue 18% 99 bp 17%
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Operating Income Before Amortization in 2012 increased from 2011 primarily due to increases of $23.5 million from Search & Applications and $20.3 million from Match, partially offset by increased losses of $3.5 million from Media. The increase from Search & Applications is primarily due to higher revenue and operating expense leverage. The increase from Match is primarily due to the acquisition of Meetic, which was not in the prior year period, and higher Core revenue. Increased losses from Media is primarily due to the inclusion of Newsweek Daily Beast, consolidated beginning June 1, 2012, and increased operating expenses at CollegeHumor.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Operating Income Before Amortization $214,994 $71,602 50% $143,392
As a percentage of total revenue 16% 111 bp 15%
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Operating Income Before Amortization in 2012 increased from 2011 primarily due to increases of $48.1 million from Search & Applications and $32.6 million from Match, partially offset by increased losses of $5.5 million from Media, all of which were due primarily to the factors described above in the three month discussion.
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Operating income $97,476 $39,245 67% $58,231
As a percentage of revenue 14% 233 bp 12%
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Operating income in 2012 increased from 2011 primarily due to the increase of $40.3 million in Operating Income Before Amortization described above and a decrease of $2.6 million in non-cash compensation expense, partially offset by an increase of $3.6 million in amortization of intangibles. The decrease in non-cash compensation expense is primarily related to a charge in the prior year period related to a modification of certain awards and the reduction in expense in the current year period related to the reassessment of the probability of the vesting of certain performance-based awards. The increase in amortization of intangibles is due to the acquisition of Meetic.
At June 30, 2012, there was $114.1 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.3 years.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Operating income $160,241 $64,674 68% $95,567
As a percentage of revenue 12% 202 bp 10%
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Operating income in 2012 increased from 2011 primarily due to the increase of $71.6 million in Operating Income Before Amortization described above and a decrease of $1.3 million in non-cash compensation expense, partially offset by an increase of $8.2 million in amortization of intangibles. The decrease in non-cash compensation expense and the increase in amortization of intangibles are primarily due to the factors described above in the three month discussion. The decrease in non-cash compensation expense was further impacted by awards becoming fully vested, partially offset by equity grants issued subsequent to the second quarter of 2011.
Other income (expense)
For the three months ended June 30, 2012 compared to the three months ended
June 30, 2011
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Equity in losses of unconsolidated
affiliates $ (19,009 ) $ (10,289 ) (118 )% $ (8,720 )
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Equity in losses of unconsolidated affiliates in 2012 includes a pre-tax non-cash charge of $18.6 million related to the re-measurement of the carrying value of our investment in Newsweek Daily Beast to fair value in connection with our acquisition of a controlling interest. Equity
Three Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Other (expense) income, net $ (1,732 ) $ (7,369 ) NM $ 5,637
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Other (expense) income, net in 2012 decreased from 2011 primarily due to the inclusion of $4.6 million in gains associated with certain non-income tax refunds related to Match Europe, which was sold in 2009, as well as an increase in foreign exchange losses.
For the six months ended June 30, 2012 compared to the six months ended
June 30, 2011
Six Months Ended June 30,
2012 $ Change % Change 2011
(Dollars in thousands)
Equity in losses of unconsolidated
affiliates $ (24,910 ) $ (14,311 ) (135 )% $ (10,599 )
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Equity in losses of unconsolidated affiliates in 2012 and 2011 are due to the factors described above in the three month discussion. Equity in losses of unconsolidated affiliates in 2011 also reflects the inclusion of earnings from our investment in Meetic, which was accounted for as an equity method investment prior to September 1, 2011, the date we achieved control.
Six Months Ended June 30,
2012 $ Change % Change 2011
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