IAC reports Earnings: Income up 65%

IAC reported earnings this morning.  IAC is one of the stocks we track in the Domain Stock Index since it owns some major Internet properties including Match.com, Dictionary.com Chemistry.com and Ask.com to name a few.

IAC said that:

• Q2 revenue reflects strong performance with double-digit growth across all segments.  Operating Income Before Amortization saw very strong double-digit growth, up 65% for the quarter and more than 70% year-to-date.

• Free Cash Flow for the first six months was $137.8 million, up 28% over the prior year, while cash flow from operating activities attributable to continuing operations was $157.2 million, up 19% over the prior year.

Search revenue grew 28%

Match Core subscribers grew 17%; OkCupid grew active users 14% since its acquisition in Q1 2011;

College Humor Media grew unique visitors 34% to 14 million and original video views 22% to 20 million;

Hatch Labs launched Blu Trumpet, a monetization and distribution platform for mobile apps specializing in CPI (cost per install) advertising.

Here are the numbers:

DISCUSSION OF FINANCIAL AND OPERATING RESULTS
		Q2 2011	Q2 2010	Growth
Revenue		$ in millions
	Search	$           252.4	$           197.2	28%
	Match	116.4	97.0	20%
	ServiceMagic	56.1	49.5	13%
	Media & Other	60.8	51.0	19%
	Intercompany Elimination	(0.3)	(0.4)	25%
		$           485.4	$           394.2	23%
Operating Income Before Amortization
	Search	$             50.6	$             32.0	58%
	Match	42.3	29.1	45%
	ServiceMagic	8.6	6.1	41%
	Media & Other	(3.1)	(2.6)	-20%
	Corporate	(14.9)	(14.2)	-5%
		$             83.4	$             50.4	65%
Operating Income (Loss)
	Search	$             50.3	$             31.6	59%
	Match	41.0	25.5	61%
	ServiceMagic	8.2	5.7	43%
	Media & Other	(3.2)	(3.0)	-7%
	Corporate	(38.1)	(35.2)	-8%
		$             58.2	$             24.6	136%

Search

Search includes Mindspark, our digital consumer products business consisting of our B2C operations, through which we develop, market and distribute downloadable applications, and our B2B operations, which provide customized browser-based applications for software and media companies; destination websites, including Ask.com and Dictionary.com, through which we provide search and additional services; and CityGrid Media, an online media company that aggregates and integrates local content and ads and distributes them to publishers across web and mobile platforms.

Search revenue reflects strong growth from Mindspark’s B2B operations as well as growth from destination websites, Mindspark’s B2C operations and CityGrid Media.  The revenue growth in B2B was driven by increased contribution from both existing and new partners. The increase in B2C revenue was driven primarily by new products launched since the year ago period.  The revenue growth in destination websites reflects increased and more efficient marketing efforts as well as improved monetization. The increase in revenue at CityGrid Media primarily reflects growth from existing resellers and the contribution from new resellers.  Profits grew faster than revenue due to operating expense leverage and lower depreciation, partially offset by higher traffic acquisition costs as a percentage of revenue.

Match

Match revenue benefited from strong growth within its Core(1) and Developing(2) operations.  Core revenue increased 22% to $97.6 million driven by a 17% increase in subscribers.  The growth in Developing revenue was primarily due to display advertising revenue from OkCupid, which was acquired in January 2011 and was not in the year ago period.  Profits were favorably impacted by higher revenue, lower customer acquisition costs as a percentage of revenue and operating expense leverage.  Customer acquisition costs as a percentage of revenue in the current year period benefited from reduced spending within Developing operations, partially offset by an increase in spending in Core operations.  Revenue and profits in 2010 were negatively impacted by the write-off of $2.2 million in deferred revenue associated with the formation of our venture with Meetic in Latin America and the Singlesnet acquisition. Operating income in 2011 reflects a decrease of $2.5 million in amortization of intangibles.

ServiceMagic

ServiceMagic revenue benefited from growth in its domestic and international operations.  Domestically, revenue growth reflects an 8% increase in accepted service requests, which was driven by an 8% increase in service requests and a 4% increase in service professionals.  Domestic growth also reflects an increase in revenue from website design and hosting services.  ServiceMagic International revenue growth reflects a 71% increase in accepted service requests.  Profits were favorably impacted by higher revenue and lower marketing expenses as a percentage of revenue.  Profits in 2010 benefited from the reversal of a $0.9 million provision for contingent consideration related to an acquisition which was not earned.

Media & Other

Media & Other includes Electus, CollegeHumor, Notional, Vimeo, Pronto, Shoebuy, Proust and Hatch Labs.  The increase in revenue primarily reflects growth at Shoebuy, Electus, Notional and Vimeo, partially offset by a decline at Pronto.  Losses were negatively impacted by increased operating expenses at Electus, lower revenue at Pronto and start up costs at Hatch Labs, which was not in the year ago period.  Operating loss in 2010 included losses related to The Daily Beast, which, following the formation of the joint venture with Harman Newsweek on January 31, 2011, has been accounted for as an equity method investment.

Corporate

Corporate expenses in the current year period reflect increased compensation and other employee-related costs. Operating loss in 2011 was impacted by an increase in non-cash compensation expense of $2.1 million, which is primarily due to the cancellation of certain equity awards during the second quarter of 2011.

Note 1: Match Core consists of Match.com in the United States, Chemistry.com and People Media.

Note 2: Match Developing consists of OkCupid, Singlesnet, mobile-only products and our international operations.

During Q2, IAC repurchased 4.8 million common shares at an average price of $35.97 per share.  As of June 30, 2011, IAC had 87.3 million common and class B common shares outstanding.  IAC may purchase shares over an indefinite period of time, depending on those factors IAC management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.

As of June 30, 2011, IAC had $911.9 million in cash and marketable securities and $95.8 million in long-term debt.  Additionally, IAC escrowed $360.6 million in cash and cash equivalents pending the outcome of the Meetic tender offer launched on July 8, 2011.  This amount secures IAC’s obligation in the event that all Meetic shares are tendered.  Escrowed amounts reflecting shares not tendered will be released to IAC after the closing of the tender.