All right. Good afternoon, everyone. Thanks for joining. Cory Carpenter, Internet Analyst at J.P. Morgan. Pleased to have IAC, soon to be People Inc., with us today. Chris and Tim, thanks for joining.
You're welcome.
Great to be here.
Soon to be People Incorporated.
People Incorporated. You know, Chris, maybe we'll start with you. IAC in the midst of a significant transformation. You're going from a holdco to People Incorporated. Maybe just to start, walk us through the changes you're making and why now.
Certainly. We announced the consolidation of corporate and a number of actions we'll talk about, but it really is the continuation of the strategy that we've publicly articulated since Q end of year 2024 earnings, so February 2025, where Barry was on the call and talked about we were spinning Angi, and our CEO Joey Levin went with it as chairman. We said we were going to continue to sell non-core assets. We were going to rationalize corporate costs and we cut them down significantly to get to a run rate of mid to low $80s. Then we disclosed this quarter that we were fully consolidating IAC corporate at the holdco into the corporate operations of People Inc, where Tim has been CFO and Neil and Tim are CFO.
As we said on the earnings call, when you're down to one core operating business, a key step in this was selling Care and closing that in March, as well as winding down our search business and other things that simplified the drains on corporate. It made no sense to have two levels of corporate for one operating business, plus our MGM stake, plus some smaller stakes. It really is just a natural evolution of what we laid out as our go-forward strategy a year and change ago. Also on a capital allocation front, buy back stock. We bought back 13% of the company in the intervening 15 months. Own more MGM both through their buybacks and direct cash from us. We're up to 26%. Do M&A through People.
It just is further implementation and we think is the absolute right thing for shareholders.
The two primary assets going forward are People and then the MGM equity stake, the 26% equity stake at MGM you just mentioned. What's the benefit of keeping those two assets together? You know, why not separate them out given there still seems to be a pretty big value disconnect with the stock price?
Certainly. Barry as our chairman and our board view real value in both businesses. I think you could argue, in the case of People, and Tim can talk to it better than I can, their outperformance relative to peers and the thoughtfulness and innovation and execution quality of their strategy has enabled them to be in a differentiated position as a media company, although the market wouldn't probably acknowledge that right now. They're our cash flow engine. It's a good thing to be inside IAC as they continue to execute, and we'll talk through all their growth vectors and the inversion strategy. On MGM, we are real believers that the public markets are undervaluing the asset in a number of components there.
To be fair to the public markets, they tend to have you know, they can buy anything, and they tend to have a shorter horizon. It makes sense to continue to support MGM, drive it forward, see a number of these initiatives and macro dynamics come to fruition or resolve themselves respectively. There will be a real, you know, re-rating there. For now, the plan is to keep both of them together.
You recently sold Care. You mentioned that earlier. What's the plan for the other non-core assets like Turo and Vivian?
If you think holistically, we've had a pretty focused liquidation plan across the portfolio, going back a year. They tend to be private transactions, so they always take longer than I think public investors would hope or are used to. Getting Care done was key. Also we are with closing down our search business, we're going to be selling our URLs that underpin or domain names that underpin that business, and we have a lot of real value there. That'll be ongoing. We have a few other asset sales.
On Turo, Barry said on the call that, you know, he with the business doing better and them on a strong strategy of growth and execution, he sort of said, "I don't expect Turo to be part of IAC in four years," but he's not racing to sell it. It's also a 32% stake in a private company. We, we think they're executing well. We talked about, you know, getting back to low double-digit growth and profitability and free cash flow in the first quarter, and they've got a whole strategy. That one, as well as Vivian, which is a great little business and a strategic asset in the healthcare staffing space.
It's more around opportunistically the right time to sell, their growth, their performance, which would in certain cases, you know, lead you to hold them longer versus the way we're trading and the fact that a number of these assets are valued at zero. You know, seeking to shrink the discount as rapidly as possible or as reasonably as possible, for our shareholders.
All right, Tim, let's shift to you. I think this is your first investor conference since the announcement.
Yep
That you're going to become the consolidated CFO shortly. I thought it'd be helpful just for investors to hear, you know, maybe a bit about your background to start.
Sure. Thanks, Cory. Yeah, you know, I started out after school as an investment banker, probably like a lot of people in this building today. I met two really important people there, my wife, and Neil Vogel, our CEO. Did that for a number of years. Joined American Express. I was out at American Express for more than 10 years, running or operating out of their corporate development team. There were only three of us when we started. We had our hands and fingers in a little bit of everything, strategy, acquisitions, divestitures, minority investments, and all that type of stuff. I left that after 10 or 11 years. There were about 35 of us, I think, at that point.
We really had gotten involved in the entirety of the global business there. I went on to be a CFO, my first CFO gig, at a JV that we helped to create, at American Express. Neil came calling about four years later and had an opportunity. He had just been hired by IAC to operate About.com, which was the predecessor to Dotdash and now the predecessor to People Inc. We'll get into that whole story today, that's the 30 years in a nutshell.
Shifting to the business, you know, could you give us a brief overview of People's properties, the scale, and just the state of the business today?
Yeah. We are, you know, America's largest publisher by pretty much any measure. We are, as I said, we created out of the combination of Dotdash, which was formerly About.com, Time Inc., and Meredith. We have some of the, you know, best, most venerable brands out there. We own People mag, Better Homes & Gardens, Food & Wine, Travel + Leisure, Southern Living, Allrecipes, a whole host of brands. You know, back in the day, those were, many of those brands were rooted in magazines. They have 50, 75-year histories in magazines. Today, 70% of the business is, the revenue of the business is actually digital media. 90% of the profitability is digital media.
We still do have a magazine business, of course, but it's a smaller subset of the brands, and the brands really live across all mediums at this point. They live again in magazines. They live on our own dotcoms. They live on Instagram, TikTok, and Apple News, and all these other distributed platforms that we'll talk about today.
The financials have actually been pretty steady, kind of mid-high single-digit grower for the digital business, at least in recent quarters. You know, a lot of moving parts under the surface. I think, you know, investors are often surprised you've been able to grow at that rate given just the traffic headwinds from AI Overviews. Maybe talk a bit about, you know, how have you been able to grow through that headwind? How are you thinking about, like, traffic going forward?
Yeah. Yeah. It's a lot of different moves. The first thing we did is we set up our brands to be operated under one owner, one general manager. you know, those folks are, they're managing all the distributed platforms, the content and the distributed platforms on which they reside. I think that that was, you know, an important move for us. you know, AI Overviews has certainly been a challenge. It's something we saw early on.
We kind of coined a phrase called Google Zero, which was an internal rallying cry to say, "If there's no traffic coming from Google, where do these brands live in the universe?" That helped to sort of rally our troops and our thinking, we've really sort of started to frame this out as, you know, the 20 years ago, this was a magazine business. For the last 10 years, it's been a digital dotcom business, and we think the next 10 years are gonna be all about the brands, and the brands can live anywhere, in the real world, across media, through AI, you know, whatever that takes. So we'll talk a little bit about the strategies that we've undertaken to get us there.
The fastest-growing part of our business today is non-session-based, we call it, meaning not on the dotcom digital revenue.
Could you talk more about that non-session-based revenue? You know, what is it? Kind of what are some of the components under there?
Yeah. Again, if you think about it, we're trying to get rather than force people to come to our brands, we're trying to bring our brands, our content, our offerings to people wherever they want to consume media. That's an important sort of mental distinction. When we do that, we are aggregating large brands and growth brands or growth audiences across Apple News, which is a Well, I think we're one of the largest publishers within the Apple News ecosystem, again, on Instagram, TikTok, and so on. The second piece of the puzzle is, you know, we have to be able to come and bring advertising solutions to those audiences for our advertisers, on behalf of our advertisers to our audiences. On the dotcom, we own the ad experience.
On Instagram, Meta owns the ad experience. We've really gotten clever at adopting our models to those platforms and really delivering those value again to the advertisers. The third piece is D/Cipher. D/Cipher is. We'll talk about it a little bit today, but it's an ad targeting capability that we take sort of this great premium performance that we've had on our brands for many years. It's always been sort of a premium buy for advertisers, we can find that same great performance off platform. That sort of addresses the traffic constraint challenge that we have and kind of uncaps the TAM or significantly expands the TAM.
The final piece of that off-platform puzzle are these AI licensed AI deals that we'll talk a little about today, which we think is, you know, we think we're well-positioned to for that to be a meaningful piece of our growth story going forward.
A few more, on Actually, I'm gonna go deeper on D/Cipher and then also on the licensing deal. Maybe on D/Cipher, you kind of said what it was.
Yeah.
I still think people are fairly unfamiliar with it. It's a fairly nascent product. Maybe, you know, give us an overview of why you're excited about it. You know, how big is it? How big do you think it can be?
Yeah. D/Cipher is an ad targeting capability. It is born out of, you know, our. It is proprietary to us, and that is our own first-party data. It basically allows us to map the performance that we see on our sites, the ad performance that we see on our sites, using AI and other tools off-platform. We can buy that same and extend the buy for the audience, for the advertiser to audiences that are not necessarily resident on a People Inc. brand. What that allows us to do, again, is uncap sort of the TAM, but it also allows us to take these solutions and apply them to CTV, to social, and to everything else.
I think one part of the story that resonates for folks, helps to bring it home is we tend to sell all of this as a package, right? We go to an advertiser or we go to the agency on behalf of the advertiser, and we're selling the combination of on-platform, off-platform with D/Cipher and our events sponsorship and other sort of capabilities. We think that that's, you know, again, unique to us when you think about a world of platforms, you know, where so many advertising dollars are going through Google and Amazon and Facebook. There's a place in the ecosystem for branded advertising solutions with a high degree of service that can be customized to what the advertiser, you know, wants and needs.
You know, we're doing that, and we've seen really great growth as a result. We think, to answer your question on size, it's still relatively early in the D/Cipher Plus. That's sort of the off-platform application, but growing. You know, we've said publicly we think it'll add 2-3 basis points to our growth in the back half of this year, so meaningful.
100 basis points.
100 basis points, yeah.
On licensing, you've entered a number of deals, OpenAI, obviously one of them. Maybe there's others you have not entered into yet. I think two questions on licensing is, you know, first, what's the monetization model that the industry's kind of coalescing or models that the industry's coalescing around? You know, how do you think about the longer-term revenue opportunity?
We're optimistic about the revenue opportunity. There's 2 models that have emerged. The first generation of this was a couple years ago, foundational models came into being, OpenAI and others, Google. We were able to cut a deal with OpenAI that was effectively what we call all you can eat, meaning they can train on our content, they can display our content, they can use our content. About a year ago, we actually started to block the AI crawlers that we didn't have a deal with. We did that through Cloudflare and some of the other CDNs.
That really sort of changed the leverage point a little bit for us, where as a couple years ago, everyone was saying, "Do I have to pay for this?" Once you start blocking folks from being able to actually access your content in real time, especially, you know, as these models have evolved and emerged, I think that's really brought people back to the table. The second model that has evolved is a more of a pay per use model. Microsoft announced something with us and some other publishers late last year that was sort of on the forefront of that. I think there are other models or other business models like that that are emerging.
I think the way to think about it is as the applications and products start to get built on top of the AI layer, they are going to need access to content. If that content is inaccessible or blocked or whatever, they will be willing to pay for it. I think where we are now is, you know, we're obviously all waiting for that application product layer to find some legs and grow. You know, we're now in the conversations with folks really talking more about price than whether or not they're going to do it, but at what price is our content gonna clear. We're excited about it.
We think that the AI, you know, at this point, from this point forward, you know, again, is more of an opportunity than a threat for our business.
I think Barry introduced this concept of inversion a couple of quarters ago. Clearly something you guys are excited about. I think you have 19 projects underway across the company. You know, what are these? Why is that a strategy you're going after?
Yeah. We talked about this off-platform revenue growth, right? Just to frame this up for a little bit for folks who are less familiar with the story, 40% of our revenue, 41% of our revenue is non-session based, meaning it does not come to a dot or dot coms. That piece of our revenue grew 24% in Q1, and that's a, you know, continuation of strong growth we saw in Q4. 60% of our revenue still comes through a session, a visit to our owned and operated websites. That piece of the business was flat, right? If you think about that sort of 60/40 dynamic and the math involved, that sort of generated the 8% revenue growth that we generated in Q1.
Inversion is sort of the next layer of growth, the layer of growth that's not captured in that 8% that we think can ride and live on top of it. It's Barry's way of sort of saying and challenging us to think completely differently about our business models. We, our group, as stewards of these sort of iconic brands, like, how do we bring these brands into the next, you know, the next 10 years of media? What does that look like? You know, we've debated different business models.
As Chris said, Barry's gotten more involved in our business, more familiar with our business, and he's sort of challenging us to again, think differently and say, "Well, why would you take 1% on a license deal for a licensed product or a small % on a international deal when you could own the whole thing?" In some cases, it makes sense to take the 1%, but in other cases, we can build and build upon and sort of build businesses off of these new models that we're envisioning. I'll give you something to make it a little bit more concrete as examples.
I think some of the things that we're gonna build, in fairness, are gonna be a little bit more adjacent than completely revolutionary, and that's where, you know, a little bit of the confusion comes in. As an adjacency, as an example of an adjacency, we launched a product called MyRecipes a year ago, a little over a year ago. Think of it as a digital cookbook. You can save any recipe across the web to this digital cookbook and sort, organize, find other recipes like it, and so on. We'll be launching a kind of a version 2.0 of the product later this summer that has a lot more capabilities and, you know, will incorporate AI, allow you to save recipes across Instagram and TikTok and so forth.
In the first year, as the sort of version 1.0 product, we've signed up over 3 million customers, 3 million registered customers for this product, all 100% on our owned and operated properties, right? If you think about sort of how this is going to evolve in our minds is first, we build products, you know, we won't bat 1,000 or we won't shoot, you know, 100% of our free throws, but we'll hit more than we won't. We can use our assets, our distribution channels, our marketing channels, whether that's email or a magazine page or a digital ad or D/Cipher to seed those businesses with customers, then we will grow those customer bases and those revenue models off of them.
The inversion is sort of has come to embody all of that kind of concept of how do we bring these brands into the next, you know, generation of media? How do we create new, sustainable, durable business models that are not, you know, disintermediatable by Google or AI or anyone else? That's what we're working on now. Yeah, it's nice to be able to say, look, I think that's the growth that's sort of on top of the growth we're already delivering.
I should have mentioned at the beginning, if anyone has a question, feel free to raise your hand or submit it online, excuse me, and we'll get around to you. Okay, let's see. How should we think about one question on margins, then I wanna get back to capital allocation, macro, and a few other topics. For People, digital margins, 45% incremental margins last quarter, you know, 60% year revenue, I mean, 40% year revenue. You know, how are the margin profiles different for the sessions versus non-session-based revenue, and how much investment is required in some of these inversion initiatives?
Yeah, I mean, we had really strong margins in Q1, 200 basis points of margin improvement year-over-year. We expect that to continue in Q2. It's coming because the each of the revenue models in the non-session-based bucket, the ones that are growing, have very attractive margins, definitionally. Otherwise, we wouldn't be able to do it. Certainly licensing, as everyone knows, is very, very high margin, and that's been growing helpful. Most folks think the fastest-growing bit of that is the AI licensing. It's actually not. It's the content syndication, the content licensing that we're doing again, across Apple News and other syndication partners, although the AI is certainly high margin and helpful.
The other key point is the, these non-session-based ad, the ad side of it, meaning D/Cipher and these sponsorships and these social extensions, all these events, all these things that we do, for advertisers, also very high margins, a very premium product against premium brands that we're able to charge for. The margin profile is strong. We are definitionally and always have been very cost-disciplined about all of this, all of our, all of our endeavors, all of our ventures. We do think that AI is benefiting us. We're getting more efficient, particularly at product development, at targeting, at, you know, kind of testing and creating ad copy. You know, there certainly are some efficiencies coming from all of that. We think that margins will continue to be strong.
As we think about inversion, the inversions that inversion projects, these new projects, again, we're using, that's the key point, we're using our assets, our owned and operated assets to seed these businesses. Once we see success, then we invest behind them. Then we can start to really accelerate them. There's not a big capital outlay today. We're reallocating resources from slowing parts of the business to growth parts of the business. We're investing and are using our owned and operated assets to grow, and then once we find success, then we can, you know, hit the accelerator and go. I think we can continue to deliver on, you know, strong margins while we make these, navigate all these currents.
I think this is the longest we've ever gone in an IAC Fireside without asking about capital allocation.
You finally had someone interesting.
I do, Chris, have a question for you on that. I mean, look, obviously, IAC has historically been very acquisitive, but you're transitioning from a hold co to a away from a hold co, I guess.
How should we think about your capital allocation priorities and how they're going to change going forward?
Sure. Barry touched on this directly on the earnings call. You know, really 3 priorities, he said. He said the M&A market is not that interesting to him. He said that for a while. Also as part of our consolidation, we're, you know, gonna have less resources running around looking at deals. Our prioritization on capital allocation is our own stock at IAC, MGM shares. The former we bought back 13% of the company over $400 million over the last 15 months. The latter, we bought about 1 million shares each of the last 2 quarters. The third would be strategic M&A through People Inc. That's how we've articulated it, that's how he's thinking about it.
It is a cleaner, clearer capital allocation strategy than we've had in some time.
I think that is a natural segue to you, Tim. third one was M&A and People Inc.
Yeah.
What would be of interest to you?
Anything that would further our ambitions to have direct relationships with the end consumer is the number one priority for us right now. Anything that can get us there faster or is scaled already would be amazing, where we can bring our channels to bear and really accelerate. We are always in the market for brands, new brands. It would only be for A-plus brands. That's the future of this segment. We have many good quality brands that are not A-plus brands, that while we have a nice, you know, kinda cash annuity, you know, cash flow annuity coming off of them, they're not the future.
A-plus brands, of which there are few direct connections to advertisers or consumers first and advertisers second, maybe a little bit of ad tech would be areas. I'd say we're more active than we've been in years, there's nothing imminent yet that we've really found that checks all the boxes.
I wanna come back to MGM just for a little bit and well, maybe we'll wrap on People. 26% stake, you're well in the green since your 2020 investment. You know, you've kind of given your rationale, I think, for holding MGM shares, but is there anything, you know, what could lead you to divest over time? Would you ever consider divesting? You know, how big of a stake would you be willing, you know, how high can you go from an ownership perspective?
Sure. There are a few elements in there. Would we ever divest? I mean, it really is up to our chairman and the board on that. Nothing has been part of IAC forever, except maybe The Daily Beast. That, you know there is an opportunism, but there is a real commitment to MGM and real belief in it, and Barry has called it a forever asset. In terms of a natural or targeted ceiling to our stake, I wouldn't articulate any such level. We did agree to a voting agreement with MGM and between Barry and the board, which really caps our voting interest at 25.7%, I think. Any voting interest we have over that will just be voted proportionally with the shareholder base.
I think it's going to be more around, you know, as MGM allocates capital, continues to allocate capital to their own stock, and such where our voting interest would go, or our ownership would go. Look, when you think about MGM, there are a number of factors that will create growth or clarity in the valuation story that are either midstream right now or are uncertain. Uncertain would be the forward environment in Las Vegas. Clearly, we're in a K-shaped economy where the high end is doing extremely well and the low end is under pressure. You can see that manifest in Las Vegas across a variety of earnings. I think when there's clarity around that, given the quality and positioning of their facilities, we think there will be a re-rating there.
Secondly, their digital assets between BetMGM, whether it's 50/50 JV with Entain, they flipped from cash flow losing to cash flow generative. They dividended out last year and have given public guidance for this year, feel good about their position and the solidity of their iGaming business as one of the leaders there. The wholly owned digital assets at MGM internationally, LeoVegas, the JV in Brazil, we think that will show real growth and profitability improvement over time as they execute on their business. China, you know, where, which is a very large holding in MGM China. The Japan project, which, you know, was an unusually large and long-dated capital project.
As we get closer to its opening date, investors, we think, will be as excited about that likely as they were about Macau opening up and Singapore and the other, you know, monopoly or close to monopoly, you know, Asian gaming assets that have been out there. We are believers in MGM and the management team and the strategy, and part of the goal is to continue to simplify the story to make clearer the value that's inherent in the assets.
Any questions in the audience?
Yeah. Hi, how are you? What are you guys are doing in,
We're recording. I just want everyone to hear.
Oh, perfect. What are you guys doing in international markets with the traffic, with the content?
We're about 85% of our traffic is U.S.-based. Internationally, we rely predominantly on programmatic markets to clear our inventory. We certainly have a lot of, or several magazine editions in, throughout Europe and the Middle East that we're excited about and are good partners for us. You guys have a lot of iconic brands that touch on the same areas that you're seeing creator economy. How do you think about that going forward as something that you are gonna co-op or something that you're going to compete with? Specifically around a lot of your premium brands, there are people getting that same kind of guidance and interaction, Right outside of that ecosystem. Good question.
We did, we actually did a little acquisition last year called Feedfeed, which is a creator economy sort of influencer network around the food space. It was something we kind of easily could plug into our premium sales team, has a lot of resonance with the advertisers. That's one model. The other is, I mean, we think that we can create those same capabilities, products, personalities ourselves. You know, either in, you know, resident inside our four walls, and we've done we have examples of that where, you know, what formerly would've been a, I don't know, a junior editor or somebody who was, like, a star is now, you know, really a social media star or sensation or creating products.
A little bit of co-opting and I guess in that sense is, has really been the model. We have brands like InStyle, which some of you are probably familiar with, which was a thick magazine 20 years ago. It doesn't even publish a magazine anymore. Has virtually no traffic from Google, is our fastest growing property, is creating original video content, is creating, you know, sort of influencer-like characteristics. I think for some brands, particularly a brand like that, so, you know, in the beauty fashion space, is really kind of creating its own space in the, in the, within that kind of the context of the creator economy. Yeah. That's a good question.
Chris, I'm gonna give you your last question, I think. You've been doing this for 5 years, coming to all these conferences, meeting with investors, so you've had a lot of IAC questions and talk. I'd be curious, what do you think, you know, from the inside, like, what are the biggest investor misperceptions around the business, or what surprised you the most over the last 5 years?
We've clearly underperformed for investors. When I came in, the portfolio was in more challenging shape than I realized, but more importantly than Barry and Joey realized at the time. The mandate when I was coming in was to help rebuild IAC with the cash balance that was there at the time, post Match and Vimeo spin, then it honestly rapidly moved to triage given the state of Angi and the Meredith Dotdash integration and a few other things. I think we've gotten it to a clearer place, these guys have done a great job getting People Inc. integrated and executing and really leading the category.
I think things that are underappreciated is how hungry and focused Barry is, how active he is, how intellectually curious he is, and just his engagement on People Inc. and MGM. I think, you know, the performance of People Inc., I think is underappreciated. You know, we've been focused on executing in a disciplined way, and that'll likely continue under Neil and Tim's management.
Maybe Tim, for you in our final minute, as you kind of step into the consolidated CFO role.
CFO people. What are you most excited about? What do you think can be most transformative to the business in the years ahead?
Yeah. I mean, we're obviously excited to take over from the good work that Chris and Joey before him and others have done and step into that seat. That'll be an experience for us. Notably about People Inc., as Chris said also, like, you know, it's been a journey since the merger. We put the former Dotdash and Meredith together about 4 years ago now, 5 years ago. Going on 5 years ago. We had to get through the integration, which is always harder than you expect. There was an ad recession, which is never great for an advertising-supported business. AI emerged, right?
We think we've sort of largely, you know, shook off all of those challenges, outperformed all of our competitors, have grown now for 10 straight quarters, you know, solidly, expanded margins. I'm excited to get sort of that story out there and that narrative past, and get past the AI overhang narrative and really start to get people focused on the future and what this business can be.
Great. Thank you both.
Thanks, Cory. Thanks, Cory.