Barry Diller’s mind-numbing InterActive Corp (IACI) reported an in-line Q1, with the also-ran search engine Ask actually coming in a bit better than expected. IAC’s strong assets, unfortunately, are hidden among its weak ones, and the conglomerate thing ain’t working. So Barry’s break-up plan can’t come soon enough.
Imran Khan of JP Morgan:
IAC reported 1Q revenue, OIBA, and pro forma EPS of $1,602M, $135.2M, and $0.30, roughly in-line with our est’s for $1,552M, $129.9M, and $0.29.
* Media & Advertising sees a mix shift toward proprietary revenue. Proprietary revenue grew faster than network and now represents 62% of total rev vs. 52% in Q4. As a result, OIBA growth significantly outpaced revenue growth at 115% Y/Y vs. 28% Y/Y rev growth. We expect this mix shift to continue at an even faster pace as the company plans to transition through network partner agreements in Q2. Thus, we are modelling total F’08 rev growth of 18% Y/Y and OIBA growth of 60% Y/Y.
* Top-line ticketing growth remains strong; profit growth is impeded by investments. 1Q ticketing rev of $349M beat our est of $335M, but OIBA came in at $62M, below our est for $72M. Profitability weakness was due to the addition of Paciolin and TicketsNow which contributed revenue but not OIBA and investment in growth in int’l markets. While we expect margin pressure to ease, we are still modelling F’08 revenue growth outpacing OIBA growth at 16% and 0.3%, respectively.
* HSN continues to rebound, but gains are offset by catalogues. HSN rev grew 9% Y/Y, an acceleration from 4Q’s 8% Y/Y growth. However, top-line growth was offset by a 7% Y/Y decline at catalogues. OIBA declined 33% Y/Y in 1Q. We think OIBA will continue to be pressured by lower gross margins in catalogues, higher shipping and handling costs, and shifts to lower margin products. Thus, we are modelling a 19% Y/Y OIBA decline for F’08.
* Spin-off plans are on track. Management hopes to complete its spin-off into 5 publicly traded companies by early 3Q.
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