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Jul. 31, 2007

Today, IAC has released its second quarter 2007 results, reporting $1.5 billion in revenue, a 6 percent rate of growth over 2006.

This also represents a $136 million in operating income before amortization, compared to $165 million in 2006.

Adjusted EPS was $0.31, compared to $0.32 in the year ago period. Free cash flow generated during the first six months of this year was $194 million, with $407 million in net cash provided by operating activities.

Operating income declined in the second quarter to $54 million, due in part to an increase in selling and marketing expense. GAAP Diluted EPS for the quarter was $0.32, compared to $0.17 in the prior year period.

Revenue in the quarter reflects increased year-over-year contributions from every sector within IAC. Retailing revenue increased slightly, including a modest gain at HSN when excluding America’s Store which shut down on April 3.

Transactions revenue reflects strong growth at ServiceMagic and modest growth at Ticketmaster, partially offset by declines at LendingTree which continues to operate in a difficult home loan market.

Growth from syndicated search and Fun Web Products drove strong revenue growth in Media & Advertising, while increased transaction volume and membership at Interval and worldwide growth in subscribers at Match drove revenue in Membership & Subscriptions.

Operating Income Before Amortization declined due primarily to lower gross margins at Retailing, increased fixed costs at Ticketmaster, and lower revenue and higher cost per loan at LendingTree, which offset growth at Interval, ServiceMagic, Match and IAC Search & Media.

“While we expected this quarter to be difficult, we did not anticipate the softness in domestic ticketing volumes which impacted Ticketmaster. We are not satisfied with these results – whether driven by market conditions or our own hand – and are taking every appropriate action to have the back half of the year reflect a demarcation point to a 2008 more reflective of our ambition,” said IAC Chairman and CEO Barry Diller said.

Revenue growth was driven by strong gains at Shoebuy and slight growth at catalogs, partially offset by a 1 percent decline at HSN. Excluding the results of America’s Store which ceased operations at the beginning of the quarter, HSN grew revenue 3 percent.

Online sales grew at a double digit rate in the second quarter. Following the sale of HSE24 on June 19, 2007, Retailing International results are now included in discontinued operations for all periods presented. The segment formerly known as Retailing U.S. has been renamed Retailing.

Retailing results benefited from a higher overall average price point on flat units shipped. Excluding America’s Store, revenue at HSN increased due to a low single digit increase in units shipped as our frequent customers bought more, while the number of customers active in the last twelve months remained relatively flat.

Catalogs revenue grew slightly on a higher average price point which was partially offset by lower units shipped resulting from a planned decrease in circulation at certain catalogs.

Operating Income Before Amortization declined due to lower overall gross margins, increased operating expenses, and higher on-air distribution costs. Gross margins were adversely impacted by lower initial product margins primarily resulting from a shift in mix to lower gross margin product categories, and increased markdowns and liquidations.

Operating income benefited from decreases in amortization of intangibles and non-cash compensation of $6.1 and $1.2 million, respectively.

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Source: IAC