Chit Chat Stocks - InterActive Corp (IAC) | Deep Dive

Episode Date: January 28, 2021

InterActive Corp is a holding company whose main operations include media and internet businesses. IAC holds many companies that you have probably heard of such as Angi's Homeservices, Vimeo, and even Turo the business interrupting the car rental industry. As always enjoy the show! Subscribe to 7 Investing with the code "CCM": https://7investing.com/subscribe/ Follow Ian and check out his work on Twitter: https://twitter.com/IanGrayLive Follow Chit Chat Money on Twitter: https://twitter.com/chitchatmoney Subscribe to Chit Chat Money on Youtube: https://www.youtube.com/channel/UCG5Ni-SI-jyrEsoNUhqftNQ Company Background | (2:31) Industry | (5:35) Management & Ownership | (8:02) Valuation | (11:05) Earnings | (13:07) Balance Sheet | (15:25) Second Half | (18:52) Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investment. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are not financial advisors. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or a recommendation. Now, please enjoy this episode. okay welcome in this is the thursday deep dive on chit chat money and we're here with ian gray as always and today we're discussing interactive corp which is known as iac but first ian you're down in flagstaff in the old incubator uh how are things going you got like two feet of snow

it's uh yeah yeah that's a crazy amount of snow i've never been anywhere where it's really snowed at all and then it was two feet in the last two days just had a couple entrepreneurs come by i think they're seven eight nine something like that shovel my driveway so lots of innovation happening here in flagstaff yeah perfect everyone yeah they're uh tell them to go buy some gamestop calls and triple their money but uh today we're going to be talking iac oh but first yeah we got to talk about our friends at seven investing ian you know about seven investing but we're going to be talking about a specific advisor there yeah steve steve Uh, he's Steve. Oh gosh. I don't know how to say his last name.

Simington. Uh, and yeah, he's, yeah. I mean, he's an overall, I mean, I don't know what his specific style is. He likes to go with, you know, some traditional value names. He plays in the higher growth men, but it's really just companies he understands and he's confident over the long period or long time horizon. Yeah. Uh, I don't know what else to say. Like I love a lot of the companies he looks at. Um, some of them, you know, are the higher growth names that people might think oh that's overvalued but really they do have that long-term time horizon at seven investing so they're not afraid to pay up for growth um and

if you want to get like a sneak peek his analysis we did a show with him for the 25 stocks at christmas i guess we did one with everyone except manisha but uh he talked about real estate investment trust is that what it's called yeah it was a real retail opportunity investment corp I think that's what it's called. Yeah, ROIC. Yeah, and so you can kind of get some free analysis there. But if you want to sign up and get all those picks at 7investing, you get $10 off with our code CCM at checkout. But we'll get done with the ad and we'll get right into Interactive Corp.

So, Ryan, why don't you get things started? Yeah, IAC is a holding company that owns pretty much, I think it's all media and internet businesses. Currently, IAC still operates a bunch of businesses, including Angie's Home Services, Vimeo, Care.com, DotDash, Turo, and a bunch of other early stage companies. Investopedia. So, Investopedia is next. It's a must-see. And they've had a lot of notable companies along the way. But be forewarned, their capital structure is a little complex.

And I mean, the business, it requires they are buying businesses at an early stage, growing them and then spinning them off a lot of the times. So there's a lot of moving parts to the business. So just be aware of that. But IAC was started as Silver King Broadcasting Company in 1986. There were a bunch of name changes and corporate transactions along the way. But it finally resulted in Barry Diller buying them and eventually calling it IAC. and they've always been a serial acquirer specifically media and internet internet businesses i believe they were trying to do like a bunch of broadcasting channels initially with silver king because barry diller i think is uh he was the fox broadcasting guy he was the

broad fox broadcasting company but from 1997 to 2005 iac bought ticketmaster hotels.com expedia match.com lending tree hotwire trip advisor and more um and eventually they bundled most of those travel companies together under the name expedia group and eventually bundled some of the dating apps together under the name match group um so it seems like they go after like like a bunch of dogs in one fight i guess they like buy all the horses in the race and then they just bet on the industry and so they did that with online travel um and then they did that with dating and so they've spun those off and a lot of them become public companies and that's basically how their business works yeah and it's interesting yeah you might be uh listening and confused like

oh match group that's a public company uh but originally it went ipo'd or whatever and then got spun off from uh iac they still owned a significant stake of the outstanding shares so that's kind of where some of the value gets derived but it's similar like to it's similar to berkshire hathaway in a sense where they're trying to buy companies you know whole companies not just invest in outside interest but they're more of in the game of spinning it off so people can choose what part of their business they want to invest in yeah and they're also bundling a lot of these companies together i mean they bought match.com early on they bought tinder tinder along the way i think 2015 2016 um and then they put them under the same umbrella so it's not like

they just bought match group and grew it like they built match group uh the the holding company match group they built so um yeah that's kind of how the business works does that does that all make sense yeah okay uh who's who's up the next industry landscapes at you yeah so again this is tough because they're kind of like conglomerate uh but i mean for iac as a whole uh there's no competitor because it's just a holding company that's investing in things but i'll just go for the two big parts of their business, which is right now, Angie's Home Service and Vimeo. Match Group used to be a big part of their business, but it's officially separated. They have no ownership anymore. And that ended in September, the summer of 2020. So Angie's Home

Service, there's not really any huge competitors to HomeAdvisor or Angie's List. There's some smaller ones, and they're out there. And then if you don't know what that is, it's just a marketplace where, you know, contractors, home improvement people, you know, a lot of people that I guess would be getting their supplies at Home Depot or, you know, contracting out a bathroom expansion or building out a deck, things like that. They are on whatever this is called, either Angie's List or Home Advisor, and then people find them and then they're just a marketplace where they have, you know, the take rates and they have a few different ways to monetize. But yeah, that market right now uh for i don't know the specific name for but basically like home improvement

is about 100 billion dollars and it's estimated to grow to about 200 billion dollars over the next decade so really a lot of room to go there and i think the majority of the market currently is still offline i think it's 90 offline so if they can get that switch to have the you know the leads and stuff like that not just being over the phone or finding something you know just to your local guy. They have a lot of opportunity there. And then Vimeo, it used to be a YouTube competitor. But since switch to selling enterprise software for focused on video, they allow you to do your own streaming service. And they allow you to do live streams, there's a couple of different things they like to do. But it's really like professionalized video, either for corporations

or creative types who are trying to say like you're a you want to be like a cooking show, or a cooking channel, but that's not the food network. It allows you to do your own app pretty easily, like on a Roku or an Amazon Fire or something like that. But yeah, that's all their industry is. Their competitors for Vimeo are kind of maybe Adobe a bit. And then there's another company called Brightco, but it's hard to judge who their actual competitors are. And it's hard to really judge the size of that market because it's really new and they're building it out themselves um all right ian you're up next with management yep so ryan mentioned earlier barry diller who's the chairman and senior executive he was the founder of iac well sort of um as as it is

today um he bought a silver king broadcasting company as ryan mentioned but he has an interesting story he originally came up through the media ranks starting like as a fairly low position at abc eventually moving on to paramount pictures he became the ceo of 20th century fox and then while he was at 20th century fox um the murdoch's basically said hey why don't we start a fourth television network um to compete with abc and nbc and cbs which was kind of a gargantuan task and they put him in charge of that um ended up being successful obviously it's still around today and one of the big pieces of success there was actually the simpsons that became one of the shows that they kind of staked um a lot of their claim on so anyways an interesting story he's been

around for a while um there's actually a really good episode of masters of scale it's a podcast with reed hoffman where he interviews um kind of business leaders but they have an episode with barry diller that's really interesting so anyways he's well respected in the business community he's on the board of coca-cola um recently got put on the board of mgm because iac invested um some money and MGM about and acquire basically 12% of the company. He owns about 6.6% of the IAC shares outstanding. So a good chunk, the only person who owns more than him, well, the only thing that owns more than him is the Vanguard group that owns about 8.1% of the company. And then I'm going to mention Joseph Levin, or Joey Levin, who's the CEO now of IAC. He's been with the company in a

variety of roles since 2003. He was formerly the CEO of Vimeo. One of the ways that their management team kind of works is you can be like the CEO of one of their companies, one of their portfolio companies, and then you become executives within their holding company or things like that. So there's a lot of shuffling around that happens. But he's been in a variety of roles for a long time and owns 3.9% of the shares outstanding. So a big, big stake. Seems to be the successor to Barry Diller and likely is going to be around for a while. They're trying to take good care of him, paying him a lot. Recently signed a new deal. I think Brett may get into that later. But interesting management team, experienced, they've done a good job. And I'll also note,

they seem to do a good job of developing leaders. Like I said, Joey Levin has been with the company since 2003. Another example of someone who was with IAC was Dara Khadrashahi, who was the CEO of Uber now. He used to be the CEO of Expedia and kind of came up through the ranks at IAC and was a CEO of Expedia, I believe, when they spun that out. But now he's the CEO of Uber. So lots of good management development happening at IAC. Yeah, it's kind of one of the big investment, or at least when I see people talking about the investment case for owning IAC, it is really coming down to management and what they can do with the cash on hand and uh kind of incubating if you want to use that term the businesses they currently have but i'll

get to the valuation that's a little tough because it's a holding company with a lot of outside interest but the ticker is iac and enterprise value um for when i looked it up is about 15.2 billion dollars according to coifin uh no dividend and you kind of want to take a sum of the parts valuation to understand all the pieces for this unique conglomerate so vimeo which iac owns just raised $300 million at about a $5.5 billion valuation. Part of it was at like a $5.2 billion pre-money and part of it was at $5.7 billion pre-money. So maybe it's a little closer to $6 billion on post-money valuation, but that brings IAC's EB down to $9.7 billion once they spend that off because they're saying they're going to spend that off in the spring. So if

you get that out of the enterprise value, it's about $9.7 billion. And then IAC also owns 85% of Angie's home services. So, you know, high majority stake, and that's valued around $5.4 billion, which brings the enterprise value down to 4.3. So about a third, two thirds of the business is, you know, one, one thirds in Vimeo, one thirds in about that stake in Angie's home service. And then they have that MGM stake, which is about $1.8 billion. So you shave off a little more um and then the core businesses uh after that which is like dot dash all the little smaller things they own that aren't that aren't growing yet or are part of the you know internet businesses there's like a search thing as well um that's valued at around 2.2 billion dollars excuse me

um and they have about 3.8 billion dollar in cash and equivalents and again it's hard to judge the multiple um and ryan's going to talk about the earnings but i mean if you back out everything and look at just the businesses they own outside of Vimeo and Angie's and MGM, the sales multiple seems very reasonable, but we don't know the exact margin structure of everything. Yeah, and the other part is when, you know, if they have success and they generate a lot of cash, they know how much cash they have.

And sometimes the earnings on a quarter-to-quarter basis can be not representative of the future because a lot of the time they're pouring money into some of these businesses to expand them. Turros, one example, and I'll get into that. But for the third quarter, they had 788 million in revenue up 12% year over year, they had 126.4 million in free cash flow for the first nine months of 2020. And that's growing at about 7% year over year. But the operating cash flow for the last nine months was actually down 12%. They just cut CapEx in half. And there was some working

capital adjustments. So the free cash flow was better. But Vimeo is their largest, or sorry, their fastest growing segment with 75 million in quarterly revenue growing 44% year over year. That's obviously, so growing at a pretty quick pace. And then Angie's Home Services has about 390 million in quarterly revenue growing 9% year over year. That is a really, I like that business. That's publicly traded too, isn't it? Yeah. So you can buy Angie's Home Service on your own And if you want, it's kind of like how Match Group used to be, where they spun off some of the shares. So 15% of it is not owned by IAC, but you can still like do the, well, I own Andrews

through IAC. It's just, you know, a smaller stake. Okay. And they had 130 million in operating losses. This is on a gap basis for the quarter. It seems like they've got a bunch of those small internet. They categorize it as other businesses. There's search and then there's other.

And I think there's three that they break out individually, which is Vimeo, Angie's, is DotDash the other one? Yeah, there's DotDash and then Surge and then Other. And then Other. And they're losing a lot of money from those other ones because they're growing. They're smaller businesses and they're willing to sacrifice a little bit of losses in those. But they have almost $7 billion in cash, goodwill and long term investments. So if you pull all those together and then obviously almost $4 billion in cash, over the last nine months, their cash balance tripled. I assume some of that had to do with the match group entire spinoff. Yeah, not sure exactly, but I would assume so as well.

So, yeah, very liquid. I think all the long-term debt is attributed to Angie's, which I think, I mean, you're going to get into the balance sheet, so I'll let you get to it. But I think less than a billion or something like that, right? Yep. So, yeah, I'll go ahead and dive into the balance sheet. So we've got about three point eight billion dollars in cash, which, like you said, a large portion of that, about three billion or so was a result of activities related to the match group spinoff. Some of it was getting some shares. Some of it was match group paying them back for some debt, stuff like that. So basically it showed up as an additional three billion dollars on the balance sheet.

They do have about one point eight billion in goodwill, which isn't alarming or surprising at all because, you know, that they're acquiring lots of companies. And so the fact is that they will be paying premiums for those types of companies. And that's just part of that's part of what you're buying when you're buying IAC. And so it's not an unreasonable amount of goodwill if there's likely write downs at different times and that type of stuff, but nothing that's too concerning there. And then like you said, Ryan, about a billion dollars in debt, outside of, or sorry, about a billion dollars in debt, including the leases outside of the operating leases, almost all of the debt is related to the Angie business. And so it's broken up between senior notes, which have about a 3.875% interest rate, and a term loan, which is LIBOR plus 1.5%. And so right now, it's about a 1.6, 1.7% interest rate. So not a whole lot of, like, pretty cheap debt, you know, pretty cheap debt, not a whole lot of debt. um and they say that the debt is for potential acquisitions and or the return of capital to investors and so looking you know looking to create value for investors with these it's not really to fund like operating losses or operations or anything like that the debt's really to be aggressive or to return capital to investors so in my opinion or go ahead and so andrew's home

services correct me if i'm wrong is another like match group sort of an umbrella it's got multiple companies underneath it right uh so it has home advisor and angie's list the two big ones but i do think it has yeah a few uh i think they have a european business that's different uh or it could just be that home advisor the company has a few ones but yeah it's similar to match although it's not as um and diversified don't they so don't they dump a lot of the debt uh when they spend these companies off don't they leave sort of the debt with those companies once they're spot off Yeah, I mean, that's one of my lowlights for investing in those companies. But if you're IAC, I guess it's better, you know, because you can't.

That's what they did with Match Group. They dumped, I think, $2 billion or maybe even more. This is why I said the capital structure is a little complex, because there's nuance to every sort of number on that balance sheet. So just pay attention to it. Yeah, I mean, fine. And it's fluid, right? Like you said, because of all these different businesses they own and the potential to spend some off and to have different capital arrangements. you could see large fluctuations in cash like we've seen in the last couple of quarters with

the match group spinoff yeah and they are going to raise i mean once they spin off vimeo which they say they're going to do shortly that should raise some more cash too and that was a good point from ryan uh having the billion dollars in notes on angie's balance sheet kind of maybe indicates that once they spin that off or if they ever spin it off fully they're gonna you know keep that debt on Angie's balance sheet. So yeah, kind of an interesting way to look at it. If you're kind of, I don't know, looking at IAC or Angie's service,

deciding what we want to invest in. But we're going to hit a break and then we're going to get back and talk about more about IAC, competitive advantages, highlights and lowlights, all the good stuff at the end. Cox Panoramic Wi-Fi includes advanced security to help protect all your connected devices.

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Advanced security must be enabled in the Panoramic Wi-Fi app. Restrictions apply. All right, welcome back. First up is competitive advantages. Again, a tough one. So we might be looking at individual businesses or just kind of how their corporate structure is,

but I'll let Ian go first. What do you have for ISE? Yeah, so I'll say, and I am going to consider this a competitive advantage, but that they are just good at the acquisition of brands and building kind of these many, not conglomerates, but many groups of companies like the Match Group or others. And it takes both the expertise and the proper scale.

They have to be big enough where they can actually buy lots of companies. So like I said, Match Group would be the obvious example of this, but I'm going to just talk about dot dash for just a minute. So that was, um, turned around from, uh, about.com was the original asset there. And then they decided we're going to go after becoming a great publisher, um, that has high quality content and not a whole lot of intrusive ads. And so basically part of that is investopedia, which it owned prior to that. And then kind of

rolled into it. Um, it acquired brides, which used to be a print magazine, and now it's just entirely online. And it built a brand called VeryWell, which is kind of a health and fitness type online brand from the ground up. And so it's using that combination of both stuff it already owns, stuff it acquires, and stuff it builds to create these many companies within it. And I think that that is a competitive advantage because not too many companies, in my opinion, have the scale or the expertise to do that. Yeah, it's probably better to have those type of companies within IAC because on their own it's kind of tougher and altogether it can help because we know those businesses can be lumpy but in the long run those group of like informational businesses and i'm

kind of looking at it through the investopedia lens they seem very stable over the long term be tough to disrupt i know it's only a small part of the business but it seems like it'd be tough to disrupt someone like dot dash yeah and also to touch on ian's point this is kind of i for competitive advantages it's kind of hard to pinpoint any one specific thing because it's a conglomerate and so they're have their hands in so many different industries but liquidity and that expertise that guidance from people that have done it before i mean barry diller's been doing this for like 30 years really well 11 15 yeah yeah so i mean any if you're able to have that as like a dot dash or any of these smaller businesses to kind of have that guidance on like

hey what should i do i think that is sort of a competitive advantage when you're looking at it on the granular level so like those companies versus their competitors not necessarily iac but then yeah management's got a really good track record and they have almost four billion dollars in cash so if you believe in management and you think they can allocate that well um like i can't that much liquidity has to be a competitive advantage somewhere and uh especially if markets or valuations on some of the businesses revert uh they have a lot of ammo to go out and buy tons of companies. And we saw that in March where they took a big stake in MGM. That's just kind of different because it was a common stock stake, but yeah, they use that to buy $2 billion

there and they're going to try to get them into that omni-channel e-sports, not e-sports, gambling strategy for sports gambling. I guess that is the other thing is like MGM, they bought it in common stock. Okay. They're not one dimensional. They don't have to buy private businesses. They don't have to buy smaller companies. They can really, they have a lot of, I hate using the term optionality but they have a lot of optionality and what they can go after yeah i'd agree all right i'll hit mine uh similar to your guys's but i do like the structure they've created with kind of the you know they have the permanent and long-term mindset where uh even if some of the common stockholders gets you know skittish or something like that that can hurt an individual

business um especially if they're in the high growth phase but with iac having the balance sheet and whether people buy or sell the stock doesn't really mean they cannot invest into like something like DotDash or the smaller businesses in the other category like Turo or Care.com was kind of a distressed asset they bought. I think that's definitely an advantage from the capital allocation standpoint, but it seems like we all had similar ones there. Yeah, they're serial acquirers. So you're betting on their ability to acquire companies. So I guess that's sort of the future of the business. Yeah, and their management team. Like that was the thing with About.com that was kind of interesting is that wasn't their original plan with it.

but they brought in this guy who they really liked and they said hey you're going to be the ceo you're in charge and he came back like six months later with the plan and said we're actually going to turn this into a major publisher and we need 35 million dollars and they said okay we trust you and he's gone and done and so they kind of empower their people to to make those bold decisions but anyways yeah it's not just the tracker of acquiring companies but it's like acquiring and then making them best in class yeah the development process has obviously worked well there yeah it seems to be a key uh all right future growth opportunities who's going first and yeah hit up first yeah sounds good so i'm intrigued by their um the stake they took in mgm

so as we've mentioned they have about a 12 stake in mgm now i think that has the potential to grow to a larger stake um particularly if mgm starts to acquire some companies so they've come alongside side and said hey we don't consider ourselves quite activists we're not we like the direction this company is going we think they're doing a good job in online um the online gambling space but we want to come in and be a deal partner in some ways and so they can have a couple of boards on the seats on the board um they so mgm is uh let me find the name here but mgm made an offer for Entain, which is its partner in the MGM iGaming and sports betting businesses. And so Entain basically said the offer was too low. There's some speculation. I think IAC has

said that they'd be willing to do this, that MGM could up their offer with some additional cash from IAC to go out and acquire Entain. And so I see this as maybe a roadmap future for future growth and for them to kind of build this umbrella of sports gambling companies, particularly just because of their expertise with it and it seems like a space that's ripe for some consolidation there's all these different players out there right now a bunch of startups in the space and they might be able to take mgm with their traditional expertise and the omni channel stuff with having some physical locations then to also be able to bring in iac's cash and their ability to build um kind of a little mini conglomerate like that i think i think it's an

interesting growth opportunity yeah and that's where i think having iac as your parent company gives the uh sort of subsidiaries a lot of flexibility is like uh all right maybe we're not sure if we can take this action well let's dip into the piggy bank which is iac uh and they always have access to capital that way yeah and the big uh the comparison with the gambling i think is apt to compare it to um the online dating space and the online travel agencies which is Expedia, which is one of their older businesses that they spun out because we're seeing this big growth with the legalization of sports betting. It should, you know, the majority of states should be legalizing it within the next few

years here. Maybe it'll take a decade, but they're kind of seeing this new opportunity where, you know, I think they're really good at identifying when that shift from offline to online is going to occur or there's going to be a big growth in that certain market. and then they make the investments and then they make or whatever. They have the partnership with MGM. It's a little different

because it's the common stock, but they're giving cash to whoever. They're helping fund operations. So even if they have to burn some money for a few years or if it takes a long time, eventually, they're going to be the number one player in the space.

But it's not guaranteed. So Ryan, what are your thoughts? Yeah, I'll get to mine. Turo in 2019, IAC made a $250 investment 250 million dollar investment uh inturo uh and so if you don't know what they are it's like this peer-to-peer car sharing marketplace so it's a lot like airbnb but for the auto business which i know sounds like well isn't that like uber like no you're literally like uh all right someone's

got their car like someone has a house on airbnb you can rent it for the day for like 100 bucks it's replacing car rentals which has been ripe for disruption for just about ever like uh i can't remember anyone that's had a good car rental experience. But yeah, Turo is reportedly a unicorn, but that's also based off partially IAC's valuation. And I do think, I mean, there's just been a lot of talk about Turo. Generally, I think they grew revenues 60% year over year in the last year. But if you're looking for confirmation bias, Larry Fitzgerald, 2Chains, Victor Oladipo, and tyrod taylor are also investors in tarot it's tarot but but well i'm all in i'm all in uh but yeah i just thought that was a funny note um yeah it's kind of it feels like a typical silicon

valley sort of unicorn but and i'm sure i mean that's a significant that's a sizable investment for uh iac is 250 million that's not small so is this kind of a standard vc round type thing where they just own a stake or do they have the majority ownership like something like vimeo yeah i think there's been 400 million dollars in funding towards turo uh and they've been responsible for 250 million of it and then they said it's a series e so so it's late stage yeah yeah i'm i'm assuming it's just sort of a yeah the stake not necessarily like owner operator kind of thing okay that makes sense um yeah i'll hit mine then uh vimeo they're gonna spin it off this spring they said i think they they said on a conference call that around the second quarter of 2021

one vimeo gets spun out um you know a five to six billion dollar valuation which is what they just raised that seems a bit rich on a sales multiple basis because i would push them into the 20s however you know the business has found its stride it's got minimal competition um you know sas they they are we talk about the ridiculous sales multiples but the business model is sound 20 times sales that's cheap yeah that is cheap if you look at on a snowflake basis but uh i mean look they do deserve a high multiple if they have that solid recurring revenue good retention rate and um the high gross margins uh you know one example for the value proposition because i think people are confused they're like vimeo why would i just not use youtube um so you can if you're

subscribing to video vimeo and say you're a company like this i guess a better example is seven investing because they do a live stream across all their different platforms um and you when you subscribe to video it allows you to simulcast to all your different social platforms or whatever type of platform you want to do it could just be on your company's website uh so it allows you to do that to five different social platforms which is a great feature so you don't have to go live to everything at once um and it also helps you transform video content like i said earlier into a full scale like streaming ott type deal where you can build your own netflix without having to do the back end um that's a little bit more of a con i think there's some

competitors there uh but it's interesting if you think that there's going to be like tens of thousands of niche um creators doing subscription content for either fitness or i don't know sports teaching cooking yeah stuff like that i don't know it seems like there's a lot of opportunity there okay uh highlights and lowlights and you want to go first yeah i can go first so i think the highlights are you know the main ones we've talked about the track record management they've just been doing this for a long time and super successful at it um it's kind of hard to find low lights with this business just because they've been so good for so long but i will say none of their major brands right now jump out at me is something that i'd be super excited about

investing in um and i think they don't have the same type like that in my view they don't have a match group right now as part of iac and they don't have an expedia as part of iac um they have some interesting stuff like you mentioned vimeo i think is interesting and i probably have to do some more diving on stuff like that but um you know and part of that you know i'm calling it a low light but part of that is what they're so good at is taking something that other people don't see as much value in and then turning it into something that has a lot of value so um anyways that's kind of my my low light if you even consider it one yeah i guess yeah angie's home service seems a bit tough for me because i've always thought that it's kind of there's a lot of friction between

the contractors and stuff onto there because what's the value like all right you're going to take what 10 of my revenue here how much value are you really going to you know provide the demand there feels a bit slow kind of like onboarding someone to say stitch fix or something like that but when you look at angie's valuation um they are like a marketplace company and typically at scale if they succeed you know with their margin structure they typically have like you know five to eight times sales multiple and again they might have different margins than someone like ebay or etsy or something like that but right now i believe they traded sub four so there's a bit of a discount um in that valuation but again it's not like dirt cheap or anything

like that yeah it's also worth noting i feel like contractors are probably slow adopters of services like that it's not like uh what's the one we're looking at fiverr it's not like developers how they'll instantly flock to those services and if they feel like they're getting revenue taken away from them there's probably some resentment there no i mean that comes back to the numbers i was saying earlier about the industry numbers 90 i believe or maybe it was 80 of the home improvement market is still offline um so maybe that changes and it's 80 20 in the other direction but uh it's a tough bet to make there's a lot of friction in there so far all right my highlights uh the highlights are pretty obvious i think we all have the same one and it's

the track record really speaks for itself a dollar invested in iac uh when barry diller assumed control would have compounded at a 14% annually, uh, at, at 14% rate annually. Um, and that is versus the market's 10%. So yes, that is a long track record and it's a good track record. Um, and I think you're buying it at a relatively cheap price here. So maybe you'll get a higher category than that. Uh, but low lights for me, I, I do like to try to understand businesses in their entirety. I, and I put try there. I like to know if there's anything hidden and there's so much, so many moving parts with IAC and there's so many companies within it that you don't actually know their financials that that's just a bit of a red flag for me. And it, it, listen, if you're

willing to dig all the way through that, I encourage you to do it. Cause there's probably, that's probably a barrier to entry that a lot of investors are avoiding. But it's just going to take more time. Yeah. I mean, would you consider that a red flag or more of like put it in the too hard pile because red flag means like oh there might be something wrong with this business it's more it's like a personal it's a personal red flag not like a red flag for the business like so do you think too hard pile kind of yeah it's right there just uh i don't know there's two there's a lot of small moving parts that and a lot of those become big companies and are born you know that other revenue makes up a large portion of their overall revenue

and that's comprised of like 40 businesses yeah yeah less i really don't know but if you're going to invest you are kind of trusting in the management and their you know vc mindset and developing all those things but um i'll put mine i guess you know same thing as you guys have but i just like to see that joey levin uh or however you say his name just signed a new 10-year deal so he's going to be there for the long term and they pay him well so i don't think he's going to leave um or i mean it seems like the likelihood of him leaving is really low he probably just wants to end his career at iac especially because it's it's really not the same company over and over it's always new things every day um and i do like vimeo i think it's strong obviously you know

a sale a valuation of five to six seems rich but again you kind of got to look at it if you're going to own iac here and you think they're going to spin off vimeo at a five to seven billion dollar valuation especially with how the market is rating these sas companies um if the market's going to rate it like that. I mean, if you hold IAC, you're going to get that value in the Vimeo shares. So that's something to consider if you're wanting to invest. And then my only low light that you guys haven't mentioned is dumping debt onto their investments, which I think is a little bit, it's not shady, but it seems mean to me. I don't know. I was like looking at match group and I was like, gosh, IAC should take some of this back. It doesn't mean that, you know,

I was like, wow, their balance sheet should be cleaner, but who knows? I mean, it's kind of small are they buying back shares not sure i did not check the share count um um yeah i'm just curious what they're doing it feels wasteful to be sitting on four billion dollars in cash yeah i can yeah they've just had that for uh they've just had that amount of cash for a small amount of time and so i expect um they'll do something i expect that's in my view that's one of the highlights is that they should be doing something in the near future and i kind of have a hunch that it could be related to this mgm investment and they'll continue to kind of move in that direction but um we'll see yeah it's interesting uh i don't know the share count

it's hard to judge because of the spinoffs can't really get a reading you have to do a real deep calculation but all right last question are you guys more interested or less interested in ic ian you want to go first yeah i think i i think i'm more interested um just between the cash they have i think they're they're gonna do something here and it's you know with the sum of the parts valuation you did you know it there looks like it looks like it's undervalued right and if they do anything good with that cash like if that cash was a spac today you know what i mean like people would be paying way more for it right but it's it's just sitting on the balance sheet right and so um but in in reality it's functioning somewhat uh you know it has the same uh functional use as

back they're going to go acquire some sort of company with it and so um i think i think it's an interesting way to kind of invest in a company that's going to hopefully acquire some some innovative companies yeah it depends on what value you put those businesses at you know the sum of the parts valuation but you can almost get to a point where you're saying all right we're buying something at a discount to the cash they have and then we're going to see what they can invest it with but it depends what valuation you put it at but ryan what do you have yeah i'd say i'm more interested this is a company that i feel like uh you're going to be able to sleep comfortably at night you're not worried that uh tomorrow they could drop 70 on some earnings uh miss

so i guess it's a comfortable pick it feels undervalued as ian mentioned and then management that track record really does um i mean that's the proof's in the pudding they they have shown that they can do this for a long time and so that's sort of the comfort part um yeah i'd say more interested obviously huge company so a lot more digging to do if i want to uh look at it further yeah and i'd agree with you guys i'm more interested um it was my choice so i guess i kind I knew going into it, but yeah, nothing else. Nothing else to add to you. Any big red flags for you?

I mean, the debt thing kind of concerns me. Barry Diller is a little bit old, but I think with Joey there or Mr. Levin or whatever as the CEO. I don't know why I call him Mr. Levin, but Levin there. I mean, that kind of helps, you know, because Diller is like pushing 80. So he's probably going to be retiring soon. uh so that'd be a red flag um i don't i don't know i mean there's not really any other red flags right no not that i could find yeah just unless you don't believe in their businesses for some reason if you say like these businesses are overvalued and they're not actually going to be

big parts of the future but um i think it's hard to say that about the businesses that they own yep especially if like one does well one might not you know it's kind of hard to judge when doing it as a sum of the parts but that's gonna do for this episode do we want to pick we're gonna each person is rotating i thought it'd be fun to do like a teaser for next week so if if i probably should have said this beforehand but if either of you have one that you want to pick for next week we can kind of give a little teaser for the next show wait what did we say last time we're going to do counterclockwise uh because they can't see it on the podcast but we're all technically sitting in a zoom triangle i mean it would be ian but if ian i don't want to put you on the spot

yeah you're putting me on the spot a little bit but maybe i'll say this maybe we're going microcap next week okay okay well we'll go all right sounds good to me all right yep that's gonna do it yep uh use our code ccm at checkout to get ten dollars off your first month at seven investing remember we are not financial advisors anything we say on this show is not formal advice or recommendation. Thank you all for listening or watching. We'll see you next week.