Yet Another Value Podcast - Boyar Value Group on the value in MSGS, IAC, and ANGI

Episode Date: November 9, 2020

Jonathan Boyar and Shrey Patel from the Boyar Value Group discuss their firm's background and their process for finding stocks trading for less than private market value. Then, we dive deep intro four of their favorite stocks: MSGE (owns Madison Square Garden), MSGS (the Knicks and Rangers), IAC (Barry DIller's holding company), and ANGI (homeadvisor + angie's list). Topics include why James Dolan isn't as bad a manager as you think, why MSGE's Sphere expansion might not be a disaster, IAC's pending Vimeo spinoff, and what the market is missing on ANGI.Boyar Website: https://www.boyarvaluegroup.com/Boyar Twitter: https://twitter.com/BoyarValueBoyar Podcast: https://www.boyarvaluegroup.com/world-according-boyar-podcast/Chapters0:00 Intro1:20 Boyar Group Background3:30 2008's market versus 2020's6:10 Why MSGS trades for less than its parts18:30 Why do value investors love IAC?20:30 ANGI bull case36:20 Why IAC is spinning Vimeo42:50 What IAC sees in MGM47:45 Plans for IAC's huge cash balance51:15 Thoughts on IAC's management and succession plan54:05 Thoughts on IAC's other businesses

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have two people from the Boyer Value Group, Jonathan Boyer, the principal over there, and then Shrey Patel, who is an analyst. Guys, how are you doing? Doing great. Thanks for having me. Yeah, it's great to be on. no thank you guys for coming on uh let me start this podcast the way i do every podcast and that's by pitching the two of you my guests it's a little different pitching two guests at the same time but you know i think the easiest way to pitch this is for the past couple years you know every time i've gotten obsessed with a different idea or a different value stock and thought i had a kind of differentiated opinion and the two i would the one i would really highlight here is sports teams and msg you know i'd start diving in and every time i started diving in you guys would have four interviews and an extensive report and everything out there. And it would cover

all the nooks and crannies and so many things I hadn't even thought of before. And, you know, I've just, I've really found your research and especially your interviews really valuable. And I actually really, you know, it's strange to pitch another podcast, but I really love your podcast, which interviews exciting management teams and business executives. We were talking before, but you guys had Angie's List CEO on there. You recently had the founder of Parlow Group. And they've just been really great. And it's one of the few must listen podcast for me. So that pitch out the way, let me turn it over to you guys. Why don't you give us a little bit of your background and your group? First, thank you for that kind

introduction of John Boyer of the Boyer Value Group. Just a little bit about myself. I've graduated from Cornell. I worked for Mario Cabelli for a couple of years, which was a terrific learning experience that made the dumbest mistake of my professional career and decided to go to law school. law school was great. Being a lawyer, not so much fun. But then I got my, after being a litigator for a couple of years, started working with my father, Mark, who founded our firm in 1975. And I've been working there ever since, since about 2008, which was a very interesting time to, you know, start, restart an investing career was trial by fire again. And just a little bit about the Boyer Value Group.

We've been around since 1975. It was founded by my father, Mark. And we really have two lines of businesses. We have a research product where we sell to institutions that focuses on intrinsic or private market value, basically taking a PE approach to public markets. And we also run money. And we've been doing that since 1983. And we have a terrific team, one of which is Shrey Patel, who's on the podcast with us.

Tray, you and do your background real quick? Yeah, sure. I'm actually a Southern boy. I went to University of North Carolina, go heels. And, you know, essentially, after being pre-med for most of my life, I decided I wanted to, you know, just start completely from scratchments to New York with no money and kind of take it from there. Managed some money from friends and family for a while. Went back to business school at Fordham and also ended up working for Mario Gabelli as an intern. opened a lot of doors for me

and then ultimately decided to kind of start my own blog actually that did pretty well and eventually the opportunity came up with the Bory Value Group with John kind of used that similar Gabelli background to kind of get my foot in the door and kind of never looked back since.

It's funny you guys mentioned Mario because in 2017 I would say it was Mario with the biggest stick and then Jonathan with the middle stick and me with the small stick just saying like MSG with the Nixon Rangers is a deal you need to do it. And we'll talk about MSG in a second, but John, let me ask you real quick. You mentioned you started in 2008 working over there. I think the market this year, I mean, today excluded with the vaccine and every stock up 10 or 15 percent or something,

the market this year, the only corollary, I think, would be 2008. What was kind of more difficult for you? This year or 2008, you know, kind of fully admitting this year is 12 years into your career, so maybe a little bit different for you. But I mean, I think 2008, I was obviously 12 years younger, didn't have a family. It was a totally different circumstance and having to deal with, obviously, the virus. You know, having a problem that is, that's killing people rather than killing the financial system. This made it a much more difficult experience. I mean, this year has baffled me in terms of if you told me what had happened and where the major averages would be.

I would be very directionally wrong, but that's why you can't use geopolitical events within your investment strategy. One thing I've struggled with is I get the markets of discounting machine, but like AMC theaters, right, movie theaters, they're issuing stock like crazy, they're raising notes at 10%. Their enterprise value today is actually higher than it was at the start of the year. Cruise ships, like this year is not just the zero for them. They're burning billions of dollars of capital. And their enterprise value today is kind of where it started the year at this point after this vaccine spike.

And like, I get the markets are discounting, but the markets are effectively saying these businesses are more valuable today than they were nine months ago once you look through all that casper and everything. And I've just, I've struggled a little bit with that. I mean, I think the only explanation you can have is the Fed, keeping rates where they are. And there's no other game in town. And you have just people chasing any sort of return possible. and it's inflating asset values. I mean, it's absolutely insane. I don't, you know, and the covenants are light on a lot of these debt deals.

I mean, it just really doesn't make sense. But that's when you just have to step back and, you know, know, know what you own. You don't have, you know, you don't have to swing at every pitch and you find the right opportunities and find ones that are going to do well, you know, regardless of what happens geopolitically. So let's, let's, you know, you mentioned the. Fed. And you mentioned that one of your key tenets is finding stocks that trade kind of for a discount to private market value. And I think for a long time, MSG, which owns the Knicks and the Rangers, and we can talk about that has been one everyone's pointed to, hey, trades on the market

for $5 billion and they've got $8 billion in assets very easily. But, you know, one of the things I worry about is, and again, MSG's a central point here is a lot of times everyone can see that MSG is worth more than it trades for today, right? We can go look at the Forbes value. But a lot of times the issue is, hey, management's in control. Management doesn't care, you know, MSG. James Dolan is, he's a clown. He's an absolute clown show. So I worry that the market is, it's not that it doesn't know the asset value.

It's that it sees that there's issues to realize in that asset value. So how do you guys kind of think about that in both when you're managing money and recommending stocks? Well, I think it's knowing your client. But this MSGS and MSGEE for that matter are not for people who have a six-month time horizon. I'm looking at something as if we're going to hold it when we buy our research of stock, we're going to hold it for five or ten years. And that's how you have to look at it, that you're a business partner with them, and you're buying something at such a discount to intrinsic value that you have that margin of safety.

Clearly, he is a terrible owner, if you are a fan, but if you are a shareholder, you've been handsomely rewarded. I mean, just to give you, you know, we've been dealing with him since Cablevision back in the early 2000s. He tried to steal Cablevision in 2007, I believe. You know, he wanted to, he wanted to take a private and the majority minority shareholders rejected the deal. He then went on to spin out MSG, MSG, he then went on to spin out AMCX. He paid a one-time, very large special dividend. He eventually sold Cablevision to Altis for more money than I ever thought he would get. Then he spun out MSGS and MSGEE, and along the way he spun out his network as well, MSGN.

So he's been very shareholder-friendly, very shrewd. I mean, he bought the Knicks in the 1990s for like $500 million. So he's, you know, people say he's not the sharpest tool in the shed. And he's a lot smarter than people think. He just happens to be a horrible owner of a team. But I think in the end, you can see this with Stephen Cohn and the Mets and other deals. Even during a pandemic, people are willing to pay very high prices for trophy assets. Yep.

No, I agree. You know, I agree. And I think he's done a lot better. for shareholders than people gave them credit for, you know, like MSGN owned the, it was the Fusion Network, if I remember correctly, and they sold it for 300 million in like 2015 or 2016, and two years later, it would have been a zero. So I think they did well. Though at the same time, I look and we were talking about this before the pod, like I look at how he's performed over the past couple years. And like on the MSGE side, he's doing the sphere and I'll let you

talk about the sphere in a second. And it's pre-pandemic that looked very weird, but post-pandemic looks crazy he's sinking so much money into this. You know, AMCX and MSGN we talked about, but those are standalone companies as the cable bundle on lines. And I think both of them have a lot of terminal value issues. He kind of missed the, missed the time to sell those. And I think both of them have very murky strategies going on right now. And then just, you know, a lot of the stuff with even the Knicks ignoring his mismanagement of the roster. Like, you know, he was the only owner, if I remember correctly, who didn't want to suspend the season during the pandemic. And I just worry, like, I worry that he's increasingly out of it. So how are you thinking about his kind of recent

track record over there? Well, I guess the last thing he, you know, everyone thought it was crazy when he redid Madison Square Gardens and a billion dollars doing it. And it was a home run. I think it's crazy what he's doing in Las Vegas. I wish he wasn't doing it. And right now, I think MSGE is about $80 a share. We have intrinsic value about $100,000. $124 a share and that's and we're doing that because we're getting to that number by taking their $1.2 billion in cash and dividing it in half. So that's what we think of how much we think of the sphere and we think it's terrible. What if we're wrong? What if he's right yet again? I don't know. I wish he would abandon this project. I wrote an open letter in Forbes that went

unanswered to James asking him to get rid of the project. But yeah, no, but the one thing I'm say, you mentioned the MSGN. The one thing you have to remember is because of the pandemic, New York State and budgets all across the country, coffers are, you know, really slammed. And one of the ways that they're going to raise money is through legalized sports gambling. And if there is legalized sports gambling, that's a fantastic opportunity for MSGGG. because regardless how good the Knicks are or aren't, if people are betting on the game, they're going to want to watch it. And the great thing about MSGN and not to make this an MSGN podcast,

like Sinclair bought all of Fox's RSNs, and I thought that was a, they paid a very low multiple, but I was always worried about that because, A, those RSNs always negotiated with the umbrella of Fox, and then when you kind of carve them out from Fox, then they were negotiated on their own, I worried about the repricing. And B, a lot of those had very short-term deal. So if they got an upside from sports betting, they would have to renegotiate with, you know, Fox Zone, Fox Detroit. They'd have to go renegotiate with the Pistons say, hey, we're making a lot of money for the sports betting.

And the Pistons would just say, thank you very much. We'll take that. Whereas MSGN has, they've got the contract sold 2035. They've got some debt, but they're easily able to pay it. They've got no issue. So they can wait through the pandemic and they can kind of get through the other side to see that sports betting upside is something I really like about that. Yeah. I mean, I think, you know, MSGE and MSGS are such good companies, even that Dolans can screw

about it is the best way to look at it. I mean, they're fantastic businesses, great asset values, they're irreplaceable assets. And the one thing that I guess to stress is this is not a traditional value, quote-unquote, value investment, and neither is the IAC, which I know we'll talk about shortly, in that it doesn't screen cheap. And that's, and I hate the term value investing, because who wants to overpay for a stock? You know, we consider ourselves opportunists. And whenever you can buy a dollar for 50 cents with lower downside risk is an opportunity we're going to try and take advantage of.

But I think that's something, you know, really important to, you know, differentiate ourselves through other value managers. Yeah. And maybe Shrey, I'll just turn this over to you. you know, I think traditionally one of the things that got me excited about sports team investing is there were only a couple on the public market. You know, I think Manchester United, Liberty Braves, MSV, and Formula One, we're kind of your only ways to play sports teams. But with SPACs and a couple others, you're starting to see other ways to play them on the market, you know, like Redbird Capital, I think they're going to merge with. Is it the Boston Red Sox group they're merging with? I think that's right.

But do you guys think that there'll be like kind of a little mini inflow of interest in the sector? Could that kind of spur some investor interest there? Yeah, I mean, I, you know, this back crazy is kind of something, not that we're not paying attention to it, but it's something we kind of, we'll see, kind of like how IAC is doing, right? We'll see how it plays out if there's some opportunity there that makes it really interesting. You know, to be honest, I would turn it back over to John because I don't follow the sports team valuations and all of that as much, the opportunity there in the public markets at least. I mean, I'm an avid sports fan and, you know,

who grew up playing sports, but I haven't followed the public market opportunities as much, aside from the online gaming, which, you know, happy to get into there. Yeah. Jonathan, what about ratings for sports as way down during the pandemic? Does that make you worry about the sports teams at all? It does, but there's never been a time

where you've had that much sports going on at once. And it's been such a weird time with the election. There's been so many distractions. that I don't think you can make a year into a trend, but it's certainly something worth monitoring. And I think to us, besides MSGS, the other way to play it. And I think you mentioned it is Liberty Braves, which, you know, you can buy a professional's baseball team for, I think, now the enterprise values like $1.6 billion or $1.7 billion. And that not only includes a team, but includes a valuable real estate development. So that's another Mario Gavelli stock as well.

he seems to pitch that a lot. Yeah, he doesn't just seem to pitch that a lot. He's a 13D fighter there, and you can see he seems to buy that a lot too. So I like that one. Yeah, I mean, the Braves real estate is really good. They almost made the World Series this year. And I was very curious to see, like, if they had made the World Series and won the World Series, would the stock have responded?

Because, like, I do think with the Knicks, I mean, they're out of the playoffs every single year. And I was almost looking to that as, hey, if the Knicks ever made the playoffs or heaven forbid, like won a championship or something like, could that be a stock price driver? It'd be kind of interesting, right? I think during the whole Jeremy Lynn phenomenon, I think they were publicly traded then. So I think it did impact the price. I mean, the Knicks are worth, you know, $4.6 billion from Forbes. And I know that seems kind of arbitrary, but people do listen to that when they're valuing, you know, when they're purchasing teams. So yeah, think about how valuable they would be if they were like a good basketball team. And you had sports gambling. I mean,

lots of different things that could go right. So while you're waiting for Dolan to sell or monetize the team, and you also have Silver Lake, I believe, and it's still involved in MSGS as well. I think the intrinsic value is going to continue to grow. And the important thing, it's growing tax-free if you're a, you know, if you're a, you know, a shareholder. Yep. And there's other. There's other little assets in there, too, that I think are pretty interesting. Like, their e-gaming league, I always thought was kind of interesting there. It's never going to really move the needle versus the Knicks and Rangers, but it's just an interesting little component. How do you guys think about the Silver Lake investment there?

Because I know when they've did it and since they did it, every couple months, there'll be a little conspiracy theory on some financing Silver Lakes doing or something where they're going to take the Knicks private and it's going to be a home run for shareholders, it's going to be home run for fans, it's going to be home run for everyone. I mean, we're positive that there's adult supervision there, and Silver Lake has done a good job. They recently made an investment in Twitter, which is another stock that we profiled earlier this year. So it's good to have smart money there. And ironically, Nelson Peltz, I believe he's just on MSGS's board, not MSGEs board, is on the board of directors. and if he wasn't on the board, he probably would be going after James Tolan if I had a guess.

I remember when I first looked at and I saw him there. I always was curious, like this guy who's known for great corporate governance and putting good managers in and stuff, he was going to activists on P&G at the time, I think. I was like, how can he be on this board and not be more allowed about how bad the capital allocation can be here

and especially the ownership of the team is? Well, yeah, it's great Rangers. He's a big hockey fan. It's a great reason. Anything else we should be talking about on MSG or any other stocks you guys want to talk about before we kind of dive into IAC and Angie? If it was last week, I'd have a lot more to talk about. But when everything's up 15, 20 percent today, you have our best ideas. It's funny, we were talking before.

I had all these stats on MSGS and like, I wrote it literally yesterday. And by this morning, they were all Nolan Boyd because every stock. up 20% on the vaccine news. Well, okay, then let's turn over to the two stocks. We're going to talk about IAC and Angie's list. They're kind of tied at the hip, which is the reason we want to talk about them. Shrey, I think you've done a lot of the heavy lifting here. So why don't you start and, Jonathan, you can maybe dive in.

Give us a quick background of IAC and Angie list. And, you know, I know a lot of value investors are really attracted to them. Why are so many value investors attracted to them? So it's interesting. Last year, we were doing it thematic. We do a thematic piece every year around the fall. Last year, we wanted to focus on spin-offs and how they've performed over the better part of the last decade and really dig deep and find a couple of ideas that could potentially outperform going forward. Out of that analysis, we've largely found that on average spin-offs have been underperforming in the last decade, but if you picked based on a few attributes, you could do pretty well.

And IAC was one of those that we thought really kind of fit the bill and could drive value going forward. at the time they were trading at a if you added up the stakes and match angie and the net cash on the balance sheet you were getting the rest of the business at a negative value um and they had you know really interesting businesses in vimeo dot dash plus uh you know a few other small-scale businesses um and so we looked at that found that really interesting did a deep dive on that um and generally we wouldn't profile something after you know it had gone up five x since the last and we profiled it a few years ago. But the unique thing about this company is they just keep reinventing themselves. So you can't really go off of past returns and get scared by past

returns and stuff like that because once they incubate a nice, healthy business with a large opportunity in front of it, they spin it out and start back from scratch. So that really intrigued us. And the more we kind of dug into it, the opportunity at Angie almost seemed like a no-brainer. That happened to be right when Angie traded all the way down to six dollars six or seven dollars a share um it had been as high as i think 25 plus um so you're talking about 70 80 percent decline in market value and so we looked at angie and basically to simplify the thesis there it was uh you get a business that's that's growing you know double digit 20 percent plus annualized as it stands today uh it's it was profitable already

generating significant amount of free cash so with a large market opportunity ahead of it in a business that yes is difficult but they had created scale there that they could build upon and then you add in potential upside optionality from this fixed price opportunity right they're trying to become almost uh is this my words not theirs but they're becoming kind of like an uber for home services where you can just book a professional on demand with a fixed price up front which would create so much would remove so much friction from the process anyone who's dealt with having to, you know, book a plumber or anything, it's just a pain, multiple calls, multiple contractors, bag and forth, getting estimates, all of that.

And so they're attempting to remove that. And you get that as kind of upside optionality and the depressed valuation. So compare all of that to the valuation today, which is about a four or five percent free cash flow yield. And that's free cash flow that they're investing in growth, right? They could optimize that further and generate a lot more profits. So we just kind of felt like it's a skewed risk reward there that yes, the bear case is concerning. The competitive issues could be concerning, but much of that is seemingly priced into the market.

And so if the upside works out and they're able to create this platform, the network effects generated from that would remove a lot of the barriers. It would create a more durable moat around the company and you get significant upside that you see in other network type businesses. So that's kind of how we look at it. And Jonathan, you know, I think most investors I talk to love IAC's assets except for Angie's list. A lot of them say, look, Angie's list has been, it's had trouble monetizing since the beginning. You know, a lot of them will say this year, you know, with COVID, they're an online marketplace. It should have been a home run for them. Instead, their growth seems to be slow. And, you know, last quarter, I think they were revenue was 9%. And they always say we're going to

get to 20%, but now they're saying we're not going to get it until, you know, the end of 2021. So a lot of investors are outright skeptical or dislike Angie's list. And that makes it 35% of IAC's value. So it's a big needle mover. I know you had Angie's CEO on your podcast over the summer. So I was wondering if you wanted to talk about a little bit more, you know, are you bullish Angie's list? And how do you feel about kind of the management team and their strategy? Yeah, the folks and yeah, I am bullish on Angie list as well as IAC. I I think IAC is probably the more conservative way of playing it. You're still getting exposure to Angie, plus you get all these other.

I don't want to call them bets, but the stake in MGM, the car business that they have, care.com, which was opportunistic that they bought. But NGC is incredibly interesting. IAC has a great management team in place. Perhaps it went public too quickly. I know they did it via, I guess, a reverse merger for. when they were doing that. But I think it's a long-term story.

And I think investors just have to be patient. It's really one of the last transitions from offline to online out there. And you've seen how that's occurred. And I think of people, you know, it's somewhat a bet on Barry Diller and his team to be able to properly monetize it. But, you know, we think the rewards, you know, skewed in our favor and it's not absurdly expensive. Yeah. The way I've liked to look at it is, you know, service demand. So user consumer requests for the service are going up 20, 30 percent year over year every quarter. And Joey put it on the conference call. He said, hey, we're IAC. We have monetized these marketplaces before, right? Like, we'll be able to do this. Trust us. The thing is, we just need to keep that consumer demand going and eventually we'll figure it out. And, you know, it makes sense to me. And I just personally think it's a misplaced. bet. As a consumer of the product, I mean, I, you know, this is one to easy, I could easily home test. Behind me, I had that, had someone come in and, you know, install that and, you know,

had a plumber in my house. The service providers are unhappy. That's what they really need to spend their time focusing on. When you speak to them, they, they're not happy with their take, et cetera. There's lots of things that they're not happy with, but those are problems that are fixable. They've solved the easy part. They have more demand than they know what to do with. They don't have enough service providers to meet the demand. And when you have an economy that is 8% unemployment rate, I think, you know, they'll somehow figure out to get the right people in for the job. Go ahead, Trey. Sorry, the part that I'd add there about the bear case and all, there's a couple of things that I

think are pretty interesting to highlight that, you know, I think it's warranted that they're worried about kind of the competitive issues, which is what seems to be the big overhang, competitive issues and the monetization or the lack thereof. On the competitive front, I think the thing that's underappreciated there is that the scale that's generated or created by both Angie's List and Home Advisor, not just on a national scale, which is how we, you know, everyone likes to look at it, but this is a very, very local business, kind of like, you know, food delivery, ride healing, stuff like that. This is market by market, you have to scale from the ground up, which is challenging to do so.

And they've already created that. They're the go-to place, like John said, for consumers looking for home services and long runway for offline to online conversion. And then you add on top of that potential from the fixed price product, which would not only help the consumer side, but could go a long way to unlocking happiness with suppliers. Because right now, while supply is constrained, it seems like they're still able to fulfill their demand using fixed price. They're able to find service professionals to transact on a fixed price basis where instead of the service professional paying Angie for a lead, which might not pan out, they can just hire a service professional for a guaranteed job, which is seemingly seems to be a big hit. And then the second thing I'd say, looking at some of these marketplace or network effects businesses, we talked about us offline, you know, Pinterest, Angie, Snapchat, you know, a few others like, Uber Lyft even that went public recently. We complain a lot about how we don't get access to them in the public markets until they're too big. But looking at Angie, it makes a whole lot of sense

as to why they might have stayed private for a long time. It's a challenging business. Your 100% of your focus should be on scaling the network and not necessarily on monetization. But at some point, when all of that starts to click, you start to get a reflexive growth on the demand side that drives supply side growth and vice versa. And the monetization kind of follows after that, which, you know, Joey alluded to on the call, Joey Levine, the CEO of IAC alluded to it on the call. Monization ends up following eventually, and when that does kick in, you look at Facebook in 2013, you look at Snapchat this year,

Pinterest this year, you know, Match Group, which is an IAC company in the last few years. When they unlocked that monetization, when it started clicking, investors bid shares up pretty quickly. They were willing to pay a massive premium for it because they finally agree that it makes sense. And so it basically comes down to whether you, think the strategy is there, the team is there, and all that's in place, and whether the monetization will come in over time. And, you know, if the shares are pricing in that it's not going to get monetized, you basically get that as an upside call, right?

No, I think that makes sense of sense. What about the pandemic? You know, I think a lot of investors thought that they should, they should have just absolutely hit the ball out of the park during the pandemic. And I think one of the surprises with Q3 earnings, I think not surprised with this point is they've said, hey, look, our service provider network is absolutely slammed, because of the pandemic, and that might be a barrier to us actually kind of scaling this network in the short term. How do you guys think about that? And do you think that's kind of an honest assessment of the situation? Yeah, so, well, the one obvious benefit is the consumer side, you know, thriving in the pandemic. They're seeing service request growth. They haven't seen

since 2017 or 2018. But more importantly, I think like a third of that service request, they're coming from new customers, which is a huge long-term indicator. The other thing is, you know, we see that 50% of service requests aren't getting monetized and unable to monetize them. Yep. But what they mentioned on the call, which is anyone who's transacted before could believe it, not every service request is going, the customer is not going to transact on those. They might just be looking for price.

They might just be looking to see what's out there. They might just be doing research. And so it's not necessarily an indicator of whether they're satisfied or not. But on the supply side, yeah, in a time like this, when business is booming, there's no reason that a supplier is going to shell out money to advertise on Angel's list or pay for a lead on Home Advisor. But the positive indicator here is that the fixed price business that they're rolling out, you know, without getting too deep into the weeds on this, if you look at the revenue growth, they did about 9% revenue

growth last quarter. Fixed price probably accounted for about 5% or 6% of that growth. So, you know, that the traditional business was maybe three or four percent growth year over year. Revenue per transactions also grew three percent, right? So basically, the traditional business only grew because of increased revenue per transaction or the ability to monetize more from the existing supply base. However, at the same time, the supply base did grow 10 percent during the quarter year over year. So that, which is a huge supply increase there. So it seems like much of that supply went towards the fixed price offering, and that's something

that managed noted on the call in that they're not having trouble fulfilling demand on the fixed price aspect of it. Suppliers are willing to opt into it. And I think that's a big positive over time. If that becomes the big business, then that supply constraint potentially gets removed because it's easy to transact for both suppliers and customers. No, I think the only other thing I'd add is I think fixed price is ultimately where the moat is biggest because you have to go service provider by service provider kind of sign them up or get

contact with them, get them on the platform. And one of the things, you mentioned the new customers, you know, a lot of the requests going unfulfilled and that might not be a bad thing. But they said, they didn't just say that. They said, hey, new customers, they who have a request that goes unfulfilled, they return and use our platform again six, nine months later at the same rate as someone who has the request fulfilled. And the bear case is, oh my gosh, 50% of requests are going unfilled, but I kind of think that's a bull case. Hey, the customers are coming on here. They're getting used to the platform. They're liking it. And whether they had their request filled or not, they're coming back to use the platform again. And, you know, all of that suggests

to me that, that flywheel is slowly accelerating. I don't know if either do you have any more thoughts on that. Yeah, I'd largely agree with that. You know, the fixed price part about the mode. That's the, you know, moat definer right there. That creates a differentiation. Brandon said it on the border podcast. That's something that Google's probably not going to try to approach on. You know, never say never, but they want to steal advertising business. They don't want to go into a completely new line of business to capture that demand. So Angie already has a jumpstart on its pure play competitors, but compared to maybe a Google or something that fixed price, that's the key to kind of getting away from them. That unfulfilled demand, if they keep

coming back without going through Google, that's just kind of pure margin revenue. over time. Go ahead. Another thing to think about, it's probably less likely because there won't be a blue wave or probably will not be a blue wave, is a more antitrust scrutiny over Google is a big positive for both IAC and Angie, whether that happens or not. And it could happen under divided government, but it's probably more likely to happen

under, you know, quote-unquote blue wave. So that wouldn't be another positive for the stock as well. Yeah. The only other thing on Angie that kind of gets me rolled up, and I know this is putting like you're facing someone else's judgment, but Joey going on the earnings call and saying, hey, we've done this before and we have every confidence we can do it here. And if you look like every time Angie's share price gets kind of probably more under

$9 and $10, but every time it goes into $9, Angie is buying back shares like crazy. And IAC already owns 90% of them. So for them to be taking like the little bit of liquidity they have and directing to your share repurchases and kind of increasing that when Angie's got a lot of uses for their money, like it just it just screams bullish to me. That certainly does. And they've been good repurchases of shares.

And that's also one of the reasons why you have such a huge swing in that stock. Yep. And the float is so small that, you know, when they release. earnings, you know, it's up 15% down 15%. And, you know, you have to take, you know, you have to watch the price action. You shouldn't even watch it. But if you are, you have to take everything with a grain of salt. I mean, we're in this for the long haul two, three, four years from now. But the moves are exaggerated because of the small flow. Do you guys, and I think you guys kind of got introduced to IAC last year, but do you guys see

any similarities now with IAC and Angie's list as IAC and Match.com? kind of late 2016 or early 2017 when match was really just getting that tender flywheel spending and I think there were still a lot of questions around it. This was actually our second go around with it. So we had profiled it probably around that time and Match.com was what got us excited about it. And then, you know, as a team, we went in and thought that you had a similar type of opportunity and it really fit in well with the theme that Trey discussed for the last year's theme of piece.

Yeah, no, I 100% agree. And, you know, at the time 2017, Matt was at like $20 per share. And I would say I met my wife on a match competitor and I was more bullish on match than a lot of people. And here we are like three years later. And if you include dividends, match is over 140 per share. And I don't think anyone was forecasting that type of, you know, stock response for match. So I don't want to say I could see it for it.

but if it pays off, you guys can tell me from wrong. I could see a lot more upside than I think a lot of even Bulls think today. So the great thing there is I completely agree with that aspect compared to Match. The other thing that Match did is, you know, they generated a ton of cash. When they became more self-sufficient and they hadn't been spun out yet, it did come to a time where they needed to start paying back the parent company, so to speak, right? And because IAC is such a large shareholder, Angie's in a similar boat where they generate a ton of cash and they're able to finance any growth that they need, barring, you know, maybe a major acquisition plus have cash left over. So, you know, repurchases make sense right now.

But if the stock does get going, you know, special dividends or something they've done in the past, the IAC has done at least with match. And it's totally something that could be in play for Angie before they were to spin it out or something. too. So you get kind of this shareholder-friendly mentality as well. Anything else on, Angie, or should we turn over to some of the other pieces of ISA? I think we're good. I'm good. Well, I think the biggest news for IAC specifically last week, you know, outside of Angie, the big value is in Vimeo. And last week they announced that they were taking, they were selling 15% of Vimeo and they're exploring a spinoff. So either one of you can start. But how do you think

about the, you know, taking a minority partner on and looking to spin off Vimeo. Yeah, it's interesting because a while back, we, you know, we kind of updated clients on on IAC and where we stood on it. And, you know, during the pandemic, obviously growth stocks, especially SaaS business that have done very well. And, you know, we thought that IAC being an opportunity management team made a lot of sense for them to kind of monetize the Vimeo stake over time. Preferably sooner rather than later, where you can get 10, 20, 30 times revenue in the public markets. Lo and behold, they ended up announcing something similar on Friday where they're exploring it. And, you know, they said a lot of fancy words about the capital and how it's more public markets might appreciate it better.

But essentially, the cost of capital is a lot lower in the public markets. Get a much better premium on that if you were to monetize the same mistake today right during a period where it's thrived. So it makes a whole lot of sense there. The only unfortunate thing is they raised capital at something like eight times revenue to kind of prove the concept out. You know, a lot of these businesses, that's like the low end of the multiple that you would get. So it would have been better to see them do a little bit higher. But look, we get it. They're proving out the concept.

And then there's still a substantial stake they can sell in the public market. So it's, you know, neither here nor there. But that's kind of the only thing that might have been unfortunate about that. Jonathan, anything else said there? No, we weren't surprised, but we were very happy to see that anytime, you know, we love management that has great capital allocation. The fact that he, he's, you know, in his letter talked about the cost of capital being significantly less outside of AAC than in is something, it's kind of music to our ears. These are very shrewd people, you know, the eight times revenue is, to me, it's something. I'm very rich, but finally these things, they go for multiples of that.

And just to Shrey, correct me if I'm wrong, and I think we were just being ultra-conservative in our model where we got to, I think, $154 or $153, a share of IAC. We were valuing Vimeo at two and a half times, right, roughly? Yeah, I think we used, we upped it to five times, but we laid out a case of what could happen And if I decided to spin it out, just to see what it would be worth, you know, at 10 times or 20 times, basically if the public markets were to appreciate it 20 times revenue, forward revenue, then you'd get roughly $77 per IAC share, which is about half of the combined market value today, which is incredible.

But, you know, let's see what they get. But even at 10 times, right, that's $30 or $40 a share in that ring. It's still very significant. No, I, Jonathan and Trey, I agree with you guys. Like, you know, they said, hey, our cost of capital is lower. We're getting eight times revenue. And like, I would never personally pay eight times revenue for something, maybe to my detriment over the past couple of years.

But at the same time, when I look at Vimeo and they say, hey, we're getting $5 of gross profit for every dollar of, every dollar of marketing and customer acquisition we put out. And by the way, that's accelerating. And by the way, we don't see any end to that. And I look at kind of what other software as a service type things trade, I say, oh my God, you guys sold this way too cheaply. Like, I kind of, in my models, I would always say, like, I think it's worth two to two and a half. I probably would pay a little bit less.

But in the market, I kind of suspected it would trade for four or five billion dollars if they had spun it off, maybe more given how much they're accelerating. It'll be interesting. And listen, I'm very happy that there's a vaccine, et cetera. But you see all these today, all these stay at home stocks and some of these, you know, Zoom, et cetera, has gone down in value precipitously. I mean, all right after a huge run, run upside. But if those SaaS, you know, the bubble and SAS continues, maybe they did do this at the exact right time. And their regret will be not selling more of it. I do think a lot of people say, hey, they probably just wanted a mark. They probably looked at what you said and said, hey, maybe this is a little bit less than what the markets would put it. But let's just get the market. It'll take six to nine months IPO, get a market, get a market, but at the same time, they got almost $3 billion of cash on the IEC balance sheet.

Like, do you guys read into it? Are they looking to do anything with this cash they raise? Like I almost wondered, hey, is it a deal for something eminent and they needed like the last hundred million or something right now? Well, financing is so cheap. I don't think they would have any trouble raising, raising money if they needed to do it. The MGM deal somewhat surprised us, even though they had a history in that. I think they're opportunistic. I think they're also very price sensitive, which is why we like them. But I let Tray kind of expand on that more. Yeah, I think the Vimeo thing was probably more to get a price mark.

Like Gunt, I think they have access to the capital if they need it. My gut says there probably isn't any major deal imminent. You know, there were a couple of things that I thought made a little bit of sense. If they chose to do it, I wouldn't be surprised that I'm happy to go into. But, yeah, it seems like in the current market environment, they'd be net sellers with something like a Vimeo and then, you know, get ready for the next downturn and be opportunistic there. Because I think they would love to own Turo 100% if they could, but that was off the table, right? And MGM, if they could get that gambling opportunity, the online gambling opportunity 100% would be something they would probably be interested in. But neither of those presented themselves, so you kind of had to just take the minority stakes.

Let's talk about MGM, speaking of that, you know, as far as I know, it's the first IEC over the summer bought over 10% of the casino operator MGM, you know, they just bought flat public shares on the public markets. Since then, Joey and Barry have hopped onto the MGM board, but I was a little surprised, you know, as far as I know, it's the first time IACs ever bought a public stock. Obviously, they've spun some stuff off, but I don't think they've ever bought a public stock before. This was over a billion dollars. So I think it's their biggest investment in in 20 years or so you know it's a huge investment for IC. How do you guys think about IEC moving into the public markets with MGM and kind of what do you

think their plans are? Yeah, I'm happy to start there. So yeah, like you said, it was about a billion dollars, but that's the largest kind of acquisition that they've made historically, which is kind of funny considering the value they've created in all of these various businesses. But I like the opportunity that's there in MGM. You know, if you look at draftings, trading at, you know, 15, 20 plus billion dollar market value, which is more than all of MGM's equity plus debt for just an online gambling operator or sports betting operators.

So things were getting a bit loopy there. But there's no doubt that that's because there's a huge opportunity in the market. It's something that IACs followed for a number of years. You know, they entered the daily fantasy space and ended up selling their offering two draft kings in the past. So they know the space really well and they know it's going to be a massive market opportunity in the U.S. is very early in terms of penetration. So I like it from that standpoint. But gambling in general, you know, you can kind of say that it gets commoditized at a mature state. So you don't want to buy something like a draft king that's trading at a massive premium.

You want to have something that is an attractive valuation, but that also has a unique go-to-market strategy, has the brand strength. And most importantly, in my opinion, is the in-house technology capability. draft kings has all of that and mgm is another one that i think has all of that too um so draft kings can easily acquire customers because they started with the daily fantasy app that amassed millions of followers um gm has a loyalty base of 30 million plus they're partnered with yahoo fantasy sports which is another 50 million plus users and that's an exclusive deal um and then through the jv that they created they get that technology team the engineering talent in-house and the reason why i think that's important is because there's a handful of operators that create the technology that

underlie these online gaming opportunities and most companies licensed from them. Draft Kings and MGM has that in-house and in a commoditized offering over time, you're going to get differentiation through innovation of new products, new games. You mentioned e-sports when talking about MSGS. Draft Kings during the sports shutdown was testing, betting on e-sports, like live betting on e-sports. That's a, this just continual testing of products that you can do to differentiate over time is going to be key. I think MGM gives you essentially a free way to play the theme because you're getting a depressed casino business today. And everyone likes to write Vegas off every time a recession happens.

You know, yes, your online gambling may make it more accessible and prevent some people from going to Vegas. But on the whole, I think in Vegas is more of an experience, more of a vacation destination and MGM has a good combination of hotels plus some of these live events arenas like the NHL stadium, the NFL stadium and properties around those stadiums do. So it's a really unique way and quite frankly a value investor's way to play this massive opportunity. Yeah. And I do like the resemblance to like with retail, there was the clicks to bricks theme where online retailers discovered like the easiest way to acquire customers is actually have a physical thing. And I do think there's going to be something for online

gaming the same, right? Like the easiest way to acquire customers is your physical gaming space generates the customer and it turns into online. And like I think draft Kings, I don't know how you can touch the stock on valuation. I do think they will be quite valuable and they'll do well going forward. Maybe not the stock, but the business. But MGM, Penn, which also has Barstool, which is a different thing. But, you know, I think there's going to be real value there. I think the market, I'm bullish on it too. Jonathan, anything else you wanted to add there? No, I agree with everything, Trey just just said. I think the worst case, at least in my opinion, is that this is just a very good equity investment for IAC. But I think there's huge potential upside in partnering with some of these, you know, on some of these joint ventures. The fact that also they bought MGM when their balance sheet was in order. It wasn't, you know, MGM kind of got lucky and sold some properties. I believe it was last year or the year before that and shorted up their balance sheet. So they bought a great business, and as straight, alluded to, you know, every time we go into a recession,

everyone says no one's ever going to travel again. No one's ever going to go to Las Vegas. And so far, that has been, you know, excused upon a terrible bet. So, yep. One other thing on online betting, in, I followed a lot of them. And apparently in late March and early April, like online betting volumes barely went down because people were so down to bet. They were betting on like Russian ping pong tournaments and South Korean, like, Bachi, games like the demand is absolutely there. So I just love that step. I see three billion in cash

on their balance sheet. That's about 25% of their market cap. What do you guys think they're most like they just made that $1 billion investment in MGM? But outside of that, what do you guys think they're most likely to do with that cash going forward? So I mean, there's a few companies that I had just kind of a watch list that I didn't get to dig into that. I thought made a lot of sense. You know, something like Upwork or something that they basically, it's a marketplace place for freelance workers to connect the companies and they're kind of seeing a pandemic related surge, but it was still within that one or two billion dollar range. And IAC is operating in the space with some very early stage businesses. So it made sense to maybe get

into that. That's how it ended up doubling last week, just on earnings. So maybe that's out of the question. I think what makes a lot more sense and I'm not sure if the appetite is there, but Angie, obviously, it's supply constraint. And that's the biggest detractor there. If they were, and there's been rumors in the past of potential acquisitions, if they were to look at something like a Yelp, which I'm torn, I'm on the fence on, or maybe a front door, which I think is the one I was going to mention. Yeah. And then Thumbtack was another one. Those are all kind of larger, though. It would use up likely all of that cash, you know, somewhere in that range. And so I'm not sure if they're looking to do that, but it would greatly accelerate Angel's

market opportunity. I think it would make a lot of sense. The only last thing I'd add is the minority stakes are great, but over time, you want them to use their core strengths, which is they're great at operations, they're great at execution and they're great at nurturing talent and building upon small businesses, figuring out the model and then just aggressively pursuing it. And you can't do that with minority stakes. So I'd love for the market to be in a place where they could put that capital to work effectively, but we know they're not going to just throw it away. So that's good in the interim, but that's kind of how I think about it. Jonathan, the last time IAC did a big spin outs, not the match spin outs, but when they did the quadruple spin, and I think was 2008,

I see over the next couple years bought back 50% of their shares. And when they did the match spin over the summer and they rolled out with almost $3 billion cash on the balance sheet, I personally thought, you know, in a pandemic environment, I thought they were going to be huge share cannibals. And we haven't really seen that far. Are you disappointed we haven't seen share buybacks? You think they're just waiting in the future? Or how are you looking at that? you know it's always a tough call you know there's so much uncertainty and it's easy to kind of Monday and I'm not saying you were doing it like Monday morning quarterback they should have bought you know aggressively in April and March and April but I think you wanted to have the balance sheet

to be able to fight another day yeah to be able to have that liquidity um it was fine you know obviously in hindsight it would have been great if they did a massive share repurchase but you know it is what it is. Even Buffett didn't really do much until recently. So he's the best capital allocator of all time. So, you know, could they do it in the future, possibly? Is it better to do it at Angie? Do they take Angie back into the fold? I have no idea. I mean, there's lots of things that they can do with that cash. But the one thing I can guarantee is they're going to do it thoughtfully and, you know, really look at all the different situations. And I think they want to have some extra cash lying around to be opportunity. I agree with all that. And it is easy to say hindsight

2020, but at any time over the past years, if IAC had bought their shares back, it would have been a pretty good deal. What about just management here? Obviously, IAC is Barry Dillard's child. He found it in the mid-90s. The returns have been incredible since then. But Barry Diller is approaching 80 years old. They just re-signed Joey, the CEO, to a 10-year deal. I think all of us are pretty happy about that. But I don't want to put words in your mouth. How do you guys think about the management team of this going forward as kind of the founder ages and kind of starts to step back a little bit? Well, Warren Buffett's 90. He's going pretty strong. So Barry has a good 10 years left in him. I think that's fine. He looks great. He's got a

great tan. He's on the boat all the time. He's still sharp as ever. But, you know, it is something you start worrying about around these times. Yeah, absolutely. But I think he's instilled a culture and has great people underneath them. I think it's fantastic that I don't know how old Joey was when he was installed as CEO, but he was either late 30s or early 40s. I mean, this is a meritocracy, and they have great people that rise to the top and they give them at a young age a lot of power and a lot of responsibility, and that creates success.

It's in some ways very reminiscent of like what 3G does. So I let Trey speak more to it, but I'm certainly not. not worried about the talent coming forward. Yeah, I think that's probably been Barry's most underrated and kind of longest lasting, like, you look at, even from the beginning, when he promoted Dara Koster Shai, he was probably in his 30s or so, running, basically running M&A to put together what is IAC today. He entrusted that in, you know, a mid-30s guy, saw a lot of talent in there, and then made him CFO and then let him lead expedient, slant it out. And then, you know, he was even nice

enough to help him get the Uber job, which arguably live into his detriment. But, you know, he has that. There's Diller's dozen, which have gone on to kind of run a bunch of different companies and been really successful. But even today, you know, the, the Anjali who runs Vimeo, she was, if I'm not mistaken, maybe top 30 under 30 or 40 under 40 on Forbes. She's very smart you hear her speak for two minutes. You're really impressed. You know, Brandon was on our podcast. Same guy can talk for hours. And if you compare that to his competitor at Thumbtack, I was super underwhelmed hearing interviews by those founders over there. You know, there's just this deep bench of young talent with long runway,

including Joey, who's probably still, I think in his 40s, I'm not mistaken. I think that's right, yep. You can lock him up for a long period. So it's just really comforting, I think, as shareholders. Yeah. No, I agree. And I'm sure you guys saw this, but Joey's 10-year contract, he gets RSUs. And the full vesting is if the stock goes over $300 per share,

He'll be a billionaire if it hits that. But shareholders will get 10% IRA for the next 10 years. I actually think they'll be able to outperform that. But that's a lot of alignment. He's about 100 million or so now, too. Yeah. Lots of alignment. They definitely eat their own cooking.

We've covered a lot here, but there's actually a lot of assets at IAC. We haven't talked about. There's care, which I love. Dot Dash, which throws off tons of cash. And I think it's really surprising. Turro, which is doing great. And that's another interesting investment. Any of these that you're particularly excited or want to call out before we log off here?

Yeah, I can start if you want, John. So, I mean, dot-dash, I think is an amazing. They've done a great job turning that around. It feels like as great as that business is, it feels like it could be the next, maybe ask.com type of thing. You know, I'm not comparing it on an apples to apples basis, but they basically took an ask.com and used that as they just milked it for cash flows for so long. And most people don't even know Ask Reeves is still around, right? Dot-dash could become a significant cash generator going forward, but might not be that phenomenal business like Match or Vimeo that have these massive opportunities.

But beyond that, I think care.com comes into focus now, obviously, right, with Vimeo being spun out. They have a great opportunity. Some of their competitors, unfortunately, an offline channel might be, you know, struggling or going out of business. And there's natural tailwinds from employers looking to provide more benefits, government's looking to provide more benefits. So they have a lot of opportunity there, and they're basically the only player. And not to mention on the pet side as well, not just with humans, pet care or whatever.

And then finally, Turo is really interesting to me. Just a similar theme where you have the offline car rental places going out of business or struggling. And at the same time, they're bringing a lot more new supply online, similar to what Airbnb did to the vacation rental industry. people can just rent out their cars and it's done pretty well it's been a pretty resilient during the pandemic it rebounded fairly quicker um and there's there's still very early stage and there's a massive opportunity there and so uh those two i think are really interesting yeah i know a lot of people were disappointed with the care dot com acquisition when it happened i or i heard a lot of people and to me it was hey they just bought this business for 500 million dollars the business i

I think they invested $2 billion into marketing over the past 10 years, which, you know, how much is $2 billion of marketing worth? Who knows? But like, you know, you've got this person who's a great, you've got this team that's great at building platforms and they went and bought this business that has a lot of brand equity that had fallen on a lot of hard times for a lot of self-inflicted reasons. You know, there were investigations in the background checks and everything. But when I looked at that and I looked at the potential for, hey, if this dominates kind of

the babysitting child caregiving market, if this is the online market, I mean, the upside is so big and this is the team you want funding it. I just love that bet. Jonathan, anything else on your end? I would echo the care.com sentiment. I mean, there was a front page article in Wall Street Journal a few weeks ago talking about how a lot of these offline babysitting centers, et cetera, has basically shut down the cost of the pandemic. So care.com is in a really unique position right now. So yeah, I think that's where they're going to be focusing their energies next. trying to shore up Angie, that as well. So, you know, there's just so many different things to be excited about.

And they're going to, and they're, I'm sure they're on the hunt for the smaller things that are going to turn into the next big thing. So it's a very exciting stock, a very exciting opportunity. And it's a very big contrast to MSG in terms of management that we started to show. I love how you brought the circle all the way back to the beginning. You know what might be an underrated thing there now that I think about it is, all the struggles that are going on at Angie on the fixed price side, that's going to be significantly beneficial to care if they figure out the on-demand stuff

because it's fairly similar in what they're trying to do there and marketplace model and all of that. And IAC's been known to encourage them to share data and any operational excellence that they have. And so that could be incredibly beneficial as kind of a later stage developer. Get the flywheel spinning a little bit faster with things you've learned over at Angie.

Perfect. Perfect. Well, hey, guys, this has been so much fun. I'll be sure to include links to Twitter, your website and everything in the description. So anybody who's listening can just go there and find you guys. Jonathan Shrey, thanks again for popping on. And we'll, with the market up 5% when you guys come on, we'll just have to talk once a week. Do this every day. Just keep driving it higher. Thanks again, guys. Thanks for having us.