IAC Pulls Out Some Upside

Adjusted net of 32 cents a share is 3 cents better than forecast.
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second-quarter earnings fell sharply from a gain-soaked year-ago period, but beat estimates when special items were backed out.

IAC earned $53.8 million, or 18 cents a share, in the quarter, down from $618 million, or $1.17 a share, a year ago. Excluding items like noncash compensation, amortization and discontinued operations, earnings were $108 million, or 32 cents a share, in the latest period. That beat the Thomson First Call estimate by 3 cents a share.

IAC's 2005 quarter included about $465 million of gains related to asset sales and tax benefits. Backed out, the company earned $96.6 million, or 28 cents a share, in the quarter.

Second-quarter revenue rose 18% from a year ago to $1.61 billion, about $10 million ahead of estimates. IAC saw a 20% rise in services revenue to $533.2 million, which included a 26% rise in lending to $107.9 million and a 14% increase in ticketing to $295.1 million.

"Ticketing revenue was driven by a 7% increase in worldwide ticket sales and 6% higher average revenue per ticket in part due to a strong summer concert season and an increased contribution from sporting events," the company said. "Domestic revenue increased 12% due to higher ticket volumes, particularly for concert events, and higher average revenue per ticket. International revenue grew by 21% due to higher ticket volumes, primarily from the United Kingdom and Australia."

"Lending revenue was driven primarily by higher revenue per loan sold, increased sales of loans into the secondary market, and higher transmit revenue due to both growth in QF volume and higher prices on the exchange," the company said. "Revenue from refinance, home equity and purchase loans grew strongly, despite the difficult market conditions. Profits were impacted by higher marketing expense as a percentage of revenue vs. the prior-year period due in part to lower close rates and higher costs associated with the origination of loans sold into the secondary market."

Retailing revenue rose 2% to $774.9 million, while membership and subscriptions revenue rose 6% to $171.1 million. IAC's media and advertising segment put up revenue of $131.3 million in the latest quarter compared with $11.5 million a year ago. Within that, search and media had a 21% revenue improvement thanks to higher sales per query on Web sites like Ask.com.

"Proprietary revenue growth was attributable to strength at Ask.com in the U.S. and the Fun Web Products business, partially offset by weakness at Ask.com in the U.K.," IAC said.

"Profits declined significantly on a comparable basis to the year-ago period due to increased marketing expense, higher revenue share payments to third-party traffic sources and higher other operating expenses. Operating loss for the current period was further impacted by higher amortization of noncash marketing expense and intangibles of $9.5 million and $12.5 million, respectively. Citysearch delivered strong revenue growth and increased user traffic."