Updated from 8:29 a.m.
rallied Monday after posting strong fourth-quarter results and boosting cash-flow guidance.
IAC chief Barry Diller didn't rest in his campaign of pitching his company's multifaceted e-commerce strategy on a conference call with analysts. Diller repeated IAC's target to have the company's favored cash-flow measure -- operating income before amortization -- grow nearly 30% a year through 2008. "It is our goal and we're going to do everything legal to get there," he said.
The shares were up $1.43, or 4.5%, to $33.38 on Monday afternoon.
For the fourth quarter ended Dec. 31, the e-commerce company -- the operator of the HSN home shopping channel, the Expedia and Hotels.com travel sites and the Match.com online dating service -- reported $1.8 billion in revenue, up 21% on a pro forma basis and edging past the $1.78 billion consensus of analysts surveyed by Thomson First Call. The difference between the two numbers nearly matched a $22.4 million increase resulting from an analysis related to estimated supplier liabilities.
Adjusted earnings per share -- which excludes amortization of various noncash items and equity income or loss from IAC's stake in Vivendi Universal Entertainment -- amounted to 29 cents, up from 24 cents a year earlier and well past the First Call consensus of 23 cents.
The company said its adjusted EPS benefited from a lower-than-normal tax rate not expected to recur. The quarterly benefit, relative to the expected full-year tax rate, was 3 cents per share in the quarter, according to
Net income for the quarter, on the basis of generally accepted accounting principles, amounted to $153 million, or 20 cents per share, compared to $145 million in the fourth quarter of 2002, or 30 cents per share. The GAAP EPS decrease, says IAC, stemmed from higher amortization of intangibles and noncash compensation, and higher shares outstanding in the fourth quarter of 2003.
Revenue at IAC Travel, the company's largest operating segment, grew 41% to $677.4 million; operating income at the segment more than doubled to $108.3 million. International gross bookings doubled, the company said, and merchant hotel revenue grew 40% despite the September cancellation of an agreement between Hotels.com unit and Travelocity, a rival to Expedia.
IAC's Electronic Retailing unit, which includes HSN, reported revenue of $647.1 million, up 14%. Operating income grew 21% to $60.3 million.
Saying that IAC's hoped-for OIBA growth rate wouldn't be hit every quarter, Diller said that first quarter OIBA was expected to be flat with, or slightly up from, first quarter 2003 OIBA, which amounted to $173.9 million. Among the elements holding growth back: marketing efficiency will match that of the second half of 2003, not the year-earlier measure, while the recently acquired local coupon book publisher EPI is expected to suffer seasonal losses.
In his dependably entertaining commentary on the call, Diller addressed at various times, in a somewhat anecdotal fashion, one of analysts' persistent questions: To what extent IAC, as parent company to numerous businesses, is creating an overall operation in which the whole is greater than the sum of the parts. Among the details that filtered through comments by Diller and the other executives on the call, the company mentioned $75 million in sourcing effiencies to be gained over the next few years, the practice of integrating Hotels.com offers into EPI's promotions, and marketing the company's travel businesses to Ticketmaster.com customers who are buying tickets to events outside their local geographic area.
Responding to a question about IAC's stock, which trades at a discount to Internet bellwethers such as
, Diller said IAC needed to act with "consistency" -- a word, that in that context, sounded like a euphemism for not making numerous acquisitions. He said IAC needs to show investors how all the businesses relate to one another, and the degree to which they protect the company from competition.
On the subject of the online travel business, Diller tried to lay some recurring investor concerns to rest. The company isn't losing market share to "direct" sites operated by individual travel brands, he suggested, because IAC sites have a "brand-agnostic" audience. Relative to competing travel sites Travelocity and Orbitz, he said, IAC believes it will gain market share this year or hold it steady. What the company calls "raw" margins -- gross margins on hotel rooms the company buys and then resells -- may fall a percentage point this year, but the "serious margin deterioration" expected by some in the travel business isn't realistic, he said. Finally, he said, over time marketing expenses as a percentage of revenue will decline, though not in the first quarter.
Engaging in stock market commentary, Diller said, "We're on our way into a new bubble, and bubbles eventually get pricked." Over the past six or eight months, Diller estimated the company had been in 10 different situations in which executives at companies with which IAC was in acquisition talks had what Diller thought were valuation expectations inflated by a bullish IPO market. "We are not going to pay valuations we think make no sense," Diller said.
IAC's interactive development group is an alternative to making such expensive acquisitions, Diller said. "We will start with our capital. We will find entrepreneurs to run them. We will build businesses on our own," he said.