There are lots of ways to describe IAC, the company that media mogul Barry Diller took over, when it had a different name, in August 1995.
Glenn Schiffman
But no statement about IAC is truer than this: It’s a very unusual and complicated company, which therefore requires a very particular approach to investor relations.
It’s a successful company to boot, especially as measured by stock returns. An investor who acquired shares at the outset of Diller’s tenure, and never sold them, has enjoyed a 14% compound annual growth rate, according to IAC’s finance chief, Glenn Schiffman.
That’s more than twice the 6.9% CAGR the S&P 500 racked up from Jan. 1, 1996 through Dec. 31, 2017, according to an online calculator. (Neither calculation is a measure of total shareholder return, as neither takes into account dividends or inflation.)
The comparison of IAC’s CAGR with that of the S&P index is not an apples-to-apples one, though. A good portion of the value reaped by IAC shareholders has been generated by the company’s practice of spinning off subsidiaries as new public companies in which existing investors get shares. The 14% CAGR figure takes that into account.
IAC — officially IAC/InterActiveCorp. — is itself publicly held. It also controls, through large majority ownership stakes, two other now-public companies, Match Group and ANGI Homeservices (the latter created by the recent merger of IAC’s HomeAdvisor business with Angie’s List, a 2017 acquisition).
IAC has no ownership interest in seven other properties it spun off to the benefit of shareholders: Expedia, HSN, Interval, Lending Tree, Live Nation (formerly Ticketmaster), TripAdvisor, and Trivago.
“The aggregate market cap for IAC and all the spun companies is $47 billion, and when Barry started the market cap was about $250 million,” Schiffman says. “So our shareholders have benefited tremendously.”
A Total Revamping of IR
The past few years have been particularly kind to shareholders, and not just because of the IPOs of Match Group (in November 2015) and ANGI Homeservices (in October 2017).
When Schiffman joined IAC as CFO in April 2016, the first thing he looked at was the company’s stock price. But he didn’t like what he saw.
“I did my own sum-of-the-parts valuation of IAC, and even with just the public information that I had at my fingertips then, I calculated a trading value well in excess of the stock price at the time,” he tells CFO.
So, Schiffman — who had been an investment banker for 25 years and had done a number of deals with IAC — made shoring up investor relations his first order of business.
IAC’s Manhattan headquarters
It was the company’s complexity that caused much of the market undervaluation, according to Schiffman. In addition to the three publicly traded companies under its control, IAC has business units focused on publishing (with well-known brands including Ask.com, Dictionary.com, Investopedia, The Daily Beast, and Reference.com), video (including Vimeo, CollegeHumor, and DailyBurn), and applications.
“The value we’ve created doesn’t appear on one screen or by punching in one ticker symbol,” the CFO says. “It’s complicated and has to be proactively and strategically explained. Each of our businesses is distinct, with different profiles, stages of development, stages in penetrating their addressable markets, and growth and margin profiles.”
Even within Match Group, for example, complexity and subtleties abound. The company owns a plethora of popular dating-site brands — including Match.com, Tinder, OkCupid, PlentyOfFish, and OurTime — each with unique positioning and strategies.
“So, we’ve demystified IAC,” Schiffman continues. “We’ve created a very consistent narrative about our pattern of buying, building, and assembling category leaders in big consumer verticals, and we repeat it over and over and over.”
None of the specific steps Schiffman has taken with respect to IR are sensational in themselves. But he’s taken a lot of steps.
For one, he reached out to specific investors that he wanted included in the company’s capital structure.
“We view our job as compounding capital over the long term, so we have a long-term horizon as we evaluate our decisions,” he says. “And we wanted investors who operate with a complementary timeframe.That required a freshman class of investors.”
As well, Schiffman successfully solicited additional analysts to cover IAC.
He and the IR team spend much more time with analysts throughout the year than had previously been the norm. “We attend more conferences and do more non-deal road shows than we ever did,” he says.
Schiffman also introduced a quarterly letter to shareholders. It provides a forum to lay out in more detail IAC’s strategy, the priorities of its businesses, and the underlying drivers of each business, he says.
“It also gives investors a window into how we think about our businesses, on a portfolio basis and with respect to how we allocate capital,” he adds.
The last page of the letter includes a simple table containing additional, unrequired disclosures: segment-by-segment EBITDA guidance for the year, as well as brief commentary on quarterly expectations for each segment.
“This simple one-pager offers information presented clearly and consistently in the same spot in the letter, every quarter,” Schiffman says. He adds, “Even in our earnings press releases, quarter after quarter analysts know they can turn to page X and get Y.”
Sometimes the table in the shareholder letter is even supplemented with disclosures about individual businesses within the segments. For example, in its Q4 2017 and Q1 2018 letters, IAC revealed for the first time the projected 2018 revenue for Vimeo ($125 million).
IAC also releases earnings near the close of business one day and holds its conference call the next morning. That’s a departure from the more common practice of releasing earnings early in a day and doing the call a few hours later.
“It gives our analysts and investors ample time to digest our results on their terms and in their timelines,” says Schiffman.
Another fairly unusual practice is that the earnings calls consist entirely of Q&A. “We don’t read our letter aloud or waste time with a canned script,” the CFO says. “The call is for the investors and analysts, so we allow them to set the agenda.”
Additionally, at the time Schiffman joined the company, it did earnings calls for IAC and Match back to back. “That was really hard on people — we were asking for two hours of their day while the market was open,” he says.
Now, Match’s results are released a day before IAC’s. The earnings call for the latter also includes the presentation on the results of ANGI Homeservices, the newest of the public companies IAC controls.
After earnings calls, IAC has individual meetings or phone calls with each of the 20 analysts that cover the company as well as the top 20 shareholders. There’s also a luncheon the day after earnings to which investors are invited.
The result of all of this activity?
It’s never possible to identify the precise degrees to which various factors contribute to fluctuations in a stock’s price. However, on the first day of April in 2016, the month Schiffman joined IAC, its stock closed at about $47.
Fast forward to mid-afternoon on Thursday, and the shares are humming along at $152 (with a P/E ratio of 32). Despite that high value, 19 of the 20 following analysts currently have the stock rated as a “buy.”
“While all the things we did had some degree of execution challenge, in retrospect they were all pretty simple,” Schiffman says. “But they were needed and important.”
