What factors drove IAC's consistent earnings surprises in 2024?

IAC Inc. experienced inconsistent earnings performance in 2024, with significant volatility and unexpected losses in certain quarters, as indicated by the diluted EPS of -$13.55 in Q4 2024 and a net loss of $142.2 million in Q2 2024. Thus, the notion of consistent earnings surprises may not fully apply. However, we can analyze the factors that contributed to its notable earnings challenges, particularly in the second quarter. 1. **Revenue Decline and Strategic Adjustments**: IAC's revenue has been declining, with a 14% decrease in the first quarter and a 15% drop in the second quarter compared to the previous year. This decline is attributed to various factors, including reduced service requests in Angi, decreased membership subscription revenues in the ads and leads business, and a reduction in marketing by affiliate partners. These strategic adjustments have likely impacted profitability, leading to unexpected losses. 2. **Sector-Specific Challenges**: Specific segments, such as Angi and Search, have faced distinct challenges. Angi has seen a 10% revenue decrease due to domestic business challenges, while Search has experienced a 13.8% revenue drop due to reduced marketing by affiliate partners and fewer visitors to ad-supported websites. These sector-specific issues have contributed to the company's earnings struggles. 3. **Partnership and Licensing Agreement**: Despite the challenges, IAC's Dotdash Meredith segment has shown some growth, particularly in digital revenue, which grew by 12%. This growth is attributed to a strategic partnership and licensing agreement with OpenAI, which is enhancing content integration and advertising solutions. This partnership may help improve earnings in the future. 4. **Unusual Items and Non-Recurring Expenses**: IAC's financial results have been influenced by unusual items and non-recurring expenses. For example, in the second quarter, the company reported a significant contribution from unusual items, which can skew the profitability picture. These one-time factors make it challenging to assess the company's underlying earnings power and create unexpected earnings variances. In summary, IAC's earnings challenges in 2024 are primarily driven by revenue declines, strategic adjustments, sector-specific issues, and unusual items. However, the company's strategic initiatives, such as the partnership with OpenAI, may provide a foundation for future earnings improvements.