As advertisers cut spending, executives at Dotdash Meredith’s parent company say they won’t meet their revenue targets for the year.
In a letter to shareholders, Joey Levin, CEO of IAC/Interactive Corp., said the New York-based media company, with major operations in Des Moines, has seen a “rapid pullback” in ad spending. He said ad rates fell in June compared to the same period last year, despite year-over-year ad revenue growth in the previous five months.
Overall, Levin told shareholders Tuesday, Dotdash Meredith’s goal of 15% to 20% digital revenue growth for 2022 is “unlikely.” He said IAC, an incubator for several tech companies, would slow hiring and reduce spending.
But, he added of Dotdash Meredith’s recent performance: “We’re not too upset.”
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Formed in a December acquisition that merged digital-first Dotdash and formerly Des Moines-based Meredith Corp., Dotdash Meredith posted an operating loss of $27.5 million for its latest quarter, which ended on June 30.
The performance was better than the previous quarter, when the company lost $56.2 million. Compared to those first three months, Dotdash Meredith’s most recent report shows its digital business went from a slight loss to a slight profit, while the company’s print business lost less than money than before.
The company is best known for its former Meredith magazine titles, which include Better Homes & Gardens, People and Entertainment Weekly. In acquiring Meredith, Dotdash CEO Neil Vogel bet he could make these venerable businesses more profitable by putting them on new, faster-loading websites, charging more for fewer ad placements, spending more staff to product reviews and assigning more stories designed to engage readers. from Google searches.
“It’s the internet, that’s how it goes sometimes,” says CEO, explaining delays
From the time of the $2.69 billion purchase, Vogel said 2022 would be a reset year for the company as Dotdash Meredith hired more employees, invested in new websites and reduced costs. veterans with severance packages and early retirement packages. He said he expected the business to grow once it commissioned the new sites and hired a new team of employees.
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But in an email to staff on Wednesday, Vogel said the transition process is taking longer than expected. The company hoped to have moved all of Meredith’s posts to new websites by now. Instead, the company has transitioned around three-quarters of the sites and doesn’t expect to launch the rest until late September.
“Our migrations took longer than we initially thought to make sure we were doing them right,” Vogel said. “It’s the internet, that’s how it goes sometimes, no matter how hard you try. What matters is that you try.”
Vogel also told employees that Dotdash Meredith’s earnings fell in July for the second month in a row.
For the April, May and June period, the company reported an operating profit of $10.9 million for the digital business, compared to a loss of $1.9 million in the prior quarter. This growth was largely driven by digital advertising revenue, which increased 15% to $157.6 million from the prior quarter.
Executives said websites will struggle to switch to new platforms, but faster sites will eventually attract more readers. Ultimately, Google will rank sites higher in its algorithm, leading to greater growth, they predict.
“The benefits will show up more in 2023 than in 2022,” Levin said.
Impression losses lower than in the previous quarter, advertising sales up
The print editions of the magazines recorded a loss of $19 million in operating profit. This was even better than the previous quarter, when they announced a loss of $38.3 million.
Dotdash Meredith does not break down expenses by business segment. But an analysis from the Des Moines Register indicates that the company spent about $280.2 million on the print side last quarter, about $48 million less than January through March.
Subscription revenue was down 17%. Performance marketing revenue fell 90%. Ad revenue was down 2%.
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At the same time, kiosk revenue increased 14%, and a line item the company calls “project/other revenue” increased 28%.
The first quarter figures are not directly comparable because the company reduced print editions by seven titles in April and May. For titles still in print, Levin told shareholders, ad sales were up 3% year over year.
In Vogel’s words: “The impression is (fire emoji) – after making very tough decisions, followed by real investment, our stocks are growing again after years of decline.”
Costs continue for merger-related expenses
In addition to digital and print businesses, Dotdash Meredith reported a loss of $18.5 million under “other businesses.” The company’s report did not reveal in detail what this includes, other than “unallocated business expenses”. The company announced a loss of $16 million in the segment for the first quarter.
Dotdash Meredith also continued to accrue costs for changes made to the business as a result of the merger. In addition to shutting down the printing operations of some magazines, the company shut down the People TV show and offered early retirement packages to veterans.
The company reported restructuring costs of $13.7 million in its most recent quarter, of which about $12.6 million was for “severance and related costs.”
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The payments came after the company spent $22.4 million in restructuring costs in the first quarter, including $20.5 million in severance and related costs. In its latest report, the company said it expects an additional $2.3 million in restructuring costs by the end of 2023.
Dotdash Meredith also revealed that on July 1, she made an $83.1 million change in control payment — an accounting term for payments to executives who leave the company, sometimes with contracts ensuring that the company will pay much of their unpaid salary and benefits.
The company made a similar payment of $60.1 million in December. The executives revealed they expected to make another much smaller payment of $4.3 million between October and December.
Dotdash Meredith also revealed they had to shell out tens of millions this year for an underfunded pension scheme in the UK. The company paid $25 million in the first three months of the year, followed by $43.6 million in the second quarter.
Trustees of the pension plan also purchased life insurance to guarantee payments to participants on July 28, resulting in an actuarial loss of $134 million. Dotdash Meredith revealed she will record the loss in a future earnings report.
“They do a lot of indigestion,” said Francine McKenna, an accounting professor at the University of Pennsylvania’s Wharton Business School.
Since issuing its last financial report on Tuesday, IAC’s stock price has fallen about 4% to $75.13 per share on Thursday.