IAC Q1 net profit rises 31.6%

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NEW YORK -- IAC/InterActiveCorp., owner of Citysearch and Ticketmaster, predicted Thursday that its second-quarter results will feel pressure from lower sales at its HSN home shopping network and LendingTree units after posting higher first-quarter net earnings.

The company said its first-quarter net profit rose 31.6%, boosted by good results from Ticketmaster and Ask.com that offset declines at HSN and LendingTree. The lower sales at those two businesses led to a 4.9% drop in operating income before amortization, a key performance measure.

The New York-based Internet conglomerate run by billionaire Barry Diller reported that net profit in the quarter ended March 31 rose to $62 million, or 20 cents per share, from $47.2 million, or 14 cents per share, a year ago.

"HSN and LendingTree performed poorly," Diller said in a conference call with analysts. "The rest of IAC showed big growth. I think the other good is that nothing in the quarter pulls down my confidence that HSN is soon going to be a far better competitor."

Diller said he expected better results in the second half of the year, as managers reduce operating costs at HSN.

Revenue in the first quarter climbed 10% to $1.6 billion from $1.45 billion last year, beating the $1.58 billion predicted by analysts.

IAC also owns Match.com, Evite and other online ventures.

The company said its operating income before amortization fell to $147.9 million from $155.6 million a year earlier. The difference between that and net profit is mostly due to accounting costs from grants of stock and options and the amortization of intangible assets from the company's many acquisitions.

A profit figure more closely related to how analysts see performance, adjusted net income, fell to $102.1 million from $104.9 million, even with a boost from lower taxes. But adjusted earnings per share climbed to 33 cents from 30 cents a year ago, to meet a consensus earnings per share estimate of analysts surveyed by Thomson Financial.

The adjusted earnings per share was boosted by a smaller number of outstanding shares. Over the quarter, the company bought back 7.6 million shares at a total cost of about $290 million.

Consensus analyst estimates usually exclude one-time charges, such as taxes.

"Results could modestly pressure the stock given the profitability shortfall," Goldman Sachs analyst Anthony Noto wrote in a note to investors.

IAC shares fell $2.49, or 6.4%, to $36.10 Thursday.

Revenue grew 2% for the company's retail unit, which accounts for nearly 50% of the company's total revenue. But earnings fell 11% at the division, which includes HSN, Shoebuy, catalogue and international operations. HSN has been struggling to increase sales amid management problems and competition from other TV shopping channels including QVC, which is owned by Liberty Interactive Entertainment Inc.

"At HSN, the turn in the business is taking longer than we'd like," Chief Operating Officer Doug Lebda said. "The results are frankly not what we expect."

Revenue for HSN fell 1% in the quarter, dragged down by costs from shutting down America's Store shopping channel in the first quarter.

The company reported a 10% rise in operating income for its transactions unit, which includes Ticketmaster and LendingTree. The division's sales climbed to $444.7 million, from $385.1 million, on a 15% rise in worldwide ticket sales volume, helped by sales of concert tickets for The Police and Kenny Chesney. LendingTree, meanwhile, suffered a declining mortgage market and reported a 99% drop in operating income over last year.

IAC's media and advertising segment, including its Ask.com search engine, grew revenue by 43%.

Chief Financial Officer Thomas J. McInerney said Ask.com was expected to report a profit decline in the second quarter, as the company launches a planned major advertising campaign.
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