IAC considers Vimeo spinoff after investment in video-production unit values it at nearly $3 billion

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A previous reference to Match should have referenced IAC. This article has been updated.

Vimeo CEO Anjali Sud

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IAC/InterActiveCorp. announced Thursday that it was “contemplating” a full spinoff of its Vimeo business, which has attracted growing interest from outside investors.

IAC IAC, -0.38% disclosed that Vimeo, which offers a suite of software for video production, recently received a $150 million equity investment from investors including Thrive Capital and Singapore sovereign wealth fund GIC that values Vimeo at $2.75 billion.

IAC has a long track record of incubating and then spinning out companies. Ten companies have made a full spin out of IAC over the course of its history, including Expedia Group Inc. EXPE, +4.67% and Match Group Inc. MTCH, +4.88%, the latter of which formally separated from IAC at the end of June.

“Given Vimeo’s success, and investor adulation for the software-as-a-service (SaaS) category generally, we expect Vimeo’s access to capital inside of IAC will be much more expensive than access to capital outside of IAC, and that capital will be helpful to enable Vimeo to achieve its highest ambitions,” IAC Chief Executive Joey Levin said in a letter to shareholders.

Vimeo has been arguably the brightest spot within IAC following the Match spinoff, as its video creation tools have attracted a new audience during the pandemic. The company offers software that lets businesses make, edit and store videos, as well as a platform for streaming live events such as conferences and internal town halls.

IAC said that Vimeo has grown revenue by 40% to 50% each month since March on a year-over-year basis. The platform counts more than 3,500 enterprise customers among its users, including Amazon.com Inc. AMZN, +2.49%, Starbucks Inc. SBUX, +0.92%, and Deloitte.

“For several years now, we’ve espoused our belief that every business needs video to communicate, both internally and externally,” Levin said in the shareholder letter. “The lockdowns not only accelerated that necessity by a few years, but also expanded even our own lofty estimates of the size of our addressable market — and I don’t expect we’ll ever go back.”

Levin said in the letter that “there’s a long way to go before” the company makes a formal decision on whether to do a full spin and that IAC would be “guided by our long-held principle of doing what’s in the best, long-term interests of our businesses and our shareholders.”

IAC’s announcement of the Vimeo investment and the potential for a spinoff came as the company also reported third-quarter results. The company posted revenue of $788.4 million, up from $705.4 million a year earlier, whereas analysts were modeling $758 million.

The company’s net income came in at $184.9 million, or $2.04 a share, up from $16.5 million, or 19 cents a share, a year earlier, but the large increase mainly reflected mark-to-market gains around the company’s investment in MGM Resorts International.

IAC’s adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) fell to $35.2 million from $59.9 million.

IAC has majority economic interest in ANGI Homeservices Inc. ANGI, -0.52%, which also trades under its own ticker. ANGI saw revenue rise to $389.9 million from $357.4 million a year prior, as the business continued to benefit from strong consumer demand for home-improvement work during the pandemic. ANGI still faces supply constraints on the service provider side of the business.

Dotdash, IAC’s media brands business, increased revenue to $50.8 million from $40.3 million. Dotdash Chief Executive Neil Vogel told MarketWatch last month that it’s “fun to be the contrarian guy in publishing” as the company looks for “good assets that need the love we can bring to them,” in addition to focusing on organic growth. The business recently acquired Simply Recipes and Serious Eats to help build out its food vertical.

“As the world gets more complicated, it’s hard to be a small publisher because now you need a recipe with nutrition info, photographic step-by-step instructions, comments, and links to knife skills,” Vogel said. He argued that IAC and Dotdash can afford the “investments in infrastructure” needed to help grow these two food publications.

IAC shares have slipped about 2% over the past three months as the S&P 500 has fallen 5.7%.