IAC/InterActiveCorp. #BB# Rating Outlook Revised To Positive On Expected Improved Metrics, Revenue Diversity

Stocks and Financial Services Press Releases Tuesday January 30, 2018 10:31
NEW YORK--30 Jan--S&P Global Ratings
NEW YORK (S&P Global Ratings) Jan. 29, 2018--S&P Global Ratings today affirmed its 'BB' corporate credit rating on IAC/InterActiveCorp. and revised the outlook to positive from stable.

At the same time, we affirmed the 'BB' issue-level rating on the company's senior unsecured notes and revised the recovery rating to '3' from '4', indicating our expectation for meaningful (50%-70%; rounded estimate: 65%) recovery in the event of a payment default.

The positive outlook reflects our expectation for improved credit measures and revenue diversification in 2018, driven by robust revenue and EBITDA growth at Match Group and ANGI Homeservices. Performance by Match Group and ANGI Homeservices has been strong, with double-digit percentage revenue growth and expanding EBITDA margins. Despite headwinds faced by the company's publishing and applications segments that continued to hurt revenue growth in 2017, we expect that both will modestly increase EBITDA in 2018, supported by tight cost controls. IAC's adjusted EBITDA margin improved to 18% for the 12 months ended Sept. 30, 2017, from 16.5% a year ago. We expect it will improve to the low-20% area 2018.

The positive outlook reflects our expectation that we could raise the corporate credit rating if the company successfully integrates and grows ANGI Homeservices revenue and EBITDA and lowers and maintain its debt leverage below 1.5x.

We could raise the corporate credit rating if IAC's revenue and EBITDA base continue to diversify as ANGI Homeservices becomes a meaningful EBITDA and cash flow contributor. Under our upgrade scenario, we would expect more than $1 billion in revenue at ANGI Homeservices and a sharp improvement in its EBITDA margin to a low-teens percentage rate, strong operating performance at Match Group, and forecast leverage below 1.5x on a consistent basis.

We could revise our outlook to stable if the company increases its ANGI Homeservices business due to integration challenges, or if it faces operating challenges at Match Group such that leverage remains above 1.5x.

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