Prepared remarks
Good day, and welcome to the IAC First Quarter 2026 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Christopher Halpin, COO and CFO. Please go ahead, sir.
Thank you. Good morning, everyone. Christopher Halpin here, and welcome to the IAC First Quarter Earnings Call. Joining me today are Barry Diller, Chairman and Senior Executive of IAC; Neil Vogel, CEO of People Inc.; and Tim Quinn, CFO of People Inc. IAC has published a presentation on the Investor Relations section of our website today entitled Q1 Earnings Presentation as well as a letter from our Chairman published last week. On this call, Barry, Neil, Tim and I will provide some introductory remarks referencing that presentation and letter and then open it up to Q&A. Before we get to that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities laws. These forward-looking statements may include statements related to our outlook, strategy and future performance and are based on current expectations and on information currently available to us.
Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent annual report on Form 10-K and in the subsequent reports we filed with the SEC. The information provided on this conference call should be considered in light of such risks. We'll also discuss certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our earnings release, investor presentations, our public filings with the SEC and again to the Investor Relations section of our website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. And now I will turn it over to Barry.
Thank you, Chris. Good morning, everyone. I wrote a letter that I hope everyone has read because it says it far better than I can say about this transition that we're undergoing. A lot of people ask why now? Well, the truth is this has really been going on for the last couple of years as we wanted to simplify our operations. We've been through—since this organization started 30 years ago—we've been through four cycles. Each time we've gone through one of those cycles, we've been a smaller enterprise because we spun off so many public entities. I like that because I think that gives us kind of energy and focus to build up again. I also think that the two principal assets, probably, hopefully, the only assets that the company will have in the future—I'm talking about the present rather than the future—are People and our interest in MGM Resorts. In a way, as I wrote, I think there's a perfect hedge.
One is in the virtual world primarily—it certainly prints a lot of magazines as well—but it's very much in the digital world; and the other is very hard assets of resorts in the United States and in China, and a building in Japan. But rather than me rambling around, I hope you'll just take a second to read the letter. I'm not—actually, I should do the thing that they do with Amazon, which is, all right. Now we'll take five minutes for everyone to read the letter and be silent, but I'm not going to do that. I would like though to be sure to thank Mr. Halpin, who has been with us for many years outstandingly.
Is this the last call which you will be on or you'd be on the next one, too?
We'll have one more of you, but thanks for the great information.
Thank you.
And with that, let's move on. It's much better, actually, I think for all of us, if you just ask pointed questions and we'll respond pointedly.
Fair enough. We're just going to do a few prepared remarks just to lay out some key pages. So Neil, do you want to kick it off?
Sure. Everyone, please go to Slide 5. As you can see, at People Inc., we had a very solid quarter. We delivered 8% digital revenue growth—our tenth consecutive quarter of growth—and digital adjusted EBITDA margins expanded to 20% from 18% in Q1 of last year. Our performance is underpinned by a diversified audience and revenue mix and a laser focus on meeting our audiences where they are now. To that end, in the quarter we continued to invest in a host of new products and services, including what BD calls inversion projects and what we've called our inversion projects. These are businesses built off of our iconic brands that extend and transcend traditional publishing models, accelerating our non-session-based revenue. We have a few updates on the early projects we've talked about and some highlights of what's to come. There's real traction around MyRecipes, our recipe locker tool, the People App and the InStyle breakout series The Intern and The Boss on social media.
We expect to roll out in Q2 a membership club for superfans of Southern Living, among our strongest audiences, and plan to follow with a similar program for Food & Wine. And something very exciting for us: we're launching a new social shopping tool based on the learnings of our scaled commerce business, where shoppers can easily save and store their picks for future purchases in a very innovative way. We plan on a drumbeat of product launches through the coming quarters, so you can expect that from us. Our focus is meeting audiences on their terms and the next slide further illustrates this. If everyone flips to Slide 6, you'll see the trends over the last few years continue. As you can see, our opportunity is clearly on the right side of this page: core web sessions continue to be challenged. Google search traffic declined as expected, and we expect that will continue. Traffic from the Open Web also declined a bit as substitution from core web sessions to off-platform audiences increases.
The driver of our growth continues to be these off-platform audiences, which grew 27% in Q1. We see strong performance across Apple News, TikTok, Instagram, YouTube and syndication partners. Our audience trends align with where users are today and how advertisers and marketers want to connect with them. That takes us to Page 7. Our big story continues to be our non-session-based revenue, which grew 24% year-over-year in Q1. Non-session-based revenue continues to grow as a percentage of our digital revenue; we're now at 41% versus 35% in the first quarter last year. Similar to last quarter, this is led by Decipher, our AI-powered ad-targeting tool, by our social and custom ad programs, by Apple News and by strong licensing performance, including the addition of our Meta deal. We also maintained a healthy sessions-based business by delivering a solid quarter and continued strong monetization of those audiences.
The strength of our brands is really driving premium rates. The model for our future is clear and in focus: one, strong growth from our non-session-based revenue streams; two, executing against our sessions-based businesses; and three, connecting directly with our audiences and advertisers and meeting them where they are—including our big focus on our inversion projects. We're very proud of the quarter, and I'd like to welcome Tim to the call who's going to give a rundown of the financials.
Great. Thanks, Neil. It's great to be here, and I'm excited to have a chance to work with everyone. I, along with almost the entirety of our management team, have been in our positions for over a decade, both working with and for Neil and under the leadership of IAC. So this continuity is a big part of the success that we've had together and something that gives us a lot of confidence as we undertake what's going to be an exciting transition. Referencing Slide 8 for a second and refocusing on the financials: as Neil said, we had a really strong quarter in Q1. Digital revenue grew 8%, and we saw digital margin expansion of about 200 basis points, generating solid incremental digital margins of 45%. This is a testament to the strength of our brands, the diverse revenue models they support and the continued discipline we bring to all of our investment decisions. Print EBITDA declined in the quarter, which was expected; there is some quarter-to-quarter volatility there, but we reiterate our expectation that full year print EBITDA will cover People Inc. corporate overhead with the caveat this year excluding the estimated $15 million of Google litigation expense.
Finally, I want to highlight that we continue to generate really solid and predictable free cash flow of almost $50 million in the quarter, putting us on track to exceed $150 million of free cash flow this year. That's on net debt of about $1.1 billion. So we feel really good about the balance sheet and the opportunity to continue to delever rather quickly. Moving on to Page 9, I want to highlight some changes we made to our segment reporting. We transitioned the management of a business we call M&I, which is a legacy media agency business previously captured within our Print segment, and it now operates under the Decipher team led by Jim Lawson. As a result, we reclassified the business from Print to Digital for Q1 and over historical periods. The reason for this is it unlocks two exciting new opportunities for us. Number one, it opens up a new distribution channel for Decipher, notably independent agencies and political advertisers previously untapped by our sales team.
The second opportunity is by putting this business and operations under Decipher, we can offer these advertisers a more advanced product delivering superior performance and at better margins to People Inc., and some of that benefit accrued to us in Q1. One point on political advertising: historically, People Inc. has not run political ads on our branded properties, but we can now target this ad category on third-party sites using Decipher. These political ad cycles create some volatility in the numbers, especially related to the 2024 presidential election cycle. Excluding those political dollars, just to give you a baseline, M&I revenue was flat, excluding political. This change in segment reporting resulted in about a 200 basis point drag in digital revenue growth in Q1—so the 8% growth would have been 10% but for the change. Ultimately, however, this move is expected to accelerate growth and adoption of Decipher, particularly in the second half of this year.
All these changes did not impact our guidance for the year, which we reiterate: digital revenue growth of mid- to high-single digits, delivering total company adjusted EBITDA in the $310 million to $340 million range. With that, I'll hand it back over to Chris to take you through the IAC changes.
Thanks, Tim. Moving to Slide 11, we'll talk through financial performance beyond People Inc. this past quarter. It was a busy quarter on a number of fronts as we continue to execute on our core strategy of simplifying IAC and building our cash balances. First off, we completed the sale of Care.com in March, generating $296 million in net proceeds. Following closing, Care.com is now presented as a discontinued operation in our consolidated financials. We think this caused a little bit of confusion overnight, which we'll talk about more later.
I mean, I hope that's the thing that caused a lot of confusion given how banged up we got just from people not being able to add properly.
We'll work with them on it, BD. We continue to allocate capital to the two companies we know best and believe in, IAC and MGM. We repurchased 2.9 million shares of IAC for $111 million since our last earnings call, and we've now bought back 13% of IAC since the beginning of 2025. We also purchased 1 million incremental shares of MGM for $37 million, increasing our ownership to 26%. As Barry said in his letter, we continue to view both stocks as the priority areas of capital allocation. Our Emerging and Other segment showed strong performance this quarter as both Vivien and The Daily Beast continued their momentum, with both seeing accelerating revenue growth and the two companies combining to generate about $4 million of adjusted EBITDA in the quarter. We also closed operations in our Search segment in April. As many of you know, this was a noncore business that had frankly lived on well past many expectations.
As previously disclosed, Google notified us late last year that it would not renew our search contract under the existing terms. Following negotiations across the first quarter, we concluded that we could not confidently operate the business profitably on the new terms on offer from Google. As part of the shutdown, we incurred $7 million in costs from severance and the write-off of prepaid software, and the search business will also now be shown as a discontinued operation starting in our second quarter financials. One other note: we sold an unutilized domain name for $7.5 million this past quarter. With the search business now closed, we will look hard at monetizing the portfolio of domains that underpinned that business, including Ask.com, creating cash-raising opportunities. Finally, there's a lot of noise in comparing year-over-year profitability in the first quarter, so we laid out on the bottom right of the page some key one-time items, including last year a large noncash lease gain at People Inc. and the costs associated with our CEO separation and, this year, notable severance, transaction and litigation expenses.
Moving to Slide 12. Last week, in parallel with Barry's letter sharing his rationale for a planned rebrand of IAC as People Inc., we issued an 8-K summarizing the key elements of the consolidation of the corporate functions of IAC parent and the People Inc. subsidiary. The underlying principle is that with one core operating business in People Inc., two layers of corporate expense—one at IAC and one at People Inc.—are no longer necessary and don't make sense. When we managed a number of operating businesses, the IAC corporate layer provided strategic oversight, shared services and M&A support to the individual companies, enabling them to operate independently and positioning them for growth and success. But with the sale of Care.com and the narrowing of our focus to People Inc. and MGM Resorts, the opportunity presented itself to eliminate duplicative functions and generate significant savings.
We've mapped out a careful consolidation plan in which, over the course of the coming quarters, more than half of the corporate employees of IAC, including much of senior leadership, will transition their responsibilities to counterparts at People Inc. and exit the company. Key areas in this consolidation are accounting, tax, internal audit, legal, M&A, among others. Each employee has a specific exit date and a retention plan in place to ensure they remain engaged until the consolidation is complete. The full transition process is planned to run through February 2027. We expect annual run-rate operating expense savings of $40 million and a reduction in stock-based compensation of $20 million to $25 million. These savings will phase in over the coming quarters as employees depart, with the second quarter of 2027 being the first clean quarter where the P&L will show the full savings of the consolidation.
Total one-time expense of the rationalization is $63 million, comprising $15 million in cash severance and related expenses, of which $10 million was recognized this past quarter, and $48 million of stock-based compensation expense, which will be recognized over the next four quarters. Kendall Handler, our superb Chief Legal Officer, and I will leave in mid-August, following the filing of second quarter financials, and then will remain on as advisers through March 2027. Further, we expect that Neil will become CEO of the parent company, newly renamed People Inc., and Tim will become CFO in that same mid-August timing. All of us are working together to have a smooth transition to set up People Inc. for continued success. Finally, moving to Slide 13. This will be the last slide we present before going to Q&A. I know you're happy about that. On guidance, we reaffirmed People Inc. adjusted EBITDA guidance at $310 million to $340 million while raising Emerging & Other guidance to $5 million to $15 million of adjusted EBITDA based on the strength at Vivien and The Daily Beast.
As a reminder, Care.com is now a discontinued operation, so it is removed from both our financials and our guidance. We saw a couple of reactions overnight that cited a Q1 IAC consolidated miss and reduced guidance, but our analysis is that those market commentators and a number of analysts failed to adjust for Care's revenue and EBITDA being removed as discontinued operations. As a reminder, Search will also be classified as such and will not be in our reported or historical revenue and prospective revenue and adjusted EBITDA and is not part of our guidance. We've raised corporate expense guidance to $95 million to $105 million due entirely to the severance that I just mentioned and other one-time charges. Following completion of the consolidation, we expect annual run-rate IAC corporate costs to be around $45 million and stock-based compensation for the entire company to decline to $30 million.
These figures are prior to any future reallocation of People Inc. leadership cost to the corporate level, which may occur; however, any such shift in cost allocations would have no impact on expected consolidated expense savings. With that, let's go to Q&A. Operator, first question, please.
Questions and answers
The first question will come from James Heaney with Jefferies.
Can you just talk about the next chapter of IAC? Like what do you think the next five years are going to look like? And what are the key areas of capital allocation going forward? And then would you still look to do M&A in select new areas? And then I have a follow-up.
Well, I can't tell you what the next five years are going to be. I can tell you what the next year or months are going to be. Five years, who the hell knows. What we have is, I think, extraordinary opportunity with what we've got. What Chris has just gone over really is kind of a great cleansing. And that cleansing, as I said, has been going on for a while now. The combination of it was actually this quarter, changing our name, doing all of the tasks and continuing to shed noncore assets. Core assets, as we said before, are hopefully going to be just two. We've got plenty of capital. We've got a very good balance sheet. We can go in whatever direction where there is opportunity. I think the biggest opportunity we have in front of us is the work that is being done in our publishing business—People—and what we call inversion, which is—we've got 19 different initiatives having nothing to do with standard advertising or subscription revenue. Out of this, I think we can build wholly owned or partnered extremely large businesses in all sorts of categories. The thing that I came to understand about People is across the—how many—actual—I mean, I always get this figure wrong—how many magazines do we have?
We have about 40 brands and nine or ten significant brands, so we are invested across a wide portfolio.
Throughout this, there is so much we know about so many things that no one else knows. And instead of being in the tried-and-true publishing model of licensing your brands and licensing all that knowledge for other people to exploit, we're going to exploit it. And out of that, I would be giantly disappointed if we are not able to build real substantive businesses having nothing to do with advertising, having nothing to do with subscriptions, but having to do with goods, services, products, etc., that out of the corpus of our understanding in all these areas, we have a better advantage than anyone else. The other thing is we publish, what, 300 million or so actual hard-copy items that are in people's homes, and adding an additional page costs us virtually nothing. If we come up with—and if we don't come up with it—we're really in trouble. But if we come up with good ideas, we can promote them at almost no additional cost to us.
What a megaphone that is for the future. So that's the work that we're going to do. Wherever else we use our cash flow, we're going to continue to opportunistically buy our stock. We'll continue to invest in MGM Resorts, which I also couldn't be more excited about its future. So this has been worked on for the last almost two years. But this moment forward is a clean, clear, simple sheet that we get to write on, and I think we have all the necessary tools. A bit long-winded, but there it was. Next question.
Great. And I actually just had one follow-up on the macro environment—sorry—just around the environment across People and other businesses. What are you seeing from geopolitical or other macro factors?
Yes, I'll do a quick take on the ad market. I think last quarter we told you guys on a 10-point scale it was a six out of ten; I think it's still a six out of ten. There are opportunities and there are risks. Tim is here with us now and he can give us some color across the industry.
Yes, there's certainly strength in places like health and pharma, tech and telco. Areas that are exposed to the average consumer are a little bit soft—things like CPG, food and beverage. We did see a little slowdown in planning related to the Iran conflict. We think that's abating a little bit now, but it's still a little bit touch and go. But overall, as Neil said, the market is strong, but it's not ripping.
Good enough to do our job unless something changes.
Yes. And I would just say, across the portfolio, we've been talking about the divergence between high income and low income for a while. I didn't know that was called K-shape but now that's called K-shape. I think that's continued and, unfortunately, is probably being exacerbated by what's going on right now.
Your next question will come from John Blackledge with TD Cowen.
Could you talk about the key drivers of the Q1 People digital revenue line items? I saw outsized growth at performance marketing and licensing and other revenue—any color on revenue trends in the second quarter? And on digital EBITDA, that was better than expected—any color on the drivers of the upside to margins and how to think about Q2 and the rest of the year? And could you give some color on one or two of the separate initiatives as part of the inversion process?
Let me do the inversion first, and then Tim can take the rest. The emergent stuff has energized our organization. We own iconic brands that are pillars of American culture. One of the first things we did is we launched the recipe locker—MyRecipes. We're probably more than half of the recipe traffic on the Open Web right now. We launched it a little more than a year ago. We have 3.5 million registered users and 40 million recipes saved. We have a lot of momentum and a bunch of new product initiatives launching in the next couple of months. The People App, which we've talked about before, again the real win here is how we're engaging people. A visit to the app is about three times as long as a visit to the web. If we get people playing games, which is the most popular thing on the app, it's a 20-minute visit. We're up to 430,000 users since the last call. The important thing about both MyRecipes and the People App—which have taught us how to engage users directly and all of these new skills—is that we have not gone outside our own assets at all to grow these things.
As we roll out and tighten up financial models around these, that's a really big opportunity. Another thing worth mentioning is we've really looked at social video: social video series is sort of like the new TV. We have a real breakout hit in InStyle with two properties called The Intern and The Boss. They launched about a year ago; the episodes are three- to four-minutes long and we've got 45 million views in a year and a robust sponsor business has grown around them. We sell seasons—about 20 minutes total across six or seven short episodes—and we've sold full seasons, some more, some less. It's completely homegrown, made by us, we own all the rights, and it's a successful venture we're now modeling across People and other properties. Southern Living is one of our strongest properties—it's such a loyal base. There are a couple of things in Southern Living that are really interesting. For example, we've developed a branded tea product and, more broadly, we're thinking about brand extensions where we manufacture and distribute under the Southern Living brand.
Also, Southern Living sells architectural plans to build high-end Southern-style houses and we have even discussed community concepts—actual Southern Living communities that could be branded and developed. When BD mentioned 19 different ideas, there are actually probably more than 19 ideas floating around and we are chasing these down. Each can be a separately organized, financed business—standalone P&L businesses separate from the historic publishing business that can spin off individually. It won't happen in a year, but over the next several years this could be fertile ground for dozens of businesses because we have intellectual property that gives us an edge once we concentrate on it.
I'll tackle the financial questions as well. Q1 was a continuation of Q4, with incredible strength in licensing and commerce in particular, while the ads business was roughly flat as we navigate volume challenges. The future, as Neil and BD are saying, is these non-session-based revenue models, which currently comprise about 40% to 41% of our revenue and grew 24% in Q1. That is the future while we hold the line on the traditional session-based media model. Regarding digital EBITDA margin upside, the mix shift toward higher-margin non-session revenue, along with disciplined cost management and scale in our digital business, drove strong margin performance in the quarter. For the remainder of the year, we expect continued margin expansion as non-session revenue grows and as some of the Decipher and product investments begin to scale. We continue to reiterate guidance for digital revenue growth in the mid- to high-single digits and total company adjusted EBITDA in the $310 million to $340 million range.
How much of our traffic have we lost from Google?
From Google, we've lost about 65% of that traffic flow compared to prior levels.
Okay. What publisher has navigated this transition anywhere close to how you have all navigated this? We have transitioned from depending on Google for traffic to building our own direct and off-platform distribution. I find it incredible that no one fully recognizes that feat for what it has been.
We think that's the future. We expect that the shift of the 40% non-session-based revenue to grow will be meaningful over the coming quarters and years.
Your next question will come from Cory Carpenter with JPMorgan.
I wanted to ask about MGM and Turo. Barry, for you on MGM: could you just talk to what you see as the benefit of keeping MGM within People Inc.? Why not split that out separately? And then on Turo, any update you can provide on how that's performing? Is that a business you plan to hold onto or look to divest?
I won't do the MGM thing in detail, but yes, the answer is of course it is manageable. This corpus used to house 50 or 60 different businesses; we can certainly handle two. The prospects for MGM are outstanding. MGM is building a large resort in Japan—a $12 billion project—and the closer we get to its opening, the more people will understand how discounted MGM is today. I'm quite happy it's discounted now because it has allowed us to buy back a lot of stock; MGM has bought back almost 45% of its stock over the last five years. Its operations have been solid. Las Vegas goes through cycles but remains resilient. For example, Canada visitation is down—I'm not sure of the exact stat, maybe 40%—which was a very good draw for Las Vegas. I'm not anxious for the discount to close too soon.
Turo has executed well on its strategic effort to return to growth. We've talked previously that Turo experienced a real slowdown in volumes coming out of the froth of the pandemic, and that, combined with industry pricing pressures due to both working off pandemic highs and mistakes made by competitors, drove Turo revenue growth to the mid-single digits at one point. The company generated over $1 billion of revenue in 2025, but management really focused last year with the board on driving substantially more growth—reinvigorating marketing and improving cost efficiency. They hired a new CMO, David Cornes, who we believe is making the right steps to drive greater brand awareness. Awareness and testing the product are the biggest challenges—repeat rates and NPS reviews are excellent—so the focus is on getting more people into the funnel and trying it. They also promoted Cedric Matthew to Chief Business Officer to improve pricing, matching and execution across the marketplace.
These efforts have borne fruit with Turo returning to double-digit revenue growth year-over-year in the first quarter, led by increases in volumes. Rental car market pricing is no longer a headwind, and the company has a clear game plan to drive more new users in. The experience is compelling. If you had asked us six months ago, we might have said we'd sell our interest, but it's now performing very well. I doubt in a year or two it will be part of this corpus because it will probably go public or be sold, but it's now operating solidly and will likely spin out in some form and generate cash for us.
Your next question will come from Ross Sandler with Barclays.
Neil or Tim, just wanted to go back to off-platform revenue. Could you talk more about how you're diversifying traffic to off-platform and what you're doing to drive monetization and better margins there, and what you see for the medium-term growth rate? And second, any update on the Google ad tech litigation—timeline for remedies and what we might hope to see as an impact to the business?
I'll start with the litigation piece. The lawsuit most people refer to is the Google ad tech litigation, which builds on government findings that Google used dominance to foreclose competition in ad server and ad exchange markets. We believe the government's findings are supportable, and we believe damages could be significant given our scale and level of participation in these markets. On off-platform revenue, if you zoom out, the reason our off-platform business is working is because we have terrific iconic brands. Since we bought Meredith five years ago, we've worked hard to position our brands where they can do these new things and come into people's lives in different ways. Whether it's inversion projects or historical events and other initiatives, we have momentum because our brands are strong—particularly the seven to nine brands we focus on most. Tim will get into the specific drivers, but that brand strength underpins everything we're doing going forward.
I mean, it's not really a simple lawsuit because the ruling has already taken place in important respects; regulators have found harmful conduct. We and others are making substantial claims. We'll just wait for this process, which could take a year or two.
We intend to invest between $10 million and $15 million in pursuing this matter this year. We expect that it will take the entirety of this year into next year optimistically to resolve in the first half of next year, unless we're able to settle sooner.
Yes. And then to transition to Tim's answer, by the way, very high margins.
Yes, that's correct.
A quick additional note on off-platform: 41% of our revenue grew 24% in Q1. That revenue is comprised of licensing—which is everything from Apple News to our AI deals to content syndication—and our commerce and social programs. We're creating more content today than we ever have and distributing it across more platforms successfully than we ever have. What's unique to us is the combination of brands, audience size and reach, first-party data and a sales organization that can access advertisers to sell into those audiences. That allows us to control our own destiny and grow the non-session-based revenue streams at attractive rates, and we actually executed on that in Q1.
The next question will come from Justin Patterson with KeyBanc.
Two for Neil. First, what are your top priorities for Decipher for the year? And second, as you step back and look at how AI has changed the traffic funnel, what are your latest learnings and how do you think you can continue standing up a durable business for the next few years?
On AI, we feel very strongly that we have more opportunities than risks. If you go back one or two years, many of the perceived risks of AI for us related to search disintermediating our audience sources—well, that already happened, and we came through it with a more diversified business that's stronger. Now we're looking at AI as an opportunity. We're producing 50% more content than we made three years ago at roughly the same cost and at high quality, and everything is still made by humans. We're able to do that because AI streamlines our processes. We use AI and Decipher to tighten ad targeting, and we use AI in commerce to understand what makes people respond to offers. We're embracers of the future and deeply unsentimental about processes we've used historically. We've taught our 3,500-person organization to use AI—it's the responsibility of every team member to understand how AI applies to their role. With so much content being produced across the web, brand becomes more valuable because people trust established brands. We can harness AI to make our brand offerings stronger. We are AI optimists and see massive opportunities. On Decipher specifically, we're optimistic: it expands our addressable market across the Open Web and CTV. We have incredible first-party data and AI powering it, and our capabilities are getting more sophisticated.
I'll just add that AI is largely irrelevant to MGM's fundamental value proposition. You can't replace the physical resort experience with AI. That's a natural hedge inside our portfolio: if some parts of our businesses are transformed by AI, MGM's in-person experience remains resilient.
We also think Decipher adds 200 to 300 basis points of growth to our growth rate in the back half of this year and into next year as adoption expands.
The next question will come from Youssef Squali with Truist.
Neil, can you talk about the level of visibility you have in performance marketing and licensing revenues within People in particular? Any chance of seeing additional licensing deals announced? And Barry, given the high free cash flow nature of the business and the cash you have on hand, is there any interest in starting a dividend to attract yield-seeking investors?
On licensing and AI deals, they're bucketing into two categories. One is all-you-can-eat foundational deals, like our Meta and OpenAI agreements, and then there are marketplace, pay-per-use deals like Microsoft. Since we started locking traffic, we've had productive discussions with many players—expected and unexpected—with the exception of Google. We're entering a phase where the most valuable content for AI models is newly produced, high-quality content; we produce a lot of that. I would expect we'll have more to report in the future. It's early, and we've chosen to seed the table with multiple partners, which we think is the right strategic approach. We'll keep you updated as things develop.
The strategic shift Neil mentioned—moving content development from evergreen to producing new content—positions People even better with AI models because they need fresh, high-quality material. That constant production of new information makes our assets more valuable for AI licensing and partnerships.
As far as a dividend is concerned, sure. I hope as we build up cash we should be a dividend-paying operation. I would expect that to happen in the future.
The next question will come from Jason Helfstein with Oppenheimer.
As a follow-up on capital allocation: given the healthy forecast for free cash flow this year, should we assume that cash will be deployed between buybacks, MGM purchases and potentially a dividend? Or is there a desire to build up the balance sheet for optionality?
The answer is yes. We'll continue to use our cash to shrink the capitalization of the company opportunistically. We'll continue to invest in MGM. I think we'll also institute an appropriate dividend at some point. Our investments will be focused inside People—there's so much opportunity in-house. We're not going to run a big M&A shop like historically; we'll be much more focused.
And the next question will come from Matt Condon with Citizens Bank.
I just want to ask on affiliate commerce growth. It seemed like you guys had a healthy quarter there. Can you talk about the drivers and the future potential to sustain growth?
The commerce business has been remarkably consistent and resilient for quarters and really for years. It's a testament to our team and their ability to drive growth and capture share. We're doing that by creating more high-quality commerce content—as Neil highlighted—and deepening partnerships with retailers. We have solid visibility there, the consumer is performing reasonably well, and we feel good about the category. We also have new products coming out soon that we're excited about.
The only thing I would add is I hope that in the coming days we straighten out any confusion in the numbers so that what was a very good first quarter isn't misinterpreted as something else, which seemed to happen overnight.
Which is the Care.com discontinued operation.
Other than that, I wish you all well. Thank you all, and we'll be in touch.
Thanks all.
Thank you, operator.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.