Hello, and welcome to the IAC Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Christopher Halpin, IAC's COO and CFO. Please go ahead.

Thank you. Good morning, everyone. Christopher Halpin here, and welcome to the IAC Second Quarter Earnings Call. Joining me today is Neil Vogel, CEO of the newly rebranded People Inc. IAC has published a presentation on the Investor Relations section of our website today entitled Q2 Earnings Presentation. On this call, Neil and I will provide some introductory remarks referencing that presentation 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. Now that we've covered that, let's turn to the presentation. On Page 3, IAC's businesses continue to seize momentum and make excellent progress against our goals in the second quarter of 2022. Dotdash Meredith rebranded as People Inc., a new name with a storied legacy, befitting a company where people,…

Thanks, guys. One of the things we just did, which was change our name to People Inc. from Dotdash Meredith. I think this is a very good time for us to reset and reflect on where we sit in the market, reflect on the media markets and give you guys some context as to our strategies and what we're doing. And I think the thing we're most excited about the People Inc. name is Dotdash Meredith was a name of convenience for us. We put together the names of 2 companies. We didn't want to offend anybody. And we wanted to live with it, and I'll be a bit more generous than our Chairman, Mr. Diller, who did not like the name at all. I was happy to live with it until we could really find something better, and we did. And it turns out, the name we wanted with emotion and aspiration and ambition and simplicity baked in was People Inc. It's the name of our hero brand. It's sort of been with us the whole time. Much like great businesses like Coca-Cola, we feel like the flagship brand should be the name of the business. And rather than having to say we're Dotdash Meredith and then the first thing you say is we're People, we can now just say that we are People. But I think the thing that got us most excited and it sort of kicks us off into the rest of the story is what People also means. And it means that we are content made by people for people. We are very aware and embracing of AI and things -- other things in the marketplace. But it's really important that experiences of our experts, our writers, our product testers are paramount to our brands,…

And just to add on a couple of themes there. The -- going to core sessions, that decline in the dark blue box from $1 billion to down to $600 million, that is partly AI and also, predating that, the numerous changes that have been made to the search page over that time, including Reddit being heavily prioritized as well as cluttering of the search page. So as Neil talked about, the -- while the portion of our traffic -- of our sessions that comes from Google Search has declined from 52% to 28%, through the proactive efforts he and the team have driven at People Inc., we've increased our non-Google Search sessions at a 29% CAGR and believe that we can still continue to fill that hole. The second point, as Neil said, those sessions generate 64% of our Digital revenue. That's a key theme. So when you think about the remaining Google Search exposure, it's that 28% of that 64% approximately that we're talking about. The off-platform views are a component of our non-sessions -- our 36% non-sessions-based revenue along with things like licensing, related performance marketing, et cetera. So we wanted to get across in this slide, relative to the broader AI question, how much Google Search has come down and also the diversification in our Digital revenues and the various growth vectors we have from here.

And we'll talk about that. It's a good transition to the next slide. Our 3 primary avenues of monetization: advertising revenue; performance marketing, a proxy for e-commerce; and licensing. All of our revenue sources are growing. Our brands are super strong. Our execution is good. We feel very good about the advertising business. We're very excited about our D/Cipher+ business that we just talked about a little bit that allows us to use our proprietary data to help People buy across the open web. We think there's a big CTV opportunity in there as well. Performance marketing, e-commerce, we work very closely with the biggest retailers online. I think in most cases, we are their largest referral partner, and that's been a really robust business. And even in our licensing business, which this quarter has -- we're 2/3 lapped the OpenAI deal that we signed last year, there's a lot of strength in places like Apple News and in Walmart. And it speaks to the strength of our brands. And Chris, do you want to do the next slide?

Yes, turning to Page 8. Thanks, Neil. On the next page, one topic we wanted to proactively cover today is our Digital margins of this past quarter. People Inc.'s Digital margins have been steadily scaling over the past few years with higher revenue. We reached just under 29% in FY '24. As a reminder, on a quarterly basis, EBITDA margins increased across the year, with the lowest margins in the first quarter and the highest margins in the fourth quarter due to revenue scale. And as we've grown Digital revenue, we have expected to see incremental Digital margin scale. You can see that demonstrated in Q1, where margins were up about 100 basis points year-over-year on 7% revenue growth. In Q2, however, Digital EBITDA was essentially flat year-over-year at $63 million, while revenues grew 9%, representing a 24% adjusted EBITDA margin. The increased cost, and this is featured at the bottom of Page 8, that reduced those margins derived heavily from the strategic investments Neil talked about across new products, technology and channels, everything we're doing to set the business up to grow. We expect and are confident in getting ROI of those investments, including in the third quarter that we're in this year. And so we expect adjusted EBITDA to grow year-over-year, you can see the guidance on the right, in Q3 on 7% to 9% revenue growth -- Digital revenue growth. And we expect margins in the 25% to 28% range and then get back to real margin scale in the fourth quarter. So with that, let's turn to Care.com on the next page, which continues to be the largest online marketplace for families and individuals looking for household caregivers across children, seniors, adults, pets, housekeeping. The company offers its services through 2 channels: consumer and enterprise. The…

[Operator Instructions] Today's first question comes from John Blackledge with TD Cowen.

So really helpful what you included in the earnings deck on sources of traffic and how they build into revenue. Can you just go into greater depth on how you see the trajectory of sessions, including Google Search and off-platform views and kind of how that translates into revenue and margin? And then second question, can you just walk through puts and takes in the 2Q People Inc. Digital revenue? And how do you think about Digital revenue growth and Digital margins in the third quarter?

I'll do sessions first, and I'll let -- maybe Chris will do the margin thing. I think you're going to see sessions -- O&O sessions. I think they're going to be -- the third quarter will be down a little bit. We have a very tough comp. But I think going forward, flat to slightly up is a fair expectation for us. Again, we're very actively investing and hustling hard to keep O&O sessions up, and I think our results prove that. I think off-platform, you're going to see continued growth, probably continued growth somewhere around the trajectory where we're growing now. Now the numbers get bigger, the percentages are going to get lower. But you're going to see real growth there. It's a real investment area for us. I'll let Chris will do the -- no, he'll take the margin piece of this.

Yes. And on margins, we view both on-platform and off-platform as generating attractive EBITDA margins. And we are capable to do that because of the technology and offerings that we have. When you -- I said before, last year, on a consolidated Digital basis, we generated 29% adjusted EBITDA margins. We view non-session revenues as slightly accretive to that margin. And then sessions, on a marginal -- on an incremental basis, session revenues are more accretive. One of the natural questions we'll get is, is all this off-platform session, non-session revenue being done at low margins? It is not. We feel good about the margins where we can do it and that we will continue to scale off that 29% adjusted EBITDA margin. And that includes D/Cipher+ as well as off-platform views on third party.

And we'll address the next question, which is the exposure to the off-platform views. We have really good diversity across all those sessions. It comes from a whole host of different places and different sources at different points in their life cycle. So we feel pretty good about when you look at the diversity of what's now driving core sessions and the diversity in off-platform sessions, I think the diversity is a real strength for us.

And then I think your second question, John, was about Q2 and Q3 revenue. In Q2 Digital, advertising grew 5%, led by 2% core session growth and some improvement in monetization. We knew it was going to be a choppy monetization quarter as we signaled on advertising last quarter between -- given all the disruptions around tariff and trade. For those interested, direct was solid. Direct premium sales were solid, led by health, travel and tech, offsetting, not surprisingly, CPG, food and bev and home. Programmatic pricing was flat for much of the quarter but began strengthening in June and has continued. Currently, we're running up about 10% on pricing year-over-year. Last quarter, performance marketing was very strong at 14% and licensing also solid at 20%. That's real strength in Apple News. Neil and team are doing a fantastic job there. Also some performance at Walmart and then some OpenAI. All in all, strength really from our diversification of -- the diversified Digital revenues that Neil talked about previously. For the third quarter, we do have some tougher comps on traffic with the Olympics last year and some entertainment. So we'd expect core sessions to be slightly down. Off-platform growth and improved monetization should drive advertising revenue growth despite that. Performance marketing continues to be excellent. Especially if you want a window into the consumer...

Consumer is very strong.

Prime Day was great for us in July. And licensing should continue to grow, led by Apple News, Walmart and other areas. All in all, we're guiding the 7% to 9% Digital revenue growth in Q3 and reaffirming 7% to 10% for the year. And then on margins, as we discussed previously, we're guiding to 25% to 28% Digital adjusted EBITDA margins in Q3. Operator, next question?

Yes, that comes from Eric Sheridan with Goldman Sachs.

Maybe following up on People first. I know in the prepared remarks, you made a couple of statements about the decisions, but I just want to go a little bit deeper in why this is the right brand and why the team and you landed on this to go forward and how you plan on sort of positioning the brand in the broader digital media ecosystem looking out over the next couple of years. And the second question would be, you led with the quote from Barry in terms of the press release that talked a little bit about deployment of capital and the current state. I wanted to better understand what you look at as the M&A landscape you're facing right now. So the alternative of returning capital to shareholders will be deploying it into external opportunities. And maybe a quick update about how you see that landscape right now.

I'll take the People thing first. So if you go to -- let's talk about our goal first. Our goal for the company for People Inc. is we believe we can have platform scale with all the benefits of premium branded publisher environments. And we needed a name to reflect that. And again, the Dotdash Meredith name was quite simply putting together Dotdash and putting together Meredith. I don't think either of those names had any particular residence in the marketplace. People does. Everybody knows what People is. Again, it was always the first thing you said when you're explaining what we did. But what we really liked about it is it's simple, it's clear. It has that second meaning about what we are. We're people making content for people. In it is energy and ambition and simplicity. And look, you can make 1 million jokes about it. Dotdash Meredith sounds like an oil company. People Inc. sounds like a media company. And if our ultimate aspiration and where we would like to end up, again, platform-level scale with premium branded performance and all the advantages of these like beautiful safe environments, both online and off-line, if you want to do that, you need a name that reflects that. And we wanted a name that when people are talking about the great media companies and the -- where we want to be like -- again, we're obviously not here yet, but you have to aspire to something. I'd like it to be Meta, Comcast, People, right, Google. And it just hangs way better. I think the reception since last week across our clients and our advertisers and, really importantly, our employees, everybody was just really happy and really energized. And it just -- as Mr. Diller said, it just -- it's easy, and it fits. The only regret I have is we probably should have done it a little bit sooner. I may have been the resistance there, but we're really happy with where it ended up.

Thanks, Eric. On M&A landscape, we are actively working, looking at things small and large and, as always, through 2 prongs: through our existing businesses, particularly People Inc. as well as new platforms. Look, we look for ways to be creative, think differently and find assets that we have a different view on or an advantage. We continue to actively pursue acquisition opportunities through People Inc., looking to build on its premier brands and technology. I'd say the more we continue to -- as everything Neil said and is doing, to make progress there, in many ways, the more opportunities we see that we have a particular advantage on. So that's a key area of effort. On a new platform basis, we've been evaluating both public and private opportunities, platform builds as well as carve-out opportunities. The investment focus, we talked about this last call, can be put in 2 buckets, quality-defensible businesses, particularly where the first one is particularly where AI disruption or disintermediation, platform risk, everything is reduced. We've talked previously about experiential businesses that cannot be disintermediated, digital interactive businesses like gaming, others where the consumer is in the moment and you can -- you don't have the overhang of AI and other products. And then we're also looking at areas where you can find AI applications to sectors that we know well. And with the growth of agentic AI, you can see AI strategies in a host of sectors that we have spent time in previously at IAC or others of us in our careers and, I won't get too specific, but are trying to get to reasonable values on those opportunities. We've not wrestled the right one into the boat yet, but continue to work hard and focus. And then as I said before, hopefully, the macro environment will allow for more price discovery and agreement between buyers and sellers. Operator, next question?

That comes from Cory Carpenter with JPMorgan.

This is Danny Pfeiffer on for Cory. For the first question, can you comment on the current penetration of Google AI Overviews? And then for the second, is there any further color you could provide on the pause in share repurchases in 2Q after the disclosed amount in April?

Yes, AI Overviews, I think we said last quarter, we were on about 35% of our searches as expected. That has rapidly expanded. It's probably on more than half of the searches where our content appears. Some properties less, some properties more, but probably around 50%, 55%. Again, we run through the math that definitely depresses CTR, but it's the reason why we're doing everything we're doing, and it's the reason why we're investing behind our brands. It's the reason why we are doing things like the People app and MyRecipes and some more things you're going to see from us to connect directly to our audiences and directly to our advertisers. And in spite of this, we're holding sessions steady. We're growing them a little bit. So -- but yes, there's -- look, we don't -- again, we said -- we run this business as if Google from search is going to go to 0. Now it's obviously not going to go to 0. But that is the discipline with which we are approaching our investment and how we see the future media landscape and where audiences are going to come from. And again, part of being in media for as long as we've been in it, it is a constant state of change, and this is just another state of change. And we have been dealing with Google and Google changes and Google disruptions for a long time. And this is nothing new. Perhaps the remedy is a bit different, but it feels -- it all feels very familiar to us.

One comment, and I'll go to buyback for a second, but one comment I'd add, we've seen research that estimates the step-down in click- through. There was a Pew report of others. Our observation relative to the decline in click down, those reports very much overstate the decline for a premium publisher like People Inc. because there's a whole swath of searches that have been 0 click for years that never led to referral traffic from Google and are not -- haven't been sources of traffic for People Inc. and our properties for years. So I think some of those -- you really need to do those studies right, normalize for what was searches, which is why when we talk about searches that are germane for People Inc., what are searches that produced Google SEO traffic historically, and then what's the change in that? There is a step-down, but not nearly as big as we're seeing.

It's almost like you have to look at it -- it's like the marginal step-down.

That's the key element there. And again, Google Search is 28% of our traffic. So it's 55% of 28% and then the step-down there. So the -- manageable. In terms of our share repurchases, we tried to signal some of this last quarter. We announced that we completed $200 million in buybacks. We said we were going to focus on M&A opportunities while continuing to look at our stock price. We definitely see value in our stock and know we have the opportunity to buy it and take advantage of that embedded discount. We are actively exploring opportunities to deploy capital and create compelling returns for shareholders that way. I know our time horizon may be longer than some shareholders will want, but we believe we've got opportunity to do both at the same time, and we will continue to analyze both. And we -- definitely, as we are together with our Chairman, Barry Diller, and our leadership team, we are contemplating both on an active basis. Operator, next question?

And that comes from Stephen Ju with UBS.

Okay. Great. I think your Slide 9, talking about Care was pretty striking because I think your trailing 12-month revenue is $360 million. And that's material. That's not even 1% of the addressable market that you're calling out of $375 billion. So the optimist in me wants to think that given the white space ahead of you, you should be growing much faster. So what factors are under your control? And what needs to happen at the industry level? What needs to happen from a consumer perspective? And what needs to happen from an enterprise perspective?

Thank you, Stephen. So you hit on it. It is obviously a massive market that Care.com participates in, has in front of us, addressable market. And when you think about the needs of families for Care, both in-home and out-of-home across children, seniors, adult care and pets, it's a national challenge. It is something that the households themselves struggle with. And there's a theme of what we call the sandwich generation that sits between an ever burgeoning number of seniors who require care as well as their own children. And that is a 2-pronged effort and then certainly, in certain cases, their pets as well. That is a demand that's an ever-increasing drain on the financial resources as well as the mental energies of families to find and maintain care. And it is a tailwind. For Care.com to fully take advantage of that TAM, they need to continue to grow demand of care seekers and supply of caregivers on each side of the marketplace and then get better and better at matching those 2 parties and making transactions easier to execute in the platforms. What does that mean in practice? First is drive consumers from using off-line methods to find Care and turn to our platform first. To do that, that is very much front and center in what we're doing of improving the product experience to make it easier. There's a big element of Care of repeat visits, particularly for those who fulfilled jobs the first time. The easier you make it, the smoother the experience, the higher the quality of the match, the more likely people are to come back and repeat, either for another child caregiver if there's turnover there or to solve their senior or pet needs after a good experience on child or vice versa.…

That comes from Jason Helfstein with Oppenheimer.

Two quick ones. Neil, how are you thinking about long-term revenue growth for People? And I guess, how do you get there from the 9% we're doing today? Just if you could kind of maybe bridge it to the aspirational goal. And then second, any thoughts on expanding licensing revenue beyond OpenAI as it relates to other LLM companies, who, I'm sure, are using your content?

Yes. I'll do the long-term revenue. I think we've said and we believe a long-term goal for us is 10% revenue growth. And I think it's a combination of what we can do on our O&O properties. We've talked about where monetization continues to get better as well as all the growth we have off-platform and in events and all the other things we're doing. So 10% remains our North Star goal, which we feel pretty comfortable with in the long term. In terms of licensing revenue, it is something we are obviously very interested in. I think there's 2 things going on in the market to make more licensing deals happen. Sort of 1 of these 2 things is going to have to happen, and they're not necessarily mutually exclusive. One, you're going to have to see a change in tenor or change in approach from the LLM creators. And two, we're going to have to manufacture some more leverage for ourselves. And you've seen that in what we've done with Cloudflare where we're now blocking almost all AI crawlers other than OpenAI, where we have a deal, and Google where we can't block them because they use one crawler for search and AI, which is a different discussion. But what we've seen in the last few weeks, and again, nothing is imminent, but we have seen some of the larger players approach us and come back to sort of reignite some discussions around how these things would work. There's lots of different ideas and lots of different economic models. We are very, very active here. You've obviously heard Mr. Diller and me and Chris and pretty much all of us talk consistently about what we believe, and we believe that if people are going to train and use and display our content, we need to be properly compensated for that. And hopefully, we're heading in that direction, but we will see.

Just can you clarify the 10% for People? Is that total or Digital? I was asking Digital, but if you want to give both.

10% for Digital, and we've said Print will continue to secularly decline. The good news is as a weighted average percent of our total revenue base, it continues to decline. We've driven low single-digit total revenue growth the last few quarters. I think that should continue as we drive 10% plus Digital.

Well, we've always said that Print will offset our Corporate expenses, and we very much manage that business for cash flow and for the branding marketing value of having Print in the world, which is fairly material.

Thank you, Jason. Operator, next question?

Yes, that comes from James Heaney with Jefferies.

Search revenue came in a little bit lighter than expected. Can you just talk about when we should see stability in that business? How much of that is an intentional pullback versus more market-related weakness?

Yes. On Search, we manage that business for margin. And there are a number of different revenue streams that we are operating in at any given time. And within the broader Google Search ecosystem as well as search on other platforms, there are different trends, different competitive dynamics. You can see in our Q2 Print, despite coming in below our revenue guidance, we came in above our adjusted EBITDA guidance, and we raised the midpoint of our full year adjusted EBITDA. That's a reflection of identifying some higher-margin channels that we were able to pursue in the quarter. And again, we're coming back to gross -- essentially gross profit on our -- on the search activities and advertiser we're driving and then running that against our OpEx. I'd say it's been a multiyear decline in Search that's been pronounced on the top line, and that has flown through to EBITDA over the last few years. We are seeing stability. It's been second derivative positive over the last few quarters. The market is hopefully finding some level. But again, the Google Search ecosystem is always volatile. We'll feel good about it at one point, and then it will switch again. That's the nature of what we're doing with. We do feel good about our ability to maintain margin and profitability there and on our guidance for adjusted EBITDA. Operator, next question?

That comes from Dan Kurnos with The Benchmark Company.

Yes. Great. Neil, nice to chat again. Maybe just going back to Jason's question. If we just think about D/Cipher+, maybe a good time to kind of refresh how you're thinking about the TAM since you alluded to new potential markets like CTV and kind of how it fits in this decreasing signal loss, but increasingly self-selecting environment, especially if agentic browsing picks up. And then Chris, kind of your point on AI industry reports. I mean a lot of the recent data actually suggest that traffic click-through quality has been improving for certain brands. So maybe just more of a question for you guys on where you sit on the data and analytics side, if you're kind of in a good position to track this evolution even as you guys prepare in case things get worse from a Google perspective.

So I'll do D+, and then Chris can pick up after that. So we're really pleased with D/Cipher+. Jim Lawson, who is an experienced executive we brought in to run it, he's doing an excellent job scaling. I think we have said this before, and we believe it's going to be -- it should be a material contributor into '26 numbers. And right now, quarter-over-quarter, the numbers, albeit small, they look really good. And what we're seeing is, again, for those less versed in the story, what D/Cipher+ does, it allows us to use our first-party, intent- based contextual data, understanding the relationship between our content, use that to target ads on other sites off-platform. So we can go and understand that inventory, buy it and essentially resell it to our pool of advertisers. This obviously greatly expands our total TAM. We did some work since our last call together because a bunch of you guys have been asking for this. We think it's 4 to 5x our -- the existing market size that we have on-platform, and that doesn't actually include CTV. CTV is very interesting because we found a way to combine our signal with the identifiers needed on a household level to target CTV. We've actually run a few of these deals. They seem to be working really well. It's too early to make a call, but we feel very good about the CTV opportunity. You said it, CTV targeting, for many reasons we don't need to get into today, is fraught. It doesn't really work that well. It's a little bit messy. This is a very clean way for us to use our data to target CTV. And if we can add it, that just -- that TAM number is going to get bigger. I think this is a really important strategy for us, D/Cipher+, because it's very much in line with what we do. We are extremely good at getting people to our owned assets, be them websites, be events, be apps, be MyRecipes things, be off-platform places. And we've always had this data product that we use to target our own ads. What this is, is a great unlock to take what we think is the best first- party data potentially in media to this real intent-driven contextual data and use it to target across the open web. And if this performs the way it performs, we're very excited about the future.

Thank you. And on the -- Dan, when I talk about click-through, there's -- we have been running our searches. This is the data we've been reporting about frequency. There's -- it's less clean on traffic that comes via attribution within an AI Overview versus a consumer just skipping the AI Overview and going down to the SEO links. What we'd say is it is, in many ways, just a continuation of the cluttering of the search page that's been going on for a number of years, with greater SEM sort of thrusting Reddit directly into the top of the search results in there, YouTube, e-commerce. We agree with you that the step-down in click-through is -- I said it before, not -- nowhere as dramatic as these reports are citing. It is something, but it feels like more of a page knock rather than -- or page fill-up rather than a significant change in the search behavior. I would say, and I'll turn it back to Neil in a sec, but I would say there is an element of the underlying content that the consumer is looking for. So the more commoditized that content is, à la historical SEO, the better AI Overview will answer and be the endpoint of that search versus what we tend to do in the core of our -- or the foundation of our core brands is much more in-depth premium content where you want to go to the actual reference page, source and learn more. And so again, as we've said before, the decline in our click-through may just be fundamentally less than other publishers that have been heavily [ advertised ].

We've been out of the commodity content business essentially for some time. This is not a new phenomenon. Remember, Google was doing things like answer boxes that was knocking some of this stuff out years and years ago. And again, I just go back to the math that Chris shared earlier, right? It's Google Search and core is 28% of traffic. Overviews, to keep the math easy, call it on 50%. It's a little bit more than 50%, but 50%. And then we lose, depending on the search, somewhere from very little to 20%, 25%...

So the baseline.

Yes, [ if we check with ] the baseline, it's lower than that. We're -- it's very well boxed and the sort of content we're making is moving away from what is being disintermediated is the point.

Operator, next question?

That comes from Matt Condon with Citizens.

My first one is just on the core D/Cipher product. Do you still believe that there's an opportunity to improve yields in your O&O properties just through algorithmic improvements or whatnot? And then my second one, just on Care.com. Understood the enterprise segment is lapping a more difficult comp there, but still declined 7% quarter-over-quarter. Can you just talk about trends you're seeing on the enterprise side of that business?

Yes. The answer to that is yes. The yield opportunity is still there. The smarter we get about our audiences, the smarter we get about targeting, the better D/Cipher gets on platform, the more we're going to be able to do. Also, as the value -- as we increase the value of our brands and the value of our content, I think we're seeing the ability to increase value on O&O was the first question. And Chris, there was the -- I'll let Chris handle the second question here.

Okay. Yes. I mean the -- on enterprise, I think the 7% you're referencing is a sequential decline quarter-over-quarter. There are elements of seasonality when you think about flu season or sickness in the winter produces more usage of backup days, and then it similarly goes up in the -- it tends to go up in the summer a lot when kids are out of school, those types of things. And then again, in many ways, on a sequential basis, Q2 is our lightest revenue quarter. Any given quarter, there are different elements. You basically have a subscription and a utilization element in that business. The utilization, you'll have peaks and valleys depending on where different employers are and the pace at which their bank of backup days get used. So long term, the sectoral tailwind of backup care and access to platforms like Care, we view as increasingly a table stakes employee benefit, but there will be some ups and downs quarter-to-quarter. Operator, one last question.

And that comes from Ygal Arounian with Citi.

Just one follow-up on Care and one on digital gaming. Neil, in some of the press articles, when you rebranded People, you talked about we've got 40 brands, and I don't think all of them are going to last. Can you just expand on that a little bit? And I understood that the core sessions are driving most of the growth. But does that create any sort of headwind to top line if we think about that transition? And the investment here you're talking about in this quarter as you rebrand and next quarter kind of going back to normal, is there a chance that you would need more investment levels as we transition around GenAI search? And then with MGM and the digital gaming, you talked about that performing well and that being a core part of the thesis with MGM. Are you guys actively involved in that as 25% shareholders and kind of maybe you could expand on that strategy a little bit?

I'll do the People question first. No, for the purpose of these numbers, the brands I was talking to in that are sort of the brands that are part of the core. So that's -- if anything, it's fully baked and fairly -- it's going to be in a steady state where it is now. It's more of a way to explain to people that are -- which you guys have known for a long time. Our biggest and best brands are carrying the water around here, and they're getting all the investment. The second question is GenAI or whatever is going to require more investment. I think we are at a point now where I think we made some really smart investments. I think they're going to pay back in -- measured in quarters, not years. And as Chris said, I think we're going to follow the margin profile Chris outlined earlier, if that's the question. I think -- we've been doing this a long time, and we're very good at investing behind success, not ahead of success. We've never been and invest ahead of success. Personally, we're going to see that these things are working, and we're going to invest. So I feel very comfortable with the margins Chris outlined, and I don't think there's going to be any outsized investment going forward that would affect that.

Yes. And just a couple of things I'd add on that. Core sessions now generate 90% of total. So we're sort of in that path to noncore becoming less and less relevant. The -- in that vein. And the only thing I'd say is relative to the investments that we made in Q2, the spend associated with those are baked into the guidance we've done in Q3 as well as our full year guidance. So we have ramped up that investment. That's a little bit why the top end of the range came down. Also the other, as I said before, there's $3 million plus of incremental health care costs due to high-cost claims that have flowed through and we are booking in the second half. We will look to optimize that going forward. On MGM, we are -- we own 24%. We are big supporters of the management team, Bill Hornbuckle, Jonathan Halkyard and others and also of the BetMGM management team and the joint venture there of Adam and Gary and others. We have humbly sought to provide our perspectives through Barry Diller and our former CEO, Joey Levin, who's on the Board, on ways to drive revenue, optimize performance, and along with the Chairman, Paul Salem and other Board members make BetMGM as successful as possible. We had a former joint employee of IAC and MGM, Gary Fritz, who's gone into MGM full-time and leads their digital and strategy efforts. And we feel great about his contributions and are thrilled he's working so closely with Bill. So we are active Board members, but really support the management team in their strategy. Thank you. Any other questions, operator? I think that's it.

Yes, I would like to return the floor at this time to Chris Halpin for any closing comments.

Thank you. Thank you to all for being on and the questions, and have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.