Angi Inc. Q4 FY2020 Earnings Call

Good morning, everyone. Glenn Schiffman here, and welcome to the IAC and ANGI Homeservices Fourth Quarter Earnings Call. Joining me today is Joey Levin, CEO of IAC and Chairman of ANGI Homeservices; also Brandon Ridenour, CEO of ANGI Homeservices; and Anjali Sud, CEO of Vimeo will be joining the call. Welcome, Anjali. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relations section of IAC’s website. I will shortly turn the call over to Joey to make a few brief introductory remarks, and then we’ll open it up to Q&A. Before we get to that, I'd like to remind you that during this call, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate, or similar such statements. These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in IAC and ANGI Homeservices' fourth quarter press releases and respective reports filed with the SEC. We'll also discuss certain non-GAAP measures, which include adjusted EBITDA, which we’ll refer to today as EBITDA for simplicity during this call. I'll also refer you to our press releases, the IAC shareholder letter, and again, to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material and non-GAAP measures. Let's jump right into it. Joey?

Thanks, Glenn. I just want to correct one mistake Glenn made there in the opening comments, which is in reference to a call. He's stuck a little bit in the past right now. I want to welcome everybody here to our video. Those of you who'll be reading the transcript, you're missing out. We've got the beautiful smiling faces of all of our analysts Anjali, Glenn, Brandon coming from Denver. And this is not just a new way of doing things. It's also a great display of what is really central right now, or the exciting story at IAC right now, which is Vimeo. And the fun part of this is not just that we've got everybody on video and we've got logos here and our names and chirons and things like that, which is pretty cool using Vimeo's Livestream technology, but the other piece is this is just the beginning of this video's journey with Vimeo. So after this, it will be edited, it will be shared, it will be archived, it will be part of our corporate library and we'll have access to that forever on Vimeo. And it's a pretty cool display of what can be done. And obviously we're seeing that happen quite a bit all over the world now in really fun and interesting and exciting ways. And I'm sure we'll talk about that today. And the other thing I wanted to say is we had a great year in 2020, and we feel very good about how we did on a lot of different levels, a lot of different ways we measure ourselves. Of course, one big one is revenue. And growing through 2020 is quite an accomplishment. And in any given year, we entered the year and we have big ambitions over the course of the year to accelerate. And where we finished the year growing 27% year-on-year in aggregate at IAC and the individual stories within IAC are really what matter there. But that growth in aggregate is something we're really excited about. And the way the team operated this year through all the things that were going on was really, really impressive. So that's the story I want to get. I know we've got a lot of people on here and we've got a lot of questions. So let's get to questions quickly. And Mark Schneider, why don’t you lead us off there?

Great. Thanks, Joey. So for our first question, we'll go to Eric Sheridan from UBS.

Thanks, everyone and happy new year to the whole team. Hope everyone is safe and well. Maybe two questions if I can. Joey for you, maybe you can help explain why a spin-off of Vimeo was the right choice in entirety for both Vimeo and IAC? And maybe lay out some of your views about how you plan on repositioning IAC ex-Vimeo on the equity side for the long term on the other side of the spin? And maybe, Anjali, if I could sneak maybe one in for you. Obviously, a super interesting year for Vimeo on the demand side. How should we be thinking about you aligning investments in product innovation against what you learned in 2020 against what you're trying to do on, sort of, a five-year view and grow Vimeo as a platform? Thanks.

On the subject of the IPO and whether it will be a full or partial spin, we previously raised capital in the private markets for Vimeo, which we believe is sufficient for the company’s needs for the time being. This approach was efficient and allowed our team to maintain focus on business growth rather than getting sidetracked by fundraising. Our goal is to ensure Vimeo operates independently with its own identity, and a complete spin-off achieves that. We’re often asked if the timing for this is driven by market value, but our primary focus is to ensure the business can operate clearly and effectively on its own, which we believe Vimeo is ready for. When considering what’s next for IAC after a spin, we recognize that there are many questions regarding future directions. We've had great success with individual businesses, including ANGI, which holds a strong market position with exciting product developments on the horizon. Dotdash is also experiencing significant growth and establishing itself within the publishing sector. Care is a relatively new venture with the potential to capture a large market, and we see room for expansion in that area. Additionally, we have a considerable cash reserve of nearly $3 billion that we plan to utilize thoughtfully rather than hastily. Our main priority with any investment will be our existing businesses since we understand those well and can leverage significant advantages in acquisitions. We are open to exploring new categories, especially with a preference for maintaining control over these investments. While we are considering a couple of successful minority positions, our main focus will remain on acquiring control positions. We are enthusiastic about our diverse portfolio, which includes early-stage companies like Nursefly and Bluecrew, alongside more established businesses such as ANGI and Dotdash. Our current holdings reflect our belief in their potential for future growth.

Hi, Eric. So to your question about incremental investment and product innovation of Vimeo over the next few years. And the thing that we've learned since the pandemic is how much bigger the market opportunity is than what we thought. And we really believe our total addressable market (TAM) is every professional, every team, every organization in the world who now needs to use video to reach their customers and employees. And we've had so many organizations and businesses knocking on our door in recent months asking to use Vimeo in ways that we don't yet have the product for. So it's an early market. I think product innovation is where we will be focusing our long-term investments. And some of the things that we're trying to do is, we want to be the single corporate video solution for any organization of any size to share content internally and externally. We have a great position now in certain parts of that. We can power town halls and training sessions, but there's so many other ways that video is proliferating throughout organizations and everything from sharing product demos and creative walkthroughs to rethinking how webinars work to making every interaction with video more engaging. And so we see lots of opportunity and you'll see both our near-term and our long-term investments really designed to solve these needs. We'll also be investing in areas like sales and marketing, on the sales side in the near term, expanding our sales force both domestically and outside the U.S.. We see a big opportunity to increase our marketing spend particularly on mobile, where we have an opportunity. We've been historically very web-focused. And you'll also see us do things like diversify our acquisition channels by investing in areas like partnerships and in our free product. So it's an early market. I think we have a great head start with a leading all-in-one software solution, but we want to turn that head start into a definitive lead and we're excited with the capital and the focus to do that.

Great. Our next question we'll go to Cory Carpenter at JPMorgan.

Great. Thanks Mark. I had two questions on ANGI. First for Brandon, could you give us an update on where you are just in terms of addressing your supply constraint challenges and how impactful you think some of your product initiatives could be this year? And then as a follow-up for Glenn, it would be good to hear your comments on some of the puts and takes to the January metrics that we got in the shareholder letter, and then also an update on how you're thinking about the trajectory of the business through the year. Thanks.

Yes, thank you. The business performed in line with our expectations in the fourth quarter and into January. Many of the challenges we've faced since the pandemic are still ongoing. However, our traditional business has shown resilience despite these external factors. We’ve identified two key trends. First, small business advertising spending has decreased, with small businesses investing less to attract new customers. Second, we needed to expand our sales force, and we ended the year with the largest sales force in our history, which has increased by 30% from its lowest point last year. This growth was achieved by outsourcing our workforce and effectively onboarding and training new sales representatives. As we start this year, our large sales team is positioned to increase our capacity, and we expect the benefits from these additional sales reps to materialize throughout the year. The question about when and how our existing customers’ spending will return to previous levels is complex. While it makes sense that it would normalize, we are not relying on that assumption. We believe we can effectively revitalize our traditional business regardless of the timing of that normalization. If it does occur, it will certainly be beneficial. With our expanded sales force and our internal initiatives, we are confident that we can accelerate our traditional business beyond its current status. Additionally, we are pleased with the performance of our fixed-price offerings in Q4. The modest growth in our overall business can largely be attributed to the success of fixed price, which exceeded our expectations and performed strongly relative to the usual seasonal trends of our traditional business. We anticipate continued strong growth in this area throughout the year, providing significant capacity to serve more customers. On the product side, we’re actively addressing supply challenges and working toward our primary goal of building a large and loyal direct-to-consumer audience of homeowners, which we believe is crucial for establishing a strong long-term business. Throughout last year, we introduced numerous innovations, and as we look ahead, we are still in the early stages of our fixed-price initiative. It has reached $160 million, which surpasses our initial expectations, and we currently have over 200 projects. There is much more innovation to come, particularly in enhancing the product experience, improving our pricing accuracy in local markets, and ultimately leveraging our scale to enhance the quality of our ecosystem. As we grow, the product becomes more robust due to increased coverage, more providers, and deeper insights about those providers, all of which leads to better fulfillment rates and greater customer satisfaction, resulting in higher repeat rates. We shared some metrics in our letter that demonstrate the positive behavioral changes among consumers engaging with our new products. The early outcomes are very promising, and our focus this year will be on attracting more customers to these offerings.

Thanks, Brandon. Just to translate that into numbers and the puts and takes for the year. Revenue in January was as expected. You'll recall last year we changed from net revenue accounting to gross revenue accounting for pre-priced or fixed price business and if you look back on the fourth quarter, that provided a lift of about $22 million to our revenue. So, the fourth quarter grew revenue about 6%, again, similar to January and as expected. We still expect as we talked about on the last earnings call, a 9% to 10% revenue growth for the ensuing quarters until probably the third, more likely, the fourth quarter as all the initiatives that Brandon spoke about begin to kick in. That's on the sales. Obviously, that's the scaling of fixed price. And that's on the other product innovations that we've been talking about for a while. In terms of the monthly metrics, I'll ask you as we report the monthly metrics this year to have one eye on the monthly metrics this year and one eye on the monthly metrics last year. Because obviously, last year there was a lot of volatility in respect of how service providers behaved due to COVID, how consumers behaved due to COVID. So, February was our strongest month of the year last year, we grew 21% and March obviously was flat and April was even down. So, you will see some volatility in the monthly metrics. But again, we are very comfortable with the 9% to 10% quarterly growth, again, until the third and fourth quarter when we expect to hit our 20% targets and then given all the work that Brandon and his team are doing accelerate into 2022.

Our next question if we can go to Brent Thill from Jefferies.

Morning. For Anjali, if you could talk through the confidence in the Vimeo trends, they're not temporary and how you're anticipating a post-pandemic recovery?

Sure. Look, we're obviously watching the demand trends carefully and they are holding. Our sales pipeline is strong. January was the strongest we've seen, even stronger than the peak of the pandemic in March. Our days to close on our sales cycle have stayed short. And on the self-serve side, our highest tiers are growing over 200% year-on-year in bookings. So, certainly from a demand perspective, no signs of a slowdown. But the bigger thing that we see is the use cases and our customers using video in ways that we would expect to ensure and in ways that are helping them drive better outcomes for their business. And there we see it very clearly. You've got companies like Starbucks and Lowe's training their store associates using video or Nike training their retail partners like Foot Locker in Europe. And then you see those organizations be able to reach their associates in ways that are more engaging more scalable at a fraction of the cost, you don't see them going away from that. Same with fitness studios, performing arts venues, cultural institutions, they're finding that they can access larger audiences than they ever could before in some cases 10x-ing the number of audience that they have. And so we just don't see a rationale for why they would go back from that. And you see small businesses, who are able to get higher clicks, more customers from using video than a major text. And by the way, that's in an environment, where a lot of small businesses are shut down. And many more hopefully after the pandemic will come back. So, just it gives us a lot of confidence that video is going to settle. We don't know exactly where from a demand perspective, but certainly at an elevated level than what we saw pre-COVID. What that means for our growth trajectory? Also, hard to predict. Before the pandemic, we have said we expect to grow between 20% and 30% in terms of revenue. Obviously, if you look at some monthly metrics that no longer applies as a range. How much higher than that is what is hard to predict. But again, certainly expect to be growing faster than we anticipated before the pandemic started.

The revenue recognition dynamics of this business as you know, the SaaS-based subscription business that deceleration from where we are today, north of 50% to the north of 30%. That will be staged over the next few quarters. It will probably bottom out in the fourth quarter. Maybe, it will come close to the 30% in the fourth quarter of this year. And then, we do expect, given all the product work we're doing, given all the investments we're doing across and we do expect to again accelerate from there into 2022.

Thank you.

Our next question we will go to Ross Sandler from Barclays.

Hey, guys. Just one for Glenn and then one for Anjali. So Glenn, yeah, nothing more exciting for IAC enthusiast than reading 487-page spin documents so thanks for dropping that during earnings season by the way, but a question on the spin mechanics. So it looks like IAC will get 88% and Vimeo will be spun out. There's a $6 billion post-money valuation right now, or about 161 million shares so about 1.6 million or thereabouts Vimeo shares for each IAC share. Is that correct in terms of the ratio? And then what's the mechanics from here in terms of the time line? And then the second question for Anjali. I thought one of the more interesting data points was that a 25% of Vimeo revenue comes from subs that you up-sell to a higher tier a higher price tier. So can you talk about how you're working to convert more of that 200 million free users into the 1.5 million pay. And then within that 1.5 million, how you move them up that would be great.

Let me know the first one. Ross, that's impressive. But there's another 150 pages. I believe, it was a 620 or 630 page document. But in terms of timing of process from here we refiled the S-4 earlier this week. We – as we respond to SEC comments, we'll probably refile it again in the next week or two, when we'll drop into year-end financials for Vimeo and IAC. And then hopefully we'll navigate through the SEC process throughout the month of February. That should tee us up for mailing to shareholders in March, and then have a shareholder vote potentially the end of March, early April. And then hope to affect the spin sometime in April, worst case early May. So, early second quarter is the timing. You – as I said there's a great read of the document. We do own after the two capital raises, we do own 88% of Vimeo. We have about 146 million shares of Vimeo, 86 million shares of IAC. So the spin ratio will be 1.6 based on these current estimates obviously that could evolve. So every shareholder of IAC will get 1.6 shares of Vimeo, again based on the current numbers and the current calculations and then, based on, the $6 billion post-money valuation that Vimeo last raised capital at, that obviously is a $35 stock price for, Vimeo.

Ross, on your question about up-selling our free base, our free users into paid customers we see a huge opportunity to do that. And a lot of our product investment is designed to unlock that. So, a couple of things that we see. Today, I think about 60% of our paying subscribers start as free first. And then about 60% of our enterprise customers come from that free or self-serve base. So already you kind of have a freemium model. But, if you actually look at, what you can do for free on Vimeo using video, we see an opportunity to get every one of those free users, to be creating content. So one of the things we've done is, we've launched our Vimeo Create app and are offering a version of that for free to our user base. We recently launched a screen recorder tool, called Vimeo Record, also free for our user base. And this is a way in which we're looking to really drive sort of bottoms-up product-led growth by having, employees, small businesses, just creating content which is usually the biggest barrier to getting people to use video. And then from there, expanding to branding and customization then up-selling to a higher tier, or security if you want to put your content in a secure portal, or expanding team size. That's a big opportunity. You'll see us do a lot to really be a sort of per-seat or team-driven model in the future. So we've got quite a few levers to kind of move that base. And if you just look at the base itself, nearly 70% of Fortune 500 companies have an account on Vimeo. And we have less than 4,000 enterprise customers today, so just huge opportunity, and we think the biggest unlock will be product, and having the right mechanisms to both get people creating content for free and then the reasons to upgrade.

Our next question will be from John Blackledge at Cowen.

Great. Thanks. So two questions, one on Vimeo subs. Just curious, what the mix of new subs was in 2020 business versus creative pros? And any color on the overall sub mix, ending 2020, again business versus creative pros? And then within business, the mix of enterprise versus SMBs, which I think Anjali just referenced, enterprise subs and how that could trend in 2021. And then on Care.com, if you could just discuss the engagement metrics that you referenced in the letter and then perhaps frame the drivers of the business in the next three years? Thank you.

On the Vimeo sub question, the majority of our new subscribers in 2020 are businesses, with a mix of smaller businesses and larger organizations. Over the years, we've noticed a shift from professionals to businesses, which has continued and even accelerated since the pandemic. We anticipate this trend will persist. In terms of enterprise versus small to medium-sized businesses, our subscriber volume is heavily weighted towards small businesses. Currently, we have about 4,000 enterprise customers, as indicated by our sales team's interactions. However, many of our actual users include large organizations that use our free and self-serve options. Our strategy focuses on expanding within organizations where we already have one user or buyer using our tools. We aim to enable other departments and teams to discover and utilize our products seamlessly. Our approach includes acquiring new customers and expanding our presence in existing organizations to increase Vimeo's share of their video usage.

Hey, John, on Care, there's – probably the best example is it also gets the big change we made in product. But what we've started to do with caregivers is they're all certified. And what that means is it's actually harder to become a caregiver. There's more friction in the process of becoming a caregiver. And that as you'd imagine leads to actually a decrease in caregivers on the platform, which should say initially bad news. Good news is the caregivers who are coming in are much more engaged and the interactions that we're now seeing between the caregivers and the families is much more fruitful. So we can deliver fewer applicants to a given job and get more success in that job being fulfilled. It's happening actually to quite a meaningful degree, meaning there was a period where you would get dozens or even hundreds of listings for a job when you had listed it. And now that's down to a handful, which is way easier for the caregiver meaning their hit rate is higher; way easier for the family meaning they have to sort through less and speak to fewer people and get success on that and be confident that the caregiver they're connected with was background checked and certified in the ways that they go through our process. And so sometimes actually we spend a lot of our time in our products trying to reduce friction is an area, where we actually added friction to drive engagement and that seems to be working well so far. Overall the metrics I – just I'm sure a lot of you would be in the same camp. Think about my family. We haven't had a caregiver in the house in a year. And in a normal year that probably would have been 30 times or 15 times or something like that. So we see less – we actually see again less engagement from families right now given that the need for childcare in going out and things like that is happening less. But in retention we're holding. And the reason we're holding retention is I think people see the value in the product. They are optimistic that they can start using their product more. And – but right now there's just less need for it. But it's – I think very encouraging to see retention holding. When we think about the future of Care in the next few years, it's continuing to drive that engagement and driving that engagement driving frequency, which means being relevant more often. So picking up on those themes, making it very easy so we've talked about this concept in other products, make it very easy to do something like instant booking. So you're going out, you will want somebody – you need somebody quickly and knowing that the caregiver has met certain parameters that you set forth, where you can instant book. Or you can see the schedule of both the family and the caregiver; you can match those and those schedules are accurate and up-to-date and reliable. When we have products like that, I think it drives subscription because you can add real value in the subscription. I think it drives engagement for both sides of the marketplace and things like that are going to be important. The other thing that's really big, I think over the next few years and you'll see us start to talk about increasingly which has been a real pleasant surprise for us is, we talked about a little bit in the letter is care work and the enterprise product. I think that is just absolutely relevant and a necessity for most enterprises today and starting to think about how they can help with childcare or senior care for their employees. And we're seeing real growth in that business, exciting growth in that business. And I think, we're going to continue to innovate there in ways that will open up what I suspect would be a much bigger market than exists today.

Thank you.

For our next question, we'll go to Brian Fitzgerald at Wells Fargo.

Thanks, guys. Maybe this for Glenn and Brandon. On ANGI fixed price or preprice is roughly 10% of the business now. Where do you think that gets to longer term? And then in terms of the long-term margin structure, is that predicated on fixed price hitting certain thresholds? Then a quick housekeeping one. Can you remind us right now, that the 200 products that are fixed price, what portion of the TAM do you assume that that addresses? Thanks.

Yes, great question. We finished the year at around 11%. Our internal target and ambition is to grow this to about half the size of the business. We believe that our traditional business and the pre-priced business work well together. As the pre-priced business grows, it not only better serves our customers but also enhances our buying power. This allows us to invest more in increasing our market presence, benefiting both product lines. Additionally, as the pre-priced ecosystem expands, the quality of service improves, which leads to better reliability and more favorable transactional economics, as we fulfill orders at a higher rate with greater quality. Our goal is to reach that half size, and we estimate a timeframe of five to seven years to achieve this, considering the growth of our traditional business. Regarding the 200 projects, that represents roughly one-third of the total addressable market for home services. Within those projects, there is around $50 billion of total addressable market, which is about 10% of the overall market. We feel confident about these projects and understand the economics involved. Last year, we discussed higher dollar projects averaging about $5,000 per ticket, where we were still in the experimental phase and figuring out fulfillment and economics. Our confidence has grown significantly, and as consumer demand increases, we've become comfortable with our ability to deliver. Our main focus this year is to ensure that this higher-value business line becomes contribution margin positive. We are optimistic about its potential for growth, as it opens up a larger addressable market.

In terms of our long-term margin structure, fixed pricing does have an effect. It's important to consider that we are looking at a market between $400 billion and $500 billion. In our traditional business model, that revenue opportunity was our take rate. With the introduction of fixed pricing, financing options, and additional products like subscriptions, we are now targeting the whole $400 billion to $500 billion opportunity. While the margin potential may be lower for some large-scale jobs, the EBITDA potential remains significant. For our traditional business and lower-value fixed price jobs, our margin goal of 35% is still attainable. To clarify, sales and marketing expenses typically account for 50% to 55% of revenue, and last year it was 52%. Product development and general and administrative costs range from 20% to 25% of revenue, and last year it was 25%. If you assess this against our current margin of 10% to 15%, you could identify 5 to 10 points in the G&A and product development area and 10 to 15 points in sales and marketing, leading us to the 35% goal. However, as we expand into medium consideration jobs where our pro-pay and material costs are significantly higher, achieving the 35% margin becomes challenging. Nonetheless, we have redefined our strategy to target the full scope of our total addressable market, which is $400 billion to $500 billion.

Thanks, guys. Appreciate it.

Our next question will be from Jason Helfstein at Oppenheimer.

Yes. Thank you. Two questions. First for Anjali. Maybe talk a bit about the behavior of your cohort. So when you think about your 2019 cohorts, the way they act in 2020, what drove the increase in the value of those cohorts, when you think about what they did, any pricing changes you made, the way you were able to drive usage? And then second, Joey, maybe, I want to dig a bit more into the use of cash, $3 billion. I mean in the letter, you did talk about a wish list for Dotdash. Historically, the content digital media has been small for you. I mean, should we expect you guys to move much more meaningfully in that if there are assets that could be bought, or could it be more things to bolster or accelerate, things like the Care.com business or maybe perhaps more investments in gaming to follow what you've already done? Thanks.

So, on the Vimeo cohort behavior, we're seeing two trends. One, our existing customers from prior cohorts are paying us more today than they were before, so our net revenue retention on enterprise has been increasing for seven consecutive quarters. And that's coming from the investment we're making in the products, expanding the use cases and sort of optimizing our sales motion. And then, we also see that new cohorts, in general, are paying us more than in 2020 than the new cohorts were in 2019 and 2018. And that's because we are seeing greater demand for our higher-priced offerings, areas like Livestream. And as we shift the mix of our subscribers, more businesses looking for advanced marketing tools, that's analytics, customization, we just see that there's more desire to pay willingness to pay for those features. And that's why even on the self-serve side, our two fastest-growing plans are our two highest-priced ones. And then the other piece of course is just general retention and product engagement. There we've been watching this very closely since the pandemic began. And we see no indication of deterioration in retention. Product engagement has been holding really strong. And in some areas like live streaming has been higher among recent cohorts. And so generally looks like a very solid healthy cohort behavior. And there's also tons of room for us to go. And this is where we look at again the use cases we serve right now. We have so many customers asking to use Vimeo and video in a bunch of other ways. And the quicker we can get some of the things that we're working on and our roadmap out into the market, the quicker we'll be able to expand that net revenue retention even further.

On the topic of M&A and cash, Dotdash is a good example. We are examining businesses in that area and believe opportunities exist, though nothing is immediately on the horizon. Our motivation stems from the standalone success of the business and the positive results from past acquisitions. If we were to consider this as a software business, their top 25 advertisers all renewed their contracts from 2019 to 2020 and increased their spending, leading to a net revenue retention rate that exceeds 100%, which is impressive for a publishing company. This success is attributed to the effectiveness of the advertising, and we are achieving this with fewer ads compared to competitors, which creates a competitive advantage. We are investing more in content than others while monetizing less effectively, all while delivering results for advertisers. Maintaining this strategy is our goal. We aim for organic growth by adding high-quality and fresh content without overly relying on the same resources. Our intention is to invest significantly more in content than our competitors in any given period. We are actively seeking opportunities to acquire publications, sites, or brands where we can apply our successful model. Thus far, we have made a few small acquisitions, the largest being around $20 million or $30 million, but I believe we can pursue larger ones. However, it’s possible that suitable options within our price range may not be available. Still, there are brands in this space that could benefit from our approach. While I don’t anticipate a significant portion of our $3 billion cash reserve going towards this, we are prioritizing other investments alongside Dotdash. Care is one focus area, especially after a recent acquisition that seems to be positively impacting the Care.com business by adding customers and revenue, though we likely won’t pursue many more acquisitions in that area for now as we concentrate on organic growth. Gaming is another exciting area. The growth numbers at Bet MGM are astounding, particularly what we’ve seen in Michigan, which reinforces MGM's position given its strong offline brand presence in Detroit. This market entry has been promising, demonstrating how well the system works. This provides confidence not just for MGM but for us in the overall category and its potential as it attracts new users. We are considering an acquisition related to MGM and are open to investing in this sector, which is rapidly transforming and growing. MGM's recovery from COVID is uncertain, but its solid balance sheet offers reassurance, along with the exciting opportunities in this area right now. I hope this addresses your question, Jason.

Yes, that's it. If you want you can call Dotdash ad tech because that's back and load right now. So there you go.

Our next question, can we go to Yoni Yadgaran at Credit Suisse.

Hey, guys. Good morning. So two questions for Brandon on ANGI if I may. So the first one is on the supply side. So you guys have called out seeing some phenomenal kind of engagement metrics for early consumers using fixed price. On the service provider side, are you guys seeing similar kind of benefits to retention? What kind of engagement are you seeing with service providers who are opting into your fixed price network versus your core lead gen business? And then second question you guys intra-quarter have called out some kind of price increases due to overwhelming demand on fixed price. We'd love to hear some more details around that the magnitude of those increases and how that maybe impacted unit economics of fixed price?

Thank you for the question, Yoni. On the service provider front for fixed price, it's a completely different model compared to our traditional service. In this case, the dynamic reverses—traditionally, service providers pay us, but for fixed price, we compensate the providers and offer them jobs. Ultimately, they decide if the job and price are appealing and if they are available. There is no downside for them; they can either accept the job or pass and potentially consider future opportunities. This dynamic makes it easier to attract providers for these types of jobs. Regarding provider retention, as long as there is a consistent demand for their services, it encourages ongoing engagement. If we have a gap—like providing a job today but none for the next couple of months—providers may become inactive. It’s important to maintain a steady flow of opportunities to keep them engaged. The cost to onboard these providers is low, and with consistent demand, retention remains high. Unlike an advertising business where retention isn’t the primary focus, our main goal is to have enough providers and coverage to meet growing demand. As we continue to expand, acquiring more providers to match this growth becomes the main challenge. Regarding the price increase for fixed price, we constantly balance rapid consumer demand with our provider coverage capabilities. Last year, due to pandemic-related volatility and our reactions to fluctuating demand, we adjusted prices upwards. We intend to lower these prices if it becomes feasible based on our ability to provide services. Currently, we have seen some improvements in that balance. As long as consumer transactions for fixed price continue to grow substantially, we will face challenges in scaling provider capacity across numerous projects and markets. This issue is likely to persist as we anticipate continued rapid growth.

Thanks, Glenn.

Thanks.

Our next question can we go to Ygal Arounian from Wedbush.

Thank you, everyone. I have a question for Anjali and one for Joey. Anjali, you briefly mentioned the e-commerce aspect with your partnerships with Shopify and GoDaddy. We are hearing increasing discussions about live streaming opportunities for direct-to-consumer brands in product sales. Could you elaborate on the e-commerce opportunities? And Joey, your insights on MGM and online gaming were useful. Can you discuss how the relationship with MGM has evolved over the past few months, including what both sides have contributed and the collaboration that's taken place? Thanks.

On the partnership front, we view partnerships as a way to acquire new customers and expand our market reach by introducing more businesses to the benefits of video on their existing platforms. We have announced native integrations with companies like GoDaddy and Shopify, with recent additions including Emails and Hubspot. We are committed to forming more partnerships and our goal is to seamlessly integrate our capabilities into these platforms, allowing customers to engage directly with Vimeo when they wish to explore more options. We’re observing promising early signs in this area, which remains a focus for growth. Within our strategy, we recognize various segments, including live streaming, website builders, marketing CRM software, and e-commerce, all of which present intriguing opportunities. E-commerce is particularly promising, as evidenced by the strong traction we are seeing. Our Shopify app has received positive reviews and high engagement. It enables e-commerce store owners to quickly create videos for their product detail pages using existing content, with options for editing and customization. We plan to further explore e-commerce, helping businesses leverage video to enhance product sales and improve conversion rates. However, this is just one aspect of our broader video strategy and partnership initiative.

On the MGM relationship, I think it's fantastic. Leadership at MGM is great. Bill Hornbuckle is doing a wonderful job with the business and is very interested in our support in digital, which is our area of expertise. MGM just hired a new CFO, Jon Halkyard, who has impressive experience and seems fantastic. They have a very engaged Board, making them wonderful to work with. Our role is to assist and be available whenever they need us. This could involve exploring digital opportunities or helping to recruit talent, and we have already contributed by bringing in new people. We hope to continue in this capacity. Having a major shareholder with considerable resources and a long-term commitment allows for open and valuable discussions with MGM's leadership. We can offer support, provide capital, and mobilize our entire organization to back initiatives. This has been productive from our viewpoint, and we hope it will remain that way. When we commit to something long-term with significant capital, we pay close attention and aim to be helpful where they want us, and we hope that this collaboration continues successfully.

Great. Thanks so much.

Can we go to Kunal Madhukar at Deutsche Bank.

Thanks Mark. Thanks for taking the questions. A couple on ANGI if I may. One, with regard to fixed price versus the traditional marketplace business, it looks like the marketplace business was flat in 2020 year-over-year. Wanted to understand if you are deliberately funneling customers along the fixed price route in order to get scale in that side? So that's one. Second, as we look at the guide that Glenn just talked about in terms of 9% to 10% growth in the first two quarters and then getting to 20% by the fourth quarter. As we look at like the comps, the comps get easier in the second and third quarters and then it gets slightly tougher in the fourth quarter. So as we look at the guide versus the comps, can you help us reconcile in terms of what is driving the confidence in your ability to get to the 20% growth in the fourth quarter, and not in the second when the comps get much easier? Thank you.

Thank you, Kunal. With respect to directing customers towards fixed price versus our traditional business model, every customer that enters our marketplace, where we provide pre-priced services, has options. They can either connect with a local provider, which generates revenue through our standard matching business, or they can opt for the pre-priced on-demand service and buy directly. The reality is that throughout 2020, we have had more customers than we can accommodate from both aspects of this business. The moderate year-over-year growth in our traditional business can primarily be attributed to small businesses reducing their spending, which reflects their capacity to manage more customers. The pandemic has impacted these small businesses in several ways, leading to a general decrease in the amount they are willing to invest in acquiring new customers. Research indicates that most small businesses anticipate an increase in their advertising expenditures in 2021. While predicting the future is challenging, our ability to funnel customers is not the reason for current trends. We are experiencing a surplus of consumer demand for services. Glenn, would you like to address the question regarding comparisons and guidance?

Certainly. Our confidence stems from a few factors. First, there’s the growth in our sales force that Brandon mentioned earlier, which typically takes about six to nine months to start showing results. We've also discussed various growth initiatives and the scaling of fixed pricing. However, the primary factor is that the world needs to return to normal. Service providers have faced challenges like hiring difficulties and supply chain issues, as well as concerns about letting service providers into homes. For us to overcome these hurdles, normalcy is essential, and we expect that to happen. Additionally, as Joey pointed out in the letter, service providers are currently experiencing high demand, some of which comes through our platform and some independently. We anticipate that as service providers adjust throughout the year, our monetized transactions will increase, making us a beneficiary of this trend. We currently have a significant amount of demand and a strong supply base, and our focus now is to reduce friction and make effective matches. Consequently, we believe our monetization metrics will follow suit.

Sure, one final.

So our last question will be from Youssef Squali from Truist.

Thank you, Mark, for fitting me in. I have two quick questions. First, I want to focus on ANGI with Brandon. I'm trying to understand the factors that will help increase the number of jobs beyond 200 and potentially target the total addressable market. Can you share insights on the contribution margin between the prepaid or pre-priced segment and the others? Are you nearing parity between the two, or does that not significantly influence your decision to accelerate growth? Now, a quick question for Anjali. The team has previously mentioned that Vimeo has the potential to grow by 20% to 30% over time, with segment EBITDA margins above 20%. As you establish your independence and engage with your own investors, what is your approach as a SaaS company? Many SaaS companies reference the rule of 30, 40, or 50, which combines growth rates with operating or EBITDA margins. Can you elaborate on your perspective and how you plan to guide expectations when the opportunity arises? Thank you.

Thanks. Good question. On the ANGI question, so for fixed price, we have a lot of projects covered that are lower value, lower ticket priced. And we feel extraordinarily confident about the long-term margin profile of those project types as they mature. And they cover in excess of $100 billion of TAM alone. So there's a tremendous amount of room to run in terms of growth just in those project types. There are higher-value projects that I referenced earlier. They are around $5,000 a ticket. And we've been more in the experimental mode with those. But at this point, we feel pretty confident that we can drive those – drive growth there with good economics. We'll still prove that out during this year. In terms of getting to more TAM, it's really in this latter bucket. We started with a subset of projects and are going out and getting good at them, if you will. And as that playbook proves successful, we'll essentially go out to more and more of those larger projects and continue to offer more of a pre-priced offering. So in terms of how much the $400 billion $500 billion do we ultimately get to? I don't know for sure, but I certainly feel comfortable and confident that we're going to get to well beyond half of that as our addressable market with pre-price and perhaps well beyond half. It will take time and iteration to get good at each of the project types. It's not a cookie-cutter process where the exact same method works for every project type. There's some learning integration involved.

Yes. Then on contribution margin, in aggregate, our fixed price or pre-priced business is contribution margin positive. We passed that in 2020. Obviously the path to profitability is the investments we're making to scale all that. But importantly, the contribution from our fixed price business is greater than the contribution we get from an equivalent service request. That's what excites us. That's what helps us reframe this opportunity about going after the entirety of that $400 billion to $500 billion market. Anjali?

We approach the business like any typical SaaS company. In 2020, we followed the rule of 40 for SaaS businesses, and in Q4, we achieved the rule of 50. It's difficult to predict what the near-term outlook for 2021 will be as we move past the pandemic. However, for long-term growth, our initial projection of 20% to 30% seems conservative. While we cannot precisely determine how much higher we will exceed that, we are confident that our position will improve compared to pre-pandemic levels. Regarding long-term margins, we have indicated around 20%. Do we believe we can exceed that? Yes. Are we aiming for immediate profitability? No, we are focused on growth investment. Our unit economics remain strong, particularly the lifetime value to customer acquisition cost. We are also increasing gross margins, which have surpassed 70%, and we see further potential for improvement. Our focus will remain on enhancing margins and maintaining solid unit economics. The early market presents ample growth opportunities, and it ultimately depends on creating the right products for our customers.

Youssef, I would also like to emphasize the importance of free cash flow when considering Vimeo. Despite the investments we made in 2020 and the ones planned for 2021, we generated over $30 million in free cash flow as shown in the S-4. This figure remains strong despite the revenue recognition dynamics and our bookings, indicating that it isn’t decreasing. I believe this provides a valuable perspective for evaluating the relationship between EBITDA, throughput, and revenue growth.

That’s great color.

All right, everybody. We've run over on time. Thank you for joining us. It's fun to have watched the entire sunrise, and Brandon's background here in Denver, and we've got a new day starting. Talk to you all soon. Bye.