Angi Inc. Q1 FY2023 Earnings Call

Good morning, and welcome to the IAC and Angi First Quarter 2023 Earnings Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Christopher Halpin, CFO and COO of IAC. Please go ahead.

Thank you. Good morning, everyone. Christopher Halpin here, and welcome to the IAC and Angi Inc.'s first quarter earnings call. Joining me today is Joey Levin, CEO of IAC and CEO and Chairman of Angi, Inc. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter, which is currently available on the Investor Relations section of IAC's website. We will not be reading the shareholder letter on this call. I will shortly turn the call over to Joey to make a few brief introductory remarks. We will then open it up to Q&A. Before we get to that, I'd like to remind you that during this presentation, 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 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's and Angi, Inc.'s first quarter releases in our respective filings with the SEC. 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 releases, the IAC shareholder letter, and again to the Investor Relations section of our respective websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now let's jump right into it, Joey.

Thank you, Chris. Welcome, everyone. We appreciate you joining us this morning. It feels good to be proactive again. I believe we've made significant progress on earnings. The back-to-basics approach seems to be effective. We've concentrated on internal improvements over the past quarter or more, and it's starting to reflect in our numbers, enabling us to focus on capital allocation again. As you saw, we invested a considerable amount of capital this quarter, mainly directed internally toward initiatives you're quite familiar with. This aligns with our back-to-basics strategy and what we're observing in our business. We're enhancing profitability, improving customer experience, and preparing for the future to gain a competitive edge, which is gratifying. I'm aware there are several aspects of this quarter's performance that people are eager to discuss, so let's move on to the questions quickly. Thank you, operator.

We will now begin the question-and-answer session. Our first question comes from Ross Sandler from Barclays. Please go ahead.

Hi guys. Yes, I just have two questions. First on the buyback and then second on Dotdash Meredith. So on the buyback, I think everybody on the call is curious as to the why now. We see the math on the course of being negative, and obviously, Angi's and DDM are turning the corner here in the first quarter or first half. So just could you walk us through the thinking on what goes into that decision and what we should expect going forward? And then on Dotdash Meredith, it looks like the progression here is happening according to plan with the January negative 20 going to like June positive. Any surprises or anything you would flag in terms of areas of weakness or strength within that business? Thanks a lot.

Sure, Ross, thank you for your question regarding share buybacks. You've already touched on a couple of key points. First, we believe the negative implied value presents a strong investment opportunity. Secondly, the current state of our business makes us more comfortable with buying back shares since we're generating cash and experiencing earnings growth; these milestones are crucial for us. The overall business environment and our sentiment play a significant role in this decision. As for the future, we don't have a concrete answer, but we regularly assess share repurchases and will continue to prioritize them when opportunities arise. Currently, the threshold for alternative investments is quite high. However, we are consistently analyzing various options and will act on opportunities as they present themselves. In the first quarter, we found a particularly compelling opportunity, and we acted on it, which felt more promising than it has in quite some time.

Thank you, Ross. Regarding Dotdash Meredith, the strategy we are employing with Meredith involves migrating the sites, enhancing their speed, eliminating outdated content and ad clutter, and boosting traffic and overall performance. As mentioned in our shareholder letter, we are quite optimistic about the major Meredith titles, with many positive indicators, and we are currently seven to twelve months into the migration process. We're observing not only positive results in general but also a solid performance in categories where Meredith and Dotdash titles are comparable. Addressing a common question, the People title is currently facing challenges, but this is unrelated to the migration; rather, it is a result of last April and May’s Oscar events and the Johnny Depp trial, which have made traffic more difficult recently. However, we had a strong first quarter, and following the Johnny Depp verdict, we anticipate a return to robust growth for that title. We are optimistic about that property. The style section has faced difficulties since our acquisition, but we are confident in our plans to reduce low-value impressions there. We are actively working on the Parents section, which remains quite small, while the other titles are performing very well in terms of traffic. Another essential aspect of our strategy is performance marketing and e-commerce, which continue to perform excellently. Our approach of integrating Dotdash's e-commerce and performance marketing resources into the Meredith brands is proving effective. We reported an increase in performance marketing across the board in March, the first time in a while, and we expect to keep progressing positively across our portfolio. So, we feel good about that. Operator, please proceed to the next question.

Next question comes from Cory Carpenter from JPMorgan. Please go ahead.

Hi, thanks for the question. I had two on Angi. Joey, could you just talk about where you're seeing the greater efficiencies that led you to raise the profit guidance? And then how much more room you have on the cost side? And then on revenue, the letter talked a lot about a focus on quality and sort of cleaning up the platform. How long do you expect it to take to work through this? Does it change your expectations at all for growth this year? I think previously you talked about kind of flattish growth in '23? Thank you.

Sure. I don't anticipate further cost reductions at this point. We've made significant progress in that area, which has enhanced our profitability and operational efficiency. With a smaller team, we are achieving more in less time, which is positive. We plan to reinvest in areas like marketing, especially television marketing, and are satisfied with our current position. The quality improvements we are implementing will unfold throughout the year, with a focus on revenue growth. By investing on the revenue side, I mean we will discontinue certain revenue streams that are not beneficial for our ecosystem in the long run, which might lead to slight revenue declines in 2023. Chris will discuss the numbers further. We plan to reinvest more revenue into enhancing the customer experience, like reducing the number of emails, shifting away from certain marketing channels, and moderating specific sales practices to improve customer retention and overall ROI on our platform. Many of these changes have been initiated in Q4 and Q1, and they will continue throughout the year. I see these efforts as investments in 2023 intended to drive growth in 2024. Most of the cost reductions in sales have been finalized, and we've adjusted our service offerings to promote higher retention and increased spending from professionals over time. While we expect to reap the benefits in 2024, there may be short-term challenges in 2023.

Sure. Thanks, Cory. Regarding our expectations for revenue and profitability, we anticipate that total revenue across all service lines will decrease on a net basis. If we consider 2022 with services accounted for net for the full year, we expect a revenue decline of 5% to 10% each quarter for the rest of 2023. This decline will be most significant in Q2, as we experienced a spike in lower-value revenues during the same period last year, focusing on improving quality. For Q3 and Q4, we expect the revenue drop to be less severe, still within the 5% to 10% range year-over-year. In terms of profitability, we expect Q2 adjusted EBITDA to be comparable to Q1 in dollar terms. Our marketing expenditures typically increase in Q2, including investments in TV, leading to slightly lower margins. While revenue is usually higher in Q2 and Q3 seasonally, we expect lower margins due to immediate marketing costs. However, we anticipate solid margins in Q3 and Q4, contributing to profitability and positive free cash flow. By eliminating lower-quality revenues, we foresee a decrease in revenue during the last two quarters of the year, which we believe positions us for growth in 2024, while still maintaining good margin performance despite revenue challenges.

Yes. I want to emphasize that within the Angi team, my focus is to stop pursuing revenue that won't enhance our customer experience and long-term relationships. If we are committed to building lifelong customers, we should prioritize their well-being. We have enough profit to support this approach, and right now, I want to focus on the customer experience over revenue. Our profits allow us to make this choice, and it will remain our priority throughout 2023 as we aim to grow from this position. I consider this a positive move and believe we're in a strong position as a business with these decisions. Thank you, operator. Next question.

Next question comes from Brian Fitzgerald from Wells Fargo. Please go ahead.

Thanks. Joey, thanks for your thoughts on AI in the letter. We wanted to ask if you could highlight some of the key opportunities you see for the use of AI in your businesses? And if you could share any thoughts on how you can differentiate and also defend your content and IP from generative AI competitors? That's the first one. And then the second one was just on Dotdash Meredith on the new intent-driven Quick Heal's product. Are you looking to drive monetization lift on your general interest sites using insights gained elsewhere within the network? Or is there an audience extension opportunity across the Internet as well? Thanks.

I will first address Dotdash, and then move on to AI. Our primary focus is not on audience extension; instead, we are concentrating on demonstrating intent through our existing product. It includes essential features desired by advertisers today, such as anonymity, meaning no need for personally identifiable information or cookies, and the ability to capture intent, which is difficult to achieve without those elements. We are actively promoting and organizing our efforts around this capability, which is beneficial for sales. The primary focus remains internal for now, although there are opportunities for audience expansion. We have a significant amount of inventory available for sale across our sites, which will take precedence, but audience extension is still a possibility and will emerge in the coming weeks, which is something to look forward to. Regarding the use of AI in our businesses, we are implementing it in various areas. The most rapid and effective application is in coding, where developers across companies are utilizing it to streamline code writing and enhance efficiency. While there are experiments in other areas like customer support that haven't been launched yet, we are also working on organizing content creation processes with AI, not for generating content but for outlining and prioritizing tasks based on data analysis. I mentioned in the letter that the marketplace aspect is particularly exciting, even though nothing is operational yet. We aim to leverage these models to analyze our proprietary supply database and incoming demand to improve matching. Better matches yield significant benefits for the business, and optimizing this process relies on data analysis, which these models are designed to handle effectively. Another point from the letter is the service request path for Angi. This multi-step process can be challenging for users to navigate. Currently, chatbots are facilitating a more natural conversational interface, making it easier for users to engage with this process. We have developed this feature further, although it is not yet live, to improve how homeowners communicate their needs and ensure better matches with service professionals. This approach could also be applied to the care side with Vivian and Turo, and I believe it could yield enjoyable and impactful results for our business.

Awesome. Thanks, Joey. Appreciate it.

Thank you, operator. Next question.

Next question comes from John Blackledge from Cowen. Please go ahead.

Great. Thank you. On DDM, any way to frame the DDM EBITDA margin trajectory in the second quarter and then into the second half, and could you clarify the lease impairment charge in Q1? And then just also on the land purchase, what was the rationale there? Thank you.

Sure. Thanks, John. I’ll begin with the lease impairment. This is a one-time non-cash charge related to two floors in Meredith's New York office that were closed when we acquired the business. These floors are currently unused and have been listed for sublease. During the acquisition, we valued these floors and made assumptions about subleasing them. All costs associated with these floors are reflected in our P&L. We determined that another impairment was necessary due to the significant decline in the commercial rental market in Lower Manhattan. The total charge is $70 million, with $44 million affecting adjusted EBITDA and the remainder classified as depreciation. We still plan to sublease that space, but it won't significantly impact the business. Looking ahead, we are maintaining our adjusted EBITDA guidance for the year at DDM of $250 million to $300 million, which excludes the lease impairment since it's non-cash. We don't anticipate major one-time charges this year, unlike last year when we were focused on integration. Historically, Q1 is the lowest revenue quarter and has the lowest margins of the year, while Q4 consistently shows the highest. We expect Q2 to mirror Q2 of last year in terms of adjusted EBITDA after accounting for one-time expenses. We foresee good scaling in margins and profitability in Q3. Last year in Q3, we faced integration challenges leading to inefficiencies in our advertising structure and costs. We expect strong profitability in Q4, driven by e-commerce growth and our revenue projections, assuming the ad market remains stable. Our goal is to achieve over 35% digital adjusted EBITDA margins. Regarding the land purchase related to Blackstone, there’s no need for concern. IAC is not entering the real estate market. This was a specific case involving our headquarters, established almost 20 years ago, under a 75-year ground lease from a New York-based property firm. Our ground lease payments have been low since the mid-2000s, and we were facing a significant increase in fair market value, despite the current softness in the commercial real estate market. The past two decades have seen considerable increases in commercial real estate values, and that increase would have directly impacted our P&L. By purchasing the land, we can avoid a substantial rise in ground rent. Additionally, owning both the building and the land enhances our options for realizing value; properties on ground leases have limitations in terms of extracting value through mortgages or transactions. This ownership provides us with greater flexibility with our balance sheet assets. Lastly, the market was challenging due to rising interest rates and tough capital conditions for real estate. We felt we were the best buyer, and we believe this decision will ultimately benefit our shareholders.

Thank you.

Thanks, John. Operator, next question.

Next question comes from Brent Thill from Jefferies. Please go ahead.

Joey, on emerging and other, could you dive a little deeper into Care, and it looks like there was profitability in that segment just understanding what's going on there. And then the question around why more Turo at this point? Thank you.

Sure. I'll start with Turo and then touch on Care before letting Chris add his insights on Care. Turo is an ideal business for us. It's a marketplace that effectively connects a diverse supply with a varied demand, providing a great customer experience in the process. When we initially invested, we questioned whether its economic model was viable, considering factors like insurance and trust. It's clear now that they've made it work, as evidenced by their financials in the S-1 filing. This is a business where scaling enhances the product rather than just reducing the price. More users benefit both hosts and guests. They are a significant leader in their category, and I anticipate that their lead will continue to grow. When we observe a business with such dynamics and the opportunity to gain deeper insights, we seize that chance, understanding both upsides and downsides. The size of their market, their share, and their ability to gain more share are very appealing. Additionally, they have potential to explore other markets that could be attractive as well. This is a business we want to increase our ownership in. Furthermore, they have an outstanding management team. The CEO is deeply involved with the product and is an enthusiastic user both as a guest and host, always striving to enhance the customer experience. This is very exciting for us, as it meets all the criteria we look for in a business. When the opportunity arose to own more, we took it. Regarding Care, it’s much more a back-to-basics story. They are focused on making small improvements in costs and revenues every quarter. Like Turo, it is also a category leader and a marketplace, with progress being made through minor adjustments. We haven’t yet seen a major breakthrough in the product, and while we would like one, we haven’t required it because there's been a lot of foundational work done. A new product is beginning to roll out along with some user experience upgrades, and we will continue to innovate from there.

Yes, and thank you, Brent. Regarding profitability, you should view Care, along with emerging and other segments, where Care contributes most of the profit. Mosaic is also turning a profit, while some smaller businesses are currently in investment mode. In the first quarter, as Joey mentioned, we executed well and managed costs effectively compared to last year. We eliminated a number of initiatives that had become excessive in 2022 and refocused on fundamental value drivers. Going forward, it's important to note that Q2 is typically a lower profitability quarter for Care and emerging and other due to our investments in marketing and television as we approach the summer season and back-to-school period. The profitability in Q1 was also influenced by household employee tax income. Therefore, Q2 will be weaker, but we anticipate strong performance in Q3 and Q4. We are satisfied with the business's current state, enjoying good gross margins and ongoing margin improvements. On the revenue side, Enterprise has performed well despite a tight corporate spending climate, with a return to office serving as a boost to the utilization of our enterprise backup care service. Consumer growth has been slower, with challenges at the top of the sales funnel. However, we recognize market opportunities to enhance our marketing and conversion rates. We believe in the long-term potential of our business as an industry leader with significant opportunities for converting offline customers to online, and we plan to continue advancing in this area by innovating our products and enhancing our marketing efforts, as Joey mentioned. Overall, we feel positive and are committed to executing effectively.

Thank you.

Thanks, Brent. Operator, next question.

Next question comes from Jason Helfstein from Oppenheimer. Please go ahead.

Thank you. I have two questions. First, you've mentioned that SEM conversion is improving at Angi. How do you see this affecting revenue? Do you think it's a good idea to invest more in SEM with paid marketing since it seems to be more effective? What's your perspective on that and the timing? Secondly, you've pointed out that performance marketing is getting better at Dotdash. How do you plan to encourage brand advertisers, particularly those from the historical Meredith brand, to operate more like performance advertisers? They've already started doing this to some extent in retail media with other properties. Is it challenging to persuade them in a lower ad market, or do you anticipate this becoming more of a catalyst in 2024? I'd like to hear your thoughts on how to attract retail media budgets to the new Meredith Dotdash. Thank you.

Yes. I'll address both points, and Chris can add his thoughts as well. Performance marketing is advantageous because its effectiveness speaks for itself; it doesn’t require much persuasion. Brand marketing, on the other hand, is trickier since it necessitates careful analysis of spending versus returns. Performance marketing is simple in nature; it involves prompting people to engage with the spending, allowing for scalability based on effectiveness. Typically, it yields positive results due to the audience's intent. Our primary focus is simply getting our products visible on various platforms and ensuring we have sufficient units available. With respect to SEM conversion at Angi, this is crucial. We recognized a steady decline in conversion over almost two years, and reversing this trend was a priority. We initially focused on capturing margins effectively, which we have now validated. The next phase involves scaling our operations cautiously and intelligently. A key aspect of scaling is ensuring we can maintain spending efficiencies, and I am very confident we can achieve this across different search engines. Additionally, it's important to coordinate with the supply side and other elements of the Angi ecosystem to function cohesively. We must also prioritize spending on channels that provide the best customer experiences and margins, ensuring that we maximize our resources rather than compromising on quality. We are working on enhancing our technology to ensure all these elements are optimized. There’s a lot to fine-tune, and we need to get it right during our scaling efforts, which we plan to do throughout this year. Thus, we emphasize margins first, which we have solidified, and now we are turning our focus towards scaling, which will unfold over the coming year. Would you like to add anything?

I think Joey articulated the broader trends in the advertising market very well. This relates to the new product that Joey mentioned, which Dotdash Meredith is launching. If you have a campaign management program that effectively targets the desired segments and provides real return path data and performance metrics, it is significantly easier to sell than a general brand campaign. This approach is embedded in Dotdash's DNA, and through integration, we can leverage it across all Meredith properties and Dotdash, benefiting from substantial scale in our categories. Regarding the overall advertising market, which was part of your question, it remains a situation where different sectors or verticals experience varying degrees of strength or weakness at different times due to various macro factors. The Health and Pharma sectors are performing well, Beauty and Style has made a strong comeback, Travel is doing well, and Retail is quite solid. We anticipate that comparisons will become easier in several of these sectors moving forward. However, there is noticeable weakness in finance compared to last year, and media, technology, and streaming are also struggling. The Home sector may show some improvement but has been weak. We will continue to navigate through this fluctuating market, but we feel very confident about our portfolio and the position of our offerings.

Thanks, Chris.

Next question comes from Eric Sheridan from Goldman Sachs. Please go ahead.

Thanks so much for taking the questions. Two, if I could. First, going back to the capital allocation section of the letter, Joey, I'd love to get a little bit deeper on your perspective of capitalizing on what might be short-duration mismatches around asset prices or opportunities that present themselves and how you think about prioritizing, capitalizing on those opportunities versus striking the right balance of continuing to invest long-duration against some of your larger addressable market goals in some of the businesses and striking the right balance from a capital allocation policy standpoint? And then maybe number two is a follow-up. We've talked a lot about the four priorities you laid out for Angi going forward. As you pivot from the second of the four services and cash flow towards the first two customer experience and SEM, SEO. Can you frame up how much of that are areas where you need to invest either at sustained higher levels or incrementally versus you think the dynamic of moving towards those first two initiatives is more about execution going forward than putting capital behind the problem? Thanks.

Thanks, Eric. Regarding asset prices, I'm not sure about that. We're not really focused on buying or trading securities. Chris mentioned the land purchase, which has been a cleanup effort for a long time, and certain events made it feasible. Factors like asset prices and interest rates have made this much more appealing than it was one, two, or even four years ago. This has been beneficial for us and we believe it helps unlock our value. We're not primarily looking to trade securities. When evaluating companies, many have recently been attractively priced. However, concerning public companies, there's a lack of reasonably priced transactions happening. There's not much appetite for that, even with lower public prices. People seem unwilling to sell at the historical reasonable premiums and are looking for much more aggressive ones, which makes the assets less attractive. Buying our own stock or Turo's or MGM's doesn't require premiums, allowing us to take advantage of what we consider attractive trading conditions. I hope that addresses the first question, though I'm not certain. As for the second question, regarding investment in customer experience and SEO and SEM, I believe we don’t need any further cost-cutting measures. However, we can invest more on the revenue side in those areas, which is our plan for the rest of the year. This is primarily about execution. Our product and technology teams can develop and enhance what’s needed. We can't do everything simultaneously, and simply adding more personnel won't speed up the process. Right now, we are focused on quickly testing and launching things to enhance the customer experience. Part of this will involve discontinuing certain revenue-generating elements that we believe will lead to happier homeowners and service professionals, resulting in them spending more and staying longer with us. We'll make those adjustments wherever they're beneficial for the ecosystem. Alright, next question.

Next question comes from Stephen Ju from Credit Suisse. Please go ahead.

Thank you. So Joey, I wanted to follow-up on the services line for Angi. So taking a step back, even before the pandemic, I think there was always a thought process around how difficult it is going to be for the business of scale for certain categories and geographies. Now that we come through the supply and demand imbalances into the pandemic and now that you've also spent some more time on the operations on a day-to-day basis, do you think the overall opportunity here is smaller? And conversely, are there certain product advancements you were able to achieve that now make what you thought was impossible previously are now possible? Thanks.

Yes, thank you for the question, Stephen. I truly see the services business as a vital part of Angi's future. Whether it's larger or smaller than before depends on individual perspectives and timing. However, it remains a significant aspect of our future for a few reasons. Firstly, we excel in delivering service in our current focus areas, particularly in low-consideration segments. This leads to an excellent customer experience. It's not only about the revenue generated but also about enhancing the overall customer journey. By offering services on our platform, we provide homeowners with valuable information about job completion and pricing, which benefits them regardless of whether they make an immediate transaction. They might return later for transactions or search for service professionals through ads and leads. This service offering bolsters the overall customer experience. We aim to grow the services sector again, but we want to do it thoughtfully, focusing on one category at a time where we can ensure a quality customer experience, balancing price and service efficiently while maintaining high customer satisfaction. Once we can achieve those goals, we'll explore other categories in an economical manner. The current smaller services segment reflects our exit from underperforming categories where we couldn't achieve the desired economic and customer experience. Now that we are shifting back to successful areas, I believe the future of our services is promising. While we expect a decline in this business over 2023 compared to 2022, it's essential we establish a healthy base from which to grow. Additionally, we've reduced our customers' exposure to the services business recently, and we're now testing ways to enhance that exposure in more compelling manners for the ecosystem. We'll evaluate these efforts throughout the year.

Next question, operator.

Next question comes from Ygal Arounian from Citigroup. Please go ahead.

Good morning, everyone. Joey, regarding the MGM situation, you mentioned almost 3 billion in liquid shares. As we evaluate the current position, could you provide some insight into how you view the MGM opportunity, your plans moving forward, and any potential avenues for cash or assets if it doesn't align with long-term strategy? Additionally, on Dotdash Meredith, it's encouraging to see the strength in e-commerce, especially considering the ongoing challenges in consumer spending. Can you elaborate on what has been driving that success? Is it linked to the integration with Meredith, or are the advantages from that integration yet to be realized?

Yes, thank you, Ygal. The second question was a bit difficult to hear, but regarding e-commerce at DDM, as Chris mentioned. In terms of MGM, we're quite pleased with that investment and its performance over time. It's an outstanding business and a category leader with an exceptional management team that is thriving in a strong market, primarily in Las Vegas, the entertainment capital of the world, which is experiencing growth. MGM is clearly at the forefront of this development. Additionally, the company has a substantial amount of cash at the moment; the OpCo/PropCo structure has effectively built up their cash reserves and supported share repurchases. We're happy to see our ownership stake increasing alongside the business maintaining a robust balance sheet while consistently generating significant free cash flow. They're utilizing that cash flow for smart capital projects and further share repurchases, which enhances yields for shareholders like us. I also believe the business remains fundamentally undervalued. You can assess it by the free cash flow available to shareholders, but also by considering the future opportunities for MGM that are not fully reflected in the current valuation. Firstly, in the digital space, MGM is one of three key players and holds a 50% interest in one of them, which is performing well in terms of revenue growth and has a pathway to profitability. Macau has shown a significant rebound, with a growing number of people with disposable income, and the pent-up demand in Las Vegas and the broader U.S. travel market is now being realized, with Macau showing even more exciting potential. In Japan, MGM appears to be the sole player or at least the only one for an extended period, which could represent a highly attractive market. Moreover, New York is in the process of opening up, offering a variety of opportunities to unlock real value at MGM. We're still eager to be involved with this business and will keep you updated on everything the team is doing to seize the opportunities ahead.

Thanks, Joey. On performance marketing at Dotdash Meredith, there are two key elements. We previously discussed this in our last few letters. One focuses on e-commerce for goods, and the other on performance marketing for services. If we take a step back, Dotdash has consistently excelled at seamlessly integrating performance marketing for partners, goods, and services into the content. For example, a review of kitchen items might include direct links or an Investopedia article could provide quick access to various savings accounts or money market funds when users are already researching that information. A crucial aspect of combining the companies was bringing those capabilities to the Meredith sites, which feature strong brands and extensive content. This allows for more relevant integrations of links to support e-commerce and service activities while also boosting the amount of content produced on Meredith sites related to those commerce opportunities. We refer to this as evergreen commerce content, and management has been actively developing these across the sites. We noted that e-commerce for goods across the Dotdash Meredith portfolio rose over 30% in Q1, with consistent month-over-month growth on a year-over-year basis, and we anticipate continued momentum. The performance marketing for services mainly pertains to financial services, which, as we've mentioned, included brokerage, crypto, and insurance a year ago. Those markets have been facing challenges. However, the good news is they declined steadily throughout '22, which means the comparisons will become easier. We remain very optimistic about continuing to grow that performance marketing line, effectively applying the Dotdash approach to a lot of Meredith's side.

Next question comes from Youssef Squali from Truist. Please go ahead.

Great, thank you. A couple of questions. Going back, Joey, going back to Angi. So over the last three-plus years, we've made a few pivots from a business model perspective. Now to refocus on maybe LTV. Going through the letter, it seems like you guys have thought through it pretty well, but it seems very intuitive to us what you're doing. I guess practically, what gives you the confidence that doing less is more, that acquiring fewer customers, sending them fewer e-mails will ultimately drive revenues? Just trying to get a sense of whether you can share maybe some proof points with that, some heavy testing that maybe you guys have done that could give investors more confidence. And then Chris, on roofing, looks like that business turned profitable. Can you speak to the sustainability of profitability in that segment going forward? Thank you.

Was the second question on Roofing? Yes. Okay. I'll do both.

We experienced a shift to profitability in our roofing segment this quarter, but I'm uncertain about its sustainability since it's a relatively small business. While we've gained valuable insights from our roofing operations, it may not have been our best decision, and we need to determine our next steps. It's not a primary focus for us, but I believe it is roughly breaking even each quarter, which is an improvement compared to last year when we were incurring losses. However, we need to establish a clear plan for that segment moving forward, and I'm quite confident that it won't significantly impact our overall performance. Regarding Angi, that's indeed a crucial question that we consider daily, and there are a few key metrics we monitor. For instance, we keep an eye on bad debt and credit rates among service professionals. When we enhance their experience and return on investment, we see improvements in these metrics, especially when we compare them to the challenging periods of Q2 and Q3 of 2022. We've made significant improvements since then. We also analyze retention rates, focusing on different cohorts based on their time with us. We look specifically at professionals who have been with us for varying durations and how they interact with our advertising and lead products, noting steady improvements in these areas over recent months. Although these changes take time and involve gradual progress, it's essential for us to change the overall trend, and we are witnessing that. Another area of focus is the repeat rate among homeowners, which has been quite challenging. We previously saw a decline in this metric, but we've managed to stop that decline. The real question is whether we can achieve growth moving forward, and we're working on strategies to accomplish that. I believe that providing a better customer experience leads to better retention and a more successful business. However, we need time to verify that theory. From an economic standpoint, we've shown that it can work, and our goal is to keep improving these areas. Lastly, concerning pricing, we've generally been lowering the prices for our service professionals. Interestingly, we found that overall spending by professionals remains consistent, even as we reduce our charges. This shift has helped establish better connections between eager homeowners and professionals, which benefits the entire system. I feel optimistic about our current direction, and I'm fully confident that prioritizing our customers will lead to positive outcomes for our business over time.

Thanks.

Thank you and operator, one last question.

Next question comes from Justin Patterson from KeyBanc. Please go ahead.

Great. Thank you. Perhaps on a final point around Angi, could you talk a little bit just around how SP satisfaction has changed with this new versus old cohort? And then perhaps just comment on some of the spending and retention differences you're seeing with them? Thank you.

Sure. One key indicator of satisfaction is the improvement in bad debt rates and credit rates. In terms of retention, approximately 60% of the professionals have been with us for over a year, which is a great statistic. These professionals have learned how to make the system work for their business, and we have also learned how to optimize it for ours. The most noticeable changes have occurred among the remaining 40%, which includes those who have only been with us for a month or three months. This group has experienced the most volatility and challenges. However, we are seeing that younger professionals are retaining better, which we track through cash collected in the first 28, 56, or 90 days, and those metrics are showing improvement. As we see these improvements, the younger professionals will constitute a larger part of the 40% that have not been with us for over a year, while the older, more challenged ones will make up a smaller part. This contributes to a healthier ecosystem of service professionals within the network. While I won't disclose specific churn or retention figures, I can say that they are generally moving in a positive direction, with the stronger new professionals replacing the more problematic older ones.

Thank you. Well, we will wrap up the earnings call now. We thank all of you for joining and wish you a good day. Thank you.

Thanks, everybody.

The conference has now concluded. Thanks for attending today's presentation. You may now disconnect.