Welcome to the Angi First Quarter 2025 Earnings Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Andrew Russakoff, CFO. Please go ahead.

Thank you, operator. Good morning, everyone. Andrew Russakoff here, CFO of Angi Inc., and welcome to the Angi Inc. first quarter earnings call. As a note, I go by Rusty, so everyone should please feel free to refer to me as Rusty. Joining me today is Jeff Kip, CEO of Angi Inc. Angi has also published a shareholder letter, which is currently available on the Investor Relations section of Angi Inc.'s website. We have also made some changes to our metrics disclosures this quarter and have published a short deck on the website to provide more helpful context and explanations. We will not be reading the shareholder letter or presenting the metrics primer deck on this call. I will soon pass it over to Jeff for a few introductory remarks, and then open it up to Q&A. But 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 our 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 quarterly report on Form 10-Q, our most recent annual report on Form 10-K, and in the subsequent reports that we file 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, shareholder letter, 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 let's jump right into it, Jeff.

Thanks, Rusty, and welcome, everyone, to Angi's first quarter earnings call and our first as an independent public company. I will share a somewhat longer introduction today than usual, considering the release of our new operating metrics that Rusty just highlighted. Overall, our performance in the first quarter was solid. As many of you know, we implemented homeowner choice during this quarter. Homeowner choice indicates that every lead sent to a professional on Angi is because a homeowner specifically chose that professional through our interface. A year ago, around 40% of our leads were automatched, and now nearly none are. We may consider some automatched leads in the future for customers who prefer that option, but for now, we have none. Homeowners tend to be more satisfied when they can choose the professionals who contact them and are much more likely to hire a professional they selected rather than one who was automatched to them. Since implementing homeowner choice in January, we have nearly reached a positive Net Promoter Score, an important measure of homeowner satisfaction, marking the first time we've seen this since we began tracking the metric. Two years ago, the score was below negative 30. An improvement of 30 points in that timeframe is a noteworthy achievement, thanks to the entire organization's hard work over the past couple of years. Additionally, our pro win rate, which measures how often a pro successfully wins a job based on a lead they pay for, increased by 10% after we implemented homeowner choice. This is another key indicator as professionals join the platform to secure work rather than just chat with homeowners. Both metrics demonstrate that we are facilitating more successful job completions, which is the ideal experience for customers on both sides of the marketplace. Homeowners turn to Angi to find a skilled, reliable professional for their projects, while professionals seek opportunities to perform well on those tasks. While we believe that ensuring high-quality job completions is essential for long-term value creation for Angi, our homeowners, our shareholders, and our team, the transition to homeowner choice did have a short-term effect on our financial results. Almost all of the revenue decrease in the first quarter can be attributed to the impact of homeowner choice on lead volume in our network channel. This transition allows me to discuss the new metrics we released last night, which we believe will help investors gain a clearer understanding of our business movements. Since this is a new disclosure and framework, I’d like to take a moment to explain it. Let’s begin with the breakdown of Service Requests and Leads, which we previously referred to as monetized transactions, into Proprietary and Network Channels. The main distinction between these two channels is who controls the homeowner customer experience and service request details. In Proprietary Channels, we at Angi manage the experience and job specifics. Proprietary channels include all traffic from our owned brands, domains, and apps, which automatically utilize our proprietary customer experience; traffic from referral partners sending homeowners directly into our service request pathway; and customers from our retail and real estate partners, from whom we can obtain the necessary details to effectively match them with our professionals. Conversely, the Angi Network Channel consists of third-party affiliate partners who guide homeowners through their own user experience to present our professionals for selection using our widget technology. In this scenario, our partners control the experience and job specifics. Regarding the numbers in the release, you'll notice the 33% and 57% declines in network service requests and leads, respectively. These drops resulted from requiring homeowners in the network channel to choose their professionals. Before the January rollout of homeowner choice, all network service requests were automatched to professionals. Following the rollout, only about half of network homeowners selected at least one of our professionals, which is slightly lower than the engagement rate from our proprietary customers. This shift has driven the decrease in lead volume and fewer service requests, as we also generate less revenue per service request for marketing. This change accounts for nearly all of our lead volume decline and essentially all of our revenue decrease in the first quarter. Moreover, it's encouraging to note that declines in proprietary service requests have decelerated significantly, improving sequentially each month during the first quarter, and proprietary lead declines have almost flattened out for the entire quarter. Our 2026 revenue guidance implies that the network channel will remain stable year-over-year when compared to the significant drop we experienced in the first quarter of 2025, and we expect this stability to continue throughout the year, while proprietary lead volume is projected to grow. Additionally, with our transition to a single pro product and the migration of our Ads professionals to this platform in the third quarter, we anticipate revenue per lead will begin to increase in the second quarter of 2025. Therefore, to summarize the basic math: flat network volume plus growing proprietary volume plus revenue per lead growth results in revenue growth in 2026 and sequential improvements in revenue declines throughout 2025. Now, turning to our active pro network metrics, I should point out that the volume of newly acquired professionals has been decreasing. Importantly, I must remind you that, as mentioned in the shareholder letter, the value created from a smaller base of professionals and sales force is nearly 150% greater than a year ago, even though we've acquired 41% fewer professionals in the first quarter. We may be acquiring fewer professionals but are achieving greater capacity and generating significantly more aggregate lifetime value. We believe this is the right way to operate the business rather than focusing on unprofitable volume growth. We expect to increase the number of professionals we acquire in 2026 and enhance total capacity, as we plan to stabilize our sales team and rollout online pro acquisition in the latter half of this year, which would likely lead to an increase in the raw number of professionals by 2027. It's not the sheer number of professionals that boosts capacity; it's the capacity per professional. Regarding our growth potential, if you analyze leads per active pro over the last few quarters, you’ll find we averaged about 11 leads per pro in the first quarter, down from 15 leads in the third quarter of 2024. This indicates we have ample capacity within our existing network, which, combined with added capacity later this year and into 2026, provides plenty of room for growth. The next notable change in our metrics is the shift of our pro network to an average monthly active basis instead of a quarterly paying or transacting basis. Our operational focus is to incentivize professionals to engage with homeowner service requests since jobs can’t be done well without engagement; hence, the change from a transactional to an active pro approach. Additionally, since we manage the business on a monthly active basis, we believe that presenting the metrics this way reflects our operational strategy more accurately. We have categorized our previously acquired professionals into cohorts to clarify year-over-year retention for each group. Newly acquired professionals from the last 12 months are evaluated based on an activity rate rather than retention, given they have no prior year activity. Our priority is activating and retaining these professionals during their first year. Professionals acquired between 12 to 24 months ago display different retention traits compared to what we term the base cohort, which includes professionals acquired over 24 months ago; thus, we have split these cohorts for separate performance analysis. I should point out that retention for each cohort is improving significantly. Base cohort retention increased by 8% over the trailing 12 months compared to the previous period as of Q1 2025, and retention for professionals acquired in the last 12 months has risen by 16%. Activation rates have similarly improved by about 16%. This means that, in a situation where the acquisition of new professionals had remained consistent over recent years, the network would be growing, driven by improvements in customer experience that have resulted in significant retention and activation efforts across each cohort. To conclude, our breakdown of Service Requests and Leads in the Proprietary and Network Channels clearly illustrates the factors contributing to revenue declines in 2025 and our trajectory toward growth in 2026. Monitoring leads per active pro on a monthly average basis also highlights the capacity within our network to support future growth. Lastly, our shift to active professional cohorts allows investors to see more clearly the relationship between declining acquisitions and enhancing retention and activation in our network, while the anticipated increase in new professional acquisitions in 2026 illustrates our path back to network growth. Thank you all for taking the time to hear my overview, and now we can proceed to your questions.

Our first question comes from Eric Sheridan from Goldman Sachs. Please go ahead.

Thanks so much for taking the questions, and thanks for all the detail in the shareholder letter and explanation. The first one would be on the macro environment. When you think about the macro environment you're operating in right now, I want to know if you could contrast elements of consumer wallet spend against the services landscape you're trying to operate in when compared to the broader competitive landscape for those dollars, just to click down a little bit on the broader landscape today. And then second, when you think about the margin framework you're laying out for the remainder of this year, how should investors think about the investments being made in product and platform and the transition that's impacting margins this year relative to the yield or the output that can produce the type of growth you're talking about in 2026 and beyond?

Thank you, Eric. This is Rusty. I can address both points. In the current macro environment, many businesses are focusing on broader economic factors. In the home services sector, similar to other industries, consumers tend to reduce spending on large, discretionary purchases during recessions and prioritize essential maintenance to avoid bigger expenses later. Survey data supports this trend. In early April, we observed a slight decrease in homeowner volume and smaller job sizes, which we estimate has affected our business metrics by about three to five percentage points, as mentioned in our shareholder letter. We have adjusted our outlook for the remainder of the year accordingly. In terms of our industry position, there are countercyclical factors that play a role. Our market share is small, and word of mouth remains our main competitor. A general weakening in the economy impacts service professionals by reducing their order volumes and leads from referrals and repeat clients. When professionals face these challenges, they seek additional demand sources, which naturally leads them to depend more on our services. This situation results in easier customer acquisition, more loyal clients, and increased spending per customer. Historically, during past economic cycles, we have seen a rise in new tradespeople joining our platform and an increase in lead consumption, providing some protection when consumer confidence declines. We experienced both ends of the spectrum during the COVID-19 pandemic when home improvement demand surged. During that time, while many professionals were overwhelmed with inquiries, we could not fully take advantage of that demand. On the homeowner side, economic difficulties lead to changes in behavior. Instead of moving to larger homes, homeowners may opt for renovations or buy older properties needing work. This shift has already adjusted our operating environment to a slower pace. About two-thirds of our business remains nondiscretionary, whether assessed by service requests, leads, or revenue, making this segment less vulnerable because necessary repairs can't wait for economic recovery. We will closely monitor how tariffs and economic uncertainty affect our customers. Fortunately, we do not face direct supply chain disruptions that could hinder our operations. Based on our understanding of the current industry and consumer landscape, and considering various influencing factors, we have provided our full-year guidance. There are many variables at play, but we have a clear view of where our business stands, the industry's trajectory for the rest of the year, and how our initiatives might affect our performance. Regarding investment and margins, we have made significant investments in enhancing customer experiences over the last few years, even at the cost of some revenue. These initiatives have positively impacted customer metrics significantly, including improvements in NPS and win rates, while also driving operational efficiency, enabling us to grow profit alongside lower revenue. We've also maintained strict control over fixed costs, reducing overhead by $100 million compared to last year. We believe we are well-positioned to support investments necessary for growth in 2025 and beyond. Our recent discussions have centered on homeowner preferences and sales force consolidation, which represent key investments that can lead to profitable growth in 2026. While there will always be variables to consider, we believe we've completed significant structural changes to our business. Thus, we are optimistic about continuing to enhance customer experiences and drive revenue growth at our current level of fixed investment. Looking ahead to 2026, we will evaluate potential increases in our TV and offline advertising spend. For 2025, we plan to scale back slightly to allow adjustment time to the new homeowner choices. We will assess our advertising effectiveness this year to inform our 2026 planning and consider any high-return investment opportunities that arise. Our guidance for the year reflects stable investment levels. To reiterate Jeff's earlier points, our strategy for the near term focuses on optimizing revenue per lead and leveraging our proprietary channels, which are critical drivers for returning to revenue growth in 2026. We expect this growth to come with high incremental margins, as we aim to retain improved unit economics and achieve operating leverage without expanding our fixed cost base into 2026.

Great. Thank you, Rusty.

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

I have two questions. First, tying together your comments about the macro environment and what you mentioned earlier about the homeowner experience, could you elaborate on what gives you confidence that revenue trends will continue to improve throughout the year despite those dynamics? Secondly, now that you are operating as an independent company, I would like to know your priorities for capital allocation.

I can address that. Thank you. In terms of our confidence in revenue trends, we have seen a notable improvement in the growth of proprietary service requests and leads, along with expected strong growth in revenue per lead. This positions us well for year-over-year revenue comparisons and helps us mitigate sequential declines. We anticipate some advantages in comparisons during the third and fourth quarters as we began implementing certain homeowner choice principles. Overall, we feel optimistic about the remainder of this year and moving into next year, where we expect the network channels to stabilize. With 80% of our business growing and 20% remaining flat, we are achieving growth. Regarding capital usage, we've recently repurchased a substantial number of shares, and we plan to continue buybacks as necessary to counter dilution, both past and future. We've made that commitment clear over time. As for our acquisition strategy, we are currently focused on integrating several acquisitions we've made in our American operations, which requires considerable effort. While we have core opportunities, taking on a significant new acquisition would necessitate more integration work. However, if we identify an opportunity that could benefit our shareholders, is a good use of our capital, and is strategically important, we would consider pursuing it. I do not see our stock as a primary means for major acquisitions due to some limitations related to tax-free spin-offs. This encapsulates our capital strategy for the next couple of years.

Thank you.

The next question comes from Justin Patterson from KeyBanc. Please go ahead.

Thanks. Good morning. Jeff, you've made a lot of foundational changes to Angi in the experience for consumers and pros. As you look over the course of '25 and into 2026, what do you view as the next product initiatives to take more friction out of the ecosystem and improve jobs done well? Related to that, how does AI change your view on the product experience you can provide and potentially introduce some operating efficiencies over time?

Great. Those are great questions. So we anticipate that we are going to continue on our most core initiatives through the next several months. And those are getting the conversation with the homeowner to ask the right questions to get the right job details to get the right match. We're doing that both through significant iteration on our set of questions, which we expect to be materially done in the second half of the year. And just to reference your second question, we've added an LLM-based AI helper in that homeowner path, which is going to help increase and already is increasing the quality of the match without actually hurting conversion. The team has done a great job with that product. And so we have a very high focus on making sure we get the job details right from the homeowner in a way that the homeowner understands to be able to match to the pro so that the pro gets the work the pro wants. I think the second piece there also drives matching, and it's the single pro product initiative we've been talking about. One-third of our revenue is coming from the old Ads product. Ads pros have less specific choice over the tasks they opt into than the Leads pros given the nature of the platform and the product. They're also required to take certain sets of ZIP codes, certain territories without having the flexibility to pick and choose. We're moving all of those pros and all of the new pros into a situation where they are able to pick and choose upfront. This is going to drive multiple things. First of all, the homeowners are going to get contacted more. The contact rate is lower with the Ads pros because they get some leads that they don't actually want because of the basket they bought. Secondly, the pros will actually very specifically pick what they want, meaning we'll have higher engagement and we will know much better exactly which jobs to match to exactly which pros, based on task and geography. So we see moving to a single pro product as a significant uptick in the customer experience because we're going to match better. Matching better means you're more likely to get a hire and a job done well. Those are two critical pieces. I think beyond that, we have opportunities to drive the connection and interaction post-match. We've had a reasonable amount of success driving our messaging and communication in Europe, and we've been able to drive up our hire rate nearly 50% over a couple of years. We've obviously had big gains in the U.S., too, but we think we have more runway in terms of driving the post-match experience. And then I think let's moving to AI. We think about AI as a technology that can facilitate our experience everywhere. The first place we're getting it out with impact on the customer is obviously what we call the service request path and the conversation with the homeowner to ensure we understand the job correctly and get the right match. There's obviously a number of other applications. As we roll out online pro acquisition, there's opportunities to use AI to enhance that path. You then can imagine that the AI and LLM interface allows us to move to smoother chatbots that we can use not only on-site, in the app, but also through voice and text. I think moving on from there, you can apply the same principles to the customer interaction with, first, our care operations teams; and secondly, our sales operations teams where we can drive more efficiency and success in terms of contact rate and solving the customer problems using AI in chat interfaces and perhaps voice interfaces on top of the human calls. I think I can go on and on from there because I think the LLM is fundamentally technology we can use to elevate our experience in multiple places and make it an easier, smoother and higher converting conversation, not just to the placement of service requests or the onboarding of a new pro, but the actual connection and conversation between the homeowner and the pro that leads to a job done well.

Thank you.

The next question comes from Stephen Ju from UBS. Please go ahead.

I was wondering if you could provide some insight into the factors affecting your revenue growth, especially in international markets, which appear to have experienced a year-over-year decline. Additionally, I appreciate the disclosure regarding the monthly active professionals; it seems that number may have reached a low point or is approaching one as you phase out previously acquired professionals. It appears that the rate of new professionals you're bringing in and the expected churn are starting to align, suggesting that this trend may hit a low point and eventually begin to improve. Any further details on this would be helpful. Thank you.

I can address that. First, regarding our international business, our Canadian operations were struggling with an outdated platform that offered low returns on investment and relied heavily on outbound sales. We transitioned that business to a new international platform, which has a lower entrance barrier but provides a much higher return on investment and better profit margins. We are in the process of phasing out the subscription model that, while high in value, offered a poor customer experience. We have also eliminated our sales force and shifted to online customer acquisition. This has resulted in a decrease in revenue, but profitability has increased significantly. We've implemented similar strategies at a smaller scale in our European markets over the years, achieving great margin leverage and profit growth alongside revenue increases. The substantial drop in revenue is affecting our international figures. Additionally, regulatory changes in Europe, particularly the requirement for new pros to provide proper identification, have been affecting conversion rates. We’ve faced challenges acquiring new pros who didn't upload the required ID, and earlier this year, we had to enforce ID checks for all existing pros due to the Digital Services Act, which mandates customer verification for marketplace businesses. This has led to a temporary decline of about 5% to 8% in our network due to identification conversions. Other regulatory issues, like GDPR affecting cookies, are also influencing our operations. Nevertheless, the core of our business remains strong. Over the past few years, we have successfully improved the rate at which homeowners submit service requests and hire professionals through our platform. We’re pleased to report a double-digit positive Net Promoter Score from homeowners and margins approaching 20%. Looking at monthly active professionals, we anticipate continued decreases in the gross number, resulting from previous unprofitable acquisitions. We retain some of these professionals, but our current acquisition practices are more efficient. Although we expect apparent declines in the numbers through 2026, this trend masks real growth potential and untapped capacity in our network, meaning we're equipped to achieve the necessary growth in 2026. We expect to see progress by 2027, contingent on the effectiveness of our online enrollment rollout. We’re currently onboarding around 140,000 professionals yearly in Europe within a smaller market. While we don’t expect to see similar numbers in the U.S., we do anticipate positive results. Our Boston market test of the European platform suggests that online enrollment can be effective in the U.S. as well, although more extensive testing is required to validate this idea. We are optimistic about our online marketing program's rollout in Europe and anticipate pro network growth to start improving by 2027, although we need to monitor how everything unfolds.

And our next question comes from Dan Kurnos from The Benchmark Company. Please go ahead.

Great, thanks. Good morning. Jeff, can we just follow up on that for a second, the pro pool? I mean if we think about the rich history, data history that Angi has, and we think about either reactivations versus attacking new pros, as you build the pool, should we think of kind of like a smaller, more concise, but more engaged and, call it, like top 20% of pros as sort of the near-term target here and that your customer acquisition cost is substantially lower? And then on marketing channels, Rusty talked on it. But again, now that you guys have this reset, love to hear how you guys are thinking about attacking paid channels in kind of different ways, especially given low organic brand recognition. I know you guys are talking about TV, but I'm more curious about attacking social and other channels as you guys start to see service requests recover.

We have made significant progress in our pro acquisition strategy by reducing our sales base. While we have decreased the overall pro acquisition costs, we have greatly improved our capacity per acquired pro. This is reflected in our nearly 150% year-over-year increase in net margin, which highlights our focus on higher value, higher capacity pros while spending considerably less on acquisition. Additionally, we have a valuable database of pros who have previously used our services, and the transition to our new model provides a great opportunity to reengage them, which we believe will enhance our acquisition efforts over the next couple of years. We anticipate maintaining a smaller sales force and fewer pros for now, with growth expected in 2026, showing capacity growth instead of raw volume growth. Regarding our paid channels, we are indeed focusing on improving acquisition costs and yields. We have successfully stabilized our proprietary lead growth and are seeing a turnaround in service request growth, which we aim to continue in the coming year. Our acquisition via SCM has also shown significant year-over-year growth, including progress in display networks and META's ecosystem, delivering a good return on investment. Our dedicated paid marketing team has performed exceptionally well, allowing us to enhance our acquisition efforts even in proprietary channels, despite challenges in the organic ecosystem. This will remain a crucial aspect of our ongoing success, and I would like to acknowledge the hard work of our teams across product, tech, and marketing.

Super helpful, Jeff. Thank you very much.

All right. Operator, I think we'll take one last call if you can queue it up, please.

Let's find out how many questions we have left in the queue.

We have one more, sir.

Could you discuss how or if your strategy changes now that you are more independent, and what kind of flexibility this gives you that you didn't have before? Additionally, could you elaborate on your expectations for how the self-serve platform for sales might grow the professional user count and the efficiency it could drive as it is integrated into the platform?

So in terms of our strategy with IAC versus without IAC, there's really no change. What we've been saying and executing on the last couple of years is the same today as it was a couple of years ago. We know that the North Star experience, the place where we get world-class NPS from our homeowners and high retention from our pros is when a homeowner on our platform hires a pro on our platform. And so we have been driving all of our experience towards improving that success rate. That's not going to change. We have to serve our customers, and we have to serve them with positive unit economics, and that's the core of what we're doing. I think we're very fortunate to be part of the IAC ecosystem. IAC has always looked to its companies to set their strategy and drive performance within their umbrella. And I think we're going to be continuing to do the same thing here. And obviously, we were lucky to have Joey as our Chairman as part of IAC and Joey is our Chairman post IAC, and that will continue as well. In terms of flexibility, the one piece you get is you get a more liquid publicly traded stock. That's great in terms of employee liquidity and stock-based compensation, and it's also of some value as a potential acquisition currency. Again, that's not something we're thinking aggressively about. There's limitations on what we can do there in terms of the spin-off, and the Board would also want to feel that the stock was in a place where that made sense as a currency. So I think longer term, yes, there are advantages. Shorter term, there's nothing that really changes in our mindset. Obviously, as I said earlier, whether it's cash or stock, we will do appropriate strategic operationally effective acquisitions so that we can create value, and we'll figure out how to integrate them and execute. In terms of pro online acquisition, which I think you referred to as self-serve, what I mentioned earlier is we've been effectively doing this in Europe for years, acquiring north of 10,000 pros a month. The countries we're operating in, in Europe are, I don't know, half the gross market value of the U.S. market. And so there are some differences in the composition of pros. Pros in Europe tend to be more no employees as a percentage, roughly half, whereas we think it's more like one-fourth in the United States, which may lend itself more to self-serve. So we're not projecting 10,000 a month out of the gate or anything like that, but we definitely think that we can achieve some volume, and we can serve some pros who were not really ROI positive with the sales model where the customer acquisition cost is higher or is interested in the higher average revenue per user models that we sold before. So we think we can increase our network. We can increase our liquidity across tasks and geographies, and we think that it can net grow our capacity and, ultimately, our active network in a very cost-efficient way. In Europe, we've been able to run this at 4:1 kind of LTV to CAC. That includes all the organic traffic. I think paid incremental runs between 2, 2.5x LTV to CAC, maybe 3x when we're really firing on all cylinders. So we've got a great opportunity to kind of really replicate the unit economics that we've targeted with our sales force and grow our pro base going forward. And then once they're on the platform, we'll have the opportunity to upsell and bring them into adjacent geographies and tasks. We think there's opportunity. That being said, it's not out yet. We don't have real numbers, and we don't want to get too far over our skis in the spirit of setting reasonable expectations and outperforming. So I think with that, we can wrap the call. I want to thank everybody for listening. Thank you, operator, for helping us. Thank you, everybody, for your questions, and we look forward to talking to you next quarter. Thanks. Appreciate it.

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