Good day, and welcome to the ANGI Homeservices reports Q1 2020 results conference call. At this time, I would like to turn the conference over to Glenn Schiffman, Chief Financial Officer of IAC. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and I hope you all are safe. Glenn Schiffman here, and welcome to the ANGI Homeservices first quarter earnings call. Joining me today is Joey Levin, Chairman of ANGI Homeservices and CEO of IAC; and Brandon Ridenour, CEO of ANGI Homeservices. Joey and I will also address any questions you may have on IAC’s first quarter results. 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 our website. I will shortly turn the call over to Joey to make a few brief introductory remarks, and then we will 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 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 both IAC and ANGI Homeservices’ first quarter press releases and our reports filed with the SEC. We’ll also discuss certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we will refer to today as EBITDA for simplicity during the call. I’ll also refer you to our press releases, the IAC shareholder letter 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. Joey?

Thanks, Glenn. Welcome, everybody. Glenn and I are sitting here in New York City, six feet apart. We’ve got Mr. Ridenour on video in Colorado, where we’re exchanging hand signals to manage the call. But other than that, the earnings ritual is not much different. We always do this with everybody remote, and hopefully that goes smoothly today. Normally, I’d like to thank our employees in the quarter when we’re doing great work and getting good results. I actually want to thank a different group today, which is our employees have the benefit right now of working from home with only minor inconveniences. And the only reason we’re all able to operate from the safety of our own homes is because there are a lot of people and a lot of other companies who are putting themselves in harm’s way and doing the work on the frontlines. I just want to say that on behalf of all 9,000 IAC employees, we’re incredibly grateful to that group of people for making what we do and what a lot of other people do possible. Back to IAC. We’re really pleased with how the quarter turned out given the overall environment. We’re cautiously optimistic regarding where things go from here. We have a meeting with the CEOs every Monday afternoon, which we’ve been doing since we started working from home and sheltering in place. It’s really interesting to see the tone of the business evolve over that time; the first couple of weeks had a little bit of confusion, the next few weeks a bit of disappointment, and the two weeks following saw a lot of optimism among our businesses. It’s tougher to be a part of IAC right now where we can see the benefit of a multi-business model and communicate with each other on what’s happening and how we’re managing through changes in the business. It’s great to see how our leadership is handling that. We’ve posted all the numbers; you’ve seen the results. You’ve seen our numbers now through April, and I’m sure that raises some questions, which I’ll now turn over to the operator to get the first question, which we can start answering. Thank you.

Thank you. We’ll take our first question from John Blackledge with Cowen.

Thanks for the question, and hope everyone is doing well. Broadly, for Joey, Glenn, and Brandon, the April trending data across many of the businesses looks better than expected. Just given the uncertainty around the pandemic, it would be very helpful if you could walk through kind of the puts and takes on the trajectories for each business as we head through 2Q and into the second half of 2020. Thank you.

Sure, John. Maybe I’ll just look at what the table is we published in the letter and walk you through that. Match, hopefully, many of you heard the call yesterday, with Shar and Gary, where I thought they did an excellent job talking about Match and what’s happening and what the outlook looks like. You can see that business is still growing, and we expect it to continue to grow. Some of the dynamics inside of Match are pretty interesting; female engagement on that platform is growing significantly. Some of the trends you see in that business kind of support the financial metrics, and we’ve worked hard with product over many years to get to this point. Certainly, no one would ever wish this pandemic on anybody, but there's a silver lining: Match is witnessing some positive metrics that support the business and the product experience. We're optimistic about Match and its future there, although it won’t likely be part of IAC much longer. At ANGI, it’s been interesting to watch. We saw demand drop in the second half of March and the beginning of April, but we’ve seen a lot of that demand come back since then. We don’t know if that’s permanent; whether it’s pent-up demand from March and early-April that suddenly came through later in April and May, or perhaps an improvement in weather coinciding with a more optimistic situation. It’s hard to predict the future given that we’ve had a significant amount of volatility, but we are cautiously optimistic about ANGI right now. I feel we’ll spend more time, and Brandon will spend more time going through some of the puts and takes around there. In Vimeo, we’ve experienced a great increase in demand, reflected in the bookings numbers we shared. You can see that in revenue acceleration through April. One hand, it’s positive to see those numbers come through, but it raises concerns about whether this trend is temporary. The reality is this shift has been anticipated for a long time; we didn’t expect it to arrive so sharply. Businesses were advised to use video for communication even when they still had a physical presence, and now that physical gatherings are limited, video has become the primary method for interaction. Our hope is that as businesses adopt these tools and recognize their effectiveness, this trend sticks, aiding the growth we thought would happen. At Dotdash, we’ve been pleasantly surprised by how well it’s holding up. Traffic has surged as everyone spends more time on devices, and advertising revenue has remained stable, particularly performance revenue. We're seeing lots of businesses with traffic up 40%, which excited me at first, but we may not be taking share if others are up the same. However, our traffic is growing in areas with intent. Our audience is focused on trying to accomplish specific tasks, which is attractive to advertisers right now. Finally, in Applications, the Desktop revenue business is disappointing and continues to decline, while the mobile application business is performing well.

And John, I’ll provide more detail to help you navigate through the year. Due to the uncertainty, the dispersion of outcomes in financial performance is going to be wide this year. I caution everyone not to run rate the March or April performance. We don’t know the length of the quarantine, consumer behavior thereafter, or the depth of the anticipated recession in the back half of the year. In terms of ANGI Homeservices, demand was down in April by 8% for service requests and 11% for monetized transactions. We expect demand to be down throughout the year; hence, we don’t anticipate our ability to monetize that demand will increase. We saw a little indication of that in March and a bit in April, as revenue per monetized transaction in Q1 was up 17%. The point at which demand decreases and our ability to monetize meets will determine whether we can grow for the year. While there are growth scenarios, there are also scenarios where we do not grow in that segment. As Brandon will talk about, we’ll continue to innovate and believe we will take share. As you think about EBITDA for the business, we came into the year planning to create incremental margin, but anticipated discretionary investments of $30 million to $50 million will probably eat into that margin based on revenue profiles this year, as we likely won’t create incremental margins and may see decremental margins. With respect to Vimeo, it's noisy with latest numbers. Recall in Q1 2019, we sold our hardware business, including about $2.3 million in revenue. In Q2, we acquired the Magisto business. The best way to evaluate Vimeo is to strip out acquisitions and analyze the organic growth rate, which for subscribers, excluding Magisto, grew by 10%, up from 8% last quarter. ARPU increased by 11%, also an acceleration, resulting in a 22% organic growth for the quarter. Bookings growth including Magisto was 59%, but 41% when excluding it. As for Dotdash, the Performance Marketing revenue line item reflecting 115% growth is indicative of the business's diversity, while the performance-based marketing will likely grow throughout the year, we expect display revenue to shrink. Where those lines cross will determine overall growth potential this year.

Thank you.

We’ll take our next question from Brad Erickson with Needham & Company.

Hi guys, thanks. Just a couple of questions. One for ANGI: Can you discuss ROI at this stage in Performance Marketing and how you balance it against a slight drop in demand and what’s likely a less competitive advertising environment? Then I have a follow-up.

Sure. This is Brandon. Thanks for the questions. We have seen costs decline across nearly every marketing channel that we use to acquire both service providers and homeowners, which has benefited us. We find ourselves fortunate as essentially the only marketplace at scale focused solely on home services. We have thousands of employees dedicated daily to improving homeowner experiences and providing best-in-class tools for small businesses to reach those homeowners. As you can imagine, we witnessed a stress test unlike anything we wanted to see, though the results were informative. From March's demand decline, we noted a couple of things: firstly, directly responding to your inquiry, marketing costs have decreased substantially in nearly every channel. Additionally, we observed the resilience of our business model at Angie’s List, which was only modestly affected. Although HomeAdvisor and our Marketplace segment did experience immediate drops in transactions, we noted significant engagement from service providers already using our platform, as well as an increase in new service providers attracted by what we believe is the best ROI toolset to reach homeowners. April was remarkable for us with SP sales, bringing on more SPs than ever in our company's history while seeing improved engagement from existing SPs. This cushioned the impact of declining demands significantly. Generally, from an overall ROI perspective, the landscape appears favorable for us right now, and we've not seen this change, even though our April results indicate a strong recovery in overall consumer demand. We're still seeing relatively favorable dynamics from an advertising rate perspective.

Got it. That's great. And then just any quick update on fixed price, any milestones you can share about changes or accelerated expansion as a result of COVID? Thanks.

Yes. There are two aspects to fixed price: First, we are still investing as planned and currently on pace. Certainly, reducing the top of the funnel by 40% or 50% has an impact, but it proved temporary. In April, we were back on track, witnessing the biggest weeks in fixed price history in terms of bookings and revenue. We are thrilled with the trajectory we see there, which aligns closely with expectations. More importantly, we have expanded into various project categories with higher value and complexity. We have confirmed that demand exists from consumers willing to engage and purchase these projects digitally. This verification is crucial because it ensures the market is receptive, and we aim to master the fulfillment and logistics involved in completing these projects. Achieving this at scale across every market we serve will be our focus for the remainder of the year. The initial categories we launched had a total addressable market of about $5 billion, while the next set exceeds $25 billion, unlocking considerable additional potential gross merchandise volume by expanding to new categories.

Great, thanks.

We'll take our next question from Cory Carpenter with JPMorgan.

Great, thanks for the questions. Brandon, could you provide more color on the performance across different categories and geographies in the quarter in April? Additionally, how do you think about the appropriate level of spend as the business starts to recover? Thank you.

Yes. That's a great question. In mid-March, I mentioned that when they canceled the NBA season, the next day sort of the bottom fell out across effectively every market and category. People seemed in shock. That lasted a couple of weeks before we began to see a very aggressive, V-shaped recovery in demand, even as lockdowns spread across the country, which I find interesting. As expected, there's a significant difference between projects done indoors versus outdoors, and which projects are necessary versus discretionary. Indoor discretionary projects, such as cleaning services or remodeling, are where we see the largest impact. Everything else, whether a nondiscretionary service indoors or outdoor projects, are recovering well. All of these are experiencing recovery, but there remains hesitancy among consumers regarding indoor discretionary work. One interesting observation is that we’re seeing a significant shift in our site’s customer mix. Since February, we have noticed a higher percentage of new customers visiting our marketplace compared to before. Given our 20-year history, we have served numerous households, yet we’re now seeing more entirely new customers joining us. This signals a potential acceleration of the shift from offline to online. People staying at home have fewer alternatives for their time and money. Like many, I have a list of home projects that are now a priority. We're uncertain how long that trend will last, but it’s a positive development, making homes a focal point and prompting more project work. Our marketplaces have always provided an advantage over traditional referrals, where behavior change is challenging. In this social distancing environment, we are providing significant value through our platforms to help individuals complete projects securely and with confidence. We’re rapidly introducing new features like contactless payments, video calling, and allowing providers to indicate the precautions taken during visits. We believe these features will help increase consumer comfort with doing indoor discretionary projects, which is a focus for the remainder of the year.

Great, thank you.

Our next question comes from Kunal Madhukar with Deutsche Bank.

Hi, thanks for taking the question. I have a bigger picture question. In terms of managing the portfolio long-term, how should investors look at the milestones you set? How do we measure against those milestones? I'm trying to understand the portfolio strategy going forward and how to evaluate things on a timely basis. Thanks.

Thanks, Kunal. It's a great question. We still assess IAC or break it down into pieces rather than looking at it as a single aggregate entity. This will remain true following the separation from Match. In that regard, we need to address each piece. Take ANGI Homeservices, for example; we believe it is still in the earliest phases of its market penetration in a tremendous market. The product innovations we are pursuing currently have meaningful potential to unlock more of that market, thus changing consumer behavior towards a more natural online transaction. This is our primary focus for ANGI Homeservices: increasing demand and supply and ultimately revenue. If we fail to build this business to multiples beyond its current size by executing our product pipeline, we will be disappointed. Vimeo follows a similar narrative. Despite strong growth recently, we believe every business will need video, and we will evaluate subscriber growth, bookings, and revenue as primary metrics. As long as we maintain the current trajectory, the business should grow significantly. Dotdash demonstrates the same approach; both the publisher and aggregated data show incredible performance by focusing on appropriate and consumable content. Dotdash has further potential across various content verticals, such as healthcare, finance with Investopedia and The Balance, and home services, where we face bigger competitors. Our aim is to achieve substantial growth in those sectors, as evidenced by our recent acquisition of Care.com, which occupies a significant portion of the market, particularly in offline interactions. Modernizing how people access reliable caregiver services comfortably and conveniently is vital for this project’s success, similar to what we implemented at ServiceMagic years ago. These are our key growth engines. While we may not excel in every endeavor, we believe all are on the correct growth trajectories. The final aspect beyond those businesses is the cash we will have available due to the Match separation. Depending on the outcome of the equity sale, we will have a notable amount of cash. In the past, our capitalization has allowed us to make advantageous investments during market disruptions, and that will be our intention.

Thank you.

Operator, next question please.

We'll take our next question from Jason Helfstein with Oppenheimer.

Thanks. Two questions: Firstly, I want to explore ANGI and then follow up on Care. Down 2% in April is impressive given that COVID has made people hesitant to invite professionals into their homes. I want to focus on what we call necessary projects, which make up about two-thirds of your GMV while the remaining one-third is discretionary projects likely sustained. Could you provide color on this? Has that two-thirds segment experienced growth?

Thanks, Jason, for the question. Two-thirds are nondiscretionary, and many discretionary projects occur outdoors. Therefore, there’s significant differentiation in how projects are realized indoors versus outdoors. Overall, we entered April at a major deficit, but we exited with some strength. As Joey noted earlier, there’s considerable uncertainty surrounding the nature of that strength; you can presuppose it's delayed or pent-up demand or even evidence of a boom in home services driven by people spending more time at home, increasing their desire to improve their surroundings. While we aren't fully certain, we have confidence in our solid financial position. April's performance exceeded expectations given the circumstances, and we hope to facilitate the transition of offline to online project requests during this period.

Our resilience is evident beyond just discretionary and nondiscretionary. As you know, we operate across 500 categories and 400 markets. We witnessed greater declines in regions most affected, particularly in the Pacific Northwest, Northeast, and northern Midwest, while other areas have displayed more positive performance. It's essential to recognize that service providers need us more during times of decreased demand, as evidenced by our compelling ROI metric, indicating $25 to $30 returns on every dollar spent. Furthermore, our fixed cost base is minimal, with 70%-80% constituting variable costs, so we can manage our cost structures effectively if necessary.

Regarding Care.com, the legal landscape concerning COVID-related liabilities is still evolving. It's essentially a regulatory and policy challenge that remains uncertain. However, the benefit of our platform is limiting interactions; one can find reliable employees while minimalizing exposure. We are striving to utilize tools to verify safety, such as testing or establishing safety protocols, which would greatly assist in assuring our user base. Until robust measures are put in place, interactions remain confined, minimizing field exposure. Apart from that, responsibility will ultimately lie with individuals assessing their comfort levels with exposure, influenced by regulatory guidelines and recommendations.

We’ll take our next question from Dan Salmon with BMO Capital Markets.

Great, good morning everyone. Maybe first for Joey and for both Glenn and Brandon. Yesterday, Shar mentioned increased use of video tools and more female engagement, which speaks volumes about specific product developments emerging due to COVID. You’ve spoken about accelerated behavior shifts; can you identify specific product opportunities for ANGI or across the IAC businesses? Vimeo appears to be an obvious candidate, but could you highlight others?

Sure. Brandon, why don't you go first on ANGI and video, and I’ll close out with the broader company opportunities.

Absolutely. Let me share two examples. Firstly, we introduced contactless payments recently. This allows consumers to pay for any project across the HomeAdvisor marketplace without needing physical cash or checks, supporting social distancing efforts. This offers convenience, and if we successfully close the loop on significant project completions, we create an opportunity to test new business models like financing while deepening engagement with customers to improve long-term value. Additionally, we added video calling, enabling consumers and SPs to hold virtual meetings, which benefits both parties in terms of safety and efficiency, saving costs and time for service providers. These features were particularly relevant because they’ve compelled people to embrace business conduct digitally during this crisis. We’re confident that even as conditions normalize, these adaptations will lead to lasting behavioral changes.

I agree with that, and you can extend this to other businesses as well. Vimeo, for example, is seeing increased traffic particularly in kids' channels with a 15x increase in sign-ups, indicating strong growth potential in this area. We see similar patterns with personal trainers and fitness experts witnessing 5x increases in demand for fitness channels. This expansion of functionality allows us to onboard more channels, which positively impacts our business. Through this, you see the growing influence of video in diverse business areas we haven't previously tapped into extensively, and it fosters ongoing collaboration with The Balance, Investopedia, and Dotdash as part of our collective vision.

Concerning the $1.5 billion, the choice of words around ‘activating the option’ is well put. We registered the $1.5 billion shares for potential sale related to the separation, which will convert into Match common stock thereafter. While potential buyers will become evident post-transaction and after the closing, rest assured these shares will only be delivered then. This gives us flexibility regarding market conditions at the time.

Thank you all for joining us. Everyone, stay safe, stay healthy, and we look forward to speaking with you next quarter.

And that does conclude today's conference. We thank you for your participation. You may now disconnect.