People Inc Q2 FY2021 Earnings Call

Good morning everyone. Mark Schneider here and welcome to the IAC and Angi Inc. Second Quarter Earnings Presentation. Joining me today is; Joey Levin, CEO of IAC and Chairman of Angi; and Oisin Hanrahan, CEO of Angi. Similar to last quarter supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relations section of IAC's website. I will shortly turn the call over to Joey to make a few brief introductory remarks and then we will open it up for 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 and Angi's second quarter press releases and 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 press releases the IAC shareholder letter and again to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now let's jump into it. Joey?

Thank you, Mark. I do want to start by thanking Mark Schneider here who everyone on the call knows very well because he answers every single one of your emails and phone calls probably instantly. And you all know he has an encyclopedic knowledge of IAC. He's been here I think as long as I have, maybe even a little bit longer. But he's always been behind the scenes. Today he is on the screen. You get to see his smiling face. So we're lucky to have Mark here. I know there's going to be a lot of important questions today, so we're going to want to get to questions quickly. But I'll just quickly take stock of where we are relative to where we've been. And going into COVID, Match and Vimeo were both still part of IAC. And they are now off on their own doing very well, $50-something billion of value off separately. And what's left in IAC is lots of small businesses and Angi Homeservices. And when I look across those businesses, every single one of them – I think almost every single one of them is better off coming out of COVID – I don't know if you can quite say coming out of COVID yet, but is better off today than we were going into the pandemic. And that's probably hardest to see at Angi but we're going to talk about Angi a lot today and what we're doing and how we're building that business for the long term. And that's really, I think quite an accomplishment, a great testament to the businesses that we have and the people that we have working here and I'm very grateful for that group of people and what I think we can do from here. So we're excited about the future. We'd love to talk about what we're doing. And let's start with the questions.

Great. So our first question will be from Dan Salmon at BMO.

Good morning everyone. I've got two questions. First Joey, can you take us another layer deeper on the brand transition impact from both Angie's List, Angi and then it looks like the more significant impact on the HomeAdvisor brand during the quarter and specifically why did that have such a significant impact on EBITDA? And then second, if you could just spell out a little bit more about the contribution from Total Home Roofing in the July growth versus where the organic trends are in that business currently. And perhaps just a few high-level comments on your reasons for buying this business? Thanks.

Yes. I'll let Oisin and Mark both elaborate here. But to address the first part about brand consolidation, it's essential to explain our reasons for it. We were investing in multiple brands, which was inefficient. Furthermore, the brand generating the highest revenue didn't seem sustainable in the long run. We've previously discussed HomeAdvisor's success as a leader in its category with the best products and the most service professionals. However, after a conversation, someone would often refer to it as Angie's List. While we do own Angie's List, the downside is that despite the considerable investment in that brand, it lacked stickiness. It was too generic and literal. We had another brand that truly defined the category, which was Angie's List. However, the concept of a list is outdated, leading us to rebrand it as Angi. We believe this new name can define the category and have lasting relevance, representing a more ambitious idea than a literal brand. In practical terms, we've updated the angieslist.com domain to Angi. This has occurred multiple times in our history, typically resulting in a V-shaped traffic pattern where traffic initially dips sharply before recovering over time. We've witnessed this at Dotdash with several brands, and we experienced it when transitioning from Service Magic to HomeAdvisor. Other companies, like Expedia with Vrbo, have faced similar situations. It’s a challenging path. What we underestimated was how quickly HomeAdvisor would lose search audience without brand support, and the drop has been more pronounced than expected. As I noted in the letter, this reinforces our decision, indicating that brand lack of stickiness required ongoing support. The investment in the new brand is expected to be much stickier and resilient. The absence of brand support has caused our search audience to decline more rapidly. This also relates to your margin query, as the organic search traffic is high-margin. Losing that traffic directly impacts our bottom line. Oisin should cover additional details, including aspects related to the acquisition.

Thank you, Joey. You highlighted an important aspect: we are fully committed to the Angi brand. Our confidence grew even more when we noticed the significant drop in HomeAdvisor's performance after we reduced our spending on it. The ongoing investment in HomeAdvisor was supporting various channels, including organic search and SEM. When we redirected that investment towards Angi, particularly in TV marketing, the decline was quicker than we expected. However, the positive side is that the brand recognition we are building for new Angi is exceeding our expectations. We are transferring brand equity from Angie's List to Angi at a much faster pace than anticipated, in terms of both unaided and aided awareness. In fact, on a dollar-per-point basis, new Angi is performing seven to ten times better than we did during the initial transition from Service Magic to HomeAdvisor. We are genuinely excited about this progress. Yet, it has affected our EBITDA. Regarding Total Home, we essentially have two business models within Angi. One involves professionals paying us to access customers, while the other involves us paying professionals to perform work. Given the current macro environment, which has seen a significant contraction in professional supply due to COVID alongside a sharp rise in consumer demand, the business model where professionals pay us is facing challenges. Despite the brand transition we are undergoing, this segment is struggling, but we believe this situation is temporary and recognize the macroeconomic volatility due to COVID. At the same time, we are committed to strengthening the other aspect of our business where we are effectively matching supply and demand. That segment, where we pay professionals to undertake work, is performing exceptionally well. The growth rate is around 120% in Q2 compared to last year, with July seeing growth of about 160%. The acquisition of Angi Roofing contributed to the overall growth in Angi Services. Without this acquisition, July’s growth would have mirrored June's performance. We are investing in Angi Services to increase supply and enhance the customer experience. Our professionals aim to expand their business, while our customers just want their jobs completed efficiently. In the roofing sector, which we are focusing on through Total Home, we are building specific expertise to help customers complete their roofing projects swiftly. With Total Home or Angi Roofing, we can quote jobs quickly, procure materials, and send roofing teams to the job site without directly employing these contractors. This strategy enables us to enhance supply and specialize the tasks at hand. We are enthusiastic about deepening our presence in the roofing category, which has a substantial average order value and a high rate of job financing. Approximately 20% of roofing jobs involve financing, which allows us to further explore financing options. By employing technology such as aerial LiDAR and photography, we can better price roofing jobs beforehand, leading to a smoother end-to-end experience on Angi through Total Home or Angi Roofing. Overall, we are excited about the direction in which Angi Services is heading.

And just a couple of things to add, when we did the IAC has gone through a couple of its businesses things like this brand consolidation before, and when we did the Service Magic and HomeAdvisor transition almost 10 years ago that took roughly 16 months before revenue returned to growth following the commencement of that. And similarly, at Dotdash, when we did the verticalization several years ago, on average it took about a year for each of those verticals to return to revenue growth. So, these things do take time. On the July revenue, as we said in the shareholder letter, we do expect that sort of organic run rate to continue for the next few months, so sort of in and around that 7% we saw in May, June, July. And then you layer on the acquisition. And just to help people size that acquisition compared to total Angi, it's relatively small. It's a little outsized in terms of growth. Just remember that, this is in our Angi Services bucket, which recognizes revenue as gross. As Oisin said, these are $100,000 tickets or more type jobs. And then seasonally, obviously, the summer months for roofing is very strong. So with that, we'll go to our next question from John Blackledge.

Great. Thanks. Couple of questions. Dotdash, the revenue and EBITDA growth was strong again in the second quarter. Could you discuss the quarter? And then we saw the top line decelerate in July. If you can Joey maybe offer a view on Dotdash's second half growth? And any color on the longer-term growth vectors for that segment? And then just two other quick ones. Care.com any update on the progress there since the acquisition thoughts about kind of the longer-term opportunity? And curious when we might start to hear more about that segment more regularly? And then just any update on the CFO search would be great?

Thank you, John. I'll address these points in reverse order to ensure I cover everything. Regarding the CFO search, we have a strong pipeline of candidates. Glenn was an outstanding CFO, making it a challenge to find someone to fill his role. We have high expectations, but we also have the time and flexibility needed for this process. I prefer not to specify a timeline for filling the position, as some candidates might fill it quickly, while others may take longer. Our finance team is fantastic and has been built over the years, with exceptional individuals in every role, including our head of accounting and head of treasury, all contributing to a smooth operation that provides solid protection for the company. We will ensure we find the right person to enhance our capital deployment strategies and add value to our executive team. Turning to Care.com, while I can't guarantee an immediate breakout of the business as a separate segment, it is performing well. The Enterprise segment has positively surprised us since our acquisition, contributing meaningfully to our growth, particularly as employers increasingly recognize the need to support their employees with childcare. This trend is directly linked to workforce diversity, which is vital for business success. The lessons from COVID have clarified this for many employers and will likely continue to benefit the Enterprise segment. However, it's important to note that Care.com's core business is growing at its fastest rate since our acquisition. This progress stems from improved conversion and retention, which are crucial for building lifetime value (LTV). As we enhance LTV, we're able to invest more in marketing, creating a virtuous cycle that encourages further growth. Additionally, senior care is becoming an essential part of our offerings, boosted by demographic trends, such as an aging population and a desire for aging individuals to remain in their homes rather than move to nursing facilities, especially since COVID has negatively impacted perceptions of nursing homes. We're satisfied with our current trajectory and are not under pressure to break Care.com out as its own segment just yet. We appreciate the operational flexibility it provides us. Looking ahead, we see product development as the biggest driver for advancement, and once we achieve significant progress, we may consider establishing it as a standalone entity. Now, regarding Dotdash, it also had an excellent quarter, despite a deceleration that we anticipated as we moved into the latter half of the year. To provide context, the Display Advertising business experienced a downturn in Q2 of 2020 followed by a rebound in Q3, making the year-over-year comparisons significant. Dotdash is emerging from the pandemic with a faster growth rate than prior to it, which is excellent news. We plan to maintain our content investment, which is crucial for our competitive advantage. In fact, our content spending has increased by 50% year-over-year, and we aim to keep growing that faster than our revenue for some time. Several trends unrelated to the pandemic support this growth as well. For instance, changes in privacy and data practices are becoming increasingly relevant, and Dotdash stands to benefit since it does not rely on tracking data. Advertisers appreciate Dotdash's straightforward approach, allowing them to target efficiently without infringing on privacy. This is reflected in the statistics of the top 25 advertisers, who spent significantly more in 2021 compared to previous years. Moreover, the concept of net revenue retention, which we’ve adopted from Vimeo, is notable for Dotdash. We anticipate long-term growth rates north of 20%, focusing on content and enhancing ad performance rather than merely increasing ad volume. We see great potential in delivering qualified customers to advertisers across various sectors, and our position at the top of the funnel allows us to capitalize on this opportunity. Mark, would you like to add anything?

Yes. Yes I'll add a little bit on the second half expectation. So why we look at that north of 20% as sort of our target and what we think is for an online publisher a really healthy number just look at some of the – I'll update some of the data points that Glenn called out in the last call. So now we've – 10 of the last 12 quarters we've grown – Dotdash has grown over 20%; six of the last nine quarters over 30%; and 13 straight months of over 20%. So we do think that 20% – north of 20% is a good way to think about the business. And as Joey said, the comps do get tougher. Last year Q2 grew 18% and that accelerated to 26% and then 33% in Q4. On margins for this business, remember that 2020 was a bit of a pull forward in terms of margins for Dotdash. Like a lot of other businesses at the onset of COVID they kind of pumped the brakes on investment. For the year – margins were 31% last year. That was up from 24% in 2019. And this year we're leaning back into content. Joey mentioned that we're – we expect to grow content – our content spend – investment 50% year-over-year. So I think you should expect to see some contraction as that sort of cycles through over the back half of the year as we lean more into it so some contraction over the second half of the year. For the full year we should be relatively flattish in line with that 31% we did last year. But to get there you have to have some contraction over the back half of the year. So for our next question we'll go to Cory Carpenter at JPMorgan.

Hi, thanks for taking the questions. Good to see you on here Mark. So on the Angi Services, how do you think about the sustainability of the recent growth and what continues to drive further penetration? And then Oisin maybe if you could talk a bit about some of the progress you've made on your product initiatives like Angi Key, HomeAdvisor Pay and consumer financing? Thanks.

Thank you, Cory. To start with Angi Services, the growth accelerated to 127%, reaching $73 million for Q2. To clarify the components of Angi Services, we have three different segments. The first is our retail business where we collaborate with some of the largest retailers worldwide to sell services in-store or online. For instance, when you buy furniture, we offer furniture assembly as an additional service. The second segment is the Book Now business, where customers can instantly book a service and pay upfront, and we then provide the service. The third is managed services, where we provide an initial online quote and require a small deposit to organize the job by phone, with payments made upon completion. The typical ticket size for managed projects ranges from $7,000 to $10,000. All three segments have witnessed substantial growth, with different growth levers for each one. We are only beginning to explore the opportunities in the Book Now and managed projects areas. Early feedback shows very strong Net Promoter Scores from both homeowners and our professionals, indicating significant engagement from both sides. At a category level, we've identified around 10 categories where we believe we can build a half-billion-dollar business, particularly in sectors like roofing, which is a $45 billion market in the U.S. Future growth hinges on vertical integration and deepening our presence in each category. For the Book Now business, we have begun to establish category teams, with several of those teams now almost fully staffed. We have improved our product offerings to enhance customer experience, with strategies focused on better pricing and more accurate customer requests leading to higher repeat rates for both customers and professionals. On the managed projects side, we are heavily focusing on roofing and are also expanding into other categories like fencing to ensure a superior experience. As for Angi Key and payments, the payment product has grown to $26 million in Q2, reflecting over 70% growth from Q1. We're excited about this momentum. For instance, it hit $3 million in just one week in July. This growth reflects our efforts to create a complete service experience for customers and ensure pros are reliably compensated. While payment features are still being rolled out to all professionals, we recently rebranded HomeAdvisor to Angi Leads and Angie's List to Angi Ads, and some ad pros are still awaiting access to payments. We anticipate continued growth as we expand this feature. Financing is also becoming increasingly important; we've seen a significant increase in financing volume from Q1 to Q2, particularly within the roofing segment. This all contributes to a virtuous cycle of enhancing customer relationships while managing payments and financing to ensure jobs are effectively completed. Regarding Angi Key, it has experienced strong month-over-month and quarter-over-quarter growth, now at 140,000 members, with a pricing model of $30 per year. We still view it as a pay-to-save program with lots of potential for added value. Our vision includes helping customers access more information, educating them to enhance service levels, and potentially offering preferential financing rates for Angi Key members. Furthermore, we see numerous opportunities for additional home-related services that can be explored with Angi Key. Our overarching goal is to create a single brand that most users rely on for everything related to their homes, encompassing services, Angi Key, payments, and our broader marketplace, all of which work together to provide comprehensive access to services.

I'd like to add a brief point to what Oisin just mentioned. In the scenario he described, it's crucial to go to Angi first because it’s faster, simpler, and more reliable. It will provide the service at a fair price. The key is prioritizing Angi as your first choice makes more sense than going elsewhere for a list, reading reviews, or sorting through options. We're focusing on establishing the infrastructure that facilitates this priority for Angi, as directing customers there first is a significant part of the groundwork we are currently laying.

I think that's a really good point. I might even add that you should turn to us first for discretionary and urgent needs. Since we have a relationship with you and understand your home better than any other professional or company, we can anticipate and handle the necessary maintenance for you. You come to us first for these discretionary needs because we've developed a strong brand, have a mobile app, and you trust and engage with us. Ideally, we can foresee maintenance tasks and manage them behind the scenes, or we can prompt you by asking if you'd like services like gutter cleaning or sprinkler blowout at the appropriate times of the year. This proactive approach can be done in a seamless way. As we bypass some of the paid demand channels and bring customers directly into the Angi ecosystem, it not only enhances the customer experience but also strengthens our business overall.

So our next question will be from Brent Thill at Jefferies.

Thanks. Joey a lot of questions around capital allocation, $3.5 billion, no buyback on IAC for a while. Can you just give us your perspective on where the stock is at relative to the activities you want to do on the core side of the business?

Sure. At IAC, we have just under $3 billion, and I believe the portion you are referring to is Angi. Our priorities remain the same as always. We will focus on our current businesses for mergers and acquisitions. I've mentioned before, and I still believe that Dotdash and publishing should be a priority because we have a strong team building a successful business that has demonstrated its capacity to acquire, integrate, and create value from acquisitions, all while being scalable. I would like to explore opportunities there, which I believe exist. That is definitely one area. We will prioritize our existing businesses over new ones for acquisitions, but we are still on the lookout for new categories to enter. As we have consistently stated, we are not interested in large company acquisitions. We seek businesses that produce real cash flow and where we have a distinctive advantage, and that remains a priority for us. Regarding share repurchases, that is always part of our considerations. It will continue to be a factor because it essentially means investing more in our existing businesses by buying more of them. That’s an easy decision. It is something we have always evaluated and will keep evaluating. The same approach applies to Angi concerning share repurchases and acquisitions. I do not foresee Angi entering a completely new business with its capital, but it will look for smaller acquisitions, like the roofing deal, that can truly make an impact, and we will also consider share repurchases if it makes sense.

Great, thank you.

So our next question will be from Jason Helfstein at Oppenheimer.

Thanks. I just wanted to dig a bit deeper into Angi. How much are you willing to draw a line in the sand to kind of hold revenue growth, let's say at 7% to 10% for the foreseeable future, given that the headwinds you're facing at HomeAdvisor, from a traffic standpoint, will take time? And obviously, it's a balance there so just help us understand kind of how bad it could get over the next several quarters. Thank.

I'll begin, and then Oisin can add in. We aren't setting any strict limits. It would be illogical to do so, as there's nothing so essential that we would risk everything for a 7% to 10% increase in revenue. Currently, we are observing that level of organic growth, which has increased following the acquisition. We believe this is sustainable, and we don't anticipate any decline. However, we are in a very unpredictable environment for several reasons, including the ongoing impacts of the pandemic on people's willingness and ability to work. Additionally, we have introduced some volatility ourselves with the brand development, causing some factors to be beyond our control. We understand the current scenario and the overall direction, which has some elements improving and others declining. We have made projections based on these trends, but changes could happen, either positively or negatively, which will always be a possibility.

Yes, I agree with that. We have a clear vision and understand what we are trying to build, and we are satisfied with our goals. To provide a bit more detail, we have two distinct businesses performing quite differently due to the macroeconomic environment and brand factors. The services business is thriving in the current market, demonstrating an excellent fit and impressive growth, even though it represents a smaller segment of our operations. In contrast, the lead business faces challenges from both brand perception and the pandemic. We believe that the brand issues are temporary, and we expect to emerge stronger. The pandemic, we all hope, is also a short-term situation. We are focused on the long-term strategy rather than maintaining current performance at all costs. This quarter reinforces our commitment to making sound long-term choices to position ourselves for success. We are confident that if we provide the right product for homeowners that helps them complete their projects and supports professionals in growing their businesses, we will be in a better position. Aside from addressing the brand changes in the lead business, we are significantly investing in enhancing the product and experience for professionals. Currently, we are testing pricing strategies in a select number of markets that could greatly improve the return on investment for our professionals. Early results are promising. We are also investing in payments to enhance the process, as professionals using these payment solutions see noticeably higher retention and engagement. Furthermore, we are exploring the verticalization of our sales force, which should enhance the professional's experience and interaction with the product. We have seen positive outcomes from our onboarding program for ads, resulting in strong win rates and retention at the 90-day mark. Our approach is not just to wait for the pandemic to subside; we are working towards making the advertising and lead businesses more profitable for professionals. We also have the option of creating our own supply, which we believe holds potential through Angi Services and other initiatives. We have successfully implemented this in some categories and look forward to expanding into more skilled areas. Ultimately, we are committed to focusing on long-term goals and ensuring we are aligned with what is best for both customers and professionals, knowing that there is a significant market opportunity, and we are increasingly confident in our ability to develop the right product.

Thanks.

Our next question will be from Ross Sandler at Barclays.

Thanks, Mark, and welcome to the call. Joey, aside from Care.com and Mosaic in Emerging & Other, which brands are you most excited about in that group? What is the positive outlook for those emerging brands? Additionally, regarding Investopedia, considering the significant increase in interest surrounding retail trading and cryptocurrencies with platforms like Robinhood, is there more you can do in that business to engage that audience? You have many how-to videos and definitions, but have you considered other strategies to connect with the growing retail trading community? Also, where does Investopedia currently stand within Dotdash concerning the approximately $300 million revenue expected in that segment this year?

Sure. The next tier after Care and Mosaic is what we refer to as the future of work. We have two businesses in this area, both small but growing well and still in the early stages. One is called Bluecrew, and the other is now called Vivian, previously NurseFly. The idea behind both businesses is that software can significantly improve the matching of employers and employees over time. In many job categories, qualifications are clear-cut, making traditional tools like resumes and interviews less valuable. Instead, software and data can provide better insights into whether applicants can perform tasks like showing up on time or lifting specific weights. We are confident that our software excels in these areas. Every customer who adopts our solution quickly sees and appreciates the difference compared to existing market options, leading to high growth in these businesses. However, I should mention that we are still investing heavily in these ventures and have not yet realized their full business potential, as delivering the product remains costly. Although the contribution margin could potentially be positive, there are situations where it might not be. We need to continue scaling and developing these businesses, which operate in multi-hundred billion-dollar markets with plenty of opportunities for new entrants. Other players are also securing funding, which is great for the industry, as it helps educate customers and fosters innovation. While these businesses are currently small and have much to demonstrate, we see this as a critical area for us. Additionally, in our Emerging & Other category, we have Newco, our new incubator, where we are developing new businesses. We have two promising ventures in the market, and we plan to build more with a focus on utilizing blockchain to enhance customer experiences. Our previous incubator concentrated on mobile applications, leading to successful products like Tinder. Now, with Newco, we aim to explore blockchain further, although our initial two businesses are not blockchain-related yet. They are still intriguing, and we will keep innovating. Regarding Investopedia, we have four main segments within Dotdash: finance, health, lifestyle, and beauty. Finance, health, and lifestyle are fairly equal in size, with beauty being slightly smaller. All these segments are significant. We have opportunities to deepen our engagement in Investopedia, particularly with the rise of retail investors, which has been beneficial for the platform. Similar trends are emerging in the beauty segment, where consumers are becoming more discerning about beauty products, allowing us to leverage influencers effectively. In each category, we can enhance our offerings to provide customers with accurate information and tailored advertising that meets advertisers' needs.

Our next question will be from Justin Patterson at KeyBanc.

Great. Thank you. One for Joey and one for Oisin. Joey, on Care.com, it's been a unique period with some tailwinds in Enterprise and some headwinds elsewhere. How should we think about just what normal growth should look like going forward as well as the investment levels to support that? Then Oisin, I wanted to tackle the Angi rebrand from a different angle, the pros perspective. How are they reacting to the new brands? Was traffic adversely affected? How are you ensuring that we don't have a new capacity problem for them? Thank you.

Thanks, Justin. You're correct, it provided support for Enterprise but created challenges for the consumer segment. However, we are beginning to see a recovery in consumer interest. The most recent COVID data could alter this view, but we are observing record numbers of new subscribers at Care. Currently, the business is profitable, and I believe it will remain profitable for the foreseeable future. While I can't guarantee it will always be that way due to potential opportunities, the level of investment we are making in the business right now supports our goals and sustains profitability. As for the growth rate, Mark, would you like to address that?

Sure. Look, I think we are – again, we're early with our ownership of this business. We owned it for about a year. We think that the TAM here is $300 billion. It's – the penetration is less than 1%. So we think there's a long runway here. You look at other marketplace businesses north of 20. Look that is potentially a long-term number here. Now, we're nowhere near, where we want to be in terms of our penetration and product and investment, so we've got a long way to go. But we think and we've said that, this is a TAM that is growing. And the opportunity here could longer term be as big as what we think we have with Angi. But we've got a lot of work to do to get there. So it's a little hard to give long-term revenue and long-term margins given our earlier stage, but if you look at other marketplace businesses you can get a sense. Yes Oisin?

I can – you want me to hit the rebrands?

Sure.

So, just to talk about the rebrand on pros. We started the rebrand by moving Angie's List to Angi for both ad pros and Angie's List customers. More recently in the last month and a half, we flipped over HomeAdvisor to read as Angi Leads for pros. So the pros now are either Angi ad customers or Angi lead customers. There's a few things going on there. One is the pro sentiment towards Angi is better than the pro sentiment towards HomeAdvisor. So that's a net win right out of the gate, where pros feel a – they feel better about the Angi brand than the HomeAdvisor brand, in terms of their association with the brand. The second is, we've got overlap with customers who are Angi ad pros and Angi lead pros. For the first time, we've invested in having a dedicated point of contact for those pros. So they now each have a single point of contact to help them manage their accounts on both ads and leads, which is – sounds obvious, but is a step forward for them so they go to one place, when they got questions concerns. And then the third is, the third opportunity I'd say is, we've obviously got different sales forces selling those different products and how we think about being more integrated on that is a pretty significant opportunity. There's a lot of product work to go on to make it happen, where today you still do have two distinct accounts, two different sets of customers that come to you or leads that come to you through those accounts. But I think now that we've got them under the same name effectively, there's a pretty big opportunity to integrate those more tightly before we take on the next phase, which would be getting those same pros access to Angi Services jobs in the future as well. So I think we're on a path here. It's clear we're making incremental steps. To me, I feel very impatient on any given day, or week, or month that we're not moving fast enough to get to a place where we've got it all in a single place, where all our pros can access all our products at a single location. But I know that the team is doing phenomenal work to pull that together. And the fact that we've rebranded at a pretty fast clip on the pro side on ads and leads just speaks to our commitment to do this. We know it's the right thing to do. We know it's going to ultimately lead to better ROI for our pros and a better experience overall. So I think we're getting through the pro-rebrand and I think there's a bunch of upside. And as you know SP retention is a significant lever for the business. And if we move that through a combination of better pricing, better brand connection and ultimately a better product as well so there are things we're doing below the surface to actually make the product and the experience better for the pros as we move into this new brand we could see upside from it.

Great. Our next question will be from Brian Fitzgerald at Wells Fargo.

Thanks guys. Maybe two quick ones. With respect to the rebranding effort maybe from an SEM SEO perspective as we reopened there's been heightened demand for kind of bottom-of-funnel performance ad formats to get ahead of that resurgent consumer spend. It sounds like you may be seeing this, kind of, in Dotdash too. Was that impacting the speed or the efficacy with which you guys roll out your kind of exercised rebrand playbook? And then second one was just on Key. 50% of new customers opting in getting a discount on the first job that's a great deal. What's the impact that's having on repeat rates? And how are repeat rates performing versus what you thought they would going into the Key rollout?

I'll focus on the Key aspect and perhaps Joey can provide insights on the SEM side as well. To begin with Key, we have released data across various segments. We compared service requests from standard service customers, those who are Key members, and Key members using the app who start with services. We're continuing to expand this, currently at 140,000 members. We first reported this data in our last letter, highlighting significant outperformance. Although there's been a slight decline, the performance remains exceptionally strong, showcasing a substantial difference between service request customers and those at the other end of the spectrum. Specifically, there's a threefold difference. For individuals who download the mobile app, engage with Angi Key, and make a booking, the performance difference is remarkable. We are eager to continue this rollout and scale it further. It's still early days for Key, and we believe in its potential value proposition. As I mentioned earlier, we see this as the start of a relationship with homeowners, helping them manage their homes. Their investment in the Key membership should encourage us to invest in understanding their needs and exploring additional services we can provide. Regarding SEM and SEO, we've noticed increased volatility due to algorithm updates in SEO, which is definitely affecting thoughts around SEM purchasing. The key observation is that reducing spending on HomeAdvisor’s TV brand has led to changes in click-through rates as we've shifted focus toward the Angi brand.

Yes, I’m not entirely sure I understand the question about SEM. Part of it relates to whether this influenced our decision on rollout timing. The answer is no, although we found it timely to make changes during a period of potential reduction in our demand funnel due to the brand and domain changes. This was convenient because the market's supply crunch meant there was less supply available, thus minimizing the overall business impact. That was one consideration. Additionally, generally speaking about SEM and the current market dynamics, it's reasonable to expect that the costs of SEM across all categories and businesses will continue to rise over time due to concentrated market share. While this situation is not ideal, what's observed is that as prices increase, those costs get passed on to the participants in the search marketplaces, ultimately affecting the customers, which reflects the reality of the market.

Yes. Thanks guys. Joey that's exactly what I was looking for. Appreciate it.

I think we have time for one more quick one. So, let's go to Nick Jones from Citi.

Great. Thanks for taking the questions. I guess just one is there's quite a bit of confusion around what the impact of the Delta variant is going to be. I mean how are you thinking about the risk kind of going into the rest of the year if people kind of pull back from letting people into their home? And then maybe second on Angi Key. Is this I guess more is this driving more proactive requests in its early days? Thanks.

Yes. So, as you pointed out I think it's really hard to predict what's going to happen with the Delta variant. What we've observed thus far is when people are in their homes, they lean into spending more on their homes and it has been a huge boon for the services side of that business. I think as we all observed, it's left us challenged on the supply side. But I think there's hope that we'll see continued hope that we will see us come out of this huge imbalance of supply and demand over the next few quarters. In terms of Angi Key, yes. we are seeing increased both bookings and service requests on an incremental basis from the users who become Angi Key members. So, they both create more bookings so for Angi Services and they submit more service requests overall. And again that's amplified further when we get those users to download or get those homeowners to download the mobile app which is a really important driver for us or a really important push for us as we think about the rest of the year. And as we think about 2022, we're really thinking about how to make sure we get more of our homeowners into that segment of Key members who have our mobile app.

All right. We've run over time here. Really appreciate everyone spending their morning with us and look forward to talking to you next quarter. So long.