People Inc Q3 FY2021 Earnings Call

Good morning, everyone. Mark Schneider here and welcome to the IAC Angi Inc. Third Quarter Earnings Presentation. Joining me today is Joey Lavin, CEO of IAC and Chairman of Angi, Oisin Hanrahan, CEO of Angi and Neil Vogel, CEO of Dotdash. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has 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 to Q&A. Before we get to that, I'd like to remind you that during this presentation, we may discuss our outlook and future performance. These forward-looking statements are typically 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 third-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 just jump right into it. Joey.

Thanks, Mark. Hello everybody. Thanks again for joining us as always. Busy, busy quarter for IAC as they usually are. We announced the Meredith deal and so it wasn't long since we saw you last. We've been deep at work trying to figure out how to get everything right for a time when we can close that deal, which we're still hoping to do by the end of the year. All the other businesses are humming along right now. It's Angi we will, I'm sure, we'll talk a lot about today, but the services business is in a really great place and we're making progress on the rebrand. Care.com is doing really well. We didn't talk about care yet, but care is growing really nicely, hitting all-time records, which we're excited about, and our little businesses are doing well. Bluecrew and Vivian are breaking growth records, which is incredibly exciting. Even the Daily Beast is having a really nice revenue growth quarter. We are all in different locations today, so hopefully we get all the logistics right, but we are feeling good about the business where we're headed and I know we've got a lot of questions. So we've brought Oisin, of course, from Angi and Neil again from Dotdash. So we could talk about all the big things going on and I'm here, of course, to talk about anything IAC. So let's get started on the first question.

Great. Our first question will be from Cory Carpenter at JPMorgan.

Thanks for the questions. I had two on Angi, maybe first of Oisin, could you just give us an update on the rebrand in Angi services, and then second, either for you or Mark, 3Q for Angi was better than you guided, so hoping you could discuss the drivers of the upside there, any changes to your expectation going forward. Thanks.

Thank you, Cory. I want to take a moment to reflect on our journey over the past nine months to prioritize the homeowner and the professional in everything we do at Angi. Overall, we're very pleased with our progress. You mentioned the services business, and we have implemented significant changes in this first year. Last quarter was no exception, with the services business growing 160% year-over-year. About half of that growth came from organic sources and half from our roofing acquisition, which is performing as expected. We reviewed our plans from Q4 of last year regarding the services business and found that we are on track with our most optimistic projections. We're quite satisfied with the results so far. The key issues we've focused on include whether we can attract customers on a large scale, our ability to fulfill those purchases, and whether we can drive margins effectively. We have successfully attracted customers at scale, with very strong conversion rates on our site. Last quarter, our contribution margin exceeded expectations, and while fulfillment is performing well in some categories, there is room for improvement in others. We're planning to reinvest some of that margin back into the business to enhance the experience for both homeowners and professionals using Angi services. Overall, we're very optimistic about the future of Angi services, and we believe we're just getting started. It's a significant part of our business, and looking ahead, we see potential for a dozen categories within Angi services to develop into billion-dollar revenue streams each. The total addressable market is vast; we’re not only focusing on the advertising expenditure of small businesses but rather on the entire market of how homeowners spend on their homes. We are thrilled with the direction we’re heading and anticipate further positive progress as we continue to expand our team. Regarding our rebrand, we noted in our recent letter that revenue from the Angi brand has surpassed that from HomeAdvisor. A year ago, most of our revenue was generated by the HomeAdvisor brand. Our team has worked diligently to transition homeowners to the Angi brand, achieving over 50% aided awareness, which is impressive for a brand that is less than a year old. This achievement comes despite primarily leveraging the legacy Angi brand recognition. We have committed resources to enhance the brand experience and drive towards a unified mobile experience. We still have some work to do, as the HomeAdvisor brand continues to play a role in attracting SEO traffic and building awareness among audiences unfamiliar with Angi. We also have other legacy brands, like Handy in retail, to gradually consolidate under the primary Angi brand. Overall, we are progressing well with the rebrand, achieving a milestone where the majority of our revenue now comes from the Angi brand. We expect to recognize the benefits of the rebrand throughout 2022 and feel increasingly positive about our progress and future potential. As for our guidance moving forward, we have made a commitment to prioritize the needs of homeowners and professionals over short-term EBITDA focus. We anticipate revenue growth to remain in the 15% to 20% range, including the impact of our acquisition, and we expect EBITDA to be flat or neutral. Some quarters might perform better, and others might lag, but that's our overall outlook. Long term, we aim to capture as much market share as possible and achieve a growth rate surpassing 20%, considering we have a $0.5 trillion total addressable market available.

Yeah. Just, just add on a little to what Oisin said, remember that we said last that you should expect for the foreseeable future sort of our organic growth number to be in that May-June range, which was roughly 7% give or take and then layer on the Angi roofing acquisition. So I think you've seen since then, July to October, that range between 15% to 21%. Consistent what Oisin just said, and that's what we expect for the foreseeable future as we navigate this brand, the rebranding as we continue to navigate out of this pandemic and then on the bottom line. Yeah, so in and around breakeven, Q3 came in a little bit better, but we're going to continue to push and as Oisin said, push back that investment into the experience to make that product the best possible.

So our next question will be from Ross Sandler at Barclays.

A question for Neil or Joey on the Meredith. So guys, how should we think about the cadence near term in 2022, given that digital advertising and you guys have some challenging comps in the first half? Second, what are the lowest hanging fruit opportunities around traffic or monetization? You talk a lot about this on the last call, but maybe what are we going to go to first and are these more iterations or are they potentially pretty quick needle-moving revenue opportunities? And then lastly, the print business, what's the overall strategy for Meredith's print business? Thank you.

Oh, sure. Joey, I can take it first. So the first, the 2022 margin and the lowest hanging fruit, that's all sort of a related question. And I know as Joey said, we have a lot of work to do, and we think we can do most of it in 2022, so that's going to make 2022 financials maybe a little tricky to read. As with all the other things we bought, we tend to take a small step back before we take some big steps forward, and obviously we're buying something very big here. So there's going to be some steps back. We do that to address the low hanging fruit, and let me finish up on the margin. I think in the long term, we would expect the margin of the whole business to look like our margins to look historically. The low-hanging question is, I think one of the things that I just most excited is the low hanging fruit or the things we know how to do, very much aligned with what we've historically been good at. Like we're going to make their sites much faster. We understand a formula for content improvement in the way that we've done things changing how they use ads and the mix of ads they use and some of the ad load stuff. That's all very easy for us. So there's going to be like an initial phase of changes that we can do very quickly, that you'd qualify as low hanging fruit that I do think are going to make a really big impact, but then as we get more into it through 2022, and then ongoing, this model is the same as our model. It's just work; it's doing the right things. It's making the very best content for all the things they cover and essentially taking their brands, which will be our brands, which we think are some of the best brands in publishing and putting them in their proper place on the internet. Again, I've said this before, I think I've actually said this to you, Ross. There is no reason why the Spruce is twice the size of Better Homes and Gardens online. That doesn't make any sense. So the opportunity to get Better Homes and Gardens to its rightful place online is some combination of this low hanging fruit and the really hard work we have to do. That's going to start sort of immediately at closing. It's going to take us through 2022, but heading into 2023, we're very confident with the numbers we put forth. We're confident about where we're going with print. Print again, I think we've been fairly straightforward with what we said we're going to do with print. Historically, they’ve been focused on a very traditional rate base model, which is print a lot of magazines and sell ads against large audiences. The days of that have probably passed. We're not the guys that are going to change the secular advertising decline on print. However, their magazines are beloved and they're incredible, and the editorial is amazing. So what we're going to do is we're going to work on the magazines and make them as good as they can be, but we're going to focus the economic model on being much more of a consumer model, which means it's some combination of subscriptions and advertising leaning much more on subscriptions and other things like newsstand a little less on advertising, which means circulation's going to go down in a lot of these titles. That's all part of the evolution of media, how to make these things healthy in the long term for Food and Wine and for Southern Living and for People and for all these properties. Print is going to be a long-term part of this mix. We just want to do it in a way that's right for 2021.

The only thing I'll add to that, I agree with everything Neil said. The only thing I'll add to that is from IAC's perspective, what we've said to Neil and team is that 2022 is a rebuilding year and should be a rebuilding year, which means get everything done in 2022. So as it relates to the financial that year, I'm not particularly... I mean, obviously we're going to want to see underlying metrics and progress on all the objectives that we've laid out. We've got a very, very clear path on what we're doing, but as it relates to the financials for 2022, we're much less focused on what that looks like. We're looking towards 2023 because we don't want to push big decisions out. We don't want to push big changes or efforts out. We want to get everything done relatively quickly and reflect all those transitional costs in 2022.

Great. Our next question will be from John Blackledge at Cowen.

Great. Thanks. Maybe a couple questions for Joey. Joey, what does IAC look like kind of post the Meredith deal? How should we think about capital allocation and maybe an update on the CFO search?

Sure. So I think the best way to think about pro forma cash is somewhere in the neighborhood of a billion and a half. We have about $3 billion of cash right now, and we've said we're going to raise $1.6 billion of debt for the Meredith transaction. Then there's probably another, realistically a couple hundred million of costs that all in, once you get through everything, all the costs related to clean up on Meredith that will come through over the course of a year. We also have, we've talked about this a little bit. We have a warrant with respect to Touro that is another potential use of cash, which we would expect to exercise at some point. So with that all in, we think about right in the neighborhood of $1.5 billion of totally free cash to spend and remember there's no debt at the parent level so that we also have greater spending capacity than just that billion and a half. There's a lot of currencies that we can invest in or that we can issue or go any direction with. We've got the IAC currency, of course, there's MGM, there's maybe at some point though, and so all these things are areas where we can think about cash going in one direction or the other, and that provides us a significant amount. I think, of flexibility and the priorities are going to be the same. They've always been meaning number one is investing into our existing businesses that could look like what we're doing with Angi right now, where we're reinvesting most of the P&L, that could look like reinvesting in our existing businesses through share repurchases. And that could also, and I think probably a significant portion of our time I am right now is spent on looking at new things and we see a lot of new areas that are fun. In a small scale, we've got, we're building businesses with NewCo. We've built a few businesses already, and we've got a great list of businesses that we're trying to build with NewCo. Again, we're always looking for new things, and so that's going to be a factor for our cash too. Second question with the CFO search, there's two kinds of what I view both actually is great news on the CFO search. One is we're seeing phenomenal candidates. I've met with another half dozen this week and there's a lot of interest in the role. And the other good news is we have the luxury of being able to take our time to make sure we get the right fit. You all have met Mr. Schneider who's doing a phenomenal job in FP&A and investor relations. We have Mike Schrman, who's doing an exceptional job and has been with us for a very long time as controller and NextStop is our treasurer and the list goes on. We have a phenomenal finance staff, so I'm not worried about where we are. It's not to say we don't need a CFO and don't want a CFO and want to get one quickly, but we have an exceptional finance staff that keeps the trains running very well with high confidence for all of us internally. We're going to make sure we find the right person for the role and take our time doing it.

Thanks, Joey.

Our next question will be from Brent Thill at Jefferies.

Good morning. Dotdash has been decelerating on a tough comp in the October growth rate was also a deceleration on an easing comp. Just curious if your confidence still on the organic 20% sustainable growth and any commentary you can provide on the tailwinds they're experiencing from an IDFA front.

Sure. I'll take that. The first thing is that IDFA, there's no tailwinds. I mean, one of the things we talk about a lot in our business is we don't need personally identifiable information to do what we do again. If someone is coming, looking for diabetes information, we pretty much know what we need to know about them. If they're trying to figure out, I think it's Joey wrote in the letter, what color to paint their children's room, we know everything we need to know about them without knowing any of that. So when none of Apple's changes have provided a headwind, I think if there is a headwind, it is, as you said, it's a hard comp. I mean, at this time, and it's primarily in the transactional commerce business this time last year, people were not shopping in stores at all. It was all eCommerce. I think at this time last year, there weren't any supply chain issues. Both of those things are fairly big headwinds. I feel good about the 20% long-term target. I think we had an exceptionally good time period last year. I think things are just evening out a little bit, but I think in the long term, I think 20% is something that we're pretty comfortable with.

Yeah. Just to add on a little to what, to what Joey said, remember that the comp last year we grew 33% in Q4, which is the high point of the year. So it is a tougher comp. It's something that we've been discussing throughout the year that the comp would get tougher on a two-year stack that growth in October would've been closer to 40% relative to where we came in. So still a really healthy number. And then I would just also highlight that sort of the macro impact. You saw some of our other businesses report, Amazon or our eCommerce business only up 3%. So that just illustrates what, what Neil was saying about the some of the headwinds that are up against our performance marketing business, but still up over in and around 10% the last couple of months.

And just a quick follow up for Joey on search, it's doing really well. Can you walk through what you're seeing on the side?

Yeah, the search business now is primarily performance marketing in the sense that we go out and acquire users and we monetize them when they get to our site. There's two components to that. There's our efficiency in acquiring users where we had a technology upgrade that got us better at the acquisition. And then on the monetization side, that's been good, pretty steady, but we've found as a result of some of the work we've been doing on some new channels for marketing where we go out and find users with a new ad unit significantly. Historically we've generally acquired users from search into a search experience. Now we've opened up the ability to acquire users from display advertising. That opens up inventory on a lot of publishers where we now can market there and drive back to the ask site for monetization. That effort really started at zero at the beginning of this year. It is going very, very well, and it's something that will continue to wean into and grow. It doesn't change my overall view on the segment, which is it's a segment that has some ups and downs but for us has been a reliable cash flow generator, and we think can continue to be a reliable cash flow generator.

Thank you. And Brent, just to talk about the numbers a little bit, just to help you understand sort of the trajectory there. Growth for total search was 57% in Q3, accelerating throughout the quarter was 78% in October. We do expect that to moderate going forward. The comp last year again, Q3 2020 ask media, which grew 80% in Q3 and over a hundred percent the last few months was down 7%. It was an easier comp versus the 40% growth that we saw in Q4 2020. So we do expect that to moderate somewhat but still healthy based on all the things we're doing and what Joey went into. The other piece of search is desktop. And as there, the big piece of that is our B2C desktop applications business, which we've effectively stopped marketing earlier this year. So you have the dynamic of the tail of that revenue continuing but that will continue to erode over time. But no marketing really against that. So that is why you're seeing sort of the profits that search jumped the last couple of quarters. We do expect continued healthy profits from search given what's going on at ask, but certainly not at the not at the levels we've seen in Q3 long term.

So our next question, we will go to Brian Fitzgerald at Wells Fargo.

Thanks guys. On Meredith, you talked about the site speed, the brand search, and some of the complementary opportunities around monetization. I wanted to ask about audience composition. Do you think the audience is a little older, more female? And I want to ask if it helps you tap into wallet share in categories like CPG?

I think the answer to all of that is yes. I think one of the things we're really excited about, and you can do this in any of the sort of the verticals in which Meredith competes. And we compete also, and just take food for instance, right? You can take the food brands that are the Meredith food brands. Food & Wine is a high-end brand and a piece of the market that we don't occupy. All Recipes is user-generated content in a piece of the market we don't occupy. You can go down the line and compare it to where the Spruce sits, which is sort of like your local supermarket or where Sirius Eats sits, which is like Brooklyn hipster food almost to every brand. They have sits in a place in the market where we don't sit. So it is very, very complimentary. You can take that, and you can start to look at some of the sales clients and a lot of this we knew beforehand, but the people we sell to there is surprisingly little overlap. There's a lot less overlap than one would expect. We do very well in endemic pharma and endemic finance. We do okay in lifestyle; they do tremendously well in lifestyle and don't really play as much in some of the areas in which we play. So it's all very complimentary. Complimentary audiences, complimentary advertising partners, even the way we do commerce is different. They're very focused on commerce that deals, and we're very focused on commerce that’s product review-based, which we're going to make the whole company focused on. One of the things, the more we learned, and the reasons we got excited is exactly it’s almost like this is a plant question for me. I like it so much that everything is complimentary, and that's what we're really, really excited about. You can even take a step further. We're very good at making money transaction-wise, and they're very good at making money selling ads. That's something Joey highlights in the letter as being very complimentary. It's really, really nice fit. It almost fits together like a perfect puzzle piece.

Okay. Appreciate it, Neil. Thank you.

Thanks. Our next question will be from Jason Stein at Oppenheimer.

Hey guys. Thanks. I want to ask a bit more about Angi total roofing. First, can you, how, what is that growth kind of maybe just perform us? So how much did your top funnel benefit that asset? And to the extent that that was successful, is this a playbook? Should you own, should you buy three, four more of these in other verticals? And then just another question on Angi, you said transacting service professionals is up 7%. Yet, the business is kind of growing pretty minimally. I mean, just is there certain service professionals you're moving in while others may be moving out. So those are two questions. Thank you.

Thanks. In terms of how we're feeling about roofing overall, we're incredibly happy with how roofing's going. The early read is that it's doing exactly what we wanted it to do. So obviously you change ownership and you want to make sure that everything is doing what you thought it was going to do. So that's happening, the two dimensions in which we're expanding that business one is geographically. So we're in three new markets. Q3, we'll be going into two more new markets in Q4. We are driving the majority of the top of funnel in those new markets from Angi. Angi is the primary source of leads in those three new markets, Q3, two new markets in Q4, and overall we're seeing comparable conversion rates to what they were seeing in the existing markets. The early read is that it is going in the right direction. We're very, very happy with the existing performance in the existing markets, and we think that there's no reason at this point to believe we won't be able to expand that out into many more markets next year. I think there's a lot we can do with that. Getting deeper into that funnel exposes us to more players in the supply chain, the manufacturer, the distributor, the financing partner gives us a lot more exposure to the different parts of the value chain that go into roofing. We haven't even started to play there yet. But I think you can expect as we scale that business out, we're going to wait or we are going to wait for those. The first two markets we've expanded into to mature a little bit, hit some critical mass, and then we will expand that number of markets again next year, assuming everything continues to go on track with roofing.

The follow-up on that was, are we going to do the same thing in other categories? I mean, as Joey pointed out, this is a material change for the business, but a relatively small financial transaction for us to buy that business. We are actively exploring the same thing in other categories. I think I've referenced before some of those categories that we think could be billion-dollar standalone categories such as fencing, driveways, exterior painting, and interior painting to a degree. We are actively looking at how we might repeat that again while we're developing the confidence that this playbook is the right one for us. I think our early read tells us that, yes, we're going the right direction with it. If you zoom all the way out on this, this was effectively the a playbook that we've had with Handy where Handy was small in a small number of categories, and we've expanded Handy out now to be Angi services in a book now business in a hundred-plus categories across the nation. So I think the early read is very positive, and we are likely to continue down that path. In terms of transacting SPs, look, we made a commitment nine months ago to say, let’s put the customer and the pro at the center of everything in terms of what that means for the pro. That means when we bring on a pro, we want them to be incredibly successful on the platform. So we've done a lot of work to change how the sales team is structured in terms of compensation plans, in terms of verticalizing that sales force, and that's started to play out. It's starting to play out in the types of SPs that we're bringing on in terms of how we throttle their spend in the first 60, 90, 12, 60, or 90 days up through the first six months, how we expose them to features on the platform, how we gradually increase their exposure. All of that is proving to be super positive. So that's some of what's going on in terms of us bringing on fewer higher-quality SPs, and by quality, I mean likely to be successful on the platform SPs, and our early read again on that data is that by doing that, we're seeing higher levels of retention and higher levels of ongoing engagement with those from those SPs. The ROI for SP is going to be much higher.

Like we said, the things we're trying to get done are for the homeowner. We want to help them get the job in their home done for the SP. What we want to do is help them grow their business, and we're not successful long term unless we truly help that SP by delivering them great ROI. So that's some of what's going on in the lead business in terms of transacting SPs in addition to that. Yeah, obviously we're facing supply constraints, and that's putting a damper in terms of engagement. There's also stuff going on in the services business in terms of transacting SPs, where we are seeing a concentration in some cases in larger SPs, which is resulting in fewer SP counts for the volume of service work that we're doing. So the mix shift of all that is changing what it means to have a transacting SP. So you can look at the transacting SPs and think, yes, we're driving towards higher quality, larger transacting SPs, who we know are going to be more successful in leads and more successful in services. Ultimately, what we want to get to is SPs that are buying across or transacting across leads, ads, and services where it's right for them.

So for our next question, we'll go to an unidentified analyst at Wedbush.

I have a couple of questions too. So first there's just been a lot of talk, especially this quarter around supply chain constraints, especially in Angi's line of business. Is that having an impact on you guys at all, especially on the Angi services side? A lot of labor costs taking longer to finish jobs, waiting for construction materials? Then you talked also a bit about expanding contribution margins; any color you could add around that? Is it coming from certain categories? Where are you along that path? How much more improvement is there? Thanks.

Great. So in terms of the supply constraints, we're seeing it in pockets of Angi services. However, the product-market fit that we have there is so strong that it's growing through it so effectively at an 80-plus percent or around half the 160%. So call it an 80% organic growth rate in that business. The product-market fit is so strong; it's basically growing through the supply constraint. Yes, there's stuff on the margin that's impacting it. Some of that business is sold through our retail partners. Some of our retail partners obviously have supply chain constraints. We've all read about the backlog on the ports, particularly in California; that's affecting that. Some of our pros are having issues getting materials, and that's affecting that. But the product-market fit is just so strong on Angi services that it's almost not being noticed quite so much. Yes, it's happening in small parts where we're experiencing more of the supply constraint issue or the supply chain constraints is actually on the lead business where the lead pros are and the ad pros are scaling back in certain cases their willingness to continue to invest in leads and ads when they know they're struggling to get more pros on board when they're struggling to get tools, machinery, and equipment, etc. And they're not growing their business as fast as we would like. So the two stories are pros are joining Angi services at such a fast rate that you don't notice supply constraints. Whereas on the ad lead business, we do see the supply constraints affecting the rate at which people are able to add capacity. In terms of the expanded contribution margin, look, we're not going to get into the specifics of the exact numbers, but the contribution margin year-over-year change was significant. We are seeing it across the board, particularly concentrated in the earlier categories that we launched. The categories that have been around the longest, the densest markets, the places where we've built up to a certain number of jobs per geo, we see the expanded margin. We see expanded take rate, lower ops costs, lower customer service costs, lower refund claim rates, etc. All contributing to expanded contribution margin, where we're also seeing interesting data is on the expansion of revenue that we're getting when we expose our customers to Angi services in the service request path. For every time we expose Angi services, we're generating about the same amount of lead revenue from a service request as we were a year ago, but we're seeing a significant increase in the amount of revenue we're generating from Angi services as a result of expanded kind conversion on-site. So increased conversion on-site, increased and more accurate average order value, so better pricing, and then the third one is increased fulfillment rate. The three of those put together are expanding the monetization of Angi services whenever we show services on. All of that is coming through and also contributing to greater density and ultimately more contribution margin.

Great. Thank you. Our next question will be from Dan Salmon at BMO.

Okay. Good morning, everyone. Maybe for Joey first, I just want to go back. You mentioned the broad strokes of the Meredith deal a moment ago. I just want to come back and ask specifically since the announcement, any updates on any details? How is the process going specifically? Anything that more that you've learned?

Yeah, the second question's much more interesting, but I'll give you the answer anyway. We're really happy about everything we've learned so far. We've got, obviously we can only go so far until we have clearance to close, but people are starting to at least get to know each other. We're doing as much research as we can to have a plan in place for when we close. And I do think that we are as tightly planned in this one as we've ever been in any of them. That's a testament to the amount of diligence and work we did in advance of getting to a deal and a testament to the ongoing work people are doing right now so that when we get to closing, we will hit the ground running and we know what needs to happen and who needs to be, and what seeds, etc. I think that's a great head start. And Neil, you want to hit the three themes?

Hey, Dan. I can actually do like a full hour on these three things. I'll try and keep it short: truth, privacy, curation. Those are sort of the words Joey used, but that's pretty much how we look at things and I'll do them in reverse order. The curation part, which Joey talks a lot about, sort of like being everything to being something that's the key to what we do. The old problem that like about.com has and even like two of the Meredith brands have this, you can't be everything to everyone, and you need to be experts in things. The way we've built our brands and the way Meredith brands are set up is we can be the experts, the single source of truth, trust expert for something that's seemingly unimportant, like how to do smokey eyes when you have a date to go on. But that's very important for the woman who needs to do smokey vs like how do I deal with this health diagnosis, which I got, which is also, which is fairly high stakes in a different way. Or what do I do to roll over my 401k? Curating and providing the very best answer on the internet or in whatever medium we're playing, whether it's print or whether it's something else is the fundamental of our business and is the fundamental thing that has gotten us here. Part of curating is doing the other things well, right? Like having a site that fast and not too many ads and all these things, and that ties right into call it truth and trust. We don't do content 10. We're not like a newsfeed. We're not fake news. We're not like conspiracy fee. We're, we're none of that. We are content written by experts with true knowledge of the topics they're talking about. We're doing that combined with Meredith at a scale no one's ever done it before, which is A, very good for users, because we're going to have the resources to make the best stuff, but B, great for advertisers. So you'd be able to spend at scale against intent-driven segments, where what somebody wants at a level that we think we can take some money away from the platforms and the Facebooks of the world who don't have that. The combination of curation, trust, and truth gets through straight to intent. That is what we do best. Even in people in entertainment is sort of the defacto go-to source someone checks when they read something, to see if it's true or not. Across everything we're doing those are really the themes that we've gone through. The last bit about privacy is something that we've been focused on for a very long time, and we haven't been right about everything, but we haven't been right about this. We never thought that something you couldn't build a business around a cookie. That never really made any sense to us that it's like the my dad looks at a pair set of golf clubs online and falls him around for a week. It freaks him out. Like that's not going to be a thing. But what we always knew is that context and content would work, and that's what's worked in media for the last hundred years. An enthusiast magazine has always done great, still does great. A food magazine still does great cause what it is. So we don't need to track people to know what they want. One of the beauties of Meredith is they have lots of lock-in data and first-party data that we don't have but data that people want you to have because they're really interested in this thing and in most cases, paying for something. So between our ability to target via content and Marriott's ability to target via content and first-party data, we can learn from there. We really look at privacy as an advantage, and you'll see there's a bunch of other media companies with some fairly big headwinds cause have changed just apple or whoever has made. That's not really been a factor for us at all.

More of a couple comments, one just looking at the selection of faces on this call, you might need to explain what smokey eyes is, Neil, but that's makeup, just so everybody knows. The one important thing for us, the trends that we're talking about here, those three trends in particular are a thing that we've believed in for several years. That's informed Dash's strategy for several years right now in execution for several years. Only now a lot of those things are coming to the forefront. In fact, for the last little while, those things were pretty unpopular. But now those things are coming to the forefront and that that's why we're another reason why we felt confidence in leaning in with Meredith and making this bet is because we see those trends. We've seen those trends, those trends have been proven, and we think those trends have a significant runway still ahead of them right now.

That's great. Thank you.

We'll make sure we all have our makeup done better for next quarter.

Go to Bernie. We'd love to see anyone with smokey eyes on this call.

Hey, good morning. Thank you very much for the question. I was just wondering if you could talk a little bit about how we should think about gross margins for Angi over the next couple of years. Particularly as services become a larger part of the mix. And then could you also talk a little bit more about the progress on Angi ancillary initiatives like Angi pay and Angi key? Thank you very much.

Sure. So in terms of the margins, I think in terms of the core ads and leads business, we've said we ultimately expect that to get towards 35%. The makeup of Angi services is going to be different. So within Angi services, you've got smaller jobs, the $200, $300 jobs where we have a significant again a significant opportunity to generate margin where the take rate is strong. The operations customer service cost is mostly something that we can automate, and we expect to be able to get to good margins on that. And then we've got the larger jobs, the $10,000 jobs where we will see lower percentage margins. Ultimately, though we put it all together and this isn't about driving towards a particular percent of margin. This is about margin dollars. This is about us saying that we had a business before, which was focused on a very small set of that half a trillion dollars of total addressable market. Now what we're saying is we're focused on the entire thing, and we should be able to generate far larger margin dollars by focusing on that. If we do the right thing for the homeowner, we do the right thing for the pro. We ultimately think that the margin dollars payoff that we build around the business, the degree to which we the degree to which we will be very differentiated from the competition will allow us to get to strong dollar margins over the long term. What exactly that looks like in terms of margin percent, it's not something we're focused on, we're focused on what the ultimate dollar margins will look like. Your, sorry, I'm blanked. Your second question was on the, and yeah, yeah. So we, we've got a number of other things going on as you pointed out. We've got Angi key membership, we've got payments, we've got financing. All of them continue to grow pretty nicely. So the Angi key membership, as a reminder for people is you pay $30 or $29 a year, and you get up to 20% off hundreds of everyday home services. That increases consumer retention rates; it increases likelihood to transition over to the mobile app. The data that we showed before in terms of where that's tracking for retention rates continues to hold, and we're pretty happy with the fact that the member who generates or the member who downloads the mobile app spends an awful lot more than the average consumer, so that that's in a pretty strong spot. The rate at which we're adding members continues to hold, so we're very happy with the growth and the membership payments. We've previously rolled it out to our lead pros. We've more recently rolled it out to our ad pros, so the rate at which we're adding consumers and pros to the payment experience continues to grow nicely. I think we had our first $600,000 day yesterday, or the day before in terms of the volume of payments that we're processing. Really happy with the consumer feedback on it, really happy with the pro feedback when pros use payments and generate revenue from the platform that we process for them, their retention rate is materially ahead of our other pros. So very happy with how that's going. And the third one is financing. So financing is still small, relatively, it's growing rapidly in terms of the growth rate. We're in the high single-digit millions of dollars of finance that we've provided to our homeowners for the quarter. Again, satisfaction rates on that are really strong. Pros love it because it allows them to engage customers they might not have been able to engage. Customers love it because of the convenience financing, where they're at the point of sale. The three of those things combined are not yet having a material impact on the business, but we hope that as we get into 2022, when they scale that we will start to see some impact in late 2022 from at least one of those initiatives overall. I think you think about where we're going holistically, we've got to make sure that we have a deep knowledge and a very robust payments platform. I don't know any large consumer marketplace that's been built recently that doesn't have payments as a core part of the product. We're going to continue to push on that financing, obviously, very topical, important. The early read we get from membership gives us the confidence that it's the right thing for us to do. I think on membership in particular, it's a pretty light program right now. It's the Angi equivalent of two-day shipping or the Angi equivalent of a Costco membership, pay to save. I think in the combined weeks and months, you'll see us make that a little richer. One of the first things we'll be starting to roll out in terms of making that richer has to do with a tech-based service, where we'll give people access to a home expert who can will give our members access to a home expert in a trial to allow them to communicate with someone who will make bookings on their behalf, help them out with issues that they've got for their home. As we start to build that program into something where you will really turn to Angi key for everything inside your home. So early read is super positive on all three.

Great. Thanks for taking the questions. I guess, one on Angi and one on Dotdash Meredith. In Angi, how much of the requests are related to people who have purchased new homes? Is there a risk that if the housing market cools off, that requests might slow down? I think buying home generally triggers people to think about doing repairs.

In terms of the volume of requests, look, the bigger driver of request value almost and the volume of dollar flowing through the platform is just the size of home and the age of home and people's ability to invest in it. So yes, you're right. That people buying new homes does trigger a percent of the service requests. However, the bigger drivers are just size of home, home age of home, and capacity to invest. That's the driver of service requests on the other side of the platform. We know that our pros are so supply constrained right now that their willingness to pay for SRS is a function of how much demand they've got from other sources. So we don't feel particularly exposed to a shift in housing demand. Instead, I would say that if we see a normalization of consumer demand, it will probably be very beneficial for our ad business and our lead business as those pros experience less of a supply constraint. Overall, the other thing I'd add and Mark Schneider probably has the number, but I think 60% of our service requests are necessary jobs. So somewhere in that ballpark, yes.

Yeah. We said, I think we've said historically, roughly two-thirds are non-discretionary.

Yeah. And non-discretionary, that was the word I was looking for. Thank you. The other thing I would say is just when home sales slow, and there's less turns, that also has a natural hedge in it, which is people do more work on their existing homes. We've seen that historically. I mean, it's really hard to predict any of these things, and COVID changed a lot of things. So maybe historical trends won't be indicative, but that's what we've seen in the past.

Great. Thank you. That’s helpful. On Dotdash, there's some interesting charts on the shareholder letter on page four, and it sounds like making Meredith properties faster is kind of a key thing you're going to work towards. So that sounds like kind of taking the entire library and replatforming into the Dotdash tech stack. When you think about maybe improving SEO, which I think in some cases is due to kind of the code actually on the content and how you format the content. Is that kind of rejiggering like the entire library, or is it more on kind of all future content? And it's going to take some time for those benefits to trickle through.

A couple answers to that, and it's probably a little bit more in the weeds and some people won't. But I'll give you the answer anyway, but tech's actually quite good. They just actually built a new one. So I'm not entirely sure we're going to migrate, we're going to migrate everything over. We may use some of their things, and that's going to, sort of like, be consistent with a lot; they're very smart over there, and they actually just completed a migration of all their brands on one unified tech. That's pretty good. So we're going to work on all of that. But what I would say, and this answer works for SEO and it also works for everything else we do. And we've said this many times, we're very focused on search because we're very focused on algorithms and if you're going to be a publisher today or if you're going to be on the consumer internet in any way or going to be in travel or going to be in anything, algorithms are going to be between you and your users. What the algorithms we care about are the algorithm that care about where they send users. That means Google, that means Pinterest, that means Apple News, that means Flipboard, that means the different algorithms within Google. We care a lot about. So when we look at a new site consistent with what we've done with other things we bought, it's very, very comprehensive, and we're as so with the oldest piece of content as you are with the newest piece of content. Because a user doesn't care, and an algorithm doesn't care; they just want to know what's on that domain and what is it covering. Is it the best thing? And that's our focus. When we make new things, they're obviously going to be made probably with some of the things that we've done historically. But one of the really, really big opportunities is these brands and these websites are some of the brands are a hundred years old. The website's obviously a hundred years old, but they're 10, 15, 20, 25 years old. The opportunity to go back and get a look at some of that content and apply some of the things we know now that they wouldn't have known then to some of their content and that some they have been working to update, and some they haven't, is a really, really big opportunity. But I think the key takeaway for this question is what we do and what we do to brands and what we do to websites. This is what we're going to do to print magazines is comprehensive. It's not cherry-picking, and again, there's one of the things we say, which we stole from another publisher, it's like not all of our content that we have makes us money, and we don't care about that, but all of it supports the content that makes us money, which means that if you're going to have a health domain, there's obviously going to be some topics that are very big and some traffics that are very small. The small topics have to be treated with the respect and the care of the big topics, because the person who uses that or the advertiser that sees it, it doesn't matter to them that it's a small topic; it matters to them that that's their topic. We look at all domains that way.

Our next question will be from Justin Patterson at Keybanc.

Great. Thank you. And thank you, Joey, for clarifying smokey eyes. I actually had to Google that a moment ago. So if I can, first one for Oisin, you brought in your first chief data officer. Would love to hear how you're thinking about just ways to leverage data on the Angi platform over the next few years and how we should think about those benefits manifesting.

Thanks. I'm curious if my wife, my wife will have smokey eyes for our date tonight. That's the logical conclusion of this. The feedback I've gotten here has been everything from how did you not have a chief data officer before to this is obviously something we should be doing to how can we put more money into investing in using our data. We have so much opportunity in data that it is almost embarrassing. So the use of our data to accurately price our leads and ads for our pros is a huge opportunity. Right now we set pricing for our leads approximately once a year. We don't really change that. That's a very obvious and very easy way that we can very quickly start to realize some benefit. The second big opportunity is bringing our products together in the most thoughtful way from a data perspective. So when to show an ad pro, when to show a lead pro, when to show services right now. The there's some logic behind it, which is intelligent, but it is not dynamic. It doesn't respond to the availability of supply. It doesn't respond to availability of demand and the likelihood that we'll have future budget from pro. So that's a second significant opportunity. And then the third is on consumer experience. So the more we can know about your home, and we know a lot about your home already, you've put in multiple service requests; we can obviously access public databases to know a lot about your home. The more we can deliver a customized experience to you that makes it easier for you to care for your home. So I think there's a huge opportunity for us to become the repository for all of your information about your home in a way that reinforces Angi as the place to go to take care of your home. The more we know about your home from you from other places online, the more we can thoughtfully help you taking care, take care of your home. Taking care of your home is a huge task. As we all know, it's the biggest financial purchase for most people and the biggest spend item overall. The average person needs a dozen plus things done in their home every single year. Most people don't even know what those dozen things are. Those dozen things are not the same in Florida, in Miami as they are in New England, in Portland, in Maine pick anywhere; it's a different dozen things. So we've got to be very thoughtful down to a zip code level, down to a home level, down to an address level on how to use the data, and I think those are the three big opportunities it's pricing, it's matching, and it's actually delivering a truly unique experience to the homeowner. I think we're best placed to do it. So if anyone out there we've got more data, and we've got this opportunity to bring it all together and build an amazing profile for you as a homeowner that helps you take care of your home.

And Justin on care, the biggest factor right now is just back to the core business and blocking and tackling on the core business where we've been able to move conversion onboarding flows data gathering that makes the matching more efficient between both sides. That makes it more likely that when you make a posting, you're going to find people applying for that job and that you'll have good, robust applications that make sense. A lot of that's why subscribers are up, I think, close to a third in this quarter. I still think we have more to drive there. I think we're benefiting in there at the moment from just people back to work and people back to going out and things like that that are naturally helping the business. On the flip side, easy comps in the prior period. But beyond that, and again, there's still more work to do there, but beyond that, there's enterprise, there's instant book, which is similar to what we've done at Angi, and there's daycare facilities, which is a new hopper opportunity for us, where we're just starting to do some experimentation. There's also tying it all together with consumer and enterprise with HomePay. And I think one of the big macro trends that we've found in care and we're excited about in care is that this notion of the enterprise starting to take a meaningful role in care in their employees' lives. It makes a big difference on getting the right people into the workforce. It is a the burdens on women against men in childcare are very significant in this country, and meaningfully less significant in a country like Sweden, where there's subsidized childcare, and the workforce participation is basically equal between genders. A little bit of macro tailwind, I think potentially some regulatory help there, which would be a phenomenal thing for this country and then just execution on these things where enterprises are starting to realize the benefit of this service and enroll in this service. I think all those are going to be drivers for the next little while.

Great. I think we've reached the top of the hour. So Joey do you have any final thoughts?

That's it. Thank you all for joining us. Really appreciate it, and see you next.