People Inc Q1 FY2022 Earnings Call

During this presentation, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate, or similar statements. These forward-looking views are subject to risks and uncertainties and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in IAC’s and Angi Inc.’s first quarter 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. Please also refer to our press releases, the AIC 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.

Good morning. I’m Chris Halpin, CFO of Interactive Corp, and I would like to welcome you to our first quarter earnings call. I’m joined here today by Joey Levin, CEO of IAC, by Oisin Hanrahan, CEO of Angi, and Neil Vogel, CEO of Dotdash Meredith. With that, I will turn it over to Joey.

Good morning everybody. Thank you for joining us in what is a very turbulent broader environment. There’s a lot of talk right now around forces outside our control - inflation and war and the very volatile market. I want to focus today on forces that are inside our control, and the two biggest things impacting IAC inside our control are Dotdash Meredith, which is led by Neil Vogel, who you’ll hear from today, and Angi, led by Oisin, who you’ll hear from today. I think what you’ll hear from both of them is a tremendous amount of confidence in where we are going in our business, and both are at pivotal proof points in the business. Dotdash Meredith is still new - I mean, we completed the acquisition only recently and deep in the midst of the integration, so there’s a lot to report on that front, and Angi, we’re coming off of a 15-month period where we really took on every project we could as an organization in terms of making changes to grow the business, and we have a lot to show for that and we’ll talk about that over the course of the call. The last piece which is relevant in this environment is what we’re going to do at IAC with our cash and our liquidity position, and we talked about that a little bit in the letter. We view this as a tremendous opportunity for us and we’ve been waiting for opportunities like this for many, many years now, and hopefully we’ll be wise enough to take advantage of it while it lasts, so let’s go to questions.

Our first question is from Ross Sandler at Barclays.

Hey guys, morning everybody. Neil, just wanted to start with your comments on Meredith and dig a little deeper. You mentioned in the letter that Health.com is going through its overhaul, and there was a statement about revenue getting back to normal after just one week - that’s a lot faster than the timeline that you guys have explained on kind of your legacy Dotdash vertical sites, when you did those overhauls. Can you just elaborate a little bit more on what’s going on with that and what’s making the revenue recovery much quicker at the Meredith properties? The second question is just for Joey, kind of high level on what you just ended with, but it seems like you’ll have pick of the litter as far as private consumer internet companies to choose from in the coming quarters. Can you bring us under the hood and what are the internal groups at AIC getting ready for right now, which marketplace categories look the most attractive or are you the most focused on, or does it just kind of come down the valuations that you think might present themselves? That’s it, guys.

Thank you for the question. Regarding Health.com, when we talk about migration, it means we integrate it into our technology and advertising systems. This has significantly improved our site performance, reduced the number of ads, and enhanced content quality. After migration, the sites are much faster and the ads are more effective. We noted in our letter that the site is about five times quicker and has around 30% fewer ads that perform better. Traditionally, it takes time for the market to recognize these improvements. Currently, the click-through rate for ads on Health.com has increased by 60% since the migration, and average rates in the programmatic space have risen by 50%. We’ve achieved these results in about a week, which is much quicker compared to previous migrations. Two main factors contributed to this success: our improved capabilities in executing migrations and the strong recognition of the Health.com brand. The market has responded favorably because the brand is more established than those we've worked with before. This bodes well for other brands we plan to migrate. Our goal isn't just to return to neutral; we aim for this migration to foster audience growth, increase revenue per visit, and enable commerce and content tools. Internally, we view this as a significant positive step in our strategy of acquiring Meredith, and we feel confident about our trajectory.

In terms of opportunities for IAC and our capital priorities, I’ll start by discussing the private markets. I don’t believe there will be significant opportunities in that area. We have identified public companies that offer compelling products in large markets with strong brands that we find interesting, and we will continue to focus on those, as they present more opportunities. Private markets, as you know, typically do not have to adjust to the current market conditions unless a business has run out of capital. These companies can take their time, so I don’t expect to find immediate opportunities there unless cash flow becomes an issue. Many companies wisely ensured they had sufficient cash over the past couple of years to avoid facing the current market challenges. While it’s possible there could be private or public opportunities, we generally see a greater number of prospects in the public market. Regarding our approach, I won’t discuss specific companies or categories, though we do favor marketplace businesses and believe we understand how to evaluate and manage them well. When considering capital allocation, we look at both our current businesses and potential new ventures. Our two largest existing businesses, Dotdash Meredith and Angi, are currently undergoing significant changes. At Dotdash Meredith, we are in the midst of a large integration, which makes it less likely that we will use acquisition currency there. Similarly, Angi is going through substantial transformations, making acquisitions there also less probable. However, we remain open to opportunities if they arise, though for now, I believe those chances are slim. We will continue to pursue smaller initiatives with our smaller businesses, but our primary focus is on new opportunities. As mentioned in our letter, we will also consider these opportunities in the context of share repurchases, a clear and regular path we will continue to pursue.

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

Great, thanks. Two questions, one for Joey. Joey, I thought the tone from the beginning of the shareholder letter for both Dotdash Meredith and Angi seemed pretty bullish in terms of profitability going forward. How confident in kind of ramping profits at the two segments through the rest of the year, and should we think about $450 million in EBITDA at Dotdash Meredith for 2023 as a bogey that you guys still believe in? Then secondly, and this can be for Joey or Chris, and Joey just kind of referenced it, but IAC has 8 million shares remaining in its buyback authorization, Angi has 15 million. Just given where the stocks are trading right now, how should we think about buyback for either IAC and/or Angi through the rest of the year? Thank you.

Sure. On profitability, I’ll let Chris weigh in on this too, we feel very confident in everything that we said. That doesn’t mean that we’re rushing back to feed profits at Angi right now, but it does mean that we are improving from here and we’re past peak investment. Dotdash Meredith, we’ve learned enough things in the few months that we’ve owned it that we feel good about the adjusted EBITDA that we think we can deliver this year. Same is true for the $450 million - the progress that we’ve made over the course of 2022 so far, and we expect to make over the rest of 2022, gives us a lot of confidence in what we said we think we can do by 2023. I think that there are really sort of, like any business, two factors: price and volume. I think at Dotdash Meredith, I think on price we’ve made the progress. We have the evidence of the progress that we need on price. Macro headwinds could impact us on price, but I think that we have the pieces in place to deliver on price, and I think that the growth on traffic is also compelling, but traffic is somewhat outside of our control. We’re going to create great content, we’re going to create the best content in the category, we’re going to have the freshest content, the fastest sites, the fewest ads, and that ought to lead to traffic, but that’s the one that is somewhat outside of our control because a lot of that traffic comes from third parties. That’s the one area that probably is left to prove, but as we say, the early evidence in terms of things we’ve done with our traffic, things we’ve done with the sites and how traffic has responded to that has been very, very encouraging. Oh yes, buyback - thank you. Do you want to add anything on profitability?

No, go ahead.

Regarding share repurchases, we continuously assess the possibility across all market conditions. Currently, we're in an intriguing situation that we haven't encountered in quite some time. Yesterday, IAC’s market capitalization was approximately $6 billion, while we possess around $3.5 billion in public securities from Angi and MGM. This leaves us with about $2.5 billion to $3 billion allocated for Dotdash Meredith, Care, Turo, and other cash-generating entities. Focusing solely on Dotdash Meredith, if we consider $2.5 billion to $3 billion for the rest, this business is expected to produce $300 million in EBITDA this year, which represents a multiple we find quite favorable. Care is performing excellently and is a strong brand in a significant market, while Turo is also excelling. With everything else balanced out, this presents a very appealing scenario that we are actively considering. The positive aspect is that we have numerous securities to analyze, including IAC, Angi, and MGM—all of which we understand in great detail and will be reviewing as we move forward.

Thank you Joey. With respect to Dotdash Meredith profit scale, there are a number of factors that throughout the year come together to explain the step up north of $300 million of EBITDA. The first is, and we messaged this in the last call, the first quarter was going to be an extremely tough comp. That was driven by COVID factors a year ago when everyone was locked down pre-vaccines, as well as a variety of movements within the Dotdash Meredith portfolio and demand shifts. You can see in the April numbers on the digital revenue side that we have already come out of the year, of March, and that builds confidence for the rest of the year. The other point, and Neil referenced the Health.com migration, we’ll talk about a few different green shoots from the combination and the status of the business. That was a major one, was what happens the first time that we move a Meredith property over to the Dotdash platform, so that we can do the Dotdash playbook on it. The positivity we’ve seen there gives us considerable confidence for where we go from here, both in terms of advertising performance, site speeds, traffic, ecommerce. All of those growth engines are available once we get the property onto the Dotdash platform, and that will drive performance through the rest of the year. The other factor that is important is the marginal profit on a digital dollar is quite high, and that’s the nature of gross margin and profitability scaling in the fixed costs on the digital side, and then finally what you’ll hear some discussion from Neil on sales force performance and growth there. When you look across, it is a back-end weighted plan, we’ve always said that, but the margin scale on digital will happen throughout the year. We expect print and corporate costs to be in the same neighborhood, and that’s how we have confidence to get above $300 million for the year on the EBITDA side of DDM.

Thank you.

Our next question will be from Cory Carpenter at JP Morgan.

Thanks for the question. Oisin, would be great to start off just with a recap of how the quarter went versus your expectations, and then looking forward, is there any change to how you’re thinking about the growth opportunity for the rest of the year? Then Chris, maybe two questions for you. Angi moving past peak investment, is this happening naturally or is this more of a decision that you guys are proactively making to pull back on spend, and anything to call out on the April comps? Thanks.

Thanks, Cory. In Q1, we faced a challenging environment with Omicron and tough comparisons to last year's performance, which was driven by strong consumer demand due to stimulus checks. Despite this, we feel confident as we move into April with a solid position. The ads and leads business is expected to improve significantly from here. Regarding our services business, we are pleased to be past the peak investment, which was planned for March when we set our strategy in Q4 last year. Looking ahead, we anticipate notable increases in gross profit from services, which will help mitigate its impact on overall business performance and lead to profitability for services. The growth in gross profit will stem from higher take rates, better optimization of variable costs related to bookings, and increased engagement from professionals in the advertising side of the business. We expect this growth in ads to gain momentum in the second half of the year, influenced by various macro factors and reduced consumer demand. As the workload for professionals decreases slightly, they become more engaged with our platform, reflected in new professional sign-ups, sales productivity, pro spending, and transaction monetization. We are optimistic about organic growth in services and confident in the growth of our high-margin ads and leads business as we move through the latter part of the year while enhancing overall profitability.

Then Cory, building on Oisin’s point, the plan has always been that peak investment would occur in March. Fixed costs increase seasonally; the first quarter typically shows lower revenue. As services revenue grows organically and seasonally throughout the year, gross profit declines against a relatively static fixed cost base, which eventually reverses the EBITDA losses. Additionally, we've noted in our letter and will continue to do so, that we plan to provide more insight to investors regarding gross profit in the services business, including details on relative profitability and how profits from ads and leads will flow through over time, as well as how services profits will develop. As Joey mentioned in the letter, while it is a lower margin product, it is growing rapidly with larger projects, leading to greater dollar gross profits.

Thanks so much.

In the April metrics, we want to highlight a few points. Firstly, there’s nothing significant to note for May and June; the comparisons look quite smooth year-over-year, unlike March and April. However, there are two key takeaways that align with our message of increased confidence. Our two largest profit sources at IAC, ads and leads at Angi and digital revenue at Dotdash, both demonstrated stability in April after a tough March. This reinforces our previous message that March was a challenging comparison for both businesses, primarily due to COVID-related issues, and we are now past that. Ads and leads revenue and digital revenue remained essentially flat year-over-year, and we anticipate that Q2 for Dotdash will also be flat, which is consistent with our guidance as we navigate the re-platforming and other integration factors. This positions us for growth in the latter part of the year, aiming to return to our target of 15% to 20% digital growth at Dotdash. Additionally, with the stability in ads and leads at Angi, that continues to be our primary profit driver, supported by organic services growth that will enhance gross profit dollars. These are the main points we wanted to emphasize in the April metrics.

Our next question is from Justin Patterson at Keybanc.

Great, thank you very much. Two, if I can. Neil, as you’ve executed on the integration and engaged with advertisers, how has the tone of your conversations changed and how should we think about that, just building up in sales force productivity the back half of the year? Then for Oisin, how do you think about rising interest rates impacting your business? Could this actually be a tailwind as consumers deal with affordability issues and start doing more projects at home? Thank you.

Thanks Justin. On the sales side, we talked a little bit in the letter and I can talk a little bit more about the integration of the two teams, which is essentially complete. We have the teams structured vertically, brand focused, feel really great. But I think the word I would describe it with is there’s a lot of excitement. There’s excitement internally and there’s a lot of excitement from advertisers because we, for the first time, can now bring them something that hasn’t been brought to them before, which is intent-based targeting, contextual targeting at a scale that’s never been able to be done before. People really like Dotdash, they like our historical hustle, they really like all the Meredith brands, and the combination is proving really powerful. I’ve been in a lot of these meetings myself with some of the biggest agencies, some of our biggest clients, and I can say almost without exception the going forward commitments, some of them are hard commitments, some of them are softer commitments, one plus one is more than two and that is probably the most exciting thing. I think we’re going to see some real growth from the biggest agencies and the biggest partners when we bring our energy, our performance, we can start showing what our performance looks like as we migrate, and you combine that with some of the Meredith brands that are frankly at a level we haven’t had before, when you can do it at Better Homes & Gardens, when you can do it at People, when you can do it at Allrecipes, when you can do it at Food & Wine, people get very, very, very excited. We are exclusively focused on brands and selling brands and selling performance, and the thing that we keep hearing - again, I’ll say it again, people are rooting for us, and I think we can make that work - we’re not there but we can be, we have the scale and performance to be a viable alternative to some of the platforms people have been putting money that they may or may not want to do that anymore. All of our content is safe, we’ve created it all, we’re not news, we’re not feeds, we’re not UGC with the exception of a few recipes at a few of our sites, so it’s a whole new thing and educating the market and bringing that excitement is our job now, so we feel really good, kind of exceptionally good with where we are.

In terms of interest rates and the macro environment, the biggest advantage or the biggest positive from what’s going on is a less dislocated relationship between supply and demand. The last two years where COVID drove exceptional demand for home services, created an incredibly challenging environment to sell advertising products, performance marketing products to service professionals, our average plumber, painter, carpenter, remodeler had more work than they could handle, and throughout that period we kept the Angi performance marketing business, the ads and leads business relatively stable. The biggest macro impact is as consumer demand normalizes, as the labor market perhaps normalizes even just a little bit, we expect to see that relationship between supply and demand give us significant tailwind for the ads and leads business. We’re already starting to see that in terms of softening consumer demand. We’re already starting to see that in terms of higher sales force productivity, and we’re already starting to see it in terms of pro engagement. You put that together with the challenging comps from last year and we expect to see the ads and leads business become more relevant in the current macroeconomic environment. You add on top of that as pros need us more, we do have pricing optimization as that relationship between demand and supply becomes a little more normal, so overall we think the macroeconomic environment is more favorable to the ads and leads business than the incredible dislocation we’ve had over the last 24 months.

Our next question is from Jason Helfstein at Oppenheimer.

Thanks. Joey, I’d like to ask about gaming. You mentioned a timely investment in MGM, which relates to your views on interactivity, sports betting, and other emerging gaming areas. Given that values in online sports betting have declined, could you discuss whether any investments in this sector would be made through MGM, or if you're considering other opportunities outside of MGM? I'd appreciate your overall thoughts on gaming at this time. Thanks.

Both inside and outside of MGM is interesting for us. We’ve gained significant insights since our arrival. The gaming business, encompassing both online gaming, which includes sports betting and i-gaming, has exceeded our expectations since we started. It has experienced remarkable growth, and we anticipate that this trend will continue for a considerable time. The challenge, as you likely know, has been the margins in this highly competitive environment. Many players feel the need to dominate this space, which results in multiple companies losing substantial amounts of money annually. One clear takeaway is that currently, i-gaming is a far more favorable business than sports betting, despite the larger market for sports betting. We intend to apply these insights and hopefully identify more opportunities within MGM, as evidenced by MGM's recent announcement regarding the acquisition of a global gaming company in Europe. We are also exploring what other possibilities exist. Our approach will prioritize collaboration with MGM, and we maintain a continuous and open line of communication regarding their interests as well as our own initiatives. While our preferred strategy is to operate through MGM, there may also be viable opportunities outside of that framework, allowing us to leverage the knowledge we’ve gained where it makes sense to pursue an independent path. If we do choose to do so, it will only occur with MGM’s approval.

Our next question is from Brian Fitzgerald at Wells Fargo.

Thanks guys. Two quick follow-ups. On Dotdash Meredith and the recovery speed there and the trajectory at Health.com, what are the drivers by which advertisers kind of pick up on the benefits of reduced clutter? Does that come through in the click through conversions, brand lift studies, or is it partly a matter of sales force communications? Second one was a follow-up on Angi. The zero match service request rate has been ticking down over the past few quarters as you continue to scale services and perhaps as pros have more available capacity, like you talked about. Any thoughts on where you think that zero match rate can go, and as you continue to make improvements and effectively fulfill demand, do you expect SEM SEO benefits from that closure?

To respond real quick, thanks Brian. It’s sort of the clients see this in a phased way. The minute you make the change, you’re sending very different signals into programmatic marketplaces, and as you can see by what happened at Health.com, those responded nearly immediately, and again in a week we’ve seen great improvement and we would expect as we refine this for that to continually improve. Now, those signals get back to clients and then start to reflect in the premium deals that are running on the sites, and those take a little bit longer, there’s a little lag, there’s less instant, and then ultimately they are reflected in things like brand lift studies. When a page has three highly performing ads for a client that does creativity and creative things that we know that work on our sites, that results in pretty much any metric you want to measure your advertising on is going to be better, and we’ve seen this at Dotdash repeatedly. If your metric is a brand hook metric because you’re launching a new car line and you want to drive the new brand or you want to drive test drives, that’s one thing. If you’re metric is CTR, that’s another thing. We are going to hit on all of them. They don’t all happen immediately, sort of the mass marketplace stuff happens immediately and then the rest of it trickles out over time, and a lot of it is educating clients, our sales team going out and educating clients how much better we perform than others and how our performance is. A little bit is for clients to understand that these units and our ad offerings are actually more valuable and something that they should pay more for. That takes a little bit longer, but we feel very strongly that we are on the path. The number one proof point is once we start to perform and the programmatic markets move, we know exactly what happens next because we’ve seen it 14 or 15 times.

On the zero match rate at Angi, or the accept rate at Angi and how it impacts SEM and SEO, you’re absolutely right - we now have the richest product portfolio out there between ads, leads, and services. There is nobody with a product portfolio that looks anything like this, so we are more attractive than ever on Angi SEO in particular and we see that coming through in terms of the performance of SEO on Angi, which the growth there is incredibly strong on a year-over-year basis and we feel really, really good about the direction that’s taking. So you’re absolutely right that having the combo of those things gives us an advantage on SEO. On SEM, it also gives us an advantage because by having ads lead services to monetize particular services requests, particular services in particular geos, it makes it more predictable for our SEM bidders to know when and where and for which categories to bid. What you will ultimately see is us buying fewer service requests where we are unable to monetize, so the more predictable our supply is, the more predictable our offerings are because we have more offerings, the easier it is for our algorithms to decide yes, it’s worth bidding on this particular click, so that would reduce our long term tendency to buy service requests that we’re unable to monetize and you should be able to see our transactions that we are monetizing start to increase. One call-out on that is that our monetized transactions don’t take account of the ad monetization yet, but it is something that we need to look at.

Thanks guys.

Our next question will be from Eric Sheridan at Goldman Sachs.

Thanks so much for taking the question. Guys, if I could just take a step back and think about the capital allocation inside the firm, you’ve got these opportunities at Dotdash Meredith and Angi and then emerging opportunities, is there any different sense of where you could accelerate some of your efforts over the medium or longer term, where you’re trying to go for the business against allocating capital behind it or is it purely down to execution, and then could we expand that conversation into areas like Care, how you see operations versus the application of capital to speed up the opportunity set? Thanks.

There’s a lot to unpack here, so I’ll break it down. We aim to invest in every business, with the exception of Search, where our focus has shifted more towards maximizing profits rather than pursuing growth, and that trend is likely to continue. In all other areas, our goal is to find a balance between short-term and long-term strategies. This means we are reinvesting some profits for growth while also ensuring profitability, as one of our colleagues used to say, it’s about balancing enjoying what you have while pursuing your dreams. It's easy to focus solely on either long-term or short-term goals, but our responsibility is to manage both effectively. At Angi, for example, we've historically invested heavily in long-term growth, and now that we’re past that peak, we’re moving towards a more balanced approach. We strive to do both across all our businesses. We are mostly not in profit maximization mode, aside from Search. In areas like our emerging businesses, we are currently investing since some are operating at a loss. In Care, it is profitable, but we are reinvesting a portion of those profits to foster growth, which we plan to continue. This approach is consistent across most of our businesses. Would you like to add anything to that?

I want to emphasize and expand on this point. In terms of capital allocation, every dollar we invest, whether in M&A transactions, follow-on investments, increased operating expenses, or growth initiatives such as marketing, represents a capital allocation decision. IAC utilizes a pool of capital that is channeled into new opportunities to enhance shareholder value. In the current environment with higher discount rates, valuations decline and capital becomes more scarce, making our strong balance sheet a significant competitive edge. We also continue to fine-tune our portfolio of investments to ensure the right returns in this context. We've discussed growth opportunities in Care, expecting these new initiatives to be very beneficial. Dotdash and Angi are heavily focused on operational aspects, particularly following a major transaction last fall involving Meredith, and they are driving substantial value for shareholders. We continuously assess our share price, along with Angi's and others', as we consider capital allocation opportunities. It involves a comprehensive analysis of where every dollar could be effectively utilized.

Our next question will be from Tom Champion at Piper Sandler.

Good morning. Oisin, could you discuss the monthly metrics and why service requests have decreased by double digits over the past three months? What is driving this trend? Additionally, could you connect this to the comments regarding ads and leads revenue that imply stabilization? Chris, I'd like to follow up on Care.com. The letter mentions some newer opportunities that have arisen post-pandemic, outside of the legacy services in nanny and long-term care. Could you elaborate on what you are observing lately?

Thank you for the question. The decrease in service requests can be attributed to two main factors. First, we have tough comparisons from last year when service requests and overall home activity reached unprecedented levels, likely inflated as people were confined to their homes. This has created a challenging benchmark. The second factor is the shift from Angi's List to Angi due to the rebranding, from which we have largely recovered and are seeing strong growth in the Angi domain. However, we also reduced our marketing for the legacy home advisor domain, which has negatively impacted service requests. Overall, we are achieving better monetization from the service requests we do receive. This means we are now more likely to connect requests with qualified professionals, making the transactions more profitable than ever before. Although it is ideal to fulfill every service request, we prefer to focus on those we can successfully deliver on. If we receive requests we're unable to fulfill adequately, it leads to a situation where we incur costs while disappointing homeowners. Therefore, we are being more careful and responsible in how we approach service requests and marketing. This is reflected in our metrics, such as the zero accept rate and monetization rates, indicating we are now more effective in these areas. In the long term, we aim to return to growth in service requests, and we expect to achieve this as we overcome these challenges and enhance our monetization efforts.

Thank you, Oisin, and Tom, I appreciate your question regarding Care. I want to emphasize two main points mentioned in Joey’s letter. First, we are experiencing inbound demand for our platform that we are currently unable to meet, particularly in areas such as out-of-home daycare, senior care, and pet services. About 40% of the incoming requests cannot be fulfilled, so our focus now is on increasing our provider supply to create a healthy two-sided marketplace. The second point we are very excited about, which Joey also mentioned in the last earnings call, is the instant book process. As parents, we can quickly recognize the value in this service, as it allows for a much quicker match for babysitting or home care needs, with providers being available within hours. This is about developing a product and ensuring that we have liquidity on both sides of the marketplace to facilitate faster turnaround times. We are currently beta-testing this product, and Tim and his team are actively working to increase its capabilities. We are enthusiastic about this rollout, but we want to ensure that while we innovate in this new marketplace, we have both the product and liquidity needed. We see this as phase two of Care after addressing historical challenges and establishing a solid core foundation. These developments are essential for our growth moving forward.

Our next question will be from Ygal Arounian at Wedbush.

Hey, good morning guys. I’ll start with just the comments on past peak investment in services and plans to expand into new categories there. Where are you with those plans on the new categories, and how does that align with the discussions about being past peak investment? Then for Joey, you hit on Bluecrew and Vivian in the investor letter. We didn’t talk about it today - it’s clearly one of the strongest areas of the business right now. Can you just expand on where things are there, where your vision is for where those businesses go in the coming months and years? Thanks.

I can start with services. From my perspective, we have experienced four consecutive quarters of over 100% year-over-year growth in services, which includes the Angi roofing acquisition. Additionally, we are seeing robust organic growth in services, and we anticipate that this growth will accelerate for the remainder of the year. Our backlog is particularly strong in larger projects, where we are selling at a faster rate than we are delivering, making our backlog the largest it has ever been for projects like roofing and other remodeling categories. We are optimistic about the ongoing growth expected in services for the latter half of the year based on these factors. Furthermore, we still have opportunities within the product to further promote services, and we are working on optimizing product flow, Q&A flow, conversion, and job allocation for efficiency. Regarding margins for services, we reached peak investment in March, largely due to increases in gross profit dollars from services. We saw a significant jump in gross profit dollars from March to April, which supports our goal of achieving profitability in services. We recognize that we have considerable levers to manage take rates. Having been involved in some categories for several years, we are confident about the take rates we can attain. We are also aware of how to optimize variable costs in customer service, operations, refunds, and other areas, and we will balance our efforts with a keen awareness of market conditions. We are in a more volatile environment than in the past, which makes things less predictable. Therefore, we will be responsive and diligent in selecting categories for investment, focusing on those that contribute positively to gross profit margins, while being selective about reducing investment in categories that are not performing well. Overall, we feel very positive and confident about the growth rate and organic growth rate of services accelerating for the rest of the year, and we are confident in the path to profitability.

Thank you Oisin. The only thing I’d add is relative to just the question, category expansion is not a key element of services going forward and relative to being past peak investment. If anything, to Oisin’s point, we’ve identified the job types and categories where margins and momentum are strongest, so it will be more around perhaps placing greater prioritization on those, but we are in a broad set of categories as it is.

On Bluecrew and Vivian, thanks for that question. They are quite different business models, but they share a fundamental aspect. Vivian focuses on matching employees with employers, particularly in nursing, and we hope to expand that to all healthcare. Bluecrew operates on an agency model, where we employ the workers. The common ground is a significant evolution from static job listings and inefficient matching processes to a more dynamic interaction between employers and candidates. This is easiest to understand when job qualifications are binary—like whether someone is certified as a nurse or capable of lifting a specific weight. We've found that much of the surrounding hiring process is inefficient, as interviews are often not as effective as believed, leading to slower results without better outcomes. With our platforms at Vivian and Bluecrew, we are building data to identify who can perform jobs well, their on-time rates, employment histories, and certifications. This makes the process more efficient for both candidates and employers, allowing more flexibility beyond the traditional work hours. Candidates can express their interests and match with employers accordingly. Vivian started with a $10 billion total addressable market in travel nursing and has expanded beyond that; when considering total healthcare, the market size increases significantly. Bluecrew began with a $30 billion market, which could also grow substantially as we expand into other categories. Our focus is on leveraging technology and data to benefit both sides of the marketplace, improving matching and fostering growth in both businesses, which continue to perform well, and we remain optimistic about their potential.

Our next question will be from Brent Thill at Jefferies.

Joey, many investors are asking if the macro headwinds get even stiffer, how you think the rest of the portfolio fares and what gives a defensive element in a tougher macro over the next year?

Sure. We will likely need to assess each business individually, starting with Dotdash Meredith. In challenging environments, the last expenses to be cut are typically performance-related, where spending can be directly linked to results. Our experience with Dotdash shows that performance is easily measurable, and we are currently transitioning all of Meredith onto the Dotdash platform to enhance our ability to measure and demonstrate that performance. We believe this segment is relatively well-protected, although if the economic climate worsens, circumstances may alter. Nevertheless, our position in this market is strong because our advertisements deliver results, as evidenced by data and advertiser retention. We previously discussed our history with Angi, which has a significant number of non-discretionary jobs—around 60%, though someone may correct me—which are necessary regardless of the economic situation, such as repairing a broken toilet or HVAC system. Therefore, we have some protection in that area. Regarding Care, we haven't experienced a downturn like others, but it managed well during the pandemic, which had unique dynamics affecting it. We'll need to see how it performs in a tougher environment, yet it fulfills a fundamental need as people require childcare to work. Thus, we think it should also be reasonably well-protected. These are the primary segments we focus on.

Our next question will be from Brad Erickson at RBC.

Hi, thanks. I have a couple of follow-up questions regarding ads and leads within Angi. You mentioned that traffic is still recovering there after the pandemic.

Sorry Brad, you’re coming in and out.

You can’t hear me? How about now? All good?

Now we can, yes.

So regarding ads and leads, Oisin, you mentioned SEO and SEM, and traffic is improving. Based on today's results, do you feel you are currently earning more or less than expected? How aggressively do you plan to invest in marketing on Angi.com once traffic fully recovers? Additionally, you have previously indicated that roofing could serve as a model for expanding into other categories, where acquiring a company's supplier and labor networks is beneficial. I'm curious if you are suggesting that acquisitions might not be a focus anymore and that you feel adequately equipped without them. Could you clarify that further?

Sure, regarding ads and leads, we still see more consumer demand than professional supply overall, even though it varies by category and vertical. There are definitely categories where additional consumer demand would allow us to monetize better, but collectively, the consumer demand surpasses the professional supply. Therefore, increasing professional supply or decreasing consumer demand would be favorable. We're not yet back to our peak media spend levels from our legacy brand, Home Advisor. As the landscape shifts and we see progress with the Angi brand, we'll strategically invest where it makes sense. We're pleased with our roofing investments, which have enabled us to quickly grow in that area, and we anticipate that growth will continue throughout the year. When it comes to mergers and acquisitions, we are being cautious and will consider opportunities based on the macroeconomic situation. This doesn’t exclude the possibility of identifying promising categories or acquisitions that would enhance our business.

Last question?

No, we’re done.

Okay, so with that, we thank you for joining us this morning and look forward to discussing more. Have a great day.

Thank you.