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 second quarter press releases and our respective filings with the SEC. We'll also discuss certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. Please also refer to our press releases, the IAC shareholder letter and to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures.

Good morning. Thank you for joining the IAC Q2 Earnings Call. I'm joined here today by Joey Levin, CEO of IAC; Oisin Hanrahan, CEO of Angi; and Neil Vogel, CEO of Dotdash Meredith. We are going to go into a statement by Joey and some early comments, and then we'll go directly into Q&A. With that, I will turn it over to Joey Levin.

Good morning, everybody. Thanks for being here. I'm grateful to be here in the office with my colleagues, building businesses. I'm thankful to all of you on the phone and video for joining us. I'm very optimistic about our businesses right now. We have our biggest business, Dotdash Meredith. We are on the path we set when we started our initiatives. We are taking the steps we planned to take and generally seeing the intended outcome. We're not moving as fast as we'd like, and I don't think we have the support from the advertising market that we expected, but we are accomplishing the objectives we set out to achieve. The most significant task we've undertaken is migrating Meredith onto the Dotdash platform, which we've done in record time. This positions us to execute effectively moving forward. The biggest thing we will need is driving traffic, which is something we've done many times before. We expect to see growth as soon as the migrations are completed. We believe our product is the best in category and that we are delivering effectively for our consumers. At Angi, the focus on profitability has been very positive. We've seen service losses decrease monthly while the business continues to grow. Even with tempering growth significantly, we're still far outpacing market growth, and we expect that to continue. I like the direction of both Dotdash Meredith and Angi. We certainly have much to prove, but we're headed in the right direction. As for the macro environment, while we've shared the data we've observed, we don't have a precise prediction. Signs suggest other businesses may be bracing for impact. However, we intend to control our operations and execute well, aiming to grow our businesses regardless of the economic climate. I know everyone has many questions, so let's move to those.

Our first question is from Cory Carpenter at JPMorgan.

I have two questions on Angi. Oisin, could you talk about the trends you observed throughout the quarter?

Go ahead, Cory.

Can you hear me now?

Yes.

Yes.

Okay. Two questions on Angi. Oisin, could you discuss the trends in the Ads, Leads, and Services business? Specifically, I hope to hear more about the optimization you're making around unit economics and how that impacts growth. And secondly, possibly for Chris, how should we think about the right level of overall growth and profit for Angi in the second half of the year?

Thanks, Cory. Let me start at the top. Overall, we're incredibly happy with the performance we saw in Q2. If we rewind a year ago, when we initiated the rebrands, and said we would get the Ads and Leads business back to growth, that would have seemed like an excellent outcome. So we're very pleased to be here and especially that we've seen strong growth in Ads and Leads. The main drivers of that growth have been around pro engagement, their willingness to pay, and becoming more active in the market, which has been incredibly beneficial. Regarding Services, we had a robust run in Q2, with focus on profitability. We've made positive trade-offs within that business that have led to an overall increase in profitability for Angi. When looking into specifics, we have encountered challenges, particularly in Roofing. After our Roofing acquisition, it's important to unpack a few things to properly gauge the overall growth rate. Excluding Roofing from the Services number, we have a 34% organic growth rate. However, Roofing revenue has dropped in July from an average of $14 million in Q2 to about $9 million. This indicates the significant operational challenges we’ve faced in Roofing, primarily around pricing. We had more success in other categories, but Roofing has caused a bit of a setback. We expect it will take a few quarters to get Roofing growth back on track, but overall, our Ads and Leads are growing mid to high-single digits, and we’re optimistic about returning our Services business back into 15% to 20% growth with increasing profitability.

Thank you, Cory. We were very happy with Q2 results, with adjusted EBITDA for Angi at $9.7 million, inclusive of a $2 million lease impairment; hence, the run rate profitability is higher. One point of encouragement was the 10% overall gross profit growth across the Angi portfolio. This is driven partly by growth at the higher-margin Ads and Leads business, but it also reflects the improvements in the take rate and margin that Oisin’s team is driving across Services. Looking ahead, high single-digit Ads and Leads revenue growth will push revenue to the bottom line, alongside continued margin improvement. As previously mentioned, we stated last quarter that we passed the peak investment in Services. We expect continued sequential improvements in Services investment throughout the year. Overall, we anticipate higher adjusted EBITDA in the third and fourth quarters than what we produced in the second quarter, and we feel very positive about the profitability picture and momentum in the business.

Great. Our next question will be from Ross Sandler at Barclays.

I have a question for Neil. We can see what's occurring in the broader digital ad space and the deceleration. Regarding MDD Digital, the 7% decline, how much of that is attributable to the macro environment versus self-inflicted issues? Or conversely, what would that 7% decline have looked like without the demonetization and replatforming of certain sites in Q2? And looking at the monthly trajectory, it appears that MDD Digital could decline low double digits to 15% in the back half. Combined with the over $300 million in EBITDA comment, this indicates about a 30% EBITDA margin for that Digital business. How much do you see multiple margin expansion in 2023 once all the replatforming is complete?

Thanks, Ross. Let me unpack that. The advertising market is indeed facing challenges, so the term self-inflicted is appropriate. It’s difficult to pinpoint exact impacts, but I’d estimate it's roughly 50-50. Additionally, slower than anticipated migrations have also contributed. The ad market varies, and while some sectors are performing decently, there are concentrated problems around retail, food, and consumer packaged goods, which primarily impact the Meredith assets that we acquired. Since we were a bit delayed on migrations, it’s also impacted our performance as we entered a challenging period without our complete tools. We're optimistic, as we’ve already migrated 75% of our traffic and expect completion by the end of next quarter. The combination of our strong brands and scale gives us a solid foundation for growth and improved advertiser conversations. As for margins, we anticipate incremental improvements moving forward. While this is a transitional year, we expect better performance by Q4 and a pathway back to profitability.

Certainly. Our focus is primarily on Digital profitability and EBITDA margins. While there'll be steady improvement throughout the year, the fourth quarter is historically our most substantial revenue and margin period due to a higher fixed cost basis in the Digital business. We're optimistic about the level of cost savings identified in Meredith through our integration. Certain factors, however, obscure these savings due to lower digital revenue stemming from the ad challenges and macro headwinds. We look forward to increasing EBITDA margins as revenue grows and stabilizes.

Our next question comes from Eric Sheridan at Goldman Sachs.

I have a few questions. First, regarding the macro environment, can you elaborate on what you're observing between enterprise and consumer trends? How are you positioning your consumer businesses for anticipated changes in spending habits? Secondly, you mentioned stock buybacks and the implication that the M&A market may return to your favor with valuation compression. Can you provide an update on broader capital allocation strategies against your stock and potential M&A? Lastly, regarding Care, how are you planning for demand improvement as we approach the back-to-school period, and how are you investing in Care broadly?

Certainly, I'll address all of these. The macro environment has clearly shown a disparity. We're preparing for potentially lower consumer spending by tightening our expenses and focusing on margins, which allows us the flexibility to operate effectively should consumer spending reduce. This strategy applies distinctly to Angi, where decreased service requests mean service professionals are more interested in our platform, ensuring our Ads and Leads products support this area. Regarding M&A and share repurchases, both are actively being evaluated. We have a keen interest in buying new assets and have adequate capital to pursue opportunities. Public markets presently offer more attractive prospects than private markets, and we anticipate that will continue. Finally, in Care, we typically see increased demand around the back-to-school season. We've invested significantly to enhance our user experience, aiming for a faster match between families and caregivers, which will foster higher usage scenarios.

Our next question will be from Jason Helfstein at Oppenheimer.

I want to delve deeper into the Angi trends. Specifically, can you discuss the slowdown in July compared to June? Can we anticipate the business performing with high single digits in Ads and Leads, or might it see low teens? Additionally, I’d like to understand your marketing decisions in balancing growth versus profitability for the remainder of the year.

Thanks, Jason. In respect to Ads and Leads, we have experienced several factors influencing growth, particularly around the rebranding process. While consumer demand is strong for the Angi brand, the HomeAdvisor brand remains a drag. With stable revenue from Ads and Leads, we’re optimistic about improvements moving forward. Regarding the Services segment, we faced headwinds in Roofing, reducing growth rates, but are aiming to recover back into the 15% to 20% range soon. The trade-offs made between growth and profitability have leaned more towards health and profitability, which we believe are the right decisions. We haven’t yet deployed significant marketing against Services, as our budget is currently directed towards Ads and Leads, but we keep evaluating when we might make that move.

Adding onto the monthly trends, we saw a considerable decline in Roofing revenue in July compared to Q2 averages, which we believe was largely based on operational challenges rather than macro declines. We are optimistic about the overall growth of the Services portfolio and have confidence in its long-term trajectory.

Indeed, fewer mistakes tend to help.

Next, we’ll hear from John Blackledge at Cowen.

Could you provide more details on the Digital optimizations of the Meredith brands? Which brands have been converted, and what results are you now observing? Additionally, how do you view the brand versus performance mix at Dotdash Meredith given the recent performance?

Absolutely, let’s address the migration aspect first. The migrations are essential for unlocking two core objectives: audience growth and enhanced performance metrics. We've successfully migrated seven sites including Health and People. Our data shows that these migrations typically lead to substantial audience growth—around 10% to 15% over four months, rising to 30% in a year and nearly 50% at the 18-month mark post-migration. Early indications suggest that our brands are exceeding expectations following these migrations. On the monetization side, the combination of programmatic and premium ads, alongside performance marketing, will be critical as we integrate our new assets. The reception from advertisers has been very positive, and we’re excited about the future capabilities this migration unlocks. Regarding the mix, we’re seeing differences by category; our transactional business has performed well to date, with challenges hitting our ad-based revenues more prominently based on some outlier events.

To summarize, as we move forward, we expect to see revenue improvements as comps ease in the fourth quarter, particularly in the Meredith properties. Although the overall environment poses challenges, we're optimistic about our growth trajectory.

Our next question will come from Youssef Squali at Truist.

Can you discuss the base case growth for Dotdash Digital heading into year-end? Previously, there was mention of 15% to 20% growth; is that sentiment still intact? Secondly, regarding the Print ad business, seeing a 3% increase in the quarter is promising. How sustainable is this positive growth long-term?

Great questions. Regarding Print, we've taken a different approach, and our focus now is on brand leadership and profitability rather than sheer volume. We’re seeing positive results in our key titles, and it's essential to reduce the number of publications to maintain quality. We believe that Print can serve as a vital brand driver without being a core economic engine. Thus, while we’re focused on digital growth, we see steady progress in Print as well. For Dotdash Digital, we anticipate returning to growth metrics by year-end, and the 15% to 20% growth target for next year remains in play.

With respect to Print, we're looking to maintain adjusted EBITDA from Print to cover our corporate expenses. We're optimistic about achieving that coverage based on current trends.

Our next question is from Daniel Kurnos from Benchmark.

Quickly, on Print: You typically reprice your national portfolio at year-end. With your aggressive cost-reduction stance, do you feel prepared to sustain investments in underlying Dotdash Meredith even with potential Print challenges? Regarding synergies from the acquisition, is this viewed as a potential additive source to your projections?

To address your question on Print, we feel well-prepared. Print will not impair our ability to invest in Digital. We have also seen potential synergies from the acquisition exceed initial expectations. However, we will remain prudent in managing this aspect. Long-term, we’re committed to leveraging our brands and maximizing their potential across all platforms, ensuring that Print functions positively as part of our overall strategy.

We would not make any decisions to limit investments that could inhibit medium and long-term growth for our core business. The focus remains on integral long-term value.

Our next question will be from Brad Erickson at RBC.

I have a few quick questions regarding the July growth metrics. You posted 10% total consolidated growth. Can you provide that number excluding Roofing? Any other one-off items in July, aside from what you've mentioned? Should we interpret the July growth rate as indicative of the rest of the quarter? Lastly, what are your concerns for second-half EBITDA margins?

Excluding Roofing, the overall Angi growth would be just over 12%. We have faced certain challenges, but the trends are promising. July trends can be used as a proxy for the quarter, reflecting improvements. Our expectation for H2 includes a scenario of improved profitability originating from increased service growth rates.

Our next question comes from Brent Thill at Jefferies.

Joey, with Care only growing 10% in Q2, how do you view its long-term growth trajectory?

I perceive it as a peripheral market that remains underpenetrated. In the second half of the year, we aim for growth between 10% to 20%, looking to accelerate further depending on our performance. This is largely contingent on the uptake of enterprise sales and new features like our instant booking service, which bolsters user engagement within the platform.

Based on our preliminary figures, the first four months of the year saw consumer growth varying around 30%, with enterprise remaining flat. We'll anticipate a growth reestablishment, which will positively influence enterprise sector demand.

On capital allocation, while the buyback is commendable, some are questioning the limited pace. Is this indicative of an intention for larger transactions or concerns regarding the core business?

There's always potential for more buybacks and such considerations. However, I wouldn't read into this any concerns regarding our businesses. Our businesses currently hold strong positions, and we’re prepared to navigate the tough macro environment. Our primary focus is on ensuring robust performance across our assets while strategically considering buybacks.

Can we go to Tom Champion at Piper Sandler?

I have a quick inquiry for Oisin. Regarding demand in home services, how do you see consumer behavior holding up? Also, how are inflation pressures affecting spending on home services? Could you provide an update on Angi Key subs?

Certainly, to address your queries: Angi Key has surpassed 300,000 members and demonstrates strong engagement levels compared to regular consumers. Regarding overall demand, our dual-product offering serves beneficially during slower periods. Lower demand for home services leads to higher pro engagement and willingness to pay for leads. Overall, we're focusing on maintaining our market share; the moderation in demand can be beneficial for increasing pro engagement and profitability.

As a final point, our expectations around home service requests have been adjusted. Reflecting on the elevated demand last year, we see moderation leading to better alignment in our marketplace.

I want to thank you all for your time today and wish you a good day.

Thank you.

Thanks everyone.