Q4 2020 IAC/InterActiveCorp and ANGI Homeservices Inc Joint Earnings Call
Quite seeing the Vimeo story as clearly as we charter as amazing as its played out meaning even even surprised that.
We've got a great collection of businesses right now are at IAC ex Vimeo, Angie you're all quite familiar with is is.
Just a huge business in a huge category with the huge leadership position and we've got a lot. We're doing on the product side that we're very excited about to open up more of the market.
Doctor Ash could starting to really come out of its shell and growing 33% last quarter and being a real business with real real most we think in the publishing category, which is something that previously didn't I didn't think was what's possible in recent history a lot of people didn't think was possible.
We've got care, which is relatively new for us, but we think can be a huge marketplace and a huge.
$30 billion $40 billion category, and I think there's ways to expand that category to the hundreds of billions.
And.
Again, a huge leadership position nobody really close there.
And we've also got as you know we get this question a lot, but a large amount of cash nearly $3 billion of cash that we're going to put to work and we're going to put that to work with no rush no urgency to buy things in order to choose to buy things in any particular market, but generally with the St.
We always have which is first the business is that we.
Know that we own are going to be the first priority on capital from when we can have a real fundamental advantage in acquiring something and I think that applies both to.
New businesses in our existing categories and to share repurchases, obviously, we understand our own business, hopefully, we understand our own business pretty well.
And then looking for new categories, and I think generally strong preference for control positions. We do have a couple of recent examples that.
It worked out in minority positions, but generally we're going to be focused on control positions and hopefully will will enter a few new categories and likely on the earlier side of things, but but we'll see.
We've got a pretty good stable of the whole range, meaning we've got early stage businesses.
Nurse flying Blue crew that we're really excited about right now and we've got a later stage businesses in <unk>. We're really excited about all of those I think if we got them in the portfolio right now it's because we believe they have real okay.
Hi, Eric So to your question about incremental investments and product innovation in EMEA over the next few years.
Thing that we've learned since the pandemic and just how much bigger the market opportunity is and then what we thought.
And we really believe our Tam is every professional every team every organization in the world now need video to reach their customers and employees and we've had so many organizations and businesses knocking on our door.
Net months asking to use video in ways that we don't yet have a product for so it's an early market I think product innovation is where we will be focusing our long term investments and some other things that we're trying to do is we wanted to be the single corporate video solution for any organization of.
Any size to share content internally and externally.
We have a great position now in certain parts of that we can power a town halls and training, but there are so many other ways that video is proliferating throughout organizations and everything from sharing product demos and creative walk throughs to rethinking how webinars work to making.
Every interaction with video more engaging and so we see lots of opportunity and you'll see both our near term and our long term investments really designed to solve these needs will also be investing in areas like sales and marketing on the sales side in the near term expanding our sales force.
Both domestically and outside the U S. We see a big opportunity to increase our marketing spend particularly on mobile.
Where we're at we have an opportunity we've been historically very web focused and you'll also see us do things like diversify our acquisition channels by investing in areas like partnerships and in our free product. So it's an early market I think we have a great head start with a leading all in one software solution, but.
We want to turn that head start into a definitive lead and we're excited with the capital and the focus to do that.
Our next question, we'll go to Cory Carpenter J P. Morgan.
Great. Thanks, Mark I had two questions on Angi first Brandon could you give us an update on where you are just in terms of addressing your supply constraint challenges impactful you've seen some of your product initiatives could be this year.
Then as a follow up for Glenn would be good to hear your comments on some of the puts and takes to the January metrics.
In the shareholder letter and then also an update on how youre thinking about the trajectory of the business through the year. Thanks.
Yes sure. Thank you so the business performed pretty consistent with our expectations in Q4 in January a lot of the factors that affected us since the start of the pandemic are still present, our traditional business was resilient I think in the face of these externalities.
But we've seen two things I talked about this consistently over the past year, one as we saw a pullback in small business advertising expense and put simply small businesses are paying a little bit less than they were before spending a little bit less to meet new customers and the other thing, which I said we had to.
<unk> was to grow our sales force and we and we ended the year with the biggest sales force in history of the company that is up 30% from the trough, we experienced from the middle of last year.
As a result of just externalizing, our work force and figuring out and learning how to onboard and trained sales reps. So as we enter this year. We have large sales force are off to a great start and the benefits of those incremental sales reps will accrue over the course of the year to provide more capacity.
The other thing is just when and how does this does the spend from our existing customers normalize or get back to previous levels I think thats, a really difficult question to answer the way we're approaching that is.
I think it makes rational sense that it normalizes, but we're not banking on that we believe we can reaccelerate our traditional business of.
Whether that whether that happens or not and irrespective of from timing of it if it does happen. It will provide obviously a nice tailwind but.
Through larger sales force and through our own internal activities. We believe very firmly that we can we can get that traditional business accelerating from where we are today.
Separately, we are very happy with but if it's fixed price delivered throughout Q4. When you look at the sort of the modest acceleration in the overall business. Most of that is a credit to the growth from fixed price.
Not only is it sort of exceeded our expectations, but it had a nice counter seasonal effect, where it's really quite strong in Q4 relative to the normal seasonal patterns of our traditional business.
We expect that growth to continue strong throughout this year. It does bring it does bring meaningful capacity to the market the ability to serve more customers.
So we're excited to see that growth.
Sort of be a counterbalance to the ebbs and flows of the way our traditional business works and then on the product front, we have a lot going on both the supply just to address supply challenges, but also meaningfully to.
Two.
Pursue our most important goal which is to develop a.
<unk>.
Very large and strong direct to brand consumer audience.
<unk>.
We are trying to build the largest audience of.
And most loyal audience of homeowners in the industry and we think that is the fundamental thing we need to accomplish to build a very very strong long term business. We've talked about over the course of the last year lots and lots of innovation debt.
We were able to bring to market in terms of new features and as we as we as we look forward to this year, we're very much in the early innings of fixed price I know it has grown.
$160 million.
We thought we would be we've got at over 200 projects. We're very much in the early innings, there's a lot of innovation yet to come both in terms of refining.
What that product experience is like.
Refining our ability and optimizing our ability to price super accurately in every local market and then ultimately to.
To through scale improved the quality of the ecosystem.
Every bit that we grow larger the product growth stronger through the benefit of more coverage more providers more history on the providers, which leads to higher fulfillment rates with our customers, which in turn leads to happier customers that repeat at a much higher rate. Thank you probably all saw on the letter we released some metrics that indicate the behavioral changes, we're seeing consumers who engage with these new.
<unk>.
The early results are very strong.
Our path ahead is about getting more and more customers into these experiences and that'll be a big focus for this year.
Thanks, Brandon just to translate that into the numbers and the puts and takes for the year revenue in January was as expected you'll recall last year, we changed from net revenue accounting for gross revenue.
Counting for free price or fixed price.
Business and if you look back on the fourth quarter.
That provided a lift of about $22 million or revenue. So the fourth quarter grew revenue about 6% again similar to January and as expected. We still expect as we've talked about on the last earnings call, a 9% to 10% revenue revenue growth for the ensuing quarters.
Probably the third or more likely the fourth quarter as all of the initiatives that branded spoke about begin to kick in and that's on the sales obviously that from scaling.
Fixed price.
That's on the other product innovations that we've been talking about for a while in terms of the monthly metrics last few as we reported a month monthly metrics. This.
This year you have one eye on the monthly metrics this year and one eye on the monthly metrics last year, because obviously last year. There is a lot of volatility in respect of health Sps behavior due to COVID-19, how consumers behave due to Covid. So February was our strongest month of the year last year, we grew 21% and March obviously.
<unk> was flat in the April was even though it was even down so you will see some some volatility in the monthly metrics, but again, we are very comfortable with a nice 10% quarterly growth again until the third and fourth quarter, when we expect to hit our 20% target.
20% targets and then given all the work that Brandon and his team are doing accelerate into 2022.
Our next question if we can go to Brent Thill from Jefferies.
Good morning from Julie if you could talk through the confidence in the vimeo trends on that Theyre, not temporary and how youre anticipating a post pandemic recovery.
Sure.
We're obviously watching that demand trends carefully.
And they are holding you know are our sales pipeline is strong January with a strong debt.
Even even stronger than the peak of the pandemic in March.
Days to close on our sales cycle and stayed short.
And on the software side, our highest tier growing over 200% year on year in bookings, so certainly from a from a demand perspective.
No signs.
Other slowdown.
The bigger thing that we see and the use cases and our customary using video in ways that we may expect to ignore and in ways that are helping them drive better outcomes for their business and there we see it very clearly.
Got companies like Starbucks and low end.
You know training their source.
Using video.
Or Nike training their retail partners like foot locker in Europe.
And when you see.
The organization to be able to.
<unk> reached their their associates in ways that are more engaging more scalable at a fraction of the cost.
See them going away from that same with fitness studios performing arts venue cultural institution, they're finding that they can access larger audiences than they ever had before in some cases tenants thing.
That then the number of audience that they have and so we just don't see a rationale for why they would go back from that.
And you see small businesses, who are able to get higher click more customers from using video a ban and major attack.
By the way that's been an environment, where a lot of small businesses are shut down and many more hopefully after the pandemic will come back so it.
It gives us a lot of confidence that video is going to.
We don't know exactly where from a demand perspective, but certainly at an elevated.
<unk> level than what we saw pre COVID-19.
That means for our growth.
Your directory also hard to predict before the pandemic, we have that we expect to grow between 20 and 30% in terms of revenue I mean, obviously, if you look at the monthly matrix that no longer applies as a range.
Much higher than that it is what it is hard to predict but again certainly expect to be growing faster than we anticipated before the pandemic started.
The revenue recognition dynamics of this business as you know the SaaS based subscription business.
Deceleration from where we are today is north of 50% to north of 30% that'll be space and over the next over the next few quarters will probably bottom out in the fourth quarter maybe.
From close to 30% in the fourth quarter of this year and then do you expect given all the product work, we're doing given all the investments we're doing.
Across the year, we do expect to again accelerate from there into 2022.
Thank you.
Our next question, we'll go to Ross Sandler from Barclays.
Hey, guys.
Just one for Glenn and then one for Andrew.
So Glenn yes, nothing more exciting for IC enthusiasts.
487 day spin documents.
Thanks for dropping that during earnings season by the way.
Sure.
But a question on the spin mechanics.
So it looks like.
So you will get.
88% of EMEA will be spun out theres, a $6 billion post money valuation right now or about 161 million share so about one six or thereabouts.
Vimeo shares for each IC share is that correct in terms of the ratio and then what's the mechanics from here in terms of the timeline and then the second question for Angela.
I thought one of the more interesting data points, we've got 25% of Vimeo revenue come from subs that you upsell to a higher tier or higher price tiers. So can you talk about how you're working to convert more of that 200 million free users into the $1 5 million pay and then we did about $1 five how do you move them.
That'd be great.
Let me first one Ross that's impressive book.
There's another 150 pages I believe it was 620 or 630 page documents.
Now in terms of in terms of timing of process from here.
We filed the S. Four earlier this week.
As we respond to FCC comments.
We'll probably re file it again in the next week or two.
When will drop and year end financials for per Vimeo, and IC and then hopefully we will navigate through the FCC process throughout the month throughout the month of February that should see us up from mailing to shareholders in March.
And then have a shareholder vote potentially the end of March early early April and then hope to affect the spin sometime in April worst case early may so early second quarter.
Timing.
As I said, there's a great read of the document we do own after the two capital raises we do own 80.
88%.
We have about 146 million shares of <unk>.
Vimeo 86 million shares of Ice's spin ratio will leap one six based on these current estimates obviously that could evolve so every shareholder.
I see well get one six shares.
Again, it's based on.
Based on the current numbers and the current per calculations.
And then based on the $6 billion post money valuation that video last.
<unk> capital that.
Obviously as a $35.
Stock price for forgive me.
On your question about Upselling.
Our free base of free users into paid customers, we see a huge opportunity to do that and a lot of our product investment is designed to unlock that so a.
A couple of things that we think that today about 60% of our paying subscribers start at free first and then about 60% of our enterprise customers come from that free herself serve base also already you kind of have a freemium model, but you actually look at what you can do for free on Vimeo using video we see it.
Her community to get every one of those free users to be creating content and one other things we've done as we've launched our vimeo create app.
And our offering a version of that for free to our user base.
Recently launched a screening quarter to all company required also free for our user base and this is a way in which we are looking to really drive from bottoms up product lab growth by having employees of small businesses, just creating content, which is usually the biggest barrier to getting people to use video.
And then from there expanding to you you know branding and customization than upselling to a higher tier or security. If you want to put your content.
And in a secure portal.
Or expanding team size, you know that says that the big opportunity, you'll see us do a lot to really.
<unk> per seat or team driven model in the future. So we've got quite a few levers to kind of move that base and if you just look at the base itself nearly 70% of Fortune 500 companies have an account on vimeo and we have less than 4000.
Customers today, so just huge opportunity and we think the biggest unlock will be product and having the right mechanisms to both get people, creating content for free and then the reasons to upgrade.
Our next question will be from John Blackledge at Cowen.
Great. Thanks, So two questions one on Vimeo. So I was just curious.
What's the mix of new subs was in 2020 business versus creative pros and any color on the overall sub mix ending 2020 again business versus creative pros and then.
Within business the mix of enterprise versus SMB, which I think is really just.
Referenced enterprise subs and how that.
Could trend in 2021, and then I am care Dot comment if you could just discuss.
Engagement metrics that you referenced in the letter and then perhaps frame the drivers of the business in the next three years. Thank.
Thank you.
On the video sub question the vast majority of our new subscribers in 2020, our businesses within that.
Good mix of smaller businesses, all the way up to large organizations.
But we very clearly you know I think every year, we've kind of seen that that mix shift away from price towards businesses that has certainly continued.
In some ways accelerated since the pandemic and we expect that trend to continue.
And then in terms of enterprise versus SMB.
Some volume is much much heavier towards the small business and we don't if you look at our customers today, we don't have we have.
On the enterprise side, which is these are this is anyone who is our sales team has spoken to that.
Around force Alvin customers, but again, if you look at the actual users in the base a lot of free and self serve customers are large organizations and the way we're sort of thinking about it is how do we know if we have one user or buyer within an organization using our tools, how do we actually expanded.
And from there.
In a very seamless way so that other departments other buyers other teams can discover our products and use them.
You'll see on the enterprise side is both trying to land new customers within our existing base and through our sales team. But then also trying to expand within each organization. So that vimeo share. If you will of how they are using video across that organization increases.
Hey, John on care.
There is.
Probably the Best example is it also gets the big change we made in product, but we've started to do with caregivers is they're all certified and what that means is it's actually harder to become a caregiver give or theres more friction in the process of becoming a caregiver and that as you would imagine leads actually a decrease.
And caregivers on the platform, which you would say initially a bad news.
Good news is the caregivers who are coming in.
We're much more engaged and the interactions that we're now seeing between the caregivers and the families is.
Much more fruitful so we can deliver fewer.
Applicants to a given job and get more success in that job being fulfilled.
It's happening I take too quite a meaningful degree, meaning there was a period, where you would get dozens or even hundreds of listings for a job. When you would list it and now that's down to a handful which is way easier for the caregiver, meaning their hit rate is higher wage or per family mean, they have to sort through less and fewer people and get success on that and be confident that the.
Caregiver there they're connected with his background checked and certified in the way that they go through our process.
And so sometimes actually we spent a lot of our time and our products trying to reduce friction is an area, where we actually added friction to drive engagement and that seems to be working well so far overall the metrics.
I'm sure a lot of you would be in the same camp thinking about my family. We haven't had a caregiver in the house in a year and in a normal year that probably would've been.
30 times, a 15 times or something like that so we see less.
We actually see again less engagement from families right now given that the need for childcare.
Going out and things like that is happening less but in retention, we're holding and the reason we're rolling our retention because I think people see the value in the product. They are optimistic that they can start using the product more and but right now there's just less need for it but it's very encouraging to see retention holding when we think about the.
The future of care and the next few years.
Continuing to drive that engagement and driving that engagement driving frequency, which means being relevant more often so so picking up on those themes, making it very easy so we've.
<unk> talked about this concept in other products make it very easy to do something like instant book.
So youre going out you'll want somebody if you need somebody quickly and knowing that the caregiver has met certain parameters that you set forth or are you going to instant book or you can see the schedule of both the family and the caregiver and you can match those in those schedules are accurate and up to date and reliable when we have products like that I think it drives the subscription because we can add real value.
Subscription I think it drives engagement for both sides of the marketplace and and things like that are going to be important. The other thing that's really big I think over the next few years and Youll see us start to talk about increasingly which has been a real pleasant surprise for US is we've talked about a little bit in letters care at work and the enterprise product I think that is just absolutely relevant.
Saturday for most enterprises today and starting to think about how they can help with childcare senior care for their employees.
And we're seeing real growth in that business exciting growth in that business and I think we're going to continue to innovate there in ways that will open up.
What I expect will be a much bigger market than than exist today.
Thank you.
Our next question, we'll go to Brian Fitzgerald at Wells Fargo.
Yes.
Thanks, guys, maybe just for Glenn and Brandon.
Angie fixed price or pre price is roughly 10% of the business now where do you think that gets to longer terms and then in terms of the long term margin structure is that predicated on fixed price hitting certain thresholds and then a quick housekeeping can you remind us right now that the 22 other products.
That are fixed price.
A portion of the Tam do you assume that addresses.
Thanks.
Yeah, Great question. So yes, I think we finished at about 11% this year.
I would say our internal target our ambition is to get this to about half the size of the business and the reason for that is a little bit arbitrary but the reason for that is debt. We believe that the two lines of business our traditional business.
Pre price business are really sort of adjusted.
As the pre price business grows at really low knowledge to serve our customers better but it ultimately increases our buying power allows us to invest more in growing participation in the marketplace in both product lines really really benefit from that separately as I mentioned earlier, the bigger of the pre price ecosystem gets fundamentally the better the service gets the higher <unk>.
Call it the better the reliability and ultimately the better.
Transactional economics get as well simply because we're fulfilling at a higher rate.
The higher level of quality so.
Getting to getting it to half the size of the business is certainly our internal ambition in terms of the timeframe to get there.
It's tricky because our traditional business is large and we do expect that traditional business to keep growing.
So we're looking at somewhere over a five to seven year timeframe. I think is a reasonable guess, obviously youre projecting out pretty far on that.
In terms of the 200 projects I think that is I think that is right around.
I think that's in the ballpark of only.
Or maybe or so maybe a little bit over the total addressable market for home services.
Within that two other projects a lot of those are I think we said are around $50 billion Tam, which is only about 10% of the addressable market.
Are the ones that we have very high confidence that we understand the economics.
The other part, which I talked about over the course of the last year, where these higher.
Projects that were averaging about $5000 per ticket I think last time, we talked I said, we were more in the early experimental phase that we had some promising signs on the consumer side in terms of their willingness to buy but we were still figuring out what it look like to fulfill those kind of projects and what the economics would be.
Where we sit today our confidence has grown substantially we are that is growing pretty quickly.
Obviously, we have consumers, who buy we've gotten comfortable with our ability to fulfill and our real focus during this year is getting that debt.
Higher net.
More valuable line of business contribution margin positive we feel optimistic I think we moved from it as an experiment to this is this is probably going to work and that can be pretty big so it opens up a lot of additional addressable market.
And then in terms of the long term margin structure, I think fixed price does impact that and I think the way to think about our opportunity.
$400 billion to $501 billion market and in our traditional business that revenue opportunity used to be our take right now.
Now that we have a fixed price of free price now that we are financing.
Now that we have.
Additional products, we talked about subscription in the letter.
I think we're now going after the full $400 billion to $501 billion opportunity. So the margin opportunity may be more muted on some other larger consideration jobs, but obviously the EBITDA opportunity is substantial if we go back to our traditional our traditional business and the lower consideration job.
On fixed price, yes, our margin target to 35%.
Or still.
We're still absolutely achievable I think I've done this a couple of times, but just to frame it up sales and marketing are 50% to 55% of revenue I think this past year. It was 52.
Product and development and G&A, 20% to 25% of revenue. This past year 25, you apply if you look at that against our current 10% to 15%.
Per cent margin and I think five to 10 points in the G&A and product development category and you have 10 to 15 points in the sales and marketing category that gets you to 35%, but again as we scale the medium consideration jobs, where our propane a lot higher materials are a lot higher component of the total that's the five.
Sales in dollar job, that's a 10000 dollar jobs to 35% a bridge too far but again, we've reframed our entire opportunity.
Go after the entirety of our Tam before interest of $500 billion.
Thanks, guys I appreciate it.
Yes.
Our next question will be from Jason <unk> at Oppenheimer.
Yeah.
Yeah.
Yeah. Thank you.
Two questions first Ron Julie maybe talk a bit about the behavior of the cohort so when you're thinking about your 2019 cohorts the way. They act in 2020, what drove the increase in the value of those cohort. When you think about what they did any pricing changes you made the way you were able to drive usage.
And then second Joey maybe I wanted to dig a bit more into the.
The use of cash $3 billion I mean in the letter you did talk about a wish list for Doc Dash.
Historically the content digital media has been small for you I mean should we expect you guys to move much more meaningfully in that is there are assets that could be bought or could it be more things to bolster or accelerate things like care dot com business or maybe.
Perhaps more investments in gaming to follow <unk> already done.
So on the Vimeo cohort behavior, we're seeing two trends one <unk>.
Our existing customers from prior cohorts are paying us more.
Today than they were before from a net revenue retention on enterprise.
It has been increasing for free now seven consecutive quarters and that's coming from.
The investment, we're making in the product expanding the use cases and share after.
Optimizing our sales motion.
And then we also see that a new cohort in general are paying off more than in 2028, and then you from cohorts, one and 19 and 18 and Thats because we are seeing greater demand for our higher priced offerings areas like live stream and as we shift the mix.
Our subscribers more businesses looking for advanced marketing tools analytics customization.
We just see that that there is at more desire to pay willingness to pay for those features and that's why I even on the software side, our two fastest growing plants, our two highest price lines.
And then the other piece of course is just general retention and product engagement.
There we've been watching it very closely since the pandemic began.
We see no indication of deterioration in retention.
Product engagement has been holding really strong and in some areas like live streaming has been higher.
Among our recent cohort and so generally it looks like a very solid healthy other co.
Cohort behavior, and there's also tons of room for us to go and this is where we look at again the use cases, we serve right now we have so many customers asking to use vimeo and video in a bunch of other ways and the quicker we can get some other things that we're working on and our roadmap out into the market.
We will be able to expand that net revenue retention even further.
On Jason M&A and the cash so that that is a good place to start.
We we definitely are looking at businesses, there and I definitely think we can find some opportunities nothing imminent right now but.
What what's driving that there is really just the success of the business Standalone and the success of the business on the acquisitions they've done so far.
Hey, if we wanted to call. This a software business, which is not but if we wanted to call. This a software business. Their top 25 advertisers are 100% of them renewed 2019 to 2020 and spent more so let's talk about like net revenue retention there are over 100% at that business, which is pretty impressive for a publishing.
Business and the reason that is true is because they have.
They perform the adds performed for advertisers and we're still doing that with the.
Fewest ads.
The competitive landscape that starts to build a real competitive moat, we're investing more in content with that.
Then than others and we're monetizing it less.
While performing per advertisers, we can keep that formula going which I do believe we can we can continue to add into that the main way. We're doing that is going to be organic growth, which is adding more content at the same level of quality of the same level of freshness with all using all those same tools.
And we want to in any given period be investing significantly more in our content than any of the competition.
But we find areas, where we've been looking for them and we continue to find areas, where we can add on a publication of site brand, where we can we can kind of put the same system to work.
And we've done that to a relatively small degree so far probably biggest acquisition there is $20 million to $30 million or something like that the I think we can we can go bigger.
It may be that it turns out there's nothing available maybe theres not been available in our price range, but I do think that Theres a lot of brands in this area that that could use help and where we will try and bring that to bear.
But I don't see it likely that that's going to be a very large portion of the $3 billion of cash just given what's available.
So that goes back to the other things that just where are we prioritizing the cash.
Besides that debt.
Cash care is a good one although we just didnt acquisition net care, which seems to be working out very well.
Net bolstered those care at work business adds a bunch of customers and revenue there and where we think we can cross sell that.
Not a huge acquisition for us, but a good one my guess is probably not a lot more acquisition of care as we digest that one focus on the organic growth.
And then gaming is another area, where the numbers at bet MGM right now inside of MGM. Our mine flowing I mean, there are unbelievable growth what we're seeing the numbers that we saw in Michigan are really unbelievable and that was a huge proof point for MGM, because we have a huge offline for MTM is a huge offline brand.
Michigan.
In Detroit, So that was a starwood that was a market where we entered in the very beginning which is obviously important.
And it's a market where the whole system.
Should work and what we're seeing so far is it is working and that's not just confidence around him. That's also a confidence for us in the category that the tailwind of of a new market growing of it being accepted and explored by a whole new base of users.
Net debt is really interesting for us for our capital that we talked about MTN, we looked at this acquisition recently.
Was public and we've talked about we would be willing to put capital into.
We were willing to put capital into that kind of thing and we're still open in this area, whether that's through MGM or otherwise, we're definitely still open in this area and it's fun to see.
Category, transforming so much and growing so much and it's fun to see especially MGM success, which was a big part of our thesis obviously the recovery on.
On Covid.
Covid at MGM, who knows us is anybody's guess, but that debt mgm's and a safe balance sheet perspective, but then there was always this option and that option seems to be really exciting and there right now.
I think that probably answers your question Jason.
If you want you can call our dogfish head.
The debt in the backend load right now.
Yeah.
Our next question can we go to Johnny and Garrett at Credit Suisse.
Hey, guys good morning.
So two questions for Brendan on energy if I may.
So the first one is on.
From the supply side. So you guys have called out seeing some phenomenal kind of engagement metrics for early consumers using a fixed price.
Thus P side are you guys seeing similar kind of benefits to retention what kind of engagement are you seeing with SP, who are opting into your fixed price network versus your core lead Gen business.
And then second question.
You guys intra quarter has called out some kind of price increases due to overwhelming demand on fixed price.
We'd love to hear some more details around that the magnitude of those increases.
How that maybe impacted your economics at which price.
Yeah, Great question. So thanks, Johnny on the on the SP side for fixed price.
It's a completely different offering and for a provider. The dynamic is exactly the opposite of our traditional service from the traditional service providers, who are paying us, but with such price, we're paying providers and we're going out and offering them a job.
Their choices, whether that job is appealing and whether the price point is appealing or whether they have the availability, but there's really no downside for them they either find it attractive and opt to do it and we pay them or where they don't and they pass it up and perhaps perhaps ticks up in the next one.
As you can imagine that that dynamic makes it much more attractive and much easier to bring providers into our marketplace for these kind of jobs and in general the way, we think about retention for providers is.
As long as we have a steady flow of demand for them it tends to promote activity right.
If we go a long stretch if we have a job for you today, but we don't have another job for you for two months than other times of those folks are the scale and it's not so much that they are quoting the service. It's just that it's the nature of sort of keeping a constant flow of activity and how that promotes engagement. So in general the cost to acquire these providers is very low as long as we have a steady flow of <unk>.
And retention is very high and quite frankly, we really think about it we really think about it differently than perhaps you would for an advertising business, where retention really isn't pro retention isn't necessarily the main driver or the biggest issue.
It's really about having enough frozen enough coverage.
And keeping up with the growth in demand and as long as we're growing at the pace. We're currently growing it is a human driven.
Cash to go out and continuously get more and more providers to keep up with that growth and that's really the gating factor is just just scaling.
In terms of the price increase on a fixed price.
Touching on exactly what I just said.
We're constantly balancing incredibly fast growth in consumer demand with our ability to keep up with just going out and scaling that providing our provider coverage and in particular last year because of some of the volatility created by the pandemic.
At one point thinking that things were falling sort of off the table and then seeing an incredible resurgence.
And reacting to a pretty big imbalance in our ability to keep up with providers, we adjusted price shocks.
We'll adjust those down as appropriate given our ability to fulfill and.
Right now I'd say that that balance has improved a bit we continue to get better at it and gotten better out through the course of the end of the last year, but that'll be the dynamic for a while as long as we're growing transactions from fixed price on the consumer side at a very high rate will be stretching to keep up in terms of growth growing provider capacity over 200.
Next from 400 plus markets. It's a it's an enormous sort of scale challenge. That's why don't I don't it's not going to go it's not going to go away for a while because we expect to grow fast for a while.
It's Ben Thanks J R.
Next question can we go to ago Iranian from Wedbush.
Yeah.
Hey, Thanks, guys. One question for Angela and went from one for Joey.
On Vimeo Anjali, you touched on it a little bit on.
E Commerce side you guys are.
Ships with Shopify with Godaddy, we've been hearing more and more about live streaming opportunities for direct to consumer companies around selling products.
Can you talk about the opportunities there around E commerce, a little bit more specifically.
And then Joey.
The color around MGM in online gaming is helpful.
Yeah.
Now that we're a few months into the relationship with MGM.
How that relationship works, what you've kind of brought to the table what they brought in where you guys have kind of collaborate on together.
Okay.
So forgive me on the partnership side, we really think of partnership adds.
Physician channel and also a way to open up our market by exposing more businesses to the power of video on the platforms out there on and so yes, we've announced native integrations or partnerships with godaddy.
Shopify North.
Recently mail chimp and hotspot, where the last latest two we've got other coming in we are investing in partnerships and really the key the model that we're looking to scale here is natively integrating parts of our capabilities directly into the platform and then having the ability for those customers to have a direct relationship with vimeo when they want to do more.
And we are seeing I think promising signs there, though it is still early and definitely a growth area for us.
Within that there's a couple of different buckets Theres live with their website builder, there marketing and CRM software companies and other E commerce for share.
And truthfully I think we're looking at all of them as a really interesting areas to go into <unk>.
E Commerce for sure is is one of the use cases that we are seeing traction in our shopify app.
<unk> is getting really great reviews, great engagement.
And there what we are allowing and E commerce.
For owner to do is just very quickly automatically generate videos for their product detail pages.
Just using the existing content, that's on those pages oven and the ability to edit and customized from there. So I think you'll see us do more in in ecommerce for share and helping businesses use video too.
You know sell their products increase their conversion rates et cetera, but if not that's one of the use cases across video that we're focused on in our partnership strategy is broader.
On the MGM relationship, it's I think it's fantastic.
We are.
Ship with MGM is great Bill Hornbuckle.
Doing a wonderful job with the business and he is very keen on our output in digital which is obviously our experience.
The just prior to the MTM just hired a new CFO, Jon Howie already since Scott great experiencing seems fantastic.
And it's a company with a very engaged board so they're they've been they've been wonderful to work with and our job there our view of our job. There is just to help them be available when they need us and if that means looking at things on digital and opining, great if that means helping recruit talent.
Bring some people into the company and will continue to help bringing people into the company in areas, where we have a good network hopefully that that continues.
Really when you think about it. It's just I think helpful to have a very big shareholder with deep pockets and a long term commitment because when you can have very open and valuable conversations with MGM leadership and management that says here.
We can be supportive we can put capital behind things.
Can put our whole organization behind things in terms of teams and work and I think thats been hopefully I mean did you see.
Certainly adds them, but hopefully that's been additive and productive and it certainly has been from our perspective and we hope that continues I mean, when we're in something for a very long term with that amount of capital we're going to put a lot of attention to it and again just do it in whatever ways that we can be helpful, where they want us in.
Hopefully that continues to work as it has been so far.
Great. Thanks, so much predicted Hudson can we go to Kunal Matador at Deutsche Bank.
Thanks, Mark Thanks for taking the questions a couple on <unk>, if I may one with <unk>.
Regard to <unk>.
Fixed days versus let's say the traditional marketplace business. It looks like the the marketplace business was flat in 2020. Other warrior wanted to understand if you are deliberately funneling customers along the fixed price growth in order to kind of get scale in that side. So that's one second.
As we look at the guide debt the debt Glenn just talked about in terms of getting a.
The 9%, 10% growth in the first two quarters, and then getting to a 20% by the fourth quarter as we look at like the comps the comps get easier in the second and third quarters.
And then it gets slightly tougher in the fourth quarter. So as we look at the guide versus the comps can you can you help us reconcile in terms of what is driving the confidence in your ability to get to the 20% growth in the fourth quarter and not in the second when the comps get much easier.
Thank you.
Okay.
Thanks Scott.
So in terms of funneling customers to fixed price versus our traditional business every customer that comes into our marketplace and the projects, where we offer pre price services is really has a choice. They can connect with a local provider in that monetize discharge, our traditional matching business or they can engage with the free price on demand offering.
<unk> purchase of service directly.
We've had and have continued to have during 2020 more customers and we can service.
Both sides of this business and.
Theres really no the reason with our traditional business. It was growth was pretty moderate last year year over year. It was largely driven by the fact that small businesses have pulled back on spending and that is really just an indication of their ability to handle more customers. The pandemic has affected.
Those small businesses in a variety of ways and we just saw broadly speaking those small businesses to pull back on the amount of money and are willing to spend to meet new customers.
Best Richard it's complicated topic, the best research I've seen.
On the industry said that most of the small business is expect to grow their AD spend in 'twenty and 'twenty one as we all know the future is.
Difficult to predict at the moment, but it is not that is not an artifact of us funneling people one way or the other we have we'd have an excess of consumer demand for services is a reality and then Glenn do you want to take the question on comps and the guidance.
Yes sure.
Our confidence is born of a couple of things.
One is the growth in sales force that Brandon spoke about earlier and as we've talked about in the past six to nine months really for that sales force. The kick in it's also the growth initiatives that we've that we've talked about and fixed price continuing to scale, but the biggest issue is the world has to get back to normal these isps, whose businesses have been.
Per either their ability to hire people either their supply chain there.
Issues that we all see with up with supply chain and people being comfortable to have <unk> come into coming to your home. The world has to get get back to normal for us to appears through that and we expect it will and then also Joey talked about in the letter S. Skus right now are inundated with with demand of course some.
From our platform and some on their own.
And as <unk>, we think will moderate over the course of the year, we think monetize transactions obviously will.
We will go up and we'll be the beneficiary of that we have agreed aggregate amount of demand and a great top of the funnel aggregate amount of supply and now we've got to remove the friction and now we've got to match that and our monetization metrics. We think will will strongly followed that.
Thanks, everyone. Thanks, Dan, but we can.
Sure. So our last question will be from Youssef Squali from choice.
Alright. Thanks, Thank you and thanks, Mark for squeezing me in so two quick ones for me.
I just wanted to double click on.
On angi with Brandon if I may so just trying to think through kind of the gating factors to take me from 200 jobs to even a greater number and.
Maybe attacking the entire Tam and the pace per that can you speak to the contribution margin of that business of the prepaid vs or pre price versus direct are you getting are you at a point, where you are already at somewhat a parity between the two or does that not even factor in this.
Early in the in the equation for you too aggressively.
Push on the accelerator there and then on the and maybe one quick question for annually.
The team is historic and you've touched a little bit on that earlier, but I want to dig a little deeper the team has historically talked about because they're new opportunity is 20% to 30% grower over time with about a 20% plus segment EBITDA margins over time as you become independent and as you go out and you know.
Your own set of investors what is the message I guess as a SaaS company a lot of <unk> companies talk about rule of 30 day rule of 40 to 50, which is your growth rate plus your.
Operating margin or EBITDA margin can you just speak to.
How you look at it and how how will you guys basically once you have an opportunity to do so.
Yes, thanks for that quick.
Yeah.
On the on the Andrew on the Andrew question, So for fixed price we have.
We have a lot of projects covered that or lower value lower ticket price and we feel extraordinarily confident about the long term margin profile of those of those project types as they mature and they cover next.
In excess of $100 billion of Tam alone. So there's a tremendous amount of room to run in terms of growth just in those project types.
There are higher value projects that I referenced earlier that around $5000.
Ticket and.
We've been more of an experimental mode with those but at this point, we feel pretty confident that we can.
Drive the drive growth there with good economics will still prove that out during this year.
In terms of getting to more Tam, it's really in this latter bucket we started with.
Subset of projects and are going out and getting good at them, if you will and as that as that playbook proves.
Proves successful Wilson will essentially go out to more and more of those larger projects and continue to.
To offer more of our pre priced offering also in terms of how much of the 405 billion that we ultimately get to.
No for sure, but I, certainly feel comfortable and confident that we're going to get to well beyond half of that as our as our addressable market with pre price and perhaps well beyond half it'll take time and iteration to get good at each of the project types. It's not a it's not a cookie cutter process, where the exact same method.
Method works for every every project type, there's some learning integration bulk.
And then on contribution margin in aggregate are fixed price or free price business is contribution margin positive we pass that.
In 2020, obviously the path to profitability is the investments, we're making to scale that.
But importantly, the contribution from our fixed price business is greater than the contribution we get from an equivalent MSR and that's what excites us that's what helps US reframe this opportunity about going after the entirety of that $400 billion to $500 billion.
The $1 billion market.
Yeah.
Look I think we think about the business like any SaaS company. What are you know we were named as a rule of 40 fast business in 2020 or rule of 50 SaaS business in Q4.
Hard to say what near term 'twenty 'twenty, one will look like as we lap the pandemic, but in terms of long term growth on top line as I said, you know our original range of 20% to 30%. We think is conservative it's hard to say how much higher will be above that but we certainly think we'll be better off than we were pre pandemic and then on margins long term I think we've.
Said around 20% do we think we can do better than that yes is is there a goal in the near term to be profitable right now no. We don't see any reason to do that we're investing in growth.
And we are focused on our unit economics, and our LTV to CAC is strong right now and we are increasing gross margin, we've we've crossed 70%.
And I think there's room from there so we'll keep focusing on improving margins and keeping our unit economics solid, but otherwise early market lots of opportunity for growth and it's all going to come down to building the right products for our customers.
One other thing I'd add is as people think about about Vimeo I'd also focus on the free cash flow because.
Despite the investment year, we're having this year of video and the adjustment here sorry. The interest me here, we had in 2020 and the investment year, we're going to have from 'twenty to 'twenty one.
As you'll see in the S. Four we still generated over $30 million of free cash flow and thats not given the revenue recognition dynamics given our booking that number is not going down.
So I think that's an interesting way for people to think about calibrating, the EBITDA and cash.
Throughput with the revenue growth that's great color alright, everybody. We've run over on time. Thank you for joining us fun to watch the entire Sunrise and Brandon as background here in Denver, and we've got a new day starting.
So.
Yeah.
Okay.