Q1 2022 IAC/InterActivecorp and Angi Inc Joint Earnings Call
We may be preceded by words, such as we expect we believe we anticipate or similar statements. These forward looking views are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.
Some of these risks have been set forth in IAC and Angi Inc's first quarter press releases and our respective filings with the SEC.
We will 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 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 Bye.
By Athene, and Mahan CEO of Angi, and Neil Vogel CEO of Dot Dash mirror 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 is a lot of talk right now around forces outside our control.
Inflation and more in a very volatile market.
I wanted to focus today on forces that are inside our control.
And the two biggest things.
The IC inside our control are.
Dash Meredith, which is led by Neil Vogel, who you'll hear from today and Angie led by Ashish, who you'll hear from today.
I think what Youll hear from both of them is a tremendous amount of confidence in where we're going in our business and both are at pivotal proof points in the business that dash Meredith is still new having completed the acquisition only recently and deep in the midst of the integration. So theres a lot to report on that front.
And.
Angie we're coming off of 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.
Over the course of the call.
<unk>.
In.
The last piece, which is relevant in this environment as.
What we're going to do at IAC.
With our cash and liquidity position and we've 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 will be.
Why is it up 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 good morning, everybody.
Neil just wanted to start with.
Your comments on.
On Meredith and dig a little deeper you mentioned in the letter that.
Health Dot com is going through its overhaul.
And there was a statement about revenue getting back to normal after just one week a lot faster than the timeline that you guys are explained on kind of your legacy dot dash vertical sides. When you did those overhaul. So can you just elaborate a little bit more on what's going on with that.
What's making the.
The revenue recovery.
Quicker the Meredith properties and the second question is just for Joey kind of high level on what you just ended with but it seems like youll have pick of the litter as far as private consumer internet companies to choose from in the coming quarters.
I guess, just can you bring us under the Hood and what are the internal groups IAC getting ready for right now which marketplace categories.
Look the most attractive or are you most focused on or does it just kind of come down to the valuations that you think might present themselves. That's it guys.
Got it.
Thanks for the question as per <unk> Dot com.
Typically what we say is let me say, we migrate something it means we take something and we put it on our tech stack and our AD stack.
And as you know and we've talked about many many times.
We boast significantly faster site significantly.
Even better content.
I'll make this migration, we pretty much sell the first two product to make it much faster with much more.
I think we said in the letter the sites about five times faster.
And there are about 30% fewer ads and a better type of that what has typically happened in the past for US is it takes some time. It takes some time for the markets to realize that the site is better and then there's fewer ads.
Perform better in a few stats I'll give you today.
Click through rate, which isn't always a measure of our performance, but it's an easy baseline here quick the RAIT only ads will help that number up 60% since we.
Did the migration and address in the programmatic market sort of programmatic Goldman shapes up 50% and if that doesn't fix federal Eric some of the odds are of course, a desert west because there's lots of little bit different so it's not a perfect comp.
<unk> seen is the combination of two adds higher prices faster sites has gotten us to a place where we're really new sacrificed revenue to make these changes we have caught up in about a week and thats materially faster than what we've done on.
Other brands in the past and I think there's two reasons why it's works of the first one is worth a lot better this than we used to be sort of a time to figure this thing out.
Our 14th 15th Reinsure migration, so we really know what we're doing and how to set these things up and it's made it really performance and the key is really replicable set this up so we can do it again and again and again and I think the second thing, which we had hoped.
Which is not a surprise, but more of a confirmation is held dot com is a really strong brand any really known brand in a really strong domain on the web stronger and things you've dealt with in the past. So we think that the markets have been much much more responsive because it really is much better than sort of like when we get back to the urls or something.
<unk>.
The about dot com, which bodes very well for brands like better homes and gardens in southern living people and the brands that are upcoming.
Frankly help us better.
Many of the brands that we have got that.
Yes, so we're pretty excited about this again this is a starting point getting back to neutral is not the goal. The goal is to this migration will drive audience growth that will drive revenue per visit growth on the AD side of online commerce that will unlock all of the content tools that we have so it's really just the beginning for us.
<unk>.
We are celebrating this internally this is a material proof point that our thesis for buying Meredith we feel very good about that we definitely are on track.
In terms of opportunities for IAC in where we're prioritizing our capital.
We.
I'll start with I guess the.
The private markets I don't think there'll be opportunities in the private markets first.
We have.
List of public companies that we look at that we think are compelling products in big markets with great brands that.
That we think are interesting and we'll keep looking at those and Thats generally I think where theres more opportunity in private markets.
Don't unless there unless a business is out of capital they don't have to.
Embrace what is the key.
Current market reality, they can take some time to do that and I don't think that that those are likely to be the nearest opportunities again, unless unless a company is around our cash, but one thing that a lot of these companies that over the last couple of years.
Smart was making sure they have enough cash that they don't have to.
In fact, the market that we're in right now who knows there could be private opportunities there could be public opportunities. We just see generally that seems to be more opportunities in the public markets.
And then to act.
We are prioritizing that.
I'm not going to talk about specific companies or even specific categories. Although youre right that we like marketplace businesses and we think we generally know how to evaluate and operate those businesses.
When we talk about capital allocation, we always think about our existing businesses and new businesses. So I think for our two biggest existing businesses.
Meredith and Angie there is a lot going on right now we have a big integration underway at.
At Dr. Meredith right now and so I think thats not.
That's not likely to be a big.
Use of acquisition currency.
And Angie we're also in the midst of big transformations I think that one is also not likely again anything is possible. If we find an opportunity. There we will we'll take it but I think right now those are less likely.
And we will do small stuff throughout with the smaller businesses, but probably the most likely thing right now for us to be looking at them prioritizing as new opportunities.
And again, we mentioned this in the letter it's always do we're going to evaluate that against share repurchases and.
<unk>.
Very clear math that we can do and that we do regularly and I.
I won't stop drilling.
Okay.
Great. Our next question will be from John Blackledge at Cowen.
Great. Thanks, two questions one for Joey.
The tone from the beginning of this shareholder letter for <unk>.
Both southwest Meredith and Andy seemed pretty bullish in terms of profitability going forward.
How confident are you in kind of ramping profits at the two segments through the rest of the year should we think about $450 million in EBITDA.
That's estimated for 2023.
As a bogey that you guys still believe in and then secondly, this evening for Julien, Chris and Joe just kind of referenced it but ICEE has 8 million shares remaining buyback authorization Angie is $15 million, just given where the stocks are trading right now how should we think about buyback offer either ICM or AMG through the rest of the year.
Thank you.
Sure on <unk>.
Profitability and I'll, let Chris weigh in on this too.
We feel very confident in everything that we said.
That doesn't mean that that where we are.
<unk> back at the peak profits at Angi right now, but it does mean that we are improving from here and we're past peak investment.
And dash Meredith we've learned enough.
Things in the few months that we've owned it that we feel good about the adjusted EBITDA that debt.
That we think we can deliver this year.
And 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've said we think we can do by 2023.
There is really sort of.
Like any business to back with price and volume.
The adapt as 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 early stuff 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 fastest site, 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 and.
That's the one area that probably is left to Peru.
As we say the early evidence in terms of things that 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.
Okay buyback thank you.
Do you want to add anything on profitability go ahead okay.
On on share repurchases.
Look as we said, we always consider share repurchases.
It is throughout every market, it's something that we evaluate.
When we look right now, it's a pretty interesting situation and one that we haven't seen in a long time, which is I think yesterday Ics margin gap was around $6 billion and we have about <unk> 5 billion of public securities between Angie and MGM that leaves two and a half for $3 billion four.
Dash Meredith care, Cairo, and everything else that.
Generates cash.
That is a well, let's just do it on dash Meredith alone.
Yeah.
If we say 253 billion for everything else in that business generate $300 million of EBITDA. This year, that's a multiple that we're very comfortable with.
And care, which is doing great and it is a phenomenal brand and a very large category.
<unk>, which is doing unbelievably well for free let's say everything else offsets, that's a really compelling equation and thats one that we are looking at.
And the good news is we have a lot of securities to two.
Evaluate so theres IAC Theres Angie there is MGM all of these things are in the consideration set and all of these things are businesses, we understand of course exceptionally well and all of these things are ones, we're going to evaluate as the as things progress from here.
Thank you Joey and with respect to dock Nash 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 as 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 vaccine.
As well as.
A variety of movements within the dot dash Meredith portfolio and demand shifts you can see in the April numbers.
On the digital revenue side.
We have.
Already come out of the year.
Sure.
March and that builds confidence for the rest of the year, the other point and Neil referenced the <unk> Dot 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.
Property over to the Dod Dash platform. So that we can do the Dod dash playbook on it.
Positivity, we've seen there gives us considerable confidence for where we go from here both in terms of advertising performance site speeds.
Traffic E Commerce all of those growth engines are available once we get the property onto the Dod dash plat form 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 Thats the nature of gross margin and profitability scale on the fixed costs on the digital side and then finally, what youll hear some.
A discussion from Neil on Salesforce Force performance.
And in growth there. So when you look across it is a backend weighted plan, we've always said that but the margin scale on digital will happen throughout the year.
We expect print and corporate cost 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 GBM.
Thank you.
Our next question will be from Cory Carpenter at Jpmorgan.
Thanks for the question.
<unk> will be great to start off just with the recap of how the quarter went versus your expectations and then looking forward is there any change to how youre thinking about the growth opportunity in the rest of the year and then Chris maybe two questions for you just Andy moving pack 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 Corey.
So in terms of the performance in Q1, we.
We started Q1, obviously with the.
Sub situation with omicron.
And then the comps were particularly challenging with last year, which we knew with between who is going to be the case.
Whereas if you recall last year, we had increased consumer demand across pretty much every category with stimulus checks and everything else going on.
As we look back on Q1, we're very happy to be coming out of it with really strong position in April .
Overall ads when leaf business becomes much better from here.
As we think about the services business we've got.
You pointed out the letter we've got.
Good fortunate the past peak investment that was by design when we created the plan in Q4 of last year March was always the the.
The high point of investment and energy services.
As we go forward from here.
We see significant increases in gross profit dollars coming from services, which helps to reduce reduce the drag that services has the overall business and ultimately services gets to ultimately services gets the profitability there.
The growth that we see in gross profit dollars coming from services <unk> four combo of an increase an increase in take rate.
Better optimization on variable cost, particularly around supporting the bookings.
In addition to that.
We see is what we see is an increase in engagement from pros and the AD business. So the growth that we see in the AD business for the back half of the year, we expect that to expect that to accelerate.
And that's driven by its driven by some of the macro factors that we've got so the overall adds in each business.
Benefits from reduced consumer demand.
Think about the logic there.
Pretty simple there is a natural hedge built into that business, where as pros have less and less work as their order book.
Runs down.
Know that they've had the most work that frankly ever had over the last year as the order book runs down slightly those pros are more engaged on the platform. We see that in terms of new pro signing up interim Salesforce productivity you see it in terms of pro spend that we see it in terms of the monetization of the transactions that we have in the platform. So we feel very good about.
Organic growth in services accelerating we feel very good about our highest margin business adds in Leeds grow into the back half of the year and we feel very good about growing profitability overall.
And then Corey just.
Building on our machines point I think this.
Was always the plan that peak investment would be in March.
Fixed costs scale up from an EBITDA perspective fixed cost scale up.
<unk> first quarter is lower on a revenue basis and as.
Services revenue grow organically and seasonally throughout the year gross profit drive drops down on.
Relatively static fixed cost base and that reverses the EBITDA losses, I would say one other point.
We have made a point in the.
Letter and we will do so going forward.
Talk more about gross profit at the services business.
And provide more insight to investors on relative profitability and over time.
As in leads.
Profits will flow through and also how services profits will grow.
Roll through us.
Joey said in the letter lower margin product, but growing rapidly and bigger projects. So larger whole dollar gross profit.
Implemented.
And then in the April metrics.
No.
A few points we would.
Point out.
Well first off there's nothing we'd flag right now is to be to think about in the may and June timeframe.
Pretty smooth comparable.
Like for like year over year different than March and April .
Two things, we point out, though which tied to the narrative into our message.
Greater confidence, our two largest profit generators across the portfolio and IAC.
And leads at AMG and digital revenue at Dod Dash.
Both showed stability in April off of really March bottoms, and that confirms what we messaged in the prior call that.
It's a tough March comps for both businesses.
Fairly COVID-19 related in both circumstances.
And.
That we are on the other side of that so.
You saw.
Flatness in ads leads revenue year over year and in.
Digital revenue and we expect Q2 dot dash will still be flattish, that's our guidance as we work through the re platforming and these other specific factors to what we're doing in the integration, but sets us up for.
Backend growth and returning to that 15% to 20%.
Digital target Dot Dash and then Angie as we have stability in ads leads that is the profit engine.
As she said and then organic services growth in the back end and growth driving gross profit dollars. There. So those would be the main things we flagged in the April metrics.
Our next question will be from Justin Patterson at Keybanc.
Yes.
Great. Thank you very much two if I can neal as you've executed on the integration and engage with advertisers that wasn't.
Tone of your conversations change and how should we think about that just building up on sales force productivity.
Half of the year and then for Oceana, 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.
Okay.
Thanks, Justin so.
On the sales.
Syed.
We talked a little bit in the letter and I cover before.
Or about the integration of the two teams which is essentially complete.
The team structure vertically brand focused.
It really great, but I think the.
I would describe it.
There's a lot of excitement.
Internally and Theres a lot of excitement from advertisers because we for the first time to now operating on something that Hasnt been brought to them before which is in turn based targeting contextual targeting at a scale that has never been able to be done before and people really like dot dash they like our historical hustle.
They really like all of the brands and the combination is proving really powerful I've been in a lot of immediate yourself 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 commitment some of them are software 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 police agencies and the biggest partners when we bring our energy our performance. We can start showing performance looks like as we migrate and you combine that with some of the Meredith brands that are frankly at a level. We havent happened when you can do it at <unk>.
Hoping you can do with your people and you can do it all recipes that we do it through to the client people get very very very exciting and we.
Our exclusively focus on brands and selling brands and selling performance.
The things that.
We keep hearing again I'll say again people are rooting for us and what I think we can become and we're not there yet.
We can be we have.
The scale and performance to be a viable alternative to some of the platforms. We've been putting money that they may or may not want to do that anymore. All of our content. We create at all we're not news we're not fee, we're not UGC with the exception of embedded recipes and a few of our sites. So it's a whole new thing and educating.
The market and bringing up this season with excitement as our job now so we feel.
Really kind of looks exceptionally good with where we are now this is hard bringing it together is hard.
Going to take a little bit of time, but in the medium to long term I think we feel really good about where we are.
In terms of interest rates and the macro environment.
Our biggest advantage where the biggest.
Positive from what's going on.
Is a less dislocated relationship between client demand. So the last two years, where COVID-19 drove.
Exceptional demand for home services created an incredibly challenging environment to sell advertising products performance marketing products to asps or.
Our average plumber painter Carpenter.
<unk> had more work than they can handle and throughout that period, we kept the angi performance marketing business the athlete business relatively stable the biggest the.
The biggest macro impact as consumer demand normalizes as the labor market, perhaps normalizes, even just a little bit.
We expect to see we.
We expect to see that relationship between supply and demand.
Give us significant tailwind an important add to 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.
Put that together with the <unk>.
<unk> comps from last year, and we expect to see added to lead business.
Become more relevant in the current macroeconomic environment.
That 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 lease business than the incredible dislocation we've had over the last 12 months.
Our next question is from Jason <unk> at Oppenheimer.
Yes.
Joe I'll ask you about gaming.
You highlighted a very pressing investment in MGM.
I think some of that investment has to do with your views on.
Interactivity and sports betting in some of the other emerging areas in gaming.
Just maybe talk we've seen kind of values really depressed now within online sports betting so maybe talk about what.
Would any investments in that area will be done through MDM or other ways youre thinking about.
Perhaps investments outside of MGM or just broad thoughts on gaming right now.
Yes.
So.
<unk>.
Inside of MTM and outside of MGM is interesting for us and we've learned a lot since we've been there I would say that the gaming business of the online gaming business overall, which is about sports betting and gaming has outperformed our expectations relative to when we came at it has grown.
Really tremendously.
And that growth is going to continue for a long time the hard part.
And as you know has been the margins and it's a wildly competitive space. There is a lot of people who feel like there's a lot of companies who feel like they need to win there on that and so.
As a category, where you have multiple players, losing half of $1 billion, a year or somewhere in that neighborhood, which is a very hard thing to do.
One thing that is a clear learning and that is that gaming is certainly right now at least is a much better business in sports betting.
Even though sports betting is in a much bigger market.
And we take those learnings and hopefully we can do more within.
Hopefully, there's more to do with an MGM and you saw MGM.
As an announcement about buying.
Global Gaming company in Europe , and we're also going to look and see what we can find but MGM everything we do we will first consider through MGM and we have a very open dialogue with them on everything that mgm's looking at at and everything that we're looking at and we're highly coordinated.
Ordinated, there and the ideal move generally would be to do things to MGM, but but there very well may be opportunities for us outside there to leverage some of the learnings we've had there where it makes sense for us to do something on our own and again, if we did that it would only be with.
Mgm's blessing.
Thanks.
Our next question is from Brian Fitzgerald at Wells Fargo.
Thanks, guys two quick follow ups on Dr. Meredith in the recovery speed, there and the trajectory of <unk> Dot com.
What are the drivers by which advertisers kind of pick up on the benefits of reduced cluttered does that come through in the quick drink versions brand lift studies or is it purely a matter of Salesforce communications.
Second one was a follow up on Angi zero match.
Saar 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've talked about any any thoughts on where you think <unk> zero match rate can go.
And as you continue to make improvements and effectively fulfill demand do you expect.
<unk> benefits from from that.
That closure.
Do you have a virtual answered just real quick thanks.
Thanks, Brian So it's sort of the clients see this in a phased way at the minute you make the change youre, sending very different signals that the programmatic marketplaces and as you can see by what happened to <unk> Dot Com Booth response, nearly immediately and again, we've seen great improvement we would expect just as we refine this.
For that to continually improve those signals get back to clients.
<unk>.
And then starts to reflect in the premium deals that are running on those six of those.
Longer lag, there's less incident and then ultimately.
They are reflected in things like brand lift studies when the page has three highly performing ads for our client that creativity and creative things that we know that.
Work on our sites that results in pretty much any metric you want to measure advertising once that.
We've seen this the dot dash reviews it so.
If your metric is brendan metric, because youre launching a new <unk>.
Your line anymore.
Driving brand, we want to drive test drives it's one thing if you're a metric to see join US. Another thing we are going to hit on all of them. They don't all happen immediately.
The math marketplace up happens immediately and then the rest of it does that over time and a lot of it is educating products ourselves and go down whats getting clients, how much better we perform than others and how our performances.
And a little bit is for clients to understand that that these units and our AD offerings are actually more valuable.
<unk> came.
And that takes a little bit longer, but we feel very strongly that we're on the path.
The number one proof point is once you start to perform in the programmatic markets move we know exactly what happens next is you've seen it.
15 glass.
On the zero match rate at angi, or the except right at angi and how it impacts SCM and SCO.
Youre absolutely right. So we now have the richest product portfolio out there between ads leads services.
Nobody with a product portfolio that looks anything like this so we are more attractive than ever on angi Sto in particular, and we see that coming through in terms of the performance of SCO on energy, which the growth there.
Credibly strong on a year over year basis, we feel really really good about the direction thats, taking so youre absolutely right that having it's a combo of those things gives us an advantage on SCO on SCM. It also gives us an advantage because by having.
We'll add lead services to monetize particular service request particular services in particular Geos. It makes it more predictable for our SCM bidders to know when and where and for which categories to pit. So would ultimately see is buying.
Buying fewer service requests, where we were unable to monetize so the more predictable our supply as the more predictable our offerings are because we have more offerings.
The easier it is for our algorithms to decide yes, we're bidding on this particular clinics, so that would reduce our long term long term tendency to buy service requests that were unable to monetize and you should be able to see are our transactions that we are monetizing.
Start to start to start to increase.
Call out on that is that are monetized transactions don't don't take account of the AD.
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.
If I could just take a step back and ticket to think about the capital allocation inside the firm and you've got these opportunities have top desk Meredith and AMG in emerging opportunities is there any different sense of where you could accelerate some of your efforts over the medium to longer term and where you are trying to go for the business.
Against allocating capital behind it or is it purely down to execution.
We expand that conversation into areas like <unk>.
Do you see operations versus the application of capital capital to speed up the opportunity. Thanks.
Sure there's a lot in that wanted to try and take.
Maybe piece by piece.
The business is where we are.
We'd like to be investing in every business I would say, that's probably true everywhere, except search were for <unk>.
A while now we've been in.
More profit maximization mode than we have been in growth mode, and I think that that continues there.
Warehouse, it's our responsibility to balance the short term and the long term, which means we're reinvesting some portion for growth.
Some portion.
<unk>.
<unk>.
One of our colleagues used to say deep while your dream.
And it's easy to just do one or the other.
Focus on long term and short term and our job is to balance both.
Andrew you've seen over the last little while we've moved probably went to the most extreme we've gone historically in terms of long term and investing.
And.
You'll see that now that we're past the peak period that sort of balances out.
If it comes to a more natural balance.
But in every one of our businesses, we want to be doing both we are not at profit maximization mode in anything really besides search of course in emerging and other some of those businesses are losing money and so we're obviously investing in trying to build a business there, but care profitable, but we are definitely reinvesting a portion of the profits.
That business to drive growth and expect to continue that for a while.
And again I think youll find that is true across <unk>.
Most of our businesses.
Add to that yes.
Agreements to build on it.
Every dollar in our capital allocation to Joey's point every dollar whether invested in a transaction in the form of M&A or follow on investment or invested.
Incremental operating expense or capital for growth initiatives or incremental margin.
It is that as a capital allocation decision.
I see.
Has a pool of capital that flows across it and into.
New opportunities to maximize value for shareholders. So in this environment, where there are higher discount rates.
Because the valuations come down capital this year.
Our strong balance sheet is that much more.
Our competitive advantage.
And at the same time.
You continue to optimize your portfolio of investments within the operating side of the companies.
For the right return in this environment, we've talked about growing opportunities that care in the winter we believe those those new.
New initiatives will be highly accretive dots Ashok Angie.
<unk> operational elements, one coming out of a large transaction that was done last fall and narrative, but they were a major operational activities that are generating value for shareholders and.
And that's the predominance of the focus and then we look at is.
Joey went off we look at our own share price and <unk> and others to think about capital allocation opportunities. There. So it is a full analysis really across the potential homes of NT dollar.
Our next question will be from Tom champion at Piper Sandler.
Great Good morning.
I was wondering if you could talk a little bit about.
The monthly metrics and the service requests down double digits last three months.
Whats driving this dynamic here and maybe you could tie this to the comments on <unk>.
Ads and leads revenue that that suggest stabilization.
And then maybe a question for Chris just to follow up on on care Dot Com the letter refers to.
Some longer term.
Some some newer opportunities outside of the.
The longer term legacy opportunities in managed care and.
And long term care that have emerged post pandemic.
I was curious if you could flesh those out a little bit what are you what are you seeing more recently.
Sure. Thanks for the question. So in terms of the service quite requesting down there's two primary drivers of that.
The first is just as we talked about the incredibly tough comps from this time last year.
When service request and the overall activity on the home was at all time.
All time highs and perhaps rationalize.
As people were.
As people are stuck at home so that created an incredibly tough credit until comp and then the second is the angi rebrand and the shift away from <unk>.
<unk> list to Angie.
Which we've largely recovered from on Angi and are back to very strong growth in the angi domain. However, we do also have the fact that we shifted from our legacy home advisor domain as I think we were putting consumer marketing dollars behind it.
Reducing our marketing in that.
It has it has led to a drag in service request overall.
We are seeing greater monetization benefit.
The service requests that we can have this means that we're more likely to match the service requests that do come in than we've ever been so our likelihood to match you with the pro and make money from that transaction is the highest its ever been.
On the one hand, you could say well don't want every service requests on the other hand.
One service requests that we're actually going to be able to fulfill a course in an ideal world. Yes. We would want every service request forever. However, if we're going to have service requests, but we're not going to deliver a great experience for the homeowner.
And we're going to pay for that that we're going to be.
The double whammy situations, where we pay per service request and we disappointed homeowner. So we are being more diligent and more.
Responsible than ever before in terms of thinking about how we buy service request, how we market and making sure that when we are marketing and you see that in the zero, except right you see it in the rate of monetization, we are more likely to monetize these transactions. So that's how we're thinking about it obviously over the long term, we do need to make sure that we.
Get back to get back to service requests growth.
Ultimately, we do expect that to happen as we lap all these things that we do.
Get to a place where we're monetizing a greater percentage than ever before.
Rules, when we get back to service requests growth.
Thanks, Rajiv and then Tom Thanks for the question on care.
I would.
Alright, two main elements that were reflected in joey's letter one.
Are areas that are.
That we've had inbound demand to our platform, but we currently aren't able to SaaS satisfy those services things like out of home daycare senior care Pet services those types of activities, where I think we said 40% of the.
Inbounds were not able to meet the request. So that's a matter of we've got the demand now, let's build up the supply and have a healthy two sided marketplace.
And so the expansion there is adding that.
That provider supply the matching element and going from there the other which we.
We are very excited about enjoy actually referenced into last the last earnings call is the instant booking process and any of us is apparent.
You can quickly see the value in this service, which is a much faster matched.
Matching the need for a.
A babysitter or any sort of homecare.
As they say instant book.
Measured in hours to get there.
The provider to your home or a partner that is an element of developing the product and then developing the liquidity on both sides of the marketplace to meet much faster turnaround times, we're beta ing that product.
And Tim and team are actively ramping it up we are excited but thats going to be a rollout we want to make sure.
As you would in any new marketplace innovation that the product is there, but also you have liquidity on both sides. So we view this as really phase two of care after remediated.
The historical issues and really building up the core care and Enterprise Foundation. These are the extensions to grow from here.
Our next question will be from Ingalls <unk> at Wedbush.
Hey, good morning, guys.
I'll start with <unk>.
Comments on past peak investment in services.
And your plans to expand into new categories there.
Where are you with those plants.
On the new categories, and how does that align with.
Discussions about being past peak investment and then for Joey.
You've been on Blue grew and Vivian and the vessel, whether we didn't talk about it today.
Clearly one of the strong series with business right. Now you just expand on where things are there kind of where your business for where those businesses Goldman coming months and years.
Sure.
In it services so.
From my perspective.
We have had four straight quarters of a 100% year over year plus growth in services.
And below that.
Honestly the answer Rubik THR acquisition below that we have incredibly strong organic growth in services and we expect that organic growth of services to accelerate accelerate through through the rest of this year, we've got an incredibly strong backlog.
In particularly in larger projects, where we are selling those at a far faster rate.
In a growth environment that we are delivering them. So our backlog is the biggest it's ever been in large projects in roofing.
There are other remodel categories. So we feel really good about the ongoing growth that we expect to see in services for the back half of the year just based on that alone. In addition to that we also have still more places within the product that we can we can continue to expose services and we do have.
We do have optimization in terms of the.
The product flow in terms of the Q&A flow in terms of conversion in terms of job allocation.
And how we and how we make that more efficient.
In terms of the margin for services.
As we said we've hit we hit peak investment in services in March.
That it is largely driven by increases in gross profit dollars coming from services and we saw significant increase in gross profit dollars even March to April , which again helps us helps us with that with our drive towards profitability and services.
We know that we have significant levers across take rate we've been doing some of these categories for 678 years within wood.
Andy So we have very high confidence level that I have very high confidence levels and the take rate.
That we know that we can get to with some of these categories. We know the path to optimize some of the variable cost and customer service and operations refunds.
<unk>.
Reduce it refunds et cetera. So we're very aware of the path that we go on to optimize each of these categories.
And we will balance out.
As <expletive> pointed out we will balance this with with observation and being incredibly vigilant of what's going on overall in the marketplace. So we're clearly in a more volatile time, then that we have been historically things are less predictable. So we will be incredibly responsive and incredibly.
Diligent in terms of selecting categories and.
Investing more behind categories, where we do have gross profit contribution margin.
We should dollars coming off those categories in all of those verticals.
And we will be more judicious about.
About.
Reducing investment in categories, where we're not having that success. So overall, we feel incredibly positive.
Credibly confident in the growth rate in the organic growth rate of services accelerating the rest of the year and confident in the path to profitability.
Thank you and the other thing I'd add is relative to that.
Just a question category expansion is not.
A key element of services going forward.
Relative to being past peak investment if anything to <unk> point, we've identified the job types and categories where margins and.
Momentum our strongest so it'll be more around.
Perhaps placing greater prioritization on those but it's.
We're in a broad set of categories as of this thank you.
Foucault and Vivian Yigal. Thanks for that question it is.
Sure.
So they're actually very different business models, but there is a fundamental thing that they share and take advantage of that.
The.
The dividend is in the matching business.
Which means matching.
Employees with employers in particular in nursing, but.
Eventually we opened all healthcare.
And <unk> is in the agency model, which means we're actually.
Employing the workers in that and that business model.
They both share is a significant evolution, which is where we see the future going from sort of job listings static job listings and.
Very inefficient matching process too.
A much more dynamic engagement between employer in Canada.
And in the <unk>.
The easiest understandable I think it goes well beyond this it's probably easiest to understand when the job qualifications are binary.
There you are.
<unk> as a nurse for the necessary certifications for that particular job or youre not.
Or in the case of Blue crew, either you can lift this amount of weight or you can just go up to this place and you can respond to the 20 minutes of training or whatever it might be in that example.
When those those.
Qualifications are binary the reality is that all the other stuff that surround the hiring process.
<unk> found to be largely inefficient or sometimes bordering on useless, meaning people aren't as good at interviews as they think.
And the think the process that people put around there just close it down and it doesn't add to yield better results.
What you find with the platform and we are building. This data at both <unk> and Bloom crew is you can no impact with data who can perform jobs well.
Our on time rate is what their employment history is what their certifications or things like that and you can make that process much more efficient for both the candidate.
And the employer and what you can also do is.
Yes.
Allow much more flexibility for both sides of that marketplace. So it need not fit necessarily in the typical 95% or 40 hour work week or whenever it was historically you can customize that using our tools and people can can indicate what they're interested in and match with employers in that way.
And so when we look at it.
Vivian starting in about a $10 billion Tam, which the travel nurse market has now expanded beyond that and when you get to total healthcare it becomes multiples of that in terms of health care staffing.
And.
On the brokerage side, starting in about I think a $30 billion Tam, but again that can become multiples bigger if we can expand into other categories as we hope.
And the key for US is just using that technology.
Absorbing the data getting the.
Yes.
The customers on both sides of that the input the data in ways that are.
That yield real benefits to them because it's it can be extended across multiple employers or multiple jobs.
As we ingest that data, we can do a better job with matching and we can grow those businesses in both of those businesses continue to grow very nicely.
We're pretty optimistic on where we think they can go.
Our next question will be from Brent Thill of Jefferies.
Joey many investors are asking is if the macro headwinds.
Even stiffer, how you think the rest of the portfolio Saracen.
What gives a defensive element.
In a tougher macro change for them for the next year.
Sure.
Again, we'd probably have to do it business by business, but in we will start with the attachment rate.
That we look at kind of what's the last dollars to get cut.
In the a.
Tough environment and generally for us.
Advertisers across all of our businesses and all of our history. The last apt to go is about performance.
Where you can very clearly tie a dollar of spend to a dollar of results.
And what.
We know from our Dod that history is that performs in that that performance can be measured very clearly.
And we're now in the process of migrating all of.
Meredith onto the diverse platform, where we can measure and prove we show that performance and so we think that that is.
But to be reasonably well protected.
Of course, the heart of the environment gets.
You start to things start to change, but where we are in that food chain. I think is a very very strong place.
Simply because our ads perform which which we see in the data and we see in the advertiser retention.
We've talked a little bit of Qunar, you talked a little bit about AMG in that regard, which is the natural hedge on the abbs and leads business, which is as demand softens on the consumer side, then interest amongst service professionals increase almost sort of direct opposite.
And you can see that in our numbers throughout our history, which is the revenue per service request for access for service requests go up as the as the consumer demand goes down.
And so we like that and remember we've talked about this in a few different environments.
In our history with AMG.
A substantial portion I want to say, 60%, but somebody here will correct me, our non discretionary jobs and so those happened in any environment, that's fixing a broken toilet or a broken HVAC or locksmith or whatever it doesn't matter what the economy is doing you got to get those things. Thanks.
And so we're somewhat protected in those.
In the other I think here, we haven't really been through.
A cycle like that with care when did held up fine during the pandemic, but that was that there was all kinds of dynamics you need to that would've impacted care.
And and so we will see in that environment, but again I think it's sort of a fundamental aid which is people who are out people need out there people go to work people need childcare and so I think that that's going to that ought to be reasonably well protected.
And those are really the big ones that that we think about.
Our next question will be from Brad Erickson at RBC.
Hi, Thanks, just a couple of follow ups on ads and leads with an AMG.
Question, you mentioned traffic is still coming back there post brand print trend.
Alright, Brad you're coming in and out.
You can hear me how about now.
Yes.
Alright, so on ads and leads which then you talked about SCO and SCM and obviously traffic so coming back as we look at our results for today would you say that you're over earning right now there are under earning.
Aggressively would you look to spend on marketing on angi dot com once traffic more fully recovers.
And then second.
Historically, you've said that roofing could be sort of like a blueprint for other category expansion you acquire you get a company's supplier network Labor network et cetera are you, saying just curious relative to you mentioned, maybe some acquisitions not being on the table there as much or are you, saying that youre not really exploring those anymore.
You just don't need to because you have the capacity need maybe you could just reconcile that a little bit more.
Sure. So in terms of where we are with in terms of where we are with ads in Leeds and the.
The relative to manage supply.
We are still.
Obviously this category by category and vertical by vertical but in aggregate, we still have more consumer demand than supply. So yes, there are certain categories, where we can monetize more if we had more.
More consumer demand however in aggregate across everything we still have.
We still have more consumer demand than supply which is why.
An increase or increase in pro supplier or a reduction in consumer demand would be.
B.
Net net net positive so we are not.
We are not yet back to if you take you take our.
Peak media spend or broad broad reach media spend on.
On our legacy brands from advisor at its peak, we are not back to that back to that level.
Broad media spend yet.
As the environment evolves changes as we continue to see progress on the on the AG brand and it continues to make sense for US we will obviously, we will obviously where it makes.
It makes sense in terms of roofing.
We're very happy with that very happy with the roofing investments that we've made it has allowed us to accelerate into that category, it's growing quite rapidly.
And we expect.
The growth in that to continue for the rest of the year.
All M&A is.
Within IC, everyone has spoken to it as opportunistic and as we think about.
As we think about that.
The rest of the year as we think about where the macro environment shakes out we're going to be more judicious and more.
More vigilance on how we make those decisions, but it certainly doesn't rule out us identifying a category where.
Where we're making great progress and where we identify an asset that makes us add to that.
The business.
That's correct.
Okay. So with that we thank you for <unk>.
Joining us this morning.
Forward to discussing more have a good day.
Thanks.