Q4 2022 Angi Inc and IAC Inc Joint Earnings Call
Speaker 1: The.
Speaker 2: Welcome to the IAC and Angie 4th quarter 2022 earnings conference hall.
Speaker 2: All participants will be in listen only mode.
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Speaker 2: After today's presentation, there will be an opportunity to ask questions.
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Speaker 2: Please note this event is being recorded.
Speaker 2: I would now like to turn the conference over to Christopher Helpham, Executive Vice President, CFO and COO of IAC. Please go ahead.
Speaker 3: Thank you, thank you. Good morning everyone. Christopher Halpin here and welcome to the IAC and Angiang fourth quarter earnings call. Joining me today is Joey Levin, CEO of IAC and CEO and Chairman of Angiang.
Speaker 3: Similar to last quarter, supplemental to our quarterly earnings releases, IAC is also published its quarterly shareholder letter, which is currently available on the Investor Released In Section of IAC's website.
Speaker 3: We will not be reading the shareholder letter on this call. In addition, Angie has published an earnings deck this quarter, which is currently available on the Investor Relations section of both IAC and Angie's respective websites.
Speaker 3: I will shortly turn the call over to Joey to make a few brief introductory remarks and then walk through that Angie Erning's deck. We will then open it up to Q&A.
Speaker 3: Before you get to that, I'd like to remind you that during this presentation, we may discuss our outlook and future performance.
Speaker 3: These forward-looking statements typically may be preceded by words such as, we expect, we believe, we anticipate, or similar statements.
Speaker 3: These four 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 IACs and Angiang's fourth quarter releases, and our respective filings with the SEC.
Speaker 3: We will also discuss certain non- GAAP measures , which as a reminder included just to EBITDA, which will refer to today as EBITDA for simplicity during the call.
Speaker 3: I'll also refer you to our releases, the IAC shareholder letter, the Angie deck, and again, to the investor relations section of our respective websites for all our comparable GAAP measures and full reconciliations for our material non- GAAP measures . Now let's jump right into it.
Speaker 3: I will turn it over to Joey who will walk through the Angie Rangstack. Thank you, Chris, and also congratulations, Chris, on the new responsibilities. Hopefully everyone saw Chris, I have the new responsibility of P-Pop rating officers, two financial officers, and a incredible addition to the team since he's been here.
Speaker 3: and we're excited about the new responsibilities. I, we changed up the format a little bit here to walk through this anti-deck. So hopefully everyone has access to the deck in front of them and I'll take you through page by page. What we wanted to accomplish here is give you
Speaker 3: sense of how things are going there and where the focus is since I've moved over to Angie a few or added I should say Angie a few months ago to my responsibility. So I'm going to start with page three here. That's the title page and pass the Safe Harbor statement....
Speaker 3: We're on page three, which is I think the most important side we have
Speaker 3: What you see here is
Speaker 3: The importance of one Andrew.
Speaker 3: This gets to our history, how we got here, and what we offer our customers. Our customers are both the consumers and the service professionals.
Speaker 3: We've been in this business now over 20 years, the starting with Angie's list, which was a directory which gave you the consumer all the information of
Speaker 3: service professionals in a category and the ratings and reviews and a trusted source for that information.
Speaker 3: We also had home advisor with matched homeowners with service professionals based on exactly what the homeowner wanted to get done and exactly
Speaker 3: true on the service professionals side. Service professionals we've learned have want to engage with our platform and with homeowners in different ways. Some just want a presence online that we help them manage.
Speaker 3: where they can manage their ratings and reviews, and to pay a fixed price per year and just get a steady flow of customers from that, and they don't want the variability. And that's the one historically the Angie's List product, and now that's a fixed annual contract product. There's also the pros who say, I only want a paper of very specific kind of job and a very specific kind of...
Speaker 3: made for police job jobs, we schedule it, we book it, they just show up and get the job done.
Speaker 3: No one else offered that full suite of products.
Speaker 3: Ability for a homeowner to do all those things in one place and a service professional to buy all those products in one place.
Speaker 3: is a very unique and special offering, and that's what one Angie does, and that's what one Angie is going to do going forward. If I turn to the next page, you can see that that collection of things also makes us the biggest in the category. By a pretty wide margin.
Speaker 3: And it's not just on revenue where we're the biggest, which is shown on this page. It's also in brand awareness, even with the new brand. Our brand is much better recognized than any other pure play brand in the category. And that's a real asset that we have. That that scale.
Speaker 3: In revenue is also really important to the customer experience.
Speaker 3: liquidity is the most important thing in this category. When I say liquidity, I mean the ability for a homeowner to find a probe who's likely to be able to get the job done and I mean for a pro to find homeowners who can fill the book of business. That liquidity is essential to engagement on the platform and that the sale of revenue is evidence.
Speaker 3: not all the innovation works, but we are constantly innovating here and having such a large serious brain innovation is also a real asset.
Speaker 3: If I go to page five, I just want to show you how
Speaker 3: We are organized now. We're doing this both to show.
Speaker 3: clarity on how the business works.
Speaker 3: clarity on where we're investing and also indicative of how we manage the business. So you can see here that ads and leads is I'm going to focus on two segments here, primarily ads and leads and services.
Speaker 3: You can see here, Adam Leeds is a vast majority of the revenue and more than all of the profit.
Speaker 3: That's a great business with great potential, which we'll get into. And the second piece is the focus on services. This while shown here on a net basis, which is comparable to the As and Leeds business, it's a smaller portion of the business, but it is a very, very important part of the business, a very important part of the customer experience and a very important part of the customer experience and a very important...
Speaker 4: period.
Speaker 3: The fundamental difference between ads and leads and services is on the ads and leads side. The service professionals pay us to find customers.
Speaker 3: And on the services side, we pay the service professional.
Speaker 3: We find the customers, we collect the money from the customers, and then we pay the service professionals to get the job done. Again, some pros want to add the leads products, some want the services products, we want all of them to be able to work on our platform.
Speaker 3: Then within ads and leads, as I mentioned previously, some service professionals pay us on a variable basis, meaning with no commitment per lead and some pay us on a fixed basis with an annual commitment. And again that works, each of those products work for some professionals and
Speaker 3: not for others, but are essential to the overall mix. If I go through the rest quickly, you see roofing was a substantial investment in 2022. We really lost an embarrassing amount of money in roofing last year. That will not continue. We've got that business profitable now and we expect that to be profitable going forward.
Speaker 3: also, I don't only briefly to say that that continues to provide real option value for us, sort of two small things that matter today, but we do have a leader in each of the countries that we're in, and we've been consistently moving that onto a common platform and getting efficiency out of that business. That gets us to total energy earnings.
Speaker 3: I'll flip the next slide now, slide six, to focus on ads and leads for a moment.
Speaker 3: Add the leads as a profitable business and we think continues to have real upside. You can see 2021 the business was declining. That was a result of most significantly the rebrand where we lost a lot of free traffic and free audience and lost the marketing efficiency.
Speaker 3: We laughed that we got back to growth over the course of 2022 and expect to be able to continue to grow
Speaker 3: There was also a big impact in that business in the pandemic, where we had a significant demand, and if you're selling at the leads, meaning you're offering to help service professionals, find new customers.
Speaker 3: in a time when there's a reduction in service professionals because some stop doing business through the pandemic and you have a growth in homeowners looking for work to get done, selling advertising is not the best place to be. But we're now also past that, but the supply demand has come more into balance.
Speaker 3: that to continue as we drive marketing and other efficiencies through this business.
Speaker 3: Switching to services which is now page 7.
Speaker 3: We really experienced the opposite in the demand but in this business, in that we could absorb that incremental homeowner demand and with price and find service professionals to go get the job done. And so that, we also...
Speaker 3: through this business, through tremendous investment, and significant exposure on the site. And so you see 2021 was really exceptional growth, and that continued in 2022.
Speaker 3: There's a few changes that we're making to this business that will change this growth trajectory.
Speaker 3: One, we're moving out of the complex services. So in our services business, we had lower average order value services, which will continue and is a nice profitable business. And we had the more complex services which.
Speaker 3: We've had trouble generating profit in and it's hard to touch a lot of consumers in the more complex services business until we moved out of that business. You can see on the right side.
Speaker 3: We started to pull back on some investments towards the end of 2022 and now most of that will come out in 2023.
Speaker 3: Q4 was an anomaly with some one time expenses, but you can see that the losses in this area have been tearing over the course of the second half of the year.
Speaker 3: I'm now going to page 8 where
Speaker 3: The question that we ask ourselves internally and we certainly got next turn will be is.
Speaker 3: Why do the services business at all? Is this a good business? Is this important to the future? And again, the answer on services is yes, absolutely essential to the future. And here's why starting on the left side of the page.
Speaker 3: 100% of services now, this is not true in 2022, but going forward, 100% of services will be priced online. That is what a homeowner wants. When homeowners begin their search, when they begin to explore whether they want to get a job done, the first question on their mind is how much will it cost?
Speaker 3: And with our, the services that we are now focused on and the categories here now focus on 100% of those can be priced.
Speaker 3: the services that we are now focused on in the categories here now focus on 100% of those can be priced online
Speaker 3: Second thing is repeat rate. And this is a theme for the remaining items on the page. All these metrics are ones where we've been trying to move them for years and years on the atmosphere, space and death. And when we deliver the right experience and services, we know we can't deliver them in.
Speaker 3: in aggregate. And on repeat rate, we see a 2x repeat rate.
Speaker 3: services. That is a phenomenal thing to be able to drive if we can drive more customers into this experience.
Speaker 3: That means that they are getting a good experience because they're coming back off. But you can see that same thing on the next item, which is the net promoter score greater than 50.
Speaker 3: If you don't see that promoter scores greater than 50 in this category, we're able to deliver this. When we get a services job done, we are able to deliver that kind of an F promoter score. And again, that shows up back in the repeat rate. Sorry. And the last is mobile transition.
Speaker 3: Very important for us in driving repeat rate and driving customer satisfaction in owning the customer experience and bringing the customer back and not having to buy the customer repeatedly.
Speaker 3: Driving mobile install is very important and we are seeing 5X increase in that mobile transition when we deliver services.
Speaker 3: The next question you get to is, okay, but can you deliver all these wonderful things profitably? And the answer to that question is yes, if you look at the right side of the page in terms of the value per job.
Speaker 3: Starting with the value per job of $230.24, you, after the variable cost, you can see we have a positive contribution margin. As we exit complex services and the mid shift changes, that value per job will come down, but actually the contribution margin because of the relative profitability.
Speaker 3: is we are touching here millions of customers with this product. And in the more complex services, we were touching thousands or tens of thousands of customers. We can touch millions of customers with this product and scaling that is really important in delivering this customer experience broadly on Angie.
Speaker 3: Going to page 9, we have...
Speaker 3: multiple growth levers in the business and we're trying to frame sort of how we think about upside and how we think about growth from here. If you focus on the left side, the changes we made to the brand, we talked about a lot had a big impact on the business. We believe that it is possible to get a lot of that back and we try to frame the size of that.
Speaker 3: On FEO, we could grow 75% from here. We get back to our pre-rebrand levels of FEO presence.
Speaker 3: may not be able to get all that back, may be able to get more than all that back, but just in framing it, that's a big upside. In FEM process, we can close to double from here. If we get back to where we were, I do believe that one's more in our grasp to accomplish and is, is, is, is,
Speaker 3: just executing on some fundamentals which we'll get into and brand awareness. Obviously the new brand is new. It is a variation on the old brand so it takes some benefit from the historic brand but we can get back to that and beyond that that brand awareness which we previously had and that close through and efficiency really through all the trails.
Speaker 3: The other thing that really excites me as I'm dug in deeper in Angie is the right side of the page.
Speaker 3: I'll actually go from the bottom up. There's the reality that a lot of service professionals have to try out on our platform and it doesn't work for everybody. That's been true forever and will be true forever. But the service professionals that it does work for, which is about one in four, reach the one year milestone.
Speaker 3: Those service professionals that it does work for stay for a very long time. They stay for an average four and a half years.
Speaker 3: And they now comprise 60% of the service professionals on our platform.
Speaker 3: Those are folks who know how our system works, know how to make it successful for them and can grow their business and have grown their business on our platform. And we are very focused on that group of customers and making that group happier. We would like to get more than one in four through the end of the funnel through through the one year. Yes, of course, but I think that we can grow that business by growing the.
Speaker 3: of our key metrics, so you can see how it has already impacted some of our key metrics. I'm starting with the upper left here. We've been reducing headcount in our sale, so headcount is Q4 with down 21% here on here.
Speaker 3: I could some of our p-metrics. I'm starting with the upper left here. We've been reducing head count in our sale. So head count is Q4 with down 21% year on year. I'm starting with the lower right here.
Speaker 3: If you look at the chart below that, transacting as P's with down 12% year over year. So while we are declining transacting service professionals, we are spending less to get them. We are having a smaller sales force to be able to get service professionals onto the platform.
Speaker 3: That means we're focused on getting the right service professionals onto the platform, service professionals for whom the product is more likely to work, who can spend money, who can deliver during customer experience, and you can see that spending money and revenue for Transacting SP, which is up in the include year over year.
Speaker 3: If we shift to the right side of the page, I think we have similar opportunities for efficiency on advertising expenses. You can see here our advertising expenses as a percent of our total ads and leads revenue in 2021 that
Speaker 3: went high to 45% that was the year we did the rebrand, which means we got the least efficiency out of our ad dollars, that improved a little bit in 2022 down to 44%, but we think we have real room for improvement to get to levels that we've seen previously in this business.
Speaker 3: Now going to page 11 on cost savings. We, it's not just in sales and just in advertising where we think we have opportunities for efficiency. We've also cut costs throughout. What you can see on this stage is our product development expenses and capital expenditures. We've cut that.
Speaker 3: take a breath and turn to Chris and then jump back in. Thanks, Joey. As you will have seen in the shareholder letter, we have resumed providing annual profitability guidance. On page 12, you can see our outlook for Angie.
Speaker 3: Adjusted ebid 60 to 100 million. I'd note at the high end of that range that's more than twice
Speaker 3: 2022, adjusted EBITDA. We're also given the reductions that we've driven in efficiency to drive free cash flow and CAPEX. Our CAPEX guidance for 2023 is 40 to 60 million.
Speaker 3: which again is pretty much down 50% year over year.
Speaker 3: And then as we discussed and we'll discuss more services is switching to net revenue reporting because of changes in the terms and conditions in those agreements with customers.
Speaker 3: to help you in forecasting the business. We wanted to get first quarter guidance on revenue of $370 to $400 million. That, at the midpoint of that range, with services net, that is basically flat year over year.
Speaker 3: We would point you to the Grids and Metrics section of our earnings release wherein you'll see good performance data that lays out 2021 and 22 quarterly revenues and financials for Angie on a net revenue basis services had been.
Speaker 2: Yes sir, we will now begin the question and answer session.
Speaker 2: To ask a question, you may pre-starve and want on your telephone heat pad.
Speaker 2: If you are using a speaker phone, please pick up your handset before printing the keys.
Speaker 2: To a giant question, please first start them too.
Speaker 2: Today's first question comes from Jason Hostney with Oppenheimer.
Speaker 3: Thanks, hey guys, have a good morning. So Joey, everybody likes to seek well. Everybody likes to seek well because consumers know what they're getting and the studios usually can predict the returns of the sequels better than the original. So I'm not sure what the sequel is now with Angie, kind of reboot number three.
Speaker 3: Before, just given this, how are you thinking about the long-term opportunity? It seems like we maybe need to think about a smaller term since you're kind of reducing the focus on the big services. But just maybe help us think how you're thinking about the long-term.
Speaker 5: revenue and margin opportunity of the new, the re-of the rebooted Angie.
Speaker 3: Yeah, I could challenge a few things and I don't really think this is a reboot of Angie, but let me engage on the Tam first and then come back to the other part. The Tam for Angie is the same that it's been and has been the same for quite some time.
Speaker 3: Some people say the US mark is 400 billion or 600 billion, but let's just take with 400 billion as the home services market and that includes the simple services and all the way to the more complex services. We're still servicing the more complex services. We're just not doing that through our services product. We're doing that through our ads and leads products.
Speaker 3: And that's a really actually phenomenal channel for our ads and leads product because those leads are very valuable to contractors and we can make real money on that and continue to and have a great customer experience where
Speaker 3: The homeowner comes to our platform looks for a service professional who can deliver in those complex services and we help find them a service professional who can deliver in those
Speaker 3: more complex services and we're paid on that on either on a weed basis or on a fixed annual contract basis from the service professional.
Speaker 3: That's a great place for us to be. Again, there's a revenue recognition difference, which is if you stick with the 400 billion, pick what percentage you think is spent on marketing. Some say between 10 and 20% is spent on marketing, call that 40 billion to 80 billion. That's still the area that we're playing in. It's just books now is 40 to 80 billion instead of the...
Speaker 3: It's the smaller less complex jobs.
Speaker 3: or less complex jobs.
Speaker 3: In terms of reboot and
Speaker 3: Where we're going with anti-overall.
Speaker 6: We...
Speaker 3: No question we overspent in 2022. There's no question we tried a lot of things
Speaker 3: we overspent in 2022. There's no question we tried a lot of things, some of which did not work.
Speaker 3: We shouldn't take from that lesson to not try new things. We should take from that lesson to when you're trying new things to be more diligent and efficient on capital. And really importantly, and I said this in the shareholder letter and I've been saying it a lot internally and will say it's all blue in the face. You can't when you're doing this.
Speaker 3: innovation new things lose sight of the basics. And we did lose sight of some of the basics around SEOM, fundamental cost management and things like that because we were in this growth mindset and that growth orientation got away from some of the efficiency orientation and I think
Speaker 3: you can ensure accomplished balance of both. And that's what we're trying to accomplish now. But 2023 is an adjustment certainly relative to that 2022.
Speaker 5: Okay. And just a quick follow up. I'm going to go ahead. You're not going to.
Speaker 5: If you're not going to build, I mean, the whole reason we're trying to get into the services where you are, the general contractor, is because you basically, I think, thought you could get a better take rate, right? Because when you provide as and leads, at the end of the day, you know, there's a diminishment, right? Because the service provider has to compete.
Speaker 5: to close that with other service providers and so you don't get the full cut. So I mean, do you agree with that thesis and just, you know, if the bulk of the business is going to be on their ads and leads, we just have to think about kind of a lower conversion rate of that 10 to 20% of advertising, you know, over time.
Speaker 3: No, it's not that. What put us into the services business was trying to drive the customer experience, so trying to be able to get greater coverage in more categories or give the homeowner more options.
Speaker 3: So what that means is, for example, where advertising doesn't work because there's a wide demand imbalance, you can't go to the service professional and say, well, come on our platform and we'll give you a leave for free or even better we'll pay you to take the leave to make sure the customers get a better experience.
Speaker 3: What you can do in services is you can price those things to make it attractive to service professionals, to service the customer on your platform. So what we're trying to get to is more homeowners who come onto our platform have a solution that works for them.
Speaker 3: Now, we have to do that in an economically feasible way and doing that in the complex services wasn't working out economically for us, but in these other areas it does. And so we can service more customers with a solution. The other thing.
Speaker 3: in that homeowners, many homeowners in particular younger homeowners want to do less work or I should say are comfortable with the platform doing more work. So that means that they trust the platform to give a fair price. They trust the platform to find a reasonable service professional and they allow us to do that work on their behalf.
Speaker 3: And yes, that does lead to more take rate in that example, but really what's driving that is, is having a compelling customer experience, which I think we can deliver. Okay.
Speaker 6: The long-term revenue growth and margins.
Speaker 3: We think this is should be a double digit revenue grower. Again, 2023 is going to be choppy because we're removing some empty calories and changing a bunch of things in the business. But it's kind of after 2023, I think double digit revenue growth is absolutely achievable with expanding margins. And there's a lot of.
Speaker 3: leverage to expand Martin we talked about possible and efficient to you much of which we've already realized but we do think that we can grow margins just by by incremental revenue on a fixed cost base from here and and
Speaker 1: That will be expected in a minute.
Speaker 4: that we expected in the business. Thank you, next question.
Speaker 2: Thank you. Our next question was from Corey Carpenter with James Morgan. Please go ahead.
Speaker 7: Thank you. One of the stupid Angie had two questions there. First, just hoping you could expand a bit on your expectations around revenue trends, maybe beyond one queue this year, but not long-term. And then on profit, you mentioned earlier that roofing has turned profitable to hopefully you could talk about where else you're expecting leverage to come from.
Speaker 7: in 2023 across the different segments. Thank you.
Speaker 7: 23 across the different segments. Thank you. Yeah, sure, Corey. Thank you.
Speaker 3: So we provided guidance of 370 to 400.
Speaker 3: in Q1, net revenue with services in net and the earnings deck.
Speaker 3: Midpoint, as we said, would be flat year over year. I think it's fair to assume.
Speaker 3: Similar trends for the for the rest of the year with services on a net basis, but that's with growth and ads and leads and then some declines and aggregate services revenue as we laugh having closed down a number of the complex money losing services in the as the year went on.
Speaker 3: So what that results in is we do expect gross profit to grow mid single digits across the overall Angie business this year, really due to even a total revenues flat and favorable mix between ads and leads and services. And as Joey said, we expect to return to consistent net revenue growth in 2024.
Speaker 3: and leads which is such a high gross margin business. But also a new reference this, you can see in the segment reporting that our new segment reporting the magnitude of the EBITI losses in both services and rupee in 22 for different reasons.
Speaker 3: that we've documented well throughout last year. We expect both of those to improve Joey reference and in the presentation, the continued contribution margin scale for a job in services. Thank you.
Speaker 3: that will will drive profitability and then also roofing we feel like we Optimize that business and and are executing on the post storm volumes and just have a good steady state as well So variety of factors will drive Growth and adjusted EBITDA and then also reduction in CAPEX will drive
Speaker 3: over to dot-meritists on two questions. First one just thoughts on the 23 revenue and ebit.tugetary. And then second question, could you discuss kind of the recent traffic trends across some of the key brands that think you highlight it in the letter and then kind of how traffic.
Speaker 3: I should trend as we get through through 2021 great. Thank you. Sure thanks John . I'll start and Joey jump in on up. I'll blend those two questions probably together as I answer. So obviously we're you know disappointed with the declines in the in the fourth quarter in digital revenue at dot-merited.
Speaker 3: as opposed to the trends in the summer and early fall. To get to revenue stability, which is our goal, we need stability both in traffic, aggregate traffic as well as ad pricing.
Speaker 3: Azure traffic volumes across the portfolio are still down circa 5 to 6% mainly driven by real weakness in a number of the historical dot bash sites that just had large booms during the pandemic and Omicron and that's the pdf the spruce others.
Speaker 3: We feel good about where the migrated narrative sites are as we detailed in the chart in the in the shareholder letter. As the year progresses, we expect traffic to get the stability at some point in you know, in flat at some point in the second quarter and then grow in the back end.
Speaker 3: That is due to continued momentum on the migrated narrative sites, easier comps as we as we move further past the pandemic and just general operational improvements.
Speaker 3: The ad market we describe right now is sort of stable weakness. If you go back to May, June last year, that's when the market first fell out of bed after Walmart earnings and Target earnings. It firmed up in the back to school area, but it really froze in November and December .
Speaker 3: on both the premium slash direct and the programmatic side. And there was really minimal spend through the end of the year. Since the beginning of the year, Mark is definitely firmer than it was at the end of 22. It's still below the high levels of spend last year.
Speaker 3: And we're dealing with some particularly difficult comps in Jan Feb last year in categories like health with the vaccines, finance, that was booming. So where we are right now is we say we're down, CPMs, we feel relatively good about our CPMs versus the market.
Speaker 3: We're down, but it's not second derivative negative in the same way it was at the end of 22. Our expectation is that, you know, the first quarter will remain weak, do both to add market weakness and tough comps.
Speaker 3: That will also strain our margins at Dot-Dash in the first quarter as it seasonally a low month, the lowest quarter of the year I should say for revenue. But you'll see signs also in the ad market of stability in the second half of the second quarter as we laugh a weaker market then.
Speaker 3: And then we'd look to be able to drive CPMs and improve our performance in the second half of the year.
Speaker 3: So overall, for the year, both traffic and revenues aim to get to flat at some point in the second quarter, see growth in the second half and drive to growth for the full year. Growth and profitability will come from a couple things.
Speaker 3: cost actions we've taken, including a reorganization that we have actioned recently.
Speaker 3: And then also just scale on high margin digital revenues. You know, we don't see the full profitability right now of our much tighter cost structure because digital revenues are depressed, but we should continue to see margin scale throughout the year. But again, Q1 will be we'll be soft during.
Speaker 8: one more on .-meritus and then a quick follow up on Angie. So just high level, we've seen all this explosion of new tools like chat, GPT, and generative AI coming out. And I'm just wondering how that might impact .-meritus on one hand. You could...
Speaker 8: potentially produce content much more efficiently in the future. On the other hand, SEO traffic might be negatively impacted. So just could you walk us through how you're thinking about that and overall impact down the road? And then on Angie, in one of those slides there was
Speaker 8: A stat about service provider retention being 25% or there about after a year one. So kind of surprised that's that low. This is kind of laid into the maturity of the Angie platform. So how can you improve that SB retention stat? That's right, pretty.
Speaker 8: How does that play into the Salesforce efficiency that you're talking about? Thanks a lot.
Speaker 4: Sure.
Speaker 3: Starting with AI, every new technology is a threat and an opportunity, and we certainly think about them in both ways. I think on the dot dash Meredith side, one of the things we're really happy with is in the context of generative AI and chat GPT.
Speaker 3: is that we did the combination with Meredith. And the reason I say that is because brands really matter, trust really matters, voice really matters. You can ask the bot questions and it's.
Speaker 3: amazing at answering those questions, but it doesn't have a voice, it doesn't have experience, and it doesn't have a brand that stands behind.
Speaker 3: those results. In fact, it sort of goes out of its way to not stand behind those results. And I think that's really important in areas like case making, which we're doing in a literal sense with food, but also in travel and home and things like that. Creating new tastes and creating new content around that is really important to have a brand and have a voice, which is what we have at that.
Speaker 3: It exists on the search engines and SEO, but generally they hold on to that traffic now. So something like greater than 50% of traffic doesn't leave Google anymore. And that's in those back base questions where Google can provide the answer or the chat bot can provide the answer. We've been dealing with that, preparing for that and are kind of...
Speaker 3: past that as it relates to the surgeon. The format of that may change on the surgeon itself, but we're not counting on that kind of traffic and haven't relied on that kind of traffic from the surgeon's for a long time.
Speaker 3: And you could argue in that context again that brand is even more important voice is even more important and that's why we have to lean into our differentiated content and our differentiated brand. We have to work with sending people to go.
Speaker 3: Be the hotel, sit in the hot tub, check out the view. And that's really important. We have people trying to pan cooking the recipe, tasting the results, seeing what happens when the pan gets too hot or too cold or whatever it is. And putting our brand behind that, and I do think that's really important in a differentiated world.
Speaker 3: There are opportunities there, which I mentioned that I do think on the cost side and some of the earlier stages of content development. This can help drive efficiency. I think that's true at both.dash Meredith and even at places like Angie where what these boxes have helped.
Speaker 3: do is allow individuals to be better at creating content. So take a service professional, for example, instead of having to hire an agency to build a profile and to have the right pictures and imagery and pros, you can use the chat box to help with that, or we can enable the chat box to help service professionals to do that.
Speaker 3: to build out their directory profiles. And I think things like that are really valuable uses of the content. Again, like with anything, the technology will evolve and will evolve with it. But we have it certainly front and center in our mind and we view real opportunities for innovation there.
Speaker 3: I'm your question. Oh no. Okay. The second question was year one retention.
Speaker 3: So I'm not as troubled by it because again it's a process to find the ones that work, but I do believe there's real opportunity to improve this. So like anything where most of the turn happens is in the first 30, 60, 90 days.
Speaker 3: And there are things we know we're doing in the first 30, 60, 90 days, the negatively impact retention that we are going to fix or change. Examples of that are pricing, for example. So pricing is not crystal clear sometimes in how or I should not fix pricing, it should take spend. That crystal clear how your spend will work out in the first 30, 60, 90 days.
Speaker 3: And we're doing things now to simplify that to make to spend much more predictable on a variable product. You can have variable spend and aggregate. And so we're making changes to make that more.
Speaker 3: clear to customers or prevent those experiences that lead people to overspend in turn. The other thing is efficiency. You mentioned efficiency on the sales side.
Speaker 3: It's bringing the right pros in so bringing in pros for whom the product is more likely to work You can do that by matching supply and demand better You can do that by matching pricing better. You can do that by matching expectations better Some folks come in with the wrong expectations and we got to make sure everyone comes in with the right expectations and putting in the The systems in place
Speaker 3: that are working there so we can try and get to that. And that's our big focus of ours and I do think a real opportunity for improvement.
Speaker 2: Thank you. Operated. Next question. Next question comes from Brian for Cheryl at Wells Fargo. Please go ahead.
Speaker 9: Thanks guys. From the shareholder letter, the decreased focus on service requests, sounds like you may be giving up some near-term revenue in exchange for those SEM SEO benefits. Anything you can tell us about the expected scale or timing, lag effects associated with that and maybe more broadly.
Speaker 3: any additional color on tweaks or changes to your SEM SEO strategy in general. Sure, look, I think you're right that we are open to making those trade-offs, not clear that that will be a trade-off, but if it is, we are open to it. When I say that, I mean, the directorates.
Speaker 3: I think our goal is to take those customers and start to build the relationship with them, bring them into the ecosystem as opposed to trying to get them to transact in that first moment of that first session. I view that as long-term positive to lifetime value and revenue retention. Whether it's a trade off or not on revenue, we don't really know that product will.
Speaker 3: launch or I should say we launch sometime this year and it also has a potential to increase traffic or even maybe meaning we increase traffic and if we do those things that that should balance out.
Speaker 3: There was another component to your question which oh FEO and FEM and the the thing around it so
Speaker 6: We've had since I got there.
Speaker 3: teams focused entirely on SEO and focused entirely on FEM. Sorry, many, much of that existed before I got there, but the level of focus and the level of resources there has expanded. And I'd say that given our focus on this area, where I think our focus was somewhat distracted previously.
Speaker 3: We are finding real results. So just as an example, we said to the SEM team and we have some great people working on SEM now. We said there's a bit of decline in a particular area. You're...
Speaker 3: you have to figure out what this decline is and there's no answer but figure it out. And as long as it takes whatever it takes to figure it out figure it out. We're low and behold there seemed to incredible work and found that the there was an area where we were losing conversion and there was a tracking pixel that was placed in somewhere that slowed down some of our pages that you pull that thing out and you see a saying out? Dean? Dean.
Speaker 3: It's not necessarily even the most fun stuff, although it is fun to get a win out of these things, that people are doing all day, every day. And it is basic work, but it is work that's getting done and yields real results. And again, I expect things like that, fundamental things like page feeding conversion to improve and show up.
Speaker 7: Joey, if you've kind of touched on a little bit just on an AMG, you talked about it more in the shareholder letter, but I guess maybe if we think about your narrow focus.
Speaker 7: I kind of touched on a little bit just on AMG. You talked about it more in the shareholder letter, but I guess maybe if we think about your narrow focus in services.
Speaker 7: Can you just talk a little bit more about differentiating that offering and kind of winning in that market place backed by sort of a new TV brand campaign if that's the way or there are other creative ways to win as you go through that more narrow focus and then on dot-ash You know Chris, I know that the diva does always a math equation is you like to point out we've had incremental head count reduction
Speaker 7: We've had incremental synergy since the acquisition, and we know Joey called out some more cost efficiency efforts. So I guess the real question is, from a longer term perspective, you did touch on this a little bit, but is there any change to your sort of longer tail expectations for where margins or revenue for that matter ultimately ends up?
Speaker 3: So I'll start and then I'll turn it to Chris, although I can quickly say no. The answer to the second question. The first question, yeah, it's a great question and. And there's a few important areas in winning in services.
Speaker 3: So even though we exposed the services business in a lot of areas post service request, the reality is that 80% of our customers are something like that never see the services product because it comes after the service request.
Speaker 3: And by the way, once the service request is complete, we ask another series of questions to drive the service in business.
Speaker 3: You can imagine us showing that much earlier in the process, not pushing the customers for whom it's relevant through the service request and sending them directly into a services experience and exposing that in the categories where we can deliver those less complex services, the low average order value services, we can expose that actually more often and get more people to see that product and use that product.
Speaker 3: The most important thing in that area is just getting people to try. Because again, once they try it, once they complete it, we know they're really happy, we know they come back more often, we know they use the mobile app, and the constraints on that is kind of how we're putting it and where we're putting it. The other area is making it clear to customers that all these opportunities exist for them.
Speaker 3: I think we've confused that a little bit. I think we've shown in terms of too many things at once or not enough things at once. And I apologize for this sounding a little bit muddled because I don't want to get into too much detail on the product. But we are...
Speaker 3: I think we've shown sort of too many things at once or not enough things at once and I apologize for this sounding a little bit muddled because I don't want to get into too much detail on the product, but we are we are
Speaker 3: capable of delivering the product that we know the homeowner wants, we just have to show them that clearly, show them that when they want it and not force the entire experience through one funnel and then
Speaker 3: on that more narrow set of customers deliver a somewhat of use experience.
Speaker 3: Okay, and yeah, Joey said it, but on dot-marray, nothing that we've experienced so far undermines our belief in both the long-term profit scale and the business in cash for generation. It obviously...
Speaker 3: doing 931 million of digital revenue in 22 disappointed us. Part of that was the integration. If we got it done faster, it was probably too optimistic. We could have driven our playbook and activities faster. The bigger share was just getting hit hard by the ad market.
Speaker 3: But as we grow revenue and particularly as we scale e-commerce and a lot of the high margin e-commerce integrations, which we're seeing being proven out by Neil and team. All of those combined with revenues will be highly accretive to profitability.
Speaker 4: and we feel as good about the long-term margins there as we have at any point. Awesome. Thanks, guys. Thank you.
Speaker 2: All right, I'll tell some. Sir, next question goes from UCS, quality with security. Please go ahead.
Speaker 10: We're, thank you. I have a question on that dash and maybe just a clarification on the engine. So on that dash, obviously, you know, a lot happened since the acquisition happened. And I guess as you look beyond 2023 at the
Speaker 10: the long-term growth potential of the business. Is it just fair to assume that that business overall, and I'm just talking about the digital side of it, not the print, should grow generally in tandem with digital advertising. Historically, you guys made the case that you should grow faster because of the content, because of the lack of exposure to things like I.D.F.A. etc.
Speaker 10: has that changed just kind of how should we think about growth beyond just 2023 for that business and maybe drivers there. And then the clarification is around just the recognition of revenues going from growth to net. Who is the merchant of record here?
Speaker 10: My understanding now is that you're still getting paid by the customer and turning and paying the service professional for some of these less complex services. Wouldn't that imply that you may need to do it on a gross basis? I'm just a little confused on that front if you can maybe clarify it. Thanks.
Speaker 3: I'll let Chris do the gross to that to say we are collecting the money from the homeowner and then we are paying the service professional but it is correct that it has to be recognized in that based on the way the terms and conditions work now and I'll let Chris do more on that but I'm...
Speaker 3: Dot-ash meritors and the long-term growth rate, we do expect the growth faster than the digital advertising market, and we should grow faster than the market. Again, right now, there's a lot of things going on with the integration and getting us to the right place. But...
Speaker 3: We are still, all of our content is clean content, meaning it's all created by us. It is safe content. It is not covering controversial topics. It is good, safe, clean places to put advertising dollars at scale. Number one.
Speaker 3: Number two, we don't need personally identifiable information. That is a good trend in our favor. We have intent on our content, and I think that that will make it a good place to spend $1. And the other one is that we have performance on our content. And that's when we literally, when people are...
Speaker 3: are clicking through and making a purchase from our site to where people are doing research on our site and purchasing later, but they're researching things that they are considering, where they are considering making a purchase. And I do think that with that focus, with that intent, with that trend of not meeting the PII, I think we're in the right place in this market to.
Speaker 3: to be taking care over time. Yeah, you said from the terms of conditions and revenue recognition.
Speaker 3: We viewed this as we've been looking at align terms and conditions across our various business lines with Angie for a while and we viewed this.
Speaker 4: resetting, moving away from complex money losing services and really driving behind simpler higher volume services as an opportunity to reset a number of things. In aligning the T's and C's between ads and leads and services.
Speaker 4: The accounting literature is clear that we are not a principal. We are providing the connection and a number of the
Speaker 4: customers and pros have, you know, renegotiated a rejiggered services over time based on expanded scope or when they're there. So just formalizing that element. But it is, you know, clear that under the literature where we were not a principal, it should be recognized as a net basis.
Speaker 10: That's going to be true of Andy. Yes, yes, correct. Great.
Speaker 10: Yes, yes, correct. Great. Thank you both.
Speaker 2: And thank you operator one last question. And our last question today comes from champion Piper Sandler.
Speaker 9: Hey, good morning. Joey, appreciate all the detail around Angie and you digging in there. It sounds like you intend to run the business indefinitely. Just curious if you could update us on your thoughts there. Also, the letter includes some interesting comments around M&A. I'm wondering if you could just.
Speaker 9: So, flush that out a little bit. Any thoughts there would be much appreciated.
Speaker 3: Sure, two good ones to end on. We are not actively searching for a CEO at Angie right now, but that doesn't mean I plan to be in the job forever. I think we want to get to a good, stable, growing place. And when we have that, we can find the right leader for the business, whether internally or in ins
Speaker 3: working and I'm enjoying the work. I'm doing it and I think we're making great progress and so I'll continue to do it as long as is necessary but that certainly is not forever. And that's a good segue to your second question which is I'm still spending real time on M&A whether for Angie or for I.C. Generally and I think.
Speaker 3: certainly much more weighted towards IAC generally. And we are continuing to look for opportunities. There is a
Speaker 3: We are not in a rush. We said that last time. We're saying that again. I think we're in this current pricing period for a while. I don't think the market's going to run away from us on price. And I do think that there are things that...
Speaker 3: are starting to be priced attractively for us. The issue now isn't so much that the price exists out there, it's that the people's willingness to transact. And I think willingness to transact becomes much more pronounced as the stock.
higher market fades further into the rearview mirror. There has been a lot of volatility in the market lately of things going up and down very quickly, but that also I think generally favors people transacting because they know they start to realize.
things can come and go relatively quickly and it's not the mindset that set in over the last 10 years, which is everything only eventually goes up. I think that there's an adjustment that's happened. I think more time passes, more stuff in the rearview mirror.
more ability to transact and we're patiently looking at things and and there are real opportunities that hopefully we'll have a chance to transact.
to transact and we're patiently looking at things and there are real opportunities that hopefully we'll have a chance to transact. Great. Thank you.
I think that does it. Happy Valentine's Day everybody. Thanks for spending your morning with us. And we'll see you next quarter. This includes conference call. We thank you all for coming into this presentation.
I think that does it. Happy Valentine's Day, everybody. Thanks for spending your morning with us and we'll see you next quarter. Thanks everyone. Thank you. This is Liz from First Call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Goodbye.