Q4 2022 Angi Inc and IAC Inc Joint Earnings Call
Speaker 1: Pro that to.
Speaker 2: Welcome to the IAC and Angie Welcome to the IAC and Angie
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Speaker 2: I would now like to turn the conference over to Christopher Halpin, Executive Vice President, CFO and COO of IAC. Please go ahead. Please turn the conference over to Christopher Halpin, Executive Vice President, CFO and COO of IAC.
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 Insection of IAC's website. We will not be reading the shareholder letter on this call.
Speaker 3: 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. I will shortly turn the call over to Joey to make a few brief introductory remarks and then walk through that Angie earnings 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 four 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 FCC.
Speaker 3: We'll also discuss certain non-GAAP measures, which as a reminder include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our releases, the IAC shareholder letter, the Angie deck, and again,
Speaker 3: 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. I'll turn it over to Joey who will walk through the Angie RangTech.
Speaker 3: Thank you, Chris, and also congratulations, Chris, on the new responsibility. Hopefully everyone saw Chris, I had the new responsibility of P-Bop rating officers, P-Canantel officer, and he's been a incredible addition to the team since he's been here, and we're excited about the new responsibilities.
Speaker 3: 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 a sense of.
Speaker 3: how things are going there and where the focus is since I moved over to Angie a few more added, I should say Angie a few months ago, to my responsibility. So I'm gonna start with page three here. Pass the title page and pass the State Harvard statement where on page three, which is, I think the most important slide we have.
Speaker 3: What you see here is
Speaker 3: you see here is the importance of
Speaker 3: This gets to our history, how we got here, and what we offer our customers. And our customers are both the consumers and the service professionals. We've been in this business now over 20 years, starting with Angie's List, which was a directory which gave you the end result as a whole.
Speaker 3: consumer all the information of 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: and that's the historical handy product now also available in ANG where they can get fully paid for fully scope jobs. We schedule it, we book it, they just show up and get the job done.
Speaker 3: No one else offers 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 skill.
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 pro who's likely to be able to get the job done and I mean for a pro to find homeowners who can fill their book of business. That liquidity is essential to engagement on the platform and that the sale of revenue is evidence of that.
Speaker 3: It's also really important for innovation to have this much revenue allows us and this much scale with with homeowners and service professionals allows us to innovate and experiment with new products you saw through a lot of that in 2022. Not all that experimentation works, not all that innovation works.
Speaker 3: but we are constantly innovating here and having such a large area for innovation is also a real asset. 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. You can see here ads and leads is vast majority of the revenue and more than all of the profits.
Speaker 3: That's a great business with great potential, which we'll get into. And the second piece is to focus on services. This while shown here on a net basis, which is comparable to the ads and leads 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.
Speaker 3: customer experience.
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 pass on a variable basis, meaning with no commitment per lead in some pass on a fixed basis with an annual commitment. And again, each of those products works 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: corporate is our overhead that will be an expense area for the indefinite future. Not quite as much as you spent in 2022, but there is corporate overhead to that this business. And international also, I don't want me briefly to say that that continues to provide real option value for us. It's sort of too small to matter today, but we do have a leader.
Speaker 3: the leads is 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 a marketing efficiency. We laughed that. We got back to growth.
Speaker 3: over the course of 2022 and expect to be able to continue to grow. There was also a big impact in that business in the pandemic where we had a significant demand plot and if you're selling at the least, meaning you're...
Speaker 3: offering to help your offering to help service professionals find new customers 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.
Speaker 3: telling you advertising is not the best place to be. But we're now also past that, the supply demand has come more into balance.
Speaker 3: And again, you can see that through the revenue. On the profit, on the right side of the page, it was just that EBITDA, we're digging our way out from the clients in pre-traffic. And you can see that growth trajectory in profit on this business looks very nice. And again, we expect that to continue as we drive marketing and other efficiencies through this business. And again, we expect that to continue as we drive marketing and other efficiencies through this business.
Speaker 3: which into services, which is now page seven, 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.
Speaker 3: And so that, and we also grew 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. 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 we've had trouble generating profit in. And it's hard to touch a lot of consumers.
Speaker 3: 2023.
Speaker 3: 2-4 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.
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. And with the services that we are now focused on and the categories we are now focused on.
Speaker 3: versus we know we can deliver them in, in, in aggregate. And.
Speaker 3: 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 next 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, the contribution margin will come up.
Speaker 3: 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. 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 back back and we tried to frame the size of that.
Speaker 3: on SEO, we could go 75% from here. If we get back to our pre-rebrand levels of SEO presence, may not be able to get all that back. Maybe able to get more than all that back, but just in framing it, that's a big upside. In FEM profit, we can close to double from here. If we get back to where we were.
Speaker 3: I do believe that one's more in our grasp to accomplish and is just executing on some fundamentals which we'll get into.
Speaker 3: 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 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'd dug in deeper and angi 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 a 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 weeks to one year milestone, 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: funnel through the one year, yes of course, but I think that we can grow that business by growing the service professionals for whom the product we know works.
Speaker 3: Now we're going to page 10. We still have real opportunities for efficiency throughout the organization.
Speaker 3: And that's going to impact some 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 headcounts in our sale. So headcounting Q4 was down 21% year on year.
Speaker 3: back going to impact some of our key metrics, or 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 headcounts in our sales. So headcounting Q4 was down 21% year on year. So headcounting Q4 was down 21% year on year.
Speaker 3: If you look at the chart below that, Transacking SPs with down 12% year over year. So while we are declining Transacking 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. So 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 per transaction, which is up in the information you'll deliver before you hire a criminal ?????en.
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 went high to 45%. That was the year we did the rebrand, which means we got the least efficiency out of our ads.
Speaker 3: in sales and just in advertising where we think we have offered to meet proficiency. 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 down meaningfully over the course of the second half of 2022 and you'll see real savings on the cost side in over the course of 2023.
Speaker 3: And that brings us to page 12, which is our outlook from here, which maybe I'll take a breath and turn to Chris and then jump back in. Thanks, Joey. As you will see 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 for oil and cap ex or cap ex guidance for 2023 is 40 to 60 million, which again is pretty much down 50 percent 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 to help you in forecasting the business. We wanted to get first quarter guidance on revenue.
Speaker 3: of 300 and 70 to 400 million. That, at the midpoint of that range, the services net, that is basically flat year over year. We would point you to the grids and metrics section of our earnings release, wherein you'll see good performance data that lays out.
Speaker 3: 2021 and 22 quarterly revenues and financials for Angie on a net revenue basis. If services had been presented, book net historically. With that, I will turn it back to Jody.
Speaker 3: 2021 and 22 quarterly revenues and financials for Angie on a net revenue basis. If services had been presented, book net historically. With that, I will turn it back to Joey. Thank you. Let's go right questions.
Speaker 2: Operator, operator, sorry, let's go to the queue. Yes sir, we will now begin the question and answer session.
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Speaker 2: Today's first question comes from Jason Hostney with Oppenheimer.
Speaker 4: Thanks, 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 sequel better than the original. So, I'm not sure what the sequel is now in Angie, kind of reboot number three, maybe four. More.
Speaker 4: 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 3: revenue and margin opportunity of the new, of the rebooted Angie. Thanks. 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...
Speaker 3: the same that it's been and has been the same for quite some time. Some people say the US mark is 400 billion or 600 billion but let's just stick with 400 billion as the home services market and that includes the the simple services and all the way to the more complex services.
Speaker 3: 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 product. 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 the homeowner comes to our platform.
Speaker 3: 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 more complex services and we're paid on that on either on a lead 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% are spent on marketing, call that 40 billion to 80 billion. That's still the area that we're playing in. It's just booked now as 40 to 80 billion instead of the.
Speaker 3: It's the smaller, less complex jobs.
Speaker 3: in terms of reboot and
Speaker 3: We're going with Angio Raw. There is no question 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 lessons and 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 we'll say it to Ambulin 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 SEO, SEM, 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 4: Okay, and just a quick follow-up. I mean, you're not going to, 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,
Speaker 4: At the end of the day, you know, there's a diminishment, right? Because the service provider has to compete 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?
Speaker 3: we just have to think about kind of a lower conversion rate of that 10 to 20% of advertising, you know, overtime. No, it's not that. It's 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.
Speaker 3: and we'll give you all the leads for free or even better we'll pay you to take the leads to make sure the customers get a better experience. 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. Now we have to do that in an economically feasible way and doing that in the complex.
Speaker 3: 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. And yes, that does lead to more take-rate in that example, but really what's driving that is having a compelling customer experience, which I think we can deliver. Long-term revenue, you know, the margins. Oh, okay. On.
Speaker 3: just the long-term revenue growth in margins. 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 talk about costumes and efficiency 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
Speaker 5: That will be expected in the next question. Thank you.
Speaker 2: Thank you. Our next question was from Corey Carpenter with Jackie Morgan. Please go ahead.
Speaker 6: Thank you. One of the snippets 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 in 2023 across the different segments. Thank you.
Speaker 3: Yes, your Cory. Thank you. So we provide a guidance of 370 to 400 in Q1 net revenue with services in net and the earnings deck. Midpoint as we said would be flat year over year. I think it's fair to assume.
Speaker 3: Similar trends for the rest of the year with services on a net basis, but that's with growth in ads and leads and then some declines in aggregate services revenue as we lap, 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: On the EBITDA side, we do anticipate
Speaker 3: continued scale and margins and growth and profitability. Part of that is driven by cost savings and marketing efficiencies. And really, the fixed cost leverage that exists in ads and leads which is such a high gross margin business. But also, and you referenced this, you can see in the segment reporting.
Speaker 3: that our new segment reporting, the magnitude of the EBITDA losses in both services and roofing in 22 for different reasons that we documented well throughout last year. We expect both of those to improve Joey reference. In the presentation, the...
Speaker 3: the continued contribution margin scale per job in services that will drive profitability and then also roofing. We feel like we've optimized that business and are executing on the post storm volumes and just have a good steady state as well.
Speaker 3: Variety of factors will drive growth and adjusted EBITDA and then also reduction in CAPEX will drive free cash flow.
Speaker 3: of factors will drive growth and adjusted EBITDA and then also reduction in cap-X will drive free cash flow. I think that covers it well.
Speaker 2: Thank you. The next question sir. The next question today comes from on blocklets with COM. Please go ahead.
Speaker 3: Well, great. Thanks. Maybe pivoting over to dot-dash Meredith. Some two questions. First one just thoughts on the 23 revenue in EBITDAW trajectory. And then second question, could you discuss kind of the recent traffic trends across some of the key brands that think you highlighted in the letter and then kind of how traffic?
Speaker 3: should trend as we get through 2023. 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 disappointed with the declines in the fourth quarter in digital revenue at Dot Dash Meredith. I would say in the,
Speaker 3: in the later portions of the quarter, particularly December , it is very exogenous of broader market. We feel good about where we are through the integration and that our platform is executing well as opposed to the trends in the summer and early fall.
Speaker 3: To get to revenue stability, which is our goal, we need stability both in traffic, aggregate traffic as well as ad pricing. Agregate traffic volumes across the portfolio are still down circa 5% to 6%, mainly driven by real weakness in a number of the historical dot dash sites that just had large booms during the pandemic in Omicron, and that's the Pedia, 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. That is due to continued momentum on the migrated narrative sites.
Speaker 3: easier comps 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 bad 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, you know, at the end of 22, let's go below the high levels of spend last year.
Speaker 3: And we're dealing with some particularly difficult comps in Jan Feb last year and 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. But we're down, but it's not second derivative negative in the same way it was at the end of 22.
Speaker 3: 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. 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, you know, for the year, we both traffic and revenues aimed to get to flat at some point in the second quarter. She growth in the second half and. And.
Speaker 3: drive to growth for the full year. Growth and profitability will come from a couple things. Cost actions we've taken including a reorganization that 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, will be soft during by the market.
Speaker 7: and a quick follow-up on Angie. So just high level, we've seen all this explosion of new tools like ChatGPT and generative AI coming out. And I'm just wondering how that might impact.dash merideth. On one hand, you could potentially produce content much more efficiently in the future on the other hand.
Speaker 7: 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 a stat about service provider retention being 25% or thereabouts.
Speaker 7: after 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 as pure attention stat? And how does that play into the Salesforce efficiency that you're talking about? Thanks a lot. Sure. So.
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-tash meridus side, one of the things we're really happy with is in the context of...
Speaker 3: generative AI and chat GPT 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, which 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 DotDash Meredith.
Speaker 3: There's a big difference if you want to draw the line between commodity content and differentiated content And I think that commodity content which I'll call you know kind of fact-based content has been threatened or or significantly removed but from the search engine
Speaker 3: for a long time. It exists on the search engines and SEO, but generally they hold onto that traffic now. So something like greater than 50% of traffic doesn't leave Google anymore. And that's in those fact-based questions where Google can provide the answer or the chatbot 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 branch. We have to work, we're sending people to go.
Speaker 3: We, though, tell, 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
Speaker 3: There are opportunities there, which I mentioned that I do think on the cost side, on some of the earlier stages of content development, this can help drive efficiency. I think that's true at both Dot Dash Meredith and even at places like ANSI where the kind of
Speaker 3: What these thoughts have helped do is allow individuals to be better at creating content. So, like, 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 prose, you can use the chatbot to help with that, or we can enable the chatbot to help service professionals to do that.
Speaker 3: to go about 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: profile 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. I'm your question.
Speaker 3: The second question was year one retention.
Speaker 3: 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, 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 versus.
Speaker 3: 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. 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.
Speaker 3: 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 systems in place to do that is important to us and something that we're focused on.
Speaker 3: So I do see real opportunity for improvement in some parts of the business, some certain products. We see that number much higher than 25 percent. So it's more like 35 percent and we know what the things are that are working there so we can try and get to that. And that's our big focus of ours and I do think that we all opportunity for improvement.
Speaker 2: Thank you. Operator, next question? The next question comes from Brian Fitzgerald at Wells Fargo. Please go ahead.
Speaker 8: Thanks, guys. From the show role letter, the decreased focus on service request 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 will make or we are open to making those trade-offs. It's 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 directory experience.
Speaker 3: I think what we want is to be able to service the customers throughout their entire journey. And some customers are not ready to transact the moment they come to Angie. They're just looking to do research and the director your elements of the directorie can help with that. I think our goal is to take those customers and start to build the relationship with them. And bring them in.
Speaker 3: So that product will launch, or I could say, re-launch sometime this year. And it also has a potential to increase traffic, or even maybe meaningfully increase traffic. And if we do those things, that should balance out.
Speaker 3: launch or I should say relaunch sometime this year. And it also has the 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 We've had since I got there
Speaker 3: teams focused entirely on SEO and focused entirely on SEM. 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 SEO.
Speaker 3: there's a been a decline in a particular area, you're, 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. Well, lo and behold, this team did incredible work and found that the there was an area where we were losing conversion and there was a
Speaker 3: track and pixel that was placed in somewhere that slowed down some of our pages that you pull that thing out You see a massive increasing conversion Those are the things that we're just digging in and finding and will yield results that I can give
Speaker 3: I will hopefully be able to give dozens of other examples of that over the course of the year. And that's the sort of incremental work. It's not the sexy work. 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.
Speaker 3: 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 over the course of the year in SEO and SEO.
Speaker 2: Thanks Joey, appreciate it.
Speaker 9: Thanks, good morning. Joey, you kind of touched on it a little bit just on E&G. You talked about it more in the shareholder letter, but I guess maybe if we think about your narrow focus. Code Phones, and lemonade candy.
Speaker 9: Good morning. Joey, you kind of touched on a little bit just on AMG. You talked about it more in the Shareholder's letter, but I guess maybe if we think about your narrow focus in services.
Speaker 9: Can you just talk a little bit more about differentiating that offering and kind of winning in that market place backed by sort of the new TV brand campaign if that's the way or there 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 evas as always a math equation is you like to point
Speaker 9: Any teams to your sort of longer-tailed expectations for where margins or revenue for that matter ultimately ends up?
Speaker 3: I'll start and then I'll turn it to Chris although.
Speaker 3: I can quickly say no. And answer to the second question. The first question, yeah, it's a great question.
Speaker 3: There's a few important areas in winning in services. Obviously everything starts with having a delightful, intuitive customer experience. One of the things that's happening in services right now is again, because we have this orientation around the service request, we put all our customers through the service request and then they see our experiences after.
Speaker 3: And, by the way, once the service request is complete, we ask another series of questions to drive the services 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.
Speaker 3: The other area is making it clear to customers that all these opportunities exist for them. I think we've confused that a little bit. 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.
Speaker 3: that all these opportunities exist for them. I think we've confused that a little bit. 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: People 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 and then on that more narrow set of customers deliver a a
Speaker 3: somewhat confused experience. Okay, and yeah, Joey said it, but on Dot Dash Meredith, nothing that we've experienced so far undermines our belief in both the long-term profit scale in the business and cashflow generation. 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. But as we grow revenue and
Speaker 3: particularly as we scale e-commerce and a lot of the high margin e-commerce integrations, which we're seeing being proven out by NEL and team, all of those combined with these revenues will be highly accretive to profitability.
Speaker 3: and we feel as good about the long-term margins there as we have at any point. Awesome, thanks Dave. Operator, our next question comes from Yousaf Squali with True Security. Please go ahead. Great, thank you. I have a question on that dash and maybe just a clarification.
Speaker 3: 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, 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, my depressed.
Speaker 6: 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 a lack of exposure to things like IDFA, et cetera. Has that changed? Just how should we think about growth beyond just 2023?
Speaker 3: 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? Because my understanding now is that you're still still.
Speaker 3: 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 the gross basis? I'm just a little confused on that phone 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 the it is correct that it has to be recognized in that based on the way the terms and conditions was down. I'll let Chris do more on that but on
Speaker 3: 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.
Speaker 3: So, dot-mariters and the long-term growth rate, we do expect to grow 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. We are still...
Speaker 3: 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. Number two, we don't need personally identifiable information. That is a good trend in our favor. We have intent on our content.
Speaker 3: research on our site and purchasing later, but there's 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 needing the PII, I think we're in the right place in this market to be taking share over time.
Speaker 3: Yeah, you said from the terms and conditions and revenue recognition. We viewed this as we've been looking to align terms and conditions across our various business lines with Angie for a while and reviewed this.
Speaker 3: resetting, moving away from complex money losing services and they're driving behind simpler higher volume services as an opportunity to reset a number of things in aligning the the agencies between ads and leads and services.
Speaker 3: The accounting literature is clear that we are not a principal. We're providing the connection and a number of the...
Speaker 3: customers and pros have renegotiated or rejiggered services over time based on expanded scope or when they're there. So just formalizing that element. But it is clear that under the literature where we are not a principal, it should be clear all employees and also our customers.
Speaker 5: recognize them in that basis. That's going to be true of Andy. Yes, yes, great.
Speaker 5: That's going to be true.
Speaker 3: And thank you operator one last question.
Speaker 2: it so be homogeneous. Thank you. I was saved.
Speaker 8: Hey, good morning. Joey, I 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 flush that out a little bit. Any thoughts there would be much appreciated. Thank you.
Speaker 3: Sure to civblland and on.
Speaker 3: 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 St. Paul and
Speaker 3: find the right leader for the business, whether internally or externally. We've made some important hires there.
Speaker 3: We'll continue to make some important hires which gets a lot more leverage out of me into the business And and as you know said earlier Chris and others stepping up a corporate to cover other things so right now that is working And I'm enjoying the work. I'm doing it Andy, and I think we're making great progress and so I'll continue to make some progress
Speaker 3: And we are continuing to look for opportunities. There is, we are not in a rush. You said that last time we're saying that again. I think we're in this current pricing period for awhile. I don't think the market's gonna run away from us on price. And I do think that there are things that.
Speaker 3: are starting to be priced attractive in for us. The issue now isn't so much that the pricing is out there, it's the people's willingness to transact. And I think willingness to transact becomes much more pronounced as the...
Speaker 3: 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 that you start to realize things can come and go relatively quickly. And it's not the mindset that's set in over the last 10 years, which is everything only eventually goes.
Speaker 3: 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. Thanks, everyone.
Speaker 2: Thank you. This includes its conference call. We thank you all for attending today's presentation.
Speaker 10: You may now do some extra lines and have a wonderful day. Goodbye.