Q1 2023 IAC/InterActiveCorp Earnings Call
Yearly earnings releases.
<unk> has also published its quarterly shareholder letter, which is currently available on the Investor Relations section of <unk> website, we will not be reading the shareholder letter on this call.
I will shortly turn the call over to Joey to make a few brief introductory remarks, we will then open it up to Q&A.
Before we get to that I'd like to remind you that during this presentation, we may discuss our outlook and future performance. These forward looking statements typically may be preceded by words, such as we expect we believe we anticipate or similar statements. These forward looking views are subject to risks and uncertainties and our actual results could differ.
Materially from the views expressed today some of these risks have been set forth in IAC and angi <unk> first quarter releases and our respective filings with the SEC.
We will also discuss certain non-GAAP measures, which as a reminder include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call.
I'll also refer you to our releases the IAC shareholder letter and again to the Investor Relations section of our respective websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures now, let's jump right into it Joey.
Thank you, Chris and welcome everybody. Thanks for joining us this morning.
Feels good to be playing a bit of offense again here.
I think we <unk>.
We turned a corner on earnings I think.
The back to basic theme is working here.
We have really focused internally for.
The last quarter or several quarters, and I think that furnace show up in our numbers and that's allowed us to focus on allocating capital again too.
We put a lot of capital to work this quarter.
And really all of it focused internally on the things, we know really well I think that's consistent with our back to basics theme and consistent with what we're seeing in our business.
Which is.
We're getting things working we're getting things working in terms of profitability.
We're getting things working in terms of customer experience.
And we're getting things working in terms of preparing for the future and I'm starting to win competitively and that that feels really good to be on that team. I know there is there is a lot of things. We did this quarter that people are interested to hear about so lets get to questions quickly.
Thanks, operator.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from.
Ross Sandler from Barclays. Please go ahead.
Hey, guys.
Good.
Two questions first on the buyback and then second on Dr. Meredith.
So on the buyback I think to everybody on the call I was curious as to the why now.
We see the math on the core stuff being negative and obviously <unk> and DBM are turning the corner here in the first quarter first half. So just could you walk us through the thinking on on what goes into that decision.
And what we should expect going forward.
Then on Dr. Meredith.
Looks like the progression here is happening according to plan with the January negative 'twenty going to like June positive.
Any surprises or anything you would flag in terms of areas of weakness or strength within.
That business, Thanks, a lot.
Sure Ross.
I appreciate the question on share buybacks.
I think you've answered it a little bit in the question. It is the things that you said one is it.
<unk>.
Negative implied value and we think Thats a.
Compelling investment thesis.
Two is the state of the businesses. So we feel more comfortable buying back shares when we're generating cash and when we're growing earnings those are important milestone for us.
And it is the.
The overall environment that we're in and kind of how we feel as a business, but we are.
When we look at what we have in aggregate.
That.
Is a compelling combination of things for us as far as where it goes from here.
Never really Cantered would answer that question.
I will say the usual, which is we consider it regularly we will continue to consider it regularly and when we see opportunities.
Will.
We'll prioritize share repurchases.
Over other things and we will.
The bar for something other than a share repurchase as a very high bar right now.
But we are with our capital we're always looking at lots of things and we'll continue to look at lots of things in and when we see opportunities we will seize them.
But right now that opportunity in the first quarter I think was very compelling and.
And we see that there and it was more compelling than it has been in a very long time.
Yes, Thanks, Ross and then on the Dr. Meredith.
Sure.
As a reminder.
Dot best Playbook that we're running on Meredith is about bringing the sites over speeding them up cutting out.
The old.
Old content as well as add clutter and driving traffic and performance as we highlighted in the shareholder letter.
Broadly across the key Meredith titles, we feel we feel very good.
A lot of green on the page and we are now 7% to 12 months into migration.
And we're seeing that not only.
On an absolute basis, but also.
Strength in similar categories between Meredith titles versus dot that titles that would be similar state.
That would be steady state.
We get the questions so I'll take them head on.
People is yellow that is nothing about the migration that's purely because last April may there was the Oscar slap as well as the Johnny Depp trial.
Traffic has been tougher there recently, but we had an excellent first quarter and once we lap.
The Johnny Depp verdict, we expect to return to strong growth there so very good about that property.
In style has been challenged.
We bought it but we feel good about the game plan there.
And really getting rid of a lot of low calorie impressions parents were working on we have a game plan there and shape is very small the rest are very strong that's on traffic. The other key part of the thesis is performance marketing and ecommerce and that continues to be excellent.
The whole thesis of taking the Dod dash.
E Commerce and performance marketing.
<unk> to the narrative sites and driving them through the Meredith brands is playing out very well, we highlighted we were up in performance marketing.
Across the board in March for the first time in a while.
And we just expect to continue to move from strength to strength across the portfolio. So so feel good there.
Operator next question.
Next question comes from Cory Carpenter from J P. Morgan. Please go ahead.
Hi, Thanks for the questions I had two on angi.
Joey could you just talk about where youre seeing the greater efficiencies that led you to raise the guide and how much more room, you can still have on the cost side.
On revenue the letter talked a lot about focus on quality and sort of cleaning up the platform. How long do you expect it to take to work through this and does it change your expectations at all for growth. This year I think previously you talked about kind of flattish growth was nicely. Thank you.
Yes.
Sure.
On.
On profit.
And on the cost side I don't expect we're cutting for their cost from here I think we did a lot on that and I think that that's worked very well not just in terms of generating more profit, but in terms of.
Operating more efficiently I think.
Fewer people were actually getting more done faster and that's good. So I think we're in a good place there.
<unk> talked about areas, where we will start to reinvest.
Like marketing in particular, TV marketing on the cost side.
But that that has gone very well and we're pleased with where we are there.
The.
<unk>.
Quality things that we're doing are going to play out over the course of this year and probably to think about where we will continue to invest really is more on the revenue side.
So what I mean, when I say invest on the revenue side is get out of certain revenue that we're doing.
I alluded to some of these things in the letter get out of certain revenue that we're generating that I don't think is long term good for our ecosystem.
I think that leads to probably.
A little declines over the course of 2023 and revenue.
Chris take you through the numbers, there, but I think we will.
Invest more of the revenue or reinvest more of the revenue and the customer experience.
Things like sending fewer emails.
Moving away from certain marketing channels.
Doing less of certain kinds of sales or allowing service professionals to buy fewer products. So that they can retain longer and have a better experience and generate a better ROI on our platform. Those we have a lot of those changes happening throughout the organization that we've put in place over there.
Course of Q4, and Q1 and that will continue to come into place over the rest of the year.
And I view that all of that investment happening really over the course of 2023 to grow in 2024.
The the.
Most of the cost cuts we did.
On sales are also complete that also and we've changed our offer mix and so that also has an impact on what we do on revenue, but again driving more.
Retention and pros to spend more over their lifetime with us when we get the benefit of that in 2024, but that.
Hurt us over the course of 2023.
Sure and thanks Corey.
In terms of outlook on revenue and profitability.
What we're expecting is that.
Aggregate revenue across across all service lines on a net basis so treating.
Looking at 2022 as if services is booked net for the full year, we expect.
Revenue to be down 5% to 10%.
Each quarter for the remainder of 'twenty three.
That that.
The decline will be most pronounced in Q2.
As we had a number of.
Lower.
Sort of a spike in lower value revenues during that period last year and stripping that are that push towards quality and then we would expect revenue in Q3 and Q4 to be at the.
Down less than that 5% to 10% range.
On a year over year basis.
On a profitability perspective.
We expect Q2 on an adjusted EBITDA basis to.
To be similar to Q1 in terms of whole dollars.
We tend to spend more marketing in Q2 on things like TV. So margins are a little lower even though seasonally.
Revenue was higher in Q2, and Q3, we expect a little bit of lower margins on.
Media marketing spend.
And then we expect margins to be solid in Q3 and Q4.
And drive profitability and free cash flow there so.
As we're getting rid of a lot of these lower quality revenues.
Expect declining revenues in the second half of the year or the last two quarters of the year and really setting us up for growth in 'twenty four but we can still.
Have good performance on margins despite the revenue headwinds.
Yes, the only thing I'd add further to that as well.
The way, we're talking about it internally.
Folks on the <unk> team as I've said to everybody.
I want to turn off revenue that is not going to be good for our customer experience.
Long term customer relationships, we are building lifelong customers, let's build the life loan customers and make that healthy we've got room on profit to do that and.
Want to prioritize the customer experience over revenue right now.
And we've got plenty of profit in there too.
Work with and that's been our priority and that'll be our priority over the course of 'twenty three to.
Go and grow from there, but I think it's a.
I view it as a very healthy thing and I view, it as being a very healthy place us as a business with those decisions.
Thank you operator next question next question comes from Brian Fitzgerald from Wells Fargo. Please go ahead.
Thanks, Joey Thanks for your thoughts on AI and the letter we wanted to ask if you could highlight some of the key opportunities you see for the use of AI in your businesses and if you could share any thoughts on how you can differentiate and also defend your content and IP from generative AI competitors. That's the first one and then second one was just on Dot Dash Merit.
Just on the new intent driven curriculum product are you looking to drive monetization lift on your general interest sites using insights gained elsewhere within the network or is there an audience extension opportunity across the internet as well thanks.
Yeah I'll.
I'll do the dot to Ashwin personally I'll come to the island.
We're not so focused on audience extension there we're focused on.
Moving.
Showing intent in the product that we had it has the key features that advertisers are looking for today, which is anonymity or you don't need <unk>.
You don't need cookies, and you have one of the hardest things to come across which is intent while not having those other two things and the fact that we can deliver that we're branding nap or organizing around that I think is very helpful towards sales.
But but the focus on that is internally. Obviously there is there are opportunities for audience expansion and there are components, where that can happen, but I think that we have a lot of inventory that we can tell across our sites and thats going to be the priority and focus of that today.
Not to say that those things arent.
Possible.
And that comes out I think in the next few weeks and so that'll be that'll be exciting and we'll see how that goes.
In terms of.
Using AI and the business is there is a bunch of places, where we're using probably where it's happening fastest.
Right and most robustly right now is in code.
Meaning people, writing code and using pieces of code that they can get through these systems are helping them write code basket.
If you talk to pretty much any developer in any company. They are using it and they're getting real value from that really quickly with fleets do efficiencies there.
There are other areas like customer support.
We have ideas or we're experimenting but they haven't quite gone live with those things yet.
And then just.
Organizing processes around content creation, we're certainly not having the.
AI radar content, but you can start to organize an outline things and figure out how to prioritize things or use AI to learn.
What kind of content works, what kind of content works better than other content and analyze data.
It's a data analysis project at significant scale.
And thats working starting to work for us.
When I think about I alluded to this in the letter the marketplace business is.
This is is I think.
Maybe one of the most exciting things, although we have nothing lives here yet.
But one of the most exciting things is to use these models to learn are.
Proprietary supply database.
And <unk>.
<unk> from our demand the demand is coming in and figure out how to make better matches.
Anytime you can figure out how to make better matches that has significant yield for the business and.
Making betterment matches as a data analysis problem.
And these models are built for big scale data analysis, and I think that that will be it could be very valuable.
Other thing that I alluded to in the letter I think is really important.
Take Andrew for example, we have.
What we call a service request path.
On the service request path for Angi people come in.
My question is it then we asked them what kind of job. It is and we have seen some details about that job and that is a multi step process. It is hard to get a user anywhere through a multi step process.
The chat.
<unk> are doing right now is theyre, creating this natural conversational UI, where users are getting comfortable with those thing which is like a gift from heaven for us to be able to get people to use that UI more comfortably and to have that be smarter and more interactive. So we've actually built one already at angi <unk>.
Live yet, but we've built that.
We're putting more work into building that to get something really exciting there and that'll be fun, but using that conversational UI to get better data from the homeowner on what they need done.
And then therefore match them better on the service professional side and you can make the same thing on the carrier side and on the.
Vivien and at Taro.
That same thing works and I think that that's that that could be that could be a lot of fun and really impactful for the business.
Awesome, Thanks, Joe I appreciate it.
My pleasure. Thank you. Thank you operator next question next question comes from John Blackledge from Cowen. Please go ahead.
Great. Thank you on PD on any way to frame the DBM EBITDA margin trajectory.
Trajectory in the second quarter, and then into the second half and could you clarify the lease impairment charge in <unk> and then just also on the land purchase.
Kind of the rationale there thank you.
Sure. Thanks, John .
So I'll start with the lease impairment.
That relates to one time noncash charge that relates to two floors.
In Meredith office space in New York that when we bought the business.
Were shuttered theyre not used or.
Any purposes, right now and had been on the sublease market.
We had at the time of the acquisition and purchase accounting we had fair.
Fair values.
<unk> floors and made our sublease assumptions.
All of the costs.
Cost associated with those Florida flows through our existing P&L.
We have came to the conclusion, we needed to take a further impairment.
On that space given the.
A substantial.
Stepped down in the commercial.
Rental market.
In lower Manhattan.
And so $44 million $70 million total charge $44 million of it.
Is above the adjusted EBITDA line with the rest is depreciation.
That's.
We will still look to sublease that space.
But no no real impact on the business.
When you think when we look forward to our reaffirming our adjusted EBITDA guidance for the year at <unk> of $2 $50 million to $300 million that is excluding.
Or adding back that lease impairment, especially since its non cash we don't expect.
Significant ones other onetime charges. This year, unlike last year, where we were going through the integration.
On a forward basis on.
EBITDA margins one thing to always remember is Q1 is the.
Lois.
Activity revenue quarter of the year as well as the lowest margin quarter of the year.
In Q4 is consistently the largest.
What we are looking forward and we talked about the phasing in the letter, but we expect Q2 to be pretty consistent with Q2 of last year on a adjusted EBITDA basis, adding back.
Onetime expenses and the like we expect to have some some good scale both in margins and profitability in Q3 last year in Q3, we were going through.
The integrations, we had a lot of inefficiencies on our AD stack.
And.
<unk> cost structure, and then Q4.
Given where we're headed and the growth in e-commerce, and our expectation of both traffic and.
Revenue growth, assuming the AD market just stays as it is we're not anticipating improvement.
We expect to have strong profitability there.
Our goal is to get to 35% plus digital.
Adjusted EBITDA margins. So that's how we think about the year.
With respect to the land purchase.
Related and Blackstone don't need to be worried IAC is not going into the real estate market. This was a specific situation.
The headquarters was built.
Just under 20 years ago.
It is.
On a 75 year ground lease.
A parcel of land that was one.
By our New York property firm.
That.
The ground lease payment that we make there has been fixed at a low level.
Since opening in the mid two thousands and we were headed towards a large step up in fair market value, even though the broader commercial real estate market.
Is soft right now you can imagine since.
In the last.
Nearly 20 years events is significant increases in commercial real estate values.
That step up would have at the fair market value would have flowed directly through our P&L. So first off for us we could buy the land and avoid a significant increase in our ground rent secondly.
Combining the building with the land increases our optionality.
Around realizing the value when it is just the building on a ground lease it's hard to do much in the form of either a mortgage or other transactions to extract value from the property.
And it just gives us greater flexibility and optionality around assets on our balance sheet and then finally it was it was.
Disrupted market.
Due to rising interest rates and broader.
Tough capital markets for real estate and I think the market knew we were the best buyer.
So we felt good on an opportunistic basis, but.
That is the context, and we think it will create value for our shareholders.
Thank you thanks John .
Operator next question next question comes from Brent Thill from Jefferies. Please go ahead.
Yes.
Good morning, Julien on emerging other could you dive.
Diving, a little deeper into care and.
It looks like there was profitability in that segment, just understanding whats going on there and then.
The question around why more taro at this point thank you.
Sure.
Two <unk> and a bit of Ontario.
With that in out there.
<unk> is a a.
Perfect business for IC, It is a marketplace business with disaggregated supply and disaggregated demand.
Is.
Delivering a great customer experience in between.
It is a and the question and that was when we first invest it is it a economic model that works because between insurance and other things and trusted.
Can you make that equation work and to approve they can make the equation work.
And you can see it in the financials they filed with their S. One.
It is a and it is one of these businesses where scale improves the product not just the price. So the more people that get on there the better it is for for hosts and the more they get on their fourth the better it is for guests.
<unk>.
I really they're a significant category leader and I expect that lead to continue to expand and when you see a business with those kinds of dynamics and you have the opportunity to know more than you know the good and the bad.
We took that opportunity.
I am and when I look at the size of the market that they play in and their market share and the way that they have gained market share.
I think that's really attractive and I think that they have the potential to play in some other markets.
That could also be really attractive.
And so that the business in one or more of them just lastly.
Exceptional management team.
I'd add the CEO of that business.
As a product person to two.
To the bone and is a avid user guest host of the product and constantly signs will improve the customer experience and.
When we see that also gets pretty excited to get pretty exciting.
And he is someone who wants to continue to do that for a very long time and that that adds to the story for us. So.
Every feature that we look for in a business and.
And when we saw the opportunity to earn more we took that opportunity.
In terms of care.
Here is very much back to basic story, it's doing the incremental work on cost and on revenue to get a little bit better every quarter.
It's also a category leader it is also a marketplace business and <unk>.
Moving the small things is what's happening there we haven't had yet a huge breakthrough on product.
We haven't needed and we would like a huge breakthrough on product, we havent needed a huge breakthrough on product, though because there's been lots of basics work.
The new product.
The new product is starting to roll out a little bit or some upgrades in terms of the user experience is starting to roll out and then we'll then we'll keep innovating from there.
Yes, and thanks Brent.
Relative to profitability.
Profitability, you should think of in emerging in other as care of the lion's share of profit. There also mosaic is profitable and then.
You've got some.
Smaller businesses that are in investment mode.
In the first quarter as Joey said.
Some good execution and some good cost management on a year over year basis, there were a number of initiatives that.
Over proliferated in 'twenty, two that we phased out during the year and really focused on back to basics big value drivers.
On a go forward basis, you should you should just bear in mind Q2 tends to be a lower quarter of profitability for care and emerging and other as a result, as we invest in marketing television others.
Going into the summer season and into <unk>.
Head of back to school and Thats also some elements in Q1 related to employee household employee tax income that leave Q1 to be profitable. So Q2 will be lower.
And then we will see us real strength in Q3 and Q4, there we like the state of the business.
Good gross margins.
<unk> margin scale that we can drive on a revenue basis enterprise has been solid even in what is a tight corporate spending environment return to office as a tailwind to utilization of the service.
Of the of the enterprise backup care service.
And then consumer has been slower growth type of bundles.
Been challenging.
We see some marketing opportunities and the opportunities to improve our marketing and conversion.
We love the business long term as a grower industry leader with a huge opportunity to convert offline to online.
And we expect to keep pushing forward there including through innovating the.
The product and improving the marketing.
As Joey said so.
We feel good we just got to put our head down and keep executing.
Thank you. Thanks, Brent Operator next question next question comes from Jason <unk> from Oppenheimer. Please go ahead.
Thanks.
You talked of two questions you talked about SCM conversion improving it Angie how do you think about this impacting revenue and just maybe your thoughts about leaning into.
Obviously paid marketing as this is working better how just how are you thinking about that and timing and then the second question you highlighted performance marketing improving in Dod Dash. How are you thinking about convincing brand advertisers that historical Meredith brand Advertiser to act more like a performance advertisers.
Sure.
Which leads to some wins that are already doing on <unk>.
Retail media right on other properties.
This is a tough time to convince them in a slower AD market to do that.
When youre thinking thats more of a 2024 catalysts. So broad thoughts on how you kind of effectively get what's now kind of retail media budgets coming into the new Meredith Dod Nash. Thanks.
Yes, one thing on that Jason.
I'll cover both.
Again, Chris add in but the great thing about performance marketing is you really don't have to convince folks on that as it performs the harder one into brand marketing where the.
The line between spend.
And return it requires a lot more mass in Asia. The performance marketing is very straightforward. So you really just have to get people too.
Sample of spend and then they can scale as much or as little as it works.
And generally it works because of the.
The intent of the audience.
So that's pretty straightforward we really.
The Big thing there is it getting it up on the sites and getting the units there and things like that.
On SCM conversion at Angie. This is really important I mean, one of the things and I got in there.
Focused on were seeing that conversion.
Relatively steady decline.
Close to two years.
And now reversing that decline.
But one of the components of doing that.
So we've now stemmed in reverse that decline in conversion.
But one the first thing we do when we did that is starting to capture the margin.
And make sure that we can capture the margins now we've proven that.
The next step is the scale.
And.
We want to scale carefully and smartly and Theres a couple components scaling one is making sure that you can find this brand at the same efficiency, which I am reasonably confident.
Highly confident I should say we can do.
Across the search engines.
And the second is to make sure that that you have the supply side and the rest of the AMD ecosystem working to absorb that.
And we've got to get all that working in concert.
A third piece is making sure that as you do all the spend that you are prioritizing the spend to channels that have the best customer experience and have the best margin so that youre not trading off the same.
You can tell if a service professional wants to buy one Lee do you want to tell them that best lead rather than a worthy so.
The things that we're doing surrounding this or building the technology or deploying new technology or making sure that technology works. So that we can get all of that optimize together that has a lot to optimize and we wanted to make sure that we get that right. When we as we scale this and that that will happen over the course of this year.
So so again margin first I think we've proven that now now we look towards scale and that'll that'll begin to happen over over the course of this year.
You want to add anything.
Just think on.
Joe you said, it well and broader AD market trends.
Hey.
Right.
<unk> new product that.
Joe you talked about that dot that.
Meredith is launching ware.
If you have a campaign management program that can target the segments, you're looking forward to give you real return path data in.
Performance metrics, that's much easier to sell than abroad.
<unk> campaign and Thats in the Dot SG&A and now through the integration we can run it across all the Meredith properties in dot that together and take advantage of massive scale in our categories in terms of the overall AD market, which was a bit in your question.
<unk>.
It continues to be a story of different <unk>.
Sectors or verticals.
Finding strength or weakness.
As different times due to a lot of macro factors.
Health pharma is excellent.
Beauty and style of really has really come back.
Travel is good retail is even pretty solid.
And we expect the comps to get easier in a number of these as you go and then you've got real weakness in finance.
On a year over year basis media technology streaming those areas and home.
May show signs of life, but it has been soft.
So we'll continue to.
Kind of manage through what's a choppy market, but we feel very good about our portfolio and where our offerings.
Thanks, Jason.
Next question comes from Eric Sheridan from Goldman Sachs. Please go ahead.
Thanks, so much for taking the questions two if I could first going back to the capital allocation section in the letter Joey would love to get a little bit deeper on your perspective of capitalizing on what might be short duration mismatches around asset prices or opportunities that present themselves and how you think about.
Prioritizing capitalizing on those opportunities versus striking the right balance of continuing to invest long duration against some of your larger sort of addressable market goals and some of the businesses and striking the right balance from a capital allocation policy standpoint.
And then maybe number two as a follow up we've talked a lot about the four priorities you laid out for <unk> going forward as you pivot from the second of the four services and cash flow towards the first two customer experience.
Can you frame up how much of that or areas, where you need to invest either at sustained higher levels or incrementally versus you think that dynamic of moving towards those first two initiatives is more about execution going forward, then putting capital behind the problem. Thanks.
Okay. Thanks, Eric.
Asset prices I don't.
I don't know I don't know the answer to that question.
I would say that.
Not like we're trying to.
Fire trade securities.
So that's not really.
In our wheelhouse.
Yes.
Chris talked about the land purchase and Thats something that sort of was due for a clean up for a very long time and.
I guess some some.
Events made that possible you could call it asset prices interest rates a bunch of other things made that possible in a way that was much more attractive than it would've been a year or two years or four years ago, frankly, and so that was that was helpful for us.
And we think unlock the value for our things like that but we're not looking at it I don't think trading securities when we look at.
Companies and we think there are many companies that are or have recently been attractively priced.
The counter to that in particular around public companies as we've talked to some is that theres not like probably transactions to be done at reasonable premium for those companies right now we haven't seen that happening we haven't seen much appetite for that.
So even though the public prices are lower I don't think that I still don't think that people have gotten comfortable selling to what would've been the historical reasonable premiums to those things I think people are looking for for much much more aggressive premium and then it gets too.
To be a relatively less attractive asset I mean, one of the things with buying our own stock or bond churros backer or MDM buying its own stock as those thing don't require premiums and.
You can sort of take advantage of what we think is where things trade is relatively attractive.
So I hope that answers the first question, although I'm not sure whether it does as far as the second question.
The investment in customer experience and SCO and SCM is I don't think there is more we need to do on the cost side I do think there is more we can do on the revenue side in investing in those things.
And that's what we're going to be doing over the course of the rest of the year and it most certainly is execution.
We have the product team.
Right now that we think can build the product and technology team that we think can build what we need built.
And improve what we need improved.
You can't really do all that at once and just adding more people to it I don't think speed this up.
So the things that we're doing right now is just trying to get things.
Tested and launched as quickly as possible and improve that customer experience, but again component of that is going to be.
Turning off certain elements of revenue that we think will lead to a happier homeowners and happier.
Service professionals over time spending more with us and staying longer with us over time.
And we'll do those wherever we think they are good for the ecosystem.
Next question next question comes from Stephen Ju from Credit Suisse. Please go ahead.
Thank you so Joey I wanted to follow up on the services line for LNG, So taking a step back even before the pandemic.
As always a thought process around.
How difficult it is going to be for the business of scale for certain categories and geographies.
Now that we've come through the supply and demand imbalance of the pandemic and now that you've also spend some more time on the operations on a day to day basis.
Do you think the overall opportunity here is smaller and Conversely are there are certain product capacity that you were able to achieve that now make what you thought was impossible previously now possible. Thanks.
Yes, thanks for the question, Steve and it is a.
I absolutely believe in the services business is a critical component of <unk> future.
And.
Is it bigger or smaller than previously I guess it depends.
Who thought in which parts of it are win.
But it is I'll, just say a big part of.
And these future and Thats for a few reasons, one where we can deliver the service as well and I think in the areas, where we're focused today, which is the lower consideration areas, where we can deliver the service as well it is a great customer experience.
And it's not just the revenue that we generate in the customer experience, but one of the things that we're thinking about for <unk>.
Whole customer journey.
And offering services on our platform is actually good for the.
Entire ecosystem advantage, meaning ads and leads to a homeowner who come to our platform now who can see services. They get a lot of information that's very helpful to them, which is when they can get a job done a price at which they can get a job done.
And doing that part of the journey is actually helpful. Regardless of whether they transact via services in that mobile they may come back and transact again later, they may come back and find the service professionals into the job through ads and lead.
There's a number of things that they can do on that but us offering that.
Service on our platform I think is very important to the aggregate customer experience.
What we'd like to do is start to grow it again, but to grow it again smartly sort of one category at a time, where we think we can deliver that customer experience with <unk>, which is which means.
Like the service remotely.
And have a very high confidence level that we can fill it with a very high customer satisfaction rate and when we can do those things we will expand into other categories and we will do that economically rationally.
The current.
Date of services, which is smaller as a result of coming out of some categories that weren't working for us.
And where we couldn't deliver the economics experience and the customer experience that we wanted to do and getting back to the one that does but now that we have that I think.
Services have.
Very bright future again and services less focus on growth 2023 over 2022.
Q3 was a meaningful pullback relative to 2022, so we're not going to see growth in that business to see declines in that business over the course of 2023, but getting to a healthy base that we can grow from.
I think is is essential.
Other piece I'll say is we have reduced exposure of the services business.
Over recent history to our customers and we're now experimenting with ways, where we can increase that exposure, but again in waves and so we think our overall more compelling for the ecosystem and we'll see how those go.
Go over the course of this year.
Next question. Operator next question comes from Yigal <unk> from Citigroup. Please go ahead.
Hey, good morning, guys with Joey on the.
MGM.
In the letter you talked about nearly $3 billion in liquid shares.
Think about where where you are here.
Just maybe refresh us on how you're thinking about MGM opportunity of the plant.
Potential source of.
Cash flow assets.
And do something else, if it's not a longer term strategic fit.
Then.
On top of the strength in E.
Thomas was really.
Interesting to see given still some weakness around the consumer and consumer spending.
Can you just spend a little bit more time talking about what's been working.
A result of the integration with Meredith or.
The integration.
The benefits of the integration.
More still to come.
Yes, Thank you guys.
I think the second question was most of it was hard to hear but as ecommerce at <unk>.
What Chris said.
And in terms of MTN.
Look obviously, we're very happy with that investment and how that's worked out over time.
Phenomenal business, it's a category leader is a phenomenal management team thats winning competitively.
A phenomenal market, which is primarily Las Vegas.
There is.
This is the entertainment capital of the World and its and its growing its getting every major sport there.
It is getting all kinds of new fun thing to add in there an MDM is a very clear leader participating in all of that.
The other great thing as the business has a ton of cash right now the Opco propco family. They generated all the where they they put a lot of cash on the balance sheet has worked out very well in terms of share repurchases and.
We're happy to see our ownership stake increase.
But also to see the business with such a.
Healthy balance sheet right now.
And continuing to generate great free cash flow.
And they're using that free cash flow on some some smart capital projects and some share repurchases, which also improves the yield for a shareholder like us.
I also think the business is still fundamentally undervalued.
You can look at it in terms of the.
What you get in free cash flow as a shareholder but you can also look at it in terms of all the things on the horizon for MGM, which I think are.
Arent really reflected number one digital.
<unk> a a one of three meaningful players in digital or at a 50% interest in one of three meaningful players in digital.
And and that continues to go well both in terms of revenue growth and in terms of <unk>.
Pipeline to profitability.
Theres Macau that has come back and come back in a meaningful way you add more people with more money.
<unk> held back for longer so when you look at what's happened in Las Vegas in the U S or when you look at what's happened in travel in the U S that sort of pent up demand is now just completely unleashing and I think in a more powerful way in Macau, which is really.
Exciting there.
You have Japan, where MGM is really going to be it looks like the only player in that market or at least the only player for a while in that market and that could be a very attractive market.
And the and do you have in New York.
<unk>.
Potential to open you got a pretty wide range of things that can unlock real value at MGM and so we're still excited to be a part of that business and I will tell you about everything the team is doing to capitalize on the opportunity in front of them.
Thanks, Joey and on <unk>.
Performance marketing.
At Dot.
Dash Meredith.
There are two key elements, we talked about this in the last few letters one is e-commerce for goods and the other is <unk>.
<unk> marketing for services.
So take a step back that that she has always been excellent at integrating.
Performance marketing for partners goods and services really natively into the content or in context.
That's a review of kitchen items, having links right there or.
Having the relevant products.
<unk>.
That's the PD article have quick links to a variety of savings accounts or money market funds when someone's already searching for that information.
The key part of the comment of the combination of the companies was bringing those tools to the Meredith sites that have tremendous brands and a lot of content, but a having more.
Highly germane integrations of links to execute.
E Commerce and services activities, but also increasing the amount of content that is produced on the Meredith sites related to those commerce opportunities, we call that the evergreen commerce content and management has been actively building those across the sites. So.
We said.
e-commerce for goods across the Tdm portfolio was up over 30% in Q1, and really increased every month sequentially on a year over year basis.
And we expect to have just continued momentum there.
E Commerce.
Gross margin for services is predominantly for financial services, which as we've said.
Brokerage crypto insurance heavy a year ago.
Those those markets are struggling but the good news is they declined steadily across 22, so they will be.
The comps only get easier there and we are cautiously optimistic products interest rate products will drive some growth.
But we are very bullish on continuing to grow that performance marketing line and it really is bringing the dot dash approach to a lot of the Meredith sites. Thank you operator next question operator next.
Next question comes from Youssef Squali from Truest. Please go ahead.
Great. Thank you a couple of questions going back Joe was going back to LNG. So over the last three plus years, we've made a few pivots from AR.
The business model perspective, now to refocus on maybe LTV.
Going through the letter it seems like you guys have thought through it pretty well, but it seems very intuitive to us what youre doing but I guess, perhaps.
Practically what gives you the confidence that doing less is more of that acquired fewer customers settling in fewer E. Mails will ultimately drive revenues just trying to get a sense of whether you can share maybe some proof points with that some AB testing that may be you guys have done that that could.
Get investors more confidence and then Chris on roofing looks like that business turned profitable can you speak to the sustainability of profitability in that segment going forward. Thank you.
Whereas the second use of what was the second question on roofing, yes, okay. Thank you both.
Yes turned the quarter on profitability in roofing is whether it's sustainable I don't know.
Very small business.
I think it is we've learned a lot in the roofing process.
Happy we've learned a lot, but it probably wasn't the smartest move we ever made and we've got to figure out what to do with that from here.
So I wouldn't it's not a huge area of focus in terms of what that does I think it is.
Breakeven give or take a little bit in every quarter I'm confident that I'm confident we're not losing money like we did last year in that business.
But I think we got to figure out what what the plan is for that business, but it will not I can say with very high confidence they will not be a meaningful needle mover in any direction.
I'm here.
As it relates to the rest on Andy is as is totally the right question and one that we ask ourselves every day and I'll give you some of the things that we look at.
One just like a really fast one is bad debt raising credit rates amongst service professionals.
When we are delivering.
Delivering a better experience at a better ROI for our service professionals, we see lower bad debt and we see lower credit rates and when I talk about each of these things I am talking about where we are relative to the.
The worst which was primarily in Q2 Q3 of 2022.
All that has improved meaningfully sequentially from there we look at retention and we look at retention by cohort. So we look at.
Those who have been with US 28 days 56 days 91 days 180 days and we'll look at that relative to the AD product. We look at that relative to the leads product and we've been steadily improving those and cross those lines really across all of that in March and then again in April at their Gen.
Really heading in the right direction.
For a little while now these things do take time so.
We're talking about very small increments in this but the key for us has been changing the direction of the slope.
And that's really important so we've seen that the other thing is repeat rates.
Repeat rate on the homeowners and one of the toughest most stubborn things that exists in the business.
We had that declining.
And we now have that we've arrested that decline and so the question is can we get it to grow.
That remains to be proven I think that.
Some of the other things we've done first of all wrapping the design and other things we've done in other areas intuitively treating the customer well leads to better outcomes.
But we.
We have to see that one prove out over time.
And generally.
Generally of the belief.
Debt.
This is no leap of faith that you deliver a better customer experience you have better customers they stay with us longer.
Better business. There is a question in there as well can you can that work economically.
And the answer I think we've proven that they can work economically and so now it's continuing to get those things better to.
To continue to to turn those methods.
And and those are a handful of them there are more Ics.
You are more which is.
Right. So one of the things that we're doing.
Doing on price as we've generally been more reducing price for growth, but what we've seen is it pros are actually spending in aggregate generally the same. So we were sort of had a double whammy of AV engineering ourselves, which is we were charging more which is earning the pros out faster, which is leading towards matches over.
Time became homeowners and.
So now we can charge less the postponed the same pro gets more out of that span the massive more homeowners and the homeowner gets more out of that spend because the homeowner matches with more eager froze.
And that's a great thing for the flywheel and a great thing for the ecosystem and we're just looking for things like that and generally finding things like that that are that are overall improving.
The system. So I do I do have a lot of confidence in what we're doing and I do I have absolute confidence that doing the right thing by our customers is going to yield good thing for the business over time.
Thank you and operator, one last question.
Next question comes from Justin Patterson from Keybanc. Please go ahead.
Great. Thank you.
To build on just as a final point is around the angi could you talk a little bit just a.
Around channel SP satisfaction has changed with this new versus old cohort and then perhaps just comment on some of the spending and retention different since youre staying with them. Thank you.
Sure.
So again, one big indicator of satisfaction as bad debt rates and credit rates, which will have been improving.
Steadily meaningfully relative to where we were in Q3.
<unk>.
And in terms of retention I guess.
And to think about.
I'll focus on the lead side for a second about 60% of the pros have been with us greater than a year.
Great.
Fantastic Stat I think.
And there's also the system they figured out how to make the system work for their business and we.
Figured out how to make that system work for our business and that that's working I think that where we've seen the most changes and the other 40%, so which breakdown something with us a month's ending with us three months et cetera.
And what that's where we've had most of the.
That's where we've had most of the volatility in that for most of the challenges and what we've done throughout the business have shown up and what we're starting to see in that area is the younger pros are retaining better and we measure that just let's start with you can measure retention, but the automated cash collected in the first 28 days to 56 days to 90 days and those things.
Improving.
And when you see those things improving those folks.
We will make up a bigger portion of that that call that 40%, that's not the greater than a year and the other folks.
And we will build over time and the other folks will make up a smaller portion of that.
And.
We get to a overall healthier ecosystem of service professionals in the network.
I'm not going to go through specific churn numbers or specific retention numbers, but they are generally in that area heading in the right direction.
To better young ones, new ones I should say are replacing the <unk>.
The mortality the older ones.
Thank you.
We will wrap up the earnings call now we thank all of you for joining in.
We feel good day. Thank you thanks, everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
Okay.
[noise].