Q3 2024 Angi Inc Earnings Call

Operator: Welcome to the IAC and Angi Q3 2024 Earnings Conference Call. I would now like to turn the conference over to Mr. Christopher Halpin, Executive Vice President, CFO, and COO of IAC. Please go ahead, sir.

Welcome to the IAC and ENGIE third quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.

After introductory remarks, there will be an opportunity to ask questions.

To ask a question, you may press star then 1 on your telephone keypad.

And to withdraw your question, please press star then 2.

Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Mr. Christopher Halpin, Executive Vice President, CFO, and COO of IAC. Please go ahead, sir.

Christopher Halpin: Thank you, operator. Good morning, everyone. Christopher Halpin here, and welcome to the IAC and Angi Inc. Q3 earnings call. Joining me today are Joey Levin, CEO of IAC and Chairman of Angi Inc., and Jeff Kip, CEO of Angi Inc. Similar to last Q, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter, which is currently available on the investor relations section of IAC's 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, and we'll then open it up for Q&A. Before that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities laws.

Speaker Change: Thank you, operator. Good morning, everyone. Christopher Halpin here, and welcome to the IAC and Angie, Inc. third quarter earnings call. Joining me today are Joey Levin, CEO of IAC and chairman of Angie, Inc., and Jeff Kipp, CEO of Angie, Inc.

Similar to last quarter, supplemental to our quarterly earnings releases.

Speaker Change: We will not be reading the shareholder letter on this call.

Speaker Change: I will shortly turn the call over to Joey to make a few brief introductory remarks and we'll then open it up for Q&A. Before that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities laws.

Christopher Halpin: These forward-looking statements may include statements related to our outlook, strategy, and future performance and are based on our current expectations and on information currently available to us.

Speaker Change: These forward-looking statements may include statements related to our outlook, strategy, and future performance, and are based on our current expectations and on information currently available to us.

Christopher Halpin: Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q and our most recent annual report on Form 10-K, and in the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. 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 earnings releases, the IAC shareholder letter, our public filings with the SEC, 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 I will turn it over to Joey.

Speaker Change: Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties.

including those contained in our most annual court.

Speaker Change: most recent quarterly report on Form 10-Q, and our most recent annual report on Form 10-K, and in the subsequent reports that we file with the SEC.

Speaker Change: The information provided on this conference call should be considered in light of such risks.

Speaker Change: We'll also discuss certain non-GAP measures, which, as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call.

Speaker Change: I'll also refer you to our earnings releases, the IAC shareholder letter, our public filings with the SEC, 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.

and now I will turn it over to Joey.

Joey Levin: Thanks, Chris. Obviously, the big news today is that we are contemplating a spin of Angi, which if we complete it, would be the first spin out of IAC in four years, and obviously join a very long line of spinoffs out of this company. Besides creating two separate focused companies, this move would allow Angi to stand on its own, have a more liquid currency, and a standalone ambitious strategy, whether that's M&A or capital allocation generally. The key to making this possible is the fact that profits and cash flow in the business have improved meaningfully. Consumer experience has improved meaningfully, and Jobs Done Well has become a true driving obsession of everybody in the business. Jeff and I believe strongly the business has revenue growth again in its future, and profitability will be stable from here.

Joey Levin: Thanks Chris. Obviously the big news today is that we are contemplating a spin of Angie, which if we complete it would be the first spin out of IAC in four years and obviously join a very long line of spinoffs out of this company.

Joey Levin: Besides creating two separate focus companies, this move would allow Angie to stand on its own, have a more liquid currency and a standalone ambitious strategy, whether that's M&A or capital allocation generally. The key to making this...

Joey Levin: possible is the fact that profits and cash flow in the business have improved meaningfully. Consumer experience has improved meaningfully and jobs done well has become a true driving obsession of everybody in the business.

Speaker Change: and Jeff and I believe strongly the business has revenue growth again in its future and profitability will be stable from here. So we're in a position to do this, a strong position to do this.

Joey Levin: We're in a position to do this, a strong position to do this, and grateful for the opportunity to have another spin out of IAC. I'm sure we'll have a lot of questions on all of this and IAC's performance generally, which we think was very good this quarter, and people worked hard. We're very proud of the work everybody did this quarter, and so let's get to the questions to talk about it.

Speaker Change: and grateful for the opportunity to have another spin out of IEC.

Speaker Change: I'm sure we'll have a lot of questions on all of this, and IAC's performance generally, which we think was very good this quarter, and people worked hard. We're very proud of the work everybody did this quarter, and so let's get to the questions to talk about it.

Jeff Kip: Thank you. Operator, first question, please.

Thank you. Operator, first question, please.

Operator: Our first question will come from Cory Carpenter with JPMorgan. Please go ahead.

Speaker Change: Our first question will come from Corey Carpenter with J.P. Morgan. Please go ahead.

Cory Carpenter: Thank you, and good morning. Joey, could you expand on why now on exploring the Angi spin? Then a second question related to that, which you just mentioned. What's giving you the confidence in Angi returning to revenue growth? Is there any impact you're expecting next year from the FCC's one-to-one consent rule? Thank you.

Speaker Change: Thank you and good morning. Joey, could you expand on why now on exploring the Angie spin? And then second question related to that, which you just mentioned, what's giving you the confidence in Angie returning to revenue growth? And is there any impact you're expecting next year from the FCC's one-on-one consent rule? Thank you.

Joey Levin: Yeah. I'll take the first one, and I'll let Jeff do the second, but I can weigh in there too. The answer to why now is, as we've said through many spins we've done in the past, there's not a particular formula or a specific kind of automatic trigger on these things. It's a confluence of things, and one is the business being spun and the other is the impact on what's left behind. In the case of Angi, the business being spun, the key is: Is it standalone, strong and healthy and capable of being on its own in the public markets? The business is now comfortably profitable, comfortably generating cash flow. We think on the right path strategically, it has all the pieces it needs to really deliver for the consumer.

Speaker Change: I'll take the first one and I'll let Jeff do the second, but I can weigh in there too.

The

The answer to why now is...

Speaker Change: As we've said through many spins we've done in the past, there's not a particular formula or a specific kind of automatic trigger on these things. It's a confluence of things. And one is the business being spun, and the other is the impact on what's left behind.

Speaker Change: And in the case of Angie, the business being spun, the key is, is it stand-alone, strong, and healthy, and capable of being on its own in the public markets?

and business is now comfortably profitable, comfortably generating cash flow.

Speaker Change: And we think on the right path strategically it has all the pieces it needs to really deliver for the consumer And there's a lot of execution ahead in terms of product But there's also a lot of execution behind it in terms of product and seeing that come through on

Joey Levin: There's a lot of execution ahead in terms of product, but there's also a lot of execution behind it in terms of product and seeing that come through on things like retention and customer satisfaction. We like the path that Angi is on right now and like Jeff's ability to execute against that. There also is benefits to a more liquid currency. There's more direct investor access. There's the ability to use that liquid currency, whether it's for M&A or compensation. I think being spun off and standalone, those things can help. Of course, this is also a tax-efficient concept in the sense that the spin, if we do it, would be tax-free. The other piece is it allows IAC to focus. We've really been on a campaign of slimming down, focusing, and we think that that can allow us to do fewer things better.

things like retention and customer satisfaction.

Speaker Change: So, we like the path that Angie is on right now and like Jeff's ability to execute against that.

Speaker Change: There also is benefits to a more liquid currency, there's more direct investor access, there's the ability to use that liquid currency whether it's for M&A or compensation, I think being spun off and stand alone those things can help.

Speaker Change: And, of course, this is also a tax-efficient concept in the sense that the...

Speaker Change: The other piece is that it allows IAC to focus. We've really been on a campaign of slimming down, focusing, and we think that that can allow us to do fewer things better, and that's what we plan to do with IAC.

Joey Levin: That's what we plan to do with IAC. Jeff.

Jeff Kip: In terms of our confidence in the stability and future growth of the business, I'm going to start by going back 2 years to when Joey took over the business with tremendous opportunity to improve at the time. Joey and the team committed to improving the quality of the business, the customer experience, and returning the business to profitable growth. We've moved a fair amount of lower quality traffic off the ship. We removed some of our lower quality third-party traffic, and we've moved a significant portion of the business to consumer choice, which I'll come back to in a minute. The result has been that our Jobs Done Well rate has grown about 30% in the last year. Pro retention has risen materially each quarter, and we've referenced that. Homeowner NPS year-over-year is up by almost 60% in this last quarter.

Speaker Change: In terms of our confidence in the stability and future growth of the business, I'm going to start by going back two years to when Joey took over the business with tremendous opportunity to improve at the time.

Speaker Change: Joey and the team committed to improving the quality of the business, the customer experience, and returning the business to profitable growth.

Speaker Change: We've moved a fair amount of lower-quality traffic off the ship. We removed some of our lower-quality third-party traffic, and we moved a significant portion of the business to consumer choice, which I'll come back to in a minute.

Speaker Change: The result has been that our jobs done well rate has grown about 30% in the last year. Pro-retention has risen materially each quarter and we've referenced that. Homeowner MPS year over year is up by almost 60% in this last quarter. So those are big markers and a tribute to what's been accomplished to drive the long-term experience and growth of the business.

Jeff Kip: Those are big markers and a tribute to what's been accomplished to drive the long-term experience and growth of the business. We've also taken our unit economics apart and put them back together. We've right-sized our sales effort to drive long-term ROI, and we've re-engineered our paid marketing to drive material profit growth despite revenue declines. You can see it in the near 30% paid channel profit growth in the last quarter. We delivered profit growth in 2023 despite revenue declines. We're doing so again this year, and we'll hold our profit again next year, as Joey referenced.

Speaker Change: We've also taken our unit economics apart and put them back together. We've right-sized our sales effort to drive long-term ROI, and we've re-engineered our paid marketing to drive material profit growth, despite revenue declines.

Speaker Change: see it in the near 30% paid channel profit growth in the last quarter.

Speaker Change: We deliver profit growth in 2023 despite revenue declines. We're doing so again this year. We'll hold our profit again next year as Joey referenced

Jeff Kip: As we make the next major investment in our customer experience by moving really the vast majority of our traffic that comes to our core customer journey to consumer choice. Yeah, I'll come back to this in a minute. We've really been progressively moving our business towards consumer choice because we believe it's the best way to drive the customer North Star experience of jobs done well in this marketplace. You may recall that our European business, which has an estimated jobs done well rate materially higher than Angi US, operates completely on a consumer choice model. We're accelerating our move in the US consistent with both the European model and the FCC order related to TCPA that I think most of you are aware of.

Speaker Change: as we make the next major investment in our customer experience.

Speaker Change: By moving really the vast majority of our traffic that comes through our core customer journey to consumer choice

Yeah, I'll come back to this in a minute

Speaker Change: We've really been progressively moving our business towards consumer choice because we believe it's the best way to drive the customer Northstar experience of jobs done well in this marketplace. You may recall that our European business, which has an estimated jobs done well rate,

Speaker Change: materially higher than Angie U.S., operates completely on a consumer choice model.

Speaker Change: We're accelerating our move in the U.S., consistent with both the European model and the FCC order related to the TCPA that I think most of you are aware of.

Jeff Kip: We're thus taking one last big step in our 2-year path of effectively reducing revenue but making material improvements in the customer experience and the long-term trajectory of the business. For those of you who aren't familiar with the FCC order, the portion of the order I'm referring to requires a business contacting a customer and using auto dialer technology to have one-to-one consent from the customer to do so. The order's going to go into effect in January 2025, and we'll be there on our move to consumer choice as well. We really welcome this change, although we do expect some volatility in H1 of next year, and we don't know precisely how the impact's going to play out.

Speaker Change: And we're thus taking one last big step in our two-year path of effectively reducing revenue, but making material improvements in the customer experience and the long-term trajectory of the business.

Speaker Change: For those of you who aren't familiar with the FCC order, the portion of the order I'm referring to requires a business contacting a customer and using auto dialer technology to have one-to-one consent from the customer to do so.

Speaker Change: The order is going to go into effect in January 2025, and we'll be there on our move to consumer choice as well.

Speaker Change: We really welcome this change, although we do expect some volatility in the first half of next year, and we don't know precisely how the impact is going to play out.

Jeff Kip: With the size and quality of our network and our ability to provide deep liquidity and one-to-one consent across that network, we believe we're uniquely positioned to benefit from the new landscape that's going to emerge post-order. We do think that the order will have the greatest impact on our third-party channel. However, we also expect the move to yield incremental real leaps in Jobs Done Well, NPS, and retention and put us squarely where we want to be with our customer experience. It is going to mean another bump down in revenue. I would say we expect our Q1 to be down about as much as the quarter just ended, and in line with what we expect in the Q4. From there, we do expect to stair-step up and grow in 2026, based on what we know and is in front of us.

Speaker Change: We do think that the order will have the greatest impact on our third-party channel. However, we also expect the move to yield incremental, real leaps in jobs done well, NPS, and retention, and put us squarely where we want to be with our customer experience.

Speaker Change: It is going to mean another bump down in revenue. I would say we expect our first quarter to be down about as much as the quarter just ended along and in line with what we expect in the fourth quarter.

Speaker Change: but from there we do expect to stair step up and grow in 2026.

Speaker Change: based on what we know and is in front of us.

Jeff Kip: We have confidence in that. In terms of profitability, we fully expect to hold our profit in 2025. Joey referenced this, I referenced it. Given everything I've already mentioned, I think Q1 2025 will probably bump down from Q4 2024, similar to the bump-down from Q4 2023 to Q1 2024, then we'll improve sequentially each quarter along with the revenue after that. All of this together gives us real confidence in the financial trajectory of the business and our return to growth. Thank you. Operator, next question.

We have confidence in that.

Speaker Change: In terms of profitability, we fully expect to hold our profit in 2025. Joey referenced this. I referenced it.

Speaker Change: Given everything I've already mentioned, I think the first quarter of 2025 will probably bump down from Q4 of 24, similar to the bump down from Q4 of 23 to Q1 of 24, but then we'll improve sequentially each quarter along with the revenue after that.

Speaker Change: All of this together gives us real confidence in the financial trajectory of the business and our return to growth.

Thank you. Operator, next question.

Operator: Next question will come from Jason Helfstein with Oppenheimer. Please go ahead.

Speaker Change: Next question will come from Jason Halstein with Oppenheimer. Please go ahead.

Jason Helfstein: Hi. Thank you. Just one question, a housekeeping question. Just to elaborate on that, I guess, for Joey and Jeff, many of us have covered Angi HomeAdvisor y'all for a long time. There's always been this big promise of a TAM you talked about in the letter. It's historically been hard to unlock, whether it's just word of mouth, Google, social media. Fully appreciate the improvement in efficiency in the business that you've been able to do. I guess why should investors get excited now that you finally figured out how to kind of really unlock the growth that has been elusive for kind of 15 years, basically, in this vertical? A follow-up. Just remind us the basis of the MGM stock and what's the tax treatment if you were to potentially sell that stake. Thank you.

Speaker Change: I think there's one question and then a housekeeping question. So just to elaborate on that I guess for Joey and Jeff, I mean

Speaker Change: Many of us have covered Angie, Home Advisor, YALT for a long time. There's always been this big promise of a TAM, you talked about in the letter, and it's historically been hard to unlock, whether it's just word of mouth, Google, social media.

Speaker Change: fully appreciate the improvement and efficiency in the business that you've been able to do, but I guess, why should investors get excited now that?

You finally figured out how to kind of really unlock

Speaker Change: the growth that has been elusive for, you know, kind of 15 years basically in this vertical. And then a follow-up, just remind us the basis of the MGM stock and what's the tax treatment if you were to potentially sell that state, thank you.

Jeff Kip: Thanks, Jason. Chris will take the second one. The first one is the fundamental difference right now, which hopefully you've been hearing for a while, and we see and have shared a lot of the underlying metrics of this, is a absolute obsession with customer experience. The folks who have succeeded at disintermediating Google, which is obviously a very tall order, or going after things like word of mouth are the ones who have absolute customer obsession in getting Jobs Done Well. I think that change in our mantra is what's going to drive both pro retention that changes the economics of the business and allows us to reinvest in compelling ways, and homeowner repeat rate and homeowner satisfaction, which allows us to reinvest in compelling ways. That is the difference, and that we're doing on a brand that is entirely dedicated to home services.

Speaker Change: Thanks, Jason. Chris will take the second one, but the first one is the fundamental difference right now, which hopefully you've been hearing for a while, and we see and have shared a lot of the underlying metrics of this is

Speaker Change: absolute obsession with customer experience. The folks who have succeeded at

Speaker Change: disintermediating Google, which is obviously a very tall order, or going after things like word of mouth are the ones who have absolute customer obsession in getting jobs done well.

Speaker Change: both pro-retention that changes the economics of the business and allows us to reinvest in compelling ways and Homeowner repeat rate and homeowners have satisfaction which allows us to reinvest in compelling ways

Speaker Change: That is the difference, and that we're doing on a brand that is entirely dedicated to home services.

Jeff Kip: That doesn't really exist in the market, and that, I think, resides with us. I think throughout the past, there has been probably an overemphasis on more shorter-term results and less on the longer-term investment of an obsessive customer experience. That's what we've put in place. That's what we continue to put in place. If we do continue to do that, I think that we can build a compelling direct brand with homeowners that goes after those other portions of the market that you mentioned. You want to add to that, Jeff? Nope. I completely agree. Jason, on the MGM stake, we currently hold 64.7 million shares of MGM. Our basis is just below $1.3 billion. IAC has Net Operating Losses in excess of $1 billion. It was $1.4 billion as of end of last year.

Speaker Change: that doesn't really exist in the market and that, I think, decides with us. And I think throughout the past, there has been

Speaker Change: probably a over-emphasis on more shorter-term results and less on the longer-term investment of an obsessive customer experience.

Speaker Change: and that's what we've put in place, that's what we continue to put in place and if we do continue to do that, I think that we can build a compelling direct brand with homeowners that goes after those other portions of the market that you mentioned.

Speaker Change: Do you want to add to that, Jeff? No, I completely agree.

Speaker Change: And then, Jason, on the MGM stake, we currently hold 64.7 million shares of MGM. Our basis is just below $1.3 billion.

Joey Levin: We know we'll use some this year to offset profits, at the current trading levels.

Christopher Halpin: Of about $1 billion, one gain. We've got more than enough NOLs to offset. We think about it, and you can see it in the sum of the parts as the market value of the shares is the appropriate way to think about our holdings, because we can offset any taxable gain right now.

Speaker Change: of about a billion one gain. We've got more than enough NOLs to offset. So we think about it, and you can see it in the sum of the parts, as the market value of the shares is the appropriate way to think about our holdings because we can offset any taxable gain right now.

[Unknown Speaker]: Thank you.

Thank you.

Christopher Halpin: Thank you. Operator, next question.

Thank you. Operator, next question.

Operator: Next question will come from John Blackledge with TD Cowen. Please go ahead.

Speaker Change: Next question will come from John Blackledge with TD Cowan. Please go ahead.

John Blackledge: Great. Thanks. On DDM digital revenue, can you talk about the drivers of the Q3 overall revenue outperformance, notably ad revenue accelerating at a faster pace than expected, while performance marketing and licensing were a bit lower? Then for Q4, can you unpack the mid to high single digit revenue guide? We had kind of low double-digit revenue growth in Q4. Then as we look into 2025, just any color there on DDM digital top line growth. Thank you.

John Blackledge: Great, thanks. On DDM digital revenue, can you talk about the drivers of the 3Q overall revenue outperformance, notably ad revenue accelerating?

John Blackledge: at a faster pace than expected, while performance marketing and licensing were a bit lower. And then for 4Q, can you unpack the mid- to high-single-digit revenue guide?

John Blackledge: Relative to our, we had kind of like a low double-digit revenue growth in 4Q and then as we look into 2025 just any color there on DDI digital top-line growth. Thank you.

Christopher Halpin: Sure, John. Thank you. Q3 digital performance was excellent across both traffic and monetization. Digital advertising revenues grew 26%, led by 14% growth in core sessions, and we're happy to see overall sessions were positive for the quarter for the first time in a while. Traffic growth was particularly strong in our entertainment and food properties, and we continue to see momentum there. Direct ad sales were strong as well. Perhaps even aided a little bit by advertisers pulling some spend forward into September ahead of the election. Programmatic was superb, with rates up 30% plus in the quarter. Performance marketing disappointed at down 7%, with continued weakness in financial services such as insurance and brokerage. That segment has improved this quarter, and we expect growth in Q4 across performance marketing broadly.

Speaker Change: Sure John, thank you. You know third quarter digital performance was excellent across both traffic and monetization.

Speaker Change: Digital advertising revenues grew 26% led by 14% growth in core sessions and we're happy to see overall sessions were positive for the quarter for the first time in a while.

Speaker Change: Traffic growth was particularly strong in our entertainment, food properties, and we continue to see momentum there. Direct ad sales were strong as well.

Speaker Change: perhaps even aided a little bit by advertisers pulling some spend forward into September ahead of the election.

Speaker Change: And then programmatic was superb with rates up 30% plus in the quarter. Performance marketing disappointed at down 7% with continued weakness in financial services such as insurance and brokerage.

Speaker Change: That segment has improved this quarter and we expect growth in the fourth quarter across performance marketing.

Christopher Halpin: Licensing continues to be solid, driven by both our OpenAI partnership and Apple News, up 17% in the Q. Overall, it added up to 16% digital revenue growth, our best Q since we acquired Meredith, and we were also happy with how that flowed down to Adjusted EBITDA. We would highlight aggregate Adjusted EBITDA only grew slightly in Q3, but that growth rate is dragged down by an $8 million favorable tax release related to the Meredith acquisition that benefited our corporate expense a year ago. Digital EBITDA grew 28% this past Q, and incremental margins were 42%. When you look at Q4, October, the month was softer on both advertising spend and traffic than we expected, resulting in digital revenues were only up 7% in October for the month.

broadly.

Speaker Change: and we were also happy with how that flowed down to adjusted EBITDA. We would highlight aggregate adjusted EBITDA only grew slightly in the third quarter.

Speaker Change: But that growth rate is dragged down by an $8 million favorable tax release related to the Meredith acquisition.

Speaker Change: that benefited our corporate expense a year ago. Digital EBITDA grew 28% this past quarter, and incremental margins were 42%.

Speaker Change: When you look at fourth quarter, October the month was softer on both advertising spend and traffic than we expected.

Christopher Halpin: We knew there'd be some challenges with the election. Consumer distraction and advertiser caution exceeded our expectations. We'd note for those who are newer to the story, that Dotdash Meredith does not sell digital inventory on its titles to political advertisers, so there's no benefit from the election and just headwinds for the properties. Good news for DDM was the election was rapidly decided, and things are shaping up to come in during November and December with advertisers steadily returning. We know Thanksgiving is a week later, so things are tighter in the overall holiday shopping period. DDM is pushing hard across its properties to drive both advertising and performance marketing, but we thought it prudent to guide Q4 digital revenue to the mid to high single digits at this point.

Speaker Change: We note, for those who are newer to the story, that Dot Dash Meredith does not sell digital inventory on its titles to political advertisers, so there's no benefit from the election and just headwinds.

for the properties.

Speaker Change: Good news for DDM was the election was rapidly decided and things are shaping up to come in during November and December with advertisers steadily returning. We know Thanksgiving is a week later, so things are tighter in the overall holiday shopping period.

Speaker Change: DDM is pushing hard across its properties to drive both advertising and performance marketing but we thought it prudent to guide fourth quarter digital revenue to the mid to high single digits at this point.

Christopher Halpin: Now, looking to 2025 and beyond, we are still confident in 10% digital revenue growth as the baseline for the DDM business. That'll be, as we've said before, driven roughly half by traffic growth and half by improved monetization. I'm sure we'll talk about Decipher, which is a key advantage tool for us in monetization. Individual quarters may bounce around above and below that 10% target, we still have confidence in that as a long-term driver of the business. Thanks, John. Operator, next question.

Speaker Change: Now looking to 2025 and beyond we are still confident in 10% digital revenue growth as the baseline for the DDM business That'll be as we've said before driven roughly half by traffic growth and half by improved monetization

Speaker Change: and I'm sure we'll talk about Decipher, which is a key advantage tool for us in monetization. Individual quarters may bounce around above and below that 10% target, but we still have confidence in that as the long-term driver of the business.

Thanks, John. Operator, next question.

Operator: The next question will come from Eric Sheridan with Goldman Sachs. Please go ahead.

Speaker Change: The next question will come from Eric Sheridan with Goldman Sachs. Please go ahead.

Eric Sheridan: Thanks so much for taking the questions, two, if I could. First, with the decision to break out Care as a reported segment, I want to know if you could hit the refresh on where that business sits today and how you're thinking about the market opportunity set ahead for Care in the years to come. Secondarily, Joey, there was sort of some crosscurrents in the letter, the depressed valuation of IAC, Angi, and MGM, but you also talked about the M&A environment being challenging from a valuation standpoint. Any reset or refreshed view on capital allocation broadly against what you see as the opportunity set? Thanks so much.

Speaker Change: X, Angie, and MGM. But you also talked about the M&A environment being challenging from a valuation standpoint. Any reset or refreshed view on capital allocation broadly against what you see as the opportunity set? Thanks so much.

Christopher Halpin: Thanks, Eric. On Care.com, we've been thinking about this for a while, and especially with an Angi spin, if that happens, breaking out Care.com as its own segment makes a lot of sense. It's a scale business, $365 million of revenue and $45 million of Adjusted EBITDA over the last 12 months. I think by far category leader in terms of online digital marketplace. Bigger in terms of brand, bigger in terms of audience, bigger in terms of providers and families by an order of magnitude relative to any competitor that we're aware of.

Thank you.

certainly would

Speaker Change: Breaking Out Care is its own segment, makes a lot of sense. It's a scale business, $365 million of revenue and $45 million of adjusted EBITDA over the last 12 months.

Speaker Change: in terms of brand, bigger in terms of audience, bigger in terms of providers and families by an order of magnitude relative to any competitor that we're aware of. And so...

Joey Levin: That is the basis of, I think, a lot of potential in the business. When we look at the opportunity, just to put some numbers around it, near term or even longer term, the site receives 7,000 to 10,000 job posts a day and 70,000 to 100,000 applications a day. We're only converting a very small fraction of that into paying customers. What that tells you is we have the liquidity both on the supply side and on the demand side, and I think we have the potential, and our new CEO has been there about a year, Brad Wilson, who's been very focused on this.

Speaker Change: That is the basis of, I think, a lot of potential in the business.

Speaker Change: When we look at the opportunity to put some numbers around it

Speaker Change: near term or even longer term. The site receives seven to ten thousand job posts a day and seventy to a hundred thousand applications a day, and we're only converting a very small fraction of that into paying customers.

Speaker Change: But what that tells you is we have the liquidity both on the supply side and on the demand side, and I think we have the potential. And our new CEO has been there about a year. Brad Wilson has been very focused on this.

Joey Levin: We have the potential to improve the product and customer experience, especially using tools like AI and machine learning to get those matches better, to use conversational UIs to get better information out of both the family and the caregiver to make those matches better. If we can do that, we think we can drive conversion and also do a better job optimizing pricing and packaging there. The other thing that's been a nice tailwind for the business, I think COVID was some volatility in the business. It might have brought some demand forward in terms of in-home childcare, and then that's ebb when as people move back out of home childcare.

Speaker Change: We have the potential to improve the product and customer experience, especially using tools like AI and machine learning to get those matches better, to use conversational UIs to get better information out of both the family and the caregiver to make those matches better.

Speaker Change: and if we can do that, we think we can drive conversion and also do a better job optimizing pricing and packaging there.

The other thing.

That's been a nice

Speaker Change: Tailwind for the business. I think COVID was some volatility in the business. It might have brought some demand forward in terms of in-home child care and then that's a headwind as people move back to out-of-home child care.

Joey Levin: One of the things that I think has been a tailwind and will continue to be a tailwind for the business is the enterprise portion of the business, where enterprises are increasingly taking on the responsibility for their employees to deliver care, childcare, senior care in the same way or similar ways to they've historically taken on responsibility for healthcare. I think that's a trend that's only going in one direction for a very long time, and Care should be a beneficiary of that, has been and should continue to be a beneficiary of that if we continue to execute there. The other thing that is embedded in Care that is currently underappreciated is beyond childcare, things like senior care, adult care, and pet care, relatively small pieces of the business today and sort of in the background relative to childcare.

Speaker Change: taking on responsibility for health care. I think that's a trend that's only going in one direction for a very long time and care should be a beneficiary of that, has been, and should continue to be a beneficiary of that if we continue to execute there.

The other thing that is embedded in care that is

is currently underappreciated is.

Speaker Change: beyond child care, things like senior care, adult care, and pet care, relatively small pieces of the business today, and sort of

Speaker Change: background relative to child care, but we can start to innovate on those products and we think serve those markets better and we've got some things coming out in particular for senior care shortly, which we hope will start to address that.

Joey Levin: We can start to innovate on those products, and we think serve those markets better. We've got some things coming out in particular for senior care shortly, which we hope will start to address that. We're excited about the potential in that business. Brad Wilson, new CEO, has been executing against that, and we'll see how that goes. In terms of capital allocation, Eric, nothing has materially changed. We've had a discount for a while, and we have not been active in the M&A market. We've been more accumulating cash than spending cash, and I think that's okay until we find opportunities that meet a very high bar. Everything is still on the table for IAC as it relates to capital allocation. We talked last quarter, Barry's referenced as it relates to share repurchases.

Speaker Change: So, we're excited about the potential in that business, and Brad Wilson, new CEO, has been executing against that, and we'll see how that goes.

In terms of

Speaker Change: of Capital Allocation, Eric, we are, nothing has materially changed. We've had a discount for a while.

Speaker Change: and we have not been active in the M&A market. We've been more accumulating cash than spending cash and I think that's okay.

Speaker Change: Until we find opportunities that meet a very high bar everything is Still on the table for I see as it relates the capital allocation We talked last quarter Barry's preference

Speaker Change: as it relates to share repurchases, but everything is on the table and will continue to be on the table for capital allocation and in the meantime, the cash balance grows.

Joey Levin: Everything is on the table and will continue to be on the table for capital allocation. In the meantime, the cash balance grows.

Eric Sheridan: Great. Thank you.

Operator, next question.

Joey Levin: Thanks, Eric. Operator, next question.

Operator: The next question will come from Ross Sandler with Barclays. Please go ahead.

Speaker Change: The next question will come from Ross Sandler with Barclays, please go ahead

Ross Sandler: Great. Back to DDM. Guys, on Decipher, there's a bunch of new information in the letter about how that's driving some improvement. Can you just talk about how the approach has changed with OpenAI now powering some of the number crunching at Decipher and how quickly you can roll that out to all your advertisers? More broadly, as we look out over the next five years, how can you take this technology to off-DDM inventory, and how big of an opportunity might that be? Thanks a lot.

Ross Sandler: Great. Back to DDM. Guys, on Decipher, there's a bunch of new information in the letter about how that's driving some improvement. Could you just talk about how the approach has changed with OpenAI?

Ross Sandler: now powering some of the number crunching at Decipher and how quickly you can roll that out to all your advertisers.

Speaker Change: and then more broadly as we look out over the next like five years how can you take this technology to off DDM inventory and how big of an opportunity might that be? Thanks a lot.

Joey Levin: Yeah. It's a really important question. I'll start, and then I'll turn it to Chris. I wouldn't say that the approach has changed with respect to Decipher. I'd say what we added to Decipher with the OpenAI integration is the ability, as you referenced, to start to address the off-DDM inventory. We've for a little while now have had DDM's inventory mapped nicely to outperform generally the market on intent, given the nature of DDM's inventory and the data we have, the unique inventory and the unique data that we have surrounding that. That's driven performance, that's driven outsized growth in CPMs and some of the stats we talked about how Decipher advertisers perform relative to non-Decipher advertisers.

Speaker Change: Yeah, it's a really important question. I'll start and then I'll turn it to Chris.

start to address the Opti-DM inventory.

Speaker Change: outperform generally the market on intent, given the nature of DDM's inventory and the data we have that, the unique inventory and the unique data that we have surrounding that. And that's driven performance, that's driven outsized growth in CPMs and some of the stats we talked about, about how Decipher advertisers perform relative to non-Decipher advertisers.

Joey Levin: What the OpenAI integration did was take that same mapping that we have inside DDM and map that to, I think, something like 30 million more URLs or somewhere in that neighborhood. Now we have the ability, whether through partnership or we can just buy some of that inventory to sell that inventory to advertisers to increase the size of their buy with us and to deliver larger scale packages. That's something that we think we can deliver in 2025, and we expect to be a driver of growth unbound by the size of DDM's existing inventory. You want to add to that?

Speaker Change: What the OpenAI integration did was take that same mapping that we have inside of DDM and map that to, I think, something like 30 million more URLs or somewhere in that neighborhood.

Speaker Change: And so now we have the ability, whether through partnership or we can just buy some of that inventory to sell that inventory to advertisers to increase the size of their buy with us and to deliver larger scale packages.

Speaker Change: and that's something that we think we can deliver in 2025 and we expect to be a driver of growth unbound by the size of BDM's existing inventory.

Christopher Halpin: No, I think the only additional element there when you think about third-party properties, you've got the demand and the supply side. Right now, of DDM's existing inventory, Decipher can address 100% of our supply. We significantly increased the supply through the capabilities that OpenAI has brought to the product to score, and then we can now transact across those incremental 30 million websites that are in categories similar to DDM. The effective supply that we can Decipherize will only increase. On the demand side, and Joey talked about this in the letter, right now, in terms of how our advertisers and agencies buy, only about half of the $640 million of digital advertising revenue is going through demand channels that were Decipher's addressable. As of right now, demand that comes through essentially forward contracted orders from advertisers and agencies, Decipher can be utilized.

You want to add to that? Yeah, no, I think...

The only, um...

Speaker Change: Additional element there, when you think about third-party properties, you've got the demand and the supply side. Right now, of DDM's existing inventory, Decipher can address 100% of our supply.

Speaker Change: that those incremental 30 million websites that are in categories similar to DDM. So the effective supply that we can decipherize will only increase.

Speaker Change: Only about half of the 640 million of digital advertising revenue is going through demand channels that where Decipher is addressable. So, as of right now, we...

Speaker Change: Demand that comes through essentially forward contracted orders from from advertisers

and agencies.

Decipher can be utilized.

Christopher Halpin: Right now, about half the revenue is coming from Decipher inclusive campaigns and about half non-Decipher inclusive campaigns. We said in the letter, the former, where Decipher is an element, are growing 25%, and the latter are growing about 5%. You can see the growth driver that Decipher is. That's only on about half of our digital advertising demand. The other half are either direct programmatic orders, essentially to Dotdash Meredith or fully programmatic orders across open ordering. The roadmap for Decipher is to make Decipher applicable to those channels, and really increase the addressable portion of the demand. It's all in the roadmap, OpenAI was a key step, We continue to grow the supply side, Then we also think we'll continue to grow the addressable demand side through product investment and development. Thank you, Ross. Operator, next question.

Speaker Change: Right now, about half the revenue is coming from Decipher-inclusive campaigns and about half non-Decipher-inclusive campaigns.

Speaker Change: We said in the letter, the former, where Decipher is an element, are growing.

to Dot Dash Meredith or programmatic, fully programmatic orders.

The road map for Decipher is to...

Speaker Change: make Decipher applicable to those channels and really increase the addressable portion of the demand. So it's all in the roadmap and OpenAI was a key step and we continue to grow the supply side and then we also think we'll continue to grow the addressable demand side.

through product investment and development.

Thank you, Ross. Operator, next question.

Christopher Halpin: The next question will come from Daniel Kurnos with The Benchmark Company. Please go ahead.

Speaker Change: The next question will come from Dan Kornos with the Benchmark Company. Please go ahead.

Daniel Kurnos: Yeah. Thanks. Good morning. Chris, can I just follow up on that? Are you as fully distributed as you want to be within the ad tech ecosystem, and do you need to make any incremental investment? We obviously know it was a pretty heavy lift to get Meredith up to Dotdash standards. Is there any more lift you need to do in order to achieve kind of full Decipher coverage on programmatic? Joey, obviously we've been here forever on this. You used the word, I guess, well, the word deconglomeration. Is that a long-term philosophical change for you in terms of M&A companies in the portfolio, time to spin, increased focus, and what does it mean for things like Stakes and Turo and MGM? Thanks.

Speaker Change: Yeah, thanks, good morning. Chris, can I just follow up on that? Are you...

fully distributed as you want to be with

Speaker Change: within the ad tech ecosystem, and do you need to make any incremental...

Joey Levin: Joey, you know, obviously, we've been here forever on this. You use the word, I guess, well, the word deconglomeration.

Joey Levin: Is that a long-term philosophical change for you in terms of M&A, companies in the portfolio, time to spin, increased focus, and what does it mean for things like stakes and Turo and MGM? Thanks.

Joey Levin: Sure. No, it's not, Dan, it's a good question, but it's not a long-term change. We've always been deconglomerating and reconglomerating. I think right now we want to focus on fewer things, simplifying and executing strongly against those things, and that's our near-term priority. It is possible in the future that we add new legs to IAC, but for the moment, we are focused on slimming and executing. We have a large cash balance, obviously. We have the, I think, wherewithal to do other things, and we're going to remain curious and remain interested in other things that are possibilities for IAC that are either already in the portfolio or could be new things. That really hasn't changed. I'd say short term, certainly with the step of Angi, it is more slimming than expanding. Dan, thanks. On the DDM question, break it down into a couple elements.

all right here

Speaker Change: No, it's not. Dan, it's a good question. It's not a long-term change. We've always been...

Speaker Change: deconglomerating and Reconglomerating I think right now we're we're focused on we want to focus on fewer things

simplifying and executing strongly against those things.

Speaker Change: And that's our near-term priority. It is possible in the future that we add new legs to IAC, but for the moment, we are focused on

Speaker Change: other things that are possibilities for IC that are either already in the portfolio or could be new things. So that really hasn't changed, but I'd say short term, certainly with the step of Angie, it is more slimming than expanding.

Speaker Change: Thanks. On the DDM question, break it down into a couple elements.

Christopher Halpin: As you mentioned, post combination of Meredith onto the Dotdash platform, we feel excellent about the state of our programmatic stack and programmatic integrations broadly. The ability for us to transact with the inventory that we don't sell directly, and get excellent monetization there. We feel great about the state of our ad tech stack and optimizing price and serving frequency, et cetera, and that Neil and his team have done a tremendous job building that out. The two continuing efforts, which we've talked about in the past, one is continuing to have Decipher integrate into demand-side platforms. We've talked about the Amazon platform previously and chipping away at others. The key step there is for them to accept non-cookie based targeting and ad buying within their DSP. For some, it can be natural or a relatively easily executable step.

Speaker Change: to the dot dash platform. We feel excellent about our state, the state of our programmatic stack and programmatic integrations.

broadly, so the ability

for us to transact.

Speaker Change: with the inventory that we don't sell directly and get excellent monetization there. We feel great about the state of our ad tech stack and optimizing price and serving frequency, etc. Neil and his team have done a tremendous job building that out.

continuing efforts which we've talked about in the past.

Speaker Change: One is continuing to have Decipher integrate into demand side platforms.

Speaker Change: We've talked about the Amazon platform previously and chipping away at others. The key step there is for them to accept non-cookie-based targeting and ad buying within their DSP. For some, it can be natural.

Christopher Halpin: Others, everything they're doing is cookie based, so it requires them to look at their algorithms differently. We're chipping away on that and allows Decipher to go more broadly. The second is further integrating ourselves directly into the workflows of agencies and then the large advertisers that transact.

of agencies and then the large advertisers that transact.

Christopher Halpin: Directly through themselves. For us, that's a focus on developing the managed service capability that DDM can offer, where Decipher is increasingly productized and programmatic-like on a direct basis. We talked about some ad tech acquisitions may help in that last case. All of them are part of the Decipher roadmap and a core focus of DDM Management. The company is heads down executing to make Decipher addressable to even more of the ad market. Thank you. Operator, next question.

So we've talked about some some ad tech

Speaker Change: acquisitions may help in that last case. All of them are part of the Decipher roadmap and a core focus of DDM management and the company is heads down executing to make Decipher addressable to even more of the ad market.

Thank you. Operator, next question.

Operator: Next question. The next question will come from Thomas Champion with Piper Sandler. Please go ahead.

Speaker Change: The next question will come from Tom Champion with Piper Sandler. Please go ahead.

Thomas Champion: Hi, guys. Good morning. Maybe for Jeff. I was wondering if you could elaborate a little bit on the comments in the letter on the Angi Ads product and the Angi Leads product unification. Is this a test? Did it already happen? Maybe something you did in Europe. Curious if you could talk to the relationship with the Jobs Done Well metric. Any connection there, or would this amplify that trend? Thanks.

Speaker Change: Hi guys, good morning. Maybe for Jeff, I was wondering if you could elaborate a little bit on the comments in the letter on the AdsPro product and the LeadsPro product unification. Is this a test? Did it already happen? Maybe something you did in Europe?

Speaker Change: Curious if you could talk to the relationship with the jobs done well metric, any connection there or would this amplify that trend? Thanks.

Jeff Kip: Sure. Right now, the ads and leads business exists as two different products, but also on two different platforms. Fundamentally, it's the same transaction that happens. Pro pays us several hundred dollars for a bundle of leads or contacts with homeowners. At the end of the day, the sort of business deal isn't that different, but operating it in two formats with some inconsistencies in setup on different technical platforms isn't, as was alluded to, sort of the way you'd do it if you were building it from scratch. We've set out to get onto a single platform so that we can market consistently and run the business consistently and sell one product to our customers rather than multiple products through multiple sales forces. We have been running a test to understand the efficacy of selling the single product.

Speaker Change: Sure. So, right now the Ads and Leads business exists as two different products, but also on two different platforms.

Fundamentally, it's the same transaction that happens.

Speaker Change: PRO pays us several hundred dollars for a bundle of leads or contacts with homeowners.

Speaker Change: So, at the end of the day, this sort of business deal isn't that different.

Speaker Change: but operating it in two formats with some inconsistencies in setup on different technical platforms isn't...

Speaker Change: as was alluded to, sort of the way you'd do it if you were building it from scratch. So we've set out to get onto a single platform so that we can market consistently and run the business consistently and sell one product to our customers rather than multiple products through multiple sales forces.

Jeff Kip: It is performing better than the leads, almost as well as the ads. We see a path to ending up on the same product. The same product will be a pro paying several hundred dollars for a bundle of leads. We don't expect this to be disruptive commercially or disruptive from the customer experience, or frankly, to our customer base, because it's fundamentally the same business deal. We think that getting it on the same platform will improve our business a great deal, again, by selling one product to our customers and marketing into one customer base. In terms of Jobs Done Well, we think this will also enhance the business.

Speaker Change: The same product will be a pro paying several hundred dollars for a bundle of leads. So we don't expect this to be disruptive commercially or disruptive from the customer experience or frankly to our customer base because it's fundamentally the same business deal.

Speaker Change: and we think that getting it on the same platform will improve our business a great deal. Again, by selling one product to our customers and marketing into one customer base.

Speaker Change: In terms of jobs done well, we think this will also enhance the business.

Jeff Kip: Currently, the difference between our ads and leads product is that ads effectively buys a bundle of zip codes across a single category, whereas leads are able to specify tasks within a category and specify zip codes. What that means is that the leads product lends itself better to matching than the ads product. What we will effectively do is take the ads product, which is a commitment product, and move it onto the leads platform as a commitment product, but with the matching features, which we think will actually materially enhance Jobs Done Well for that piece of our customer base. In short, we think we're going to drive commercial efficiency, effectiveness, and Jobs Done Well.

Speaker Change: Currently, the difference between our ads and leads product is that ads effectively buys a bundle of zip codes across a single category, whereas leads are able to specify tasks within a category and specify zip codes.

Speaker Change: What that means is that the leads product lends itself better to matching than the ads product and what we will effectively do is take the ads product which is a commitment product

Speaker Change: and move it on to the LEADS platform as a commitment product but with the matching features which we think will actually materially enhance jobs done well for that piece of our customer base.

Speaker Change: So in short, we think we're going to drive commercial efficiency and effectiveness and jobs done well. And at the end of the day, I don't think you asked this, but just to cover it,

Jeff Kip: At the end of the day, I don't think you asked this, but just to cover it, this is a migration of about the size we've already performed five of in Europe and are about to perform a sixth by moving the Canadian business to the European platform. This is a core competency in Angi, and although these things are not simple or easy, this is about as close to BAU as it comes when it comes to doing one of these things.

Speaker Change: This is a migration of about the size we've already performed five of in Europe and are about to form a sixth by moving the Canadian business to the European.

Speaker Change: So this is a core competency in ANGI, and although these things are not simple or easy, this is about as close to BAU as it comes when it comes to doing one of these things.

Thomas Champion: Thanks.

Thank you, Tom. Operator, next question.

Jeff Kip: Operator, next question.

Operator: The next question will come from James Heaney with Jefferies. Please go ahead.

Speaker Change: The next question will come from James Hinney with Jeffries. Please go ahead.

James Heaney: Thank you. Can we just get a little bit more detail on the comment that you made around reducing corporate costs post an Angi spin? What specifically are some of those areas? How much could we expect in terms of savings over the near, medium, and long term? Thank you.

James Hinney: Thank you. Can we just get a little bit more detail on the comment that you made around reducing corporate costs post an Angie spin and you know what specifically are some of those areas and how much could we expect in terms of savings over the you know near, medium, and long term. Thank you.

Jeff Kip: Sure. I'll start, and Chris can add to this. We're not putting a number out on it, James, but we'll look at all corporate costs. Everything's on the table in there to figure out what we need in a slimmer IAC that currently provides services for Angi. Some of those costs may go with Angi, and some of those costs may go away. Everything in that context is on the table, and we're just beginning that exercise right now, making sure we preserve the ability to grow at IAC, but do that more efficiently and tightly.

Speaker Change: I'll start and Chris can add to this, but we're not putting a number out on it, James,

Speaker Change: We'll look at all corporate costs, everything's on the table in there.

Speaker Change: to figure out what we need in a slimmer IEC that currently provides services for Angie. Some of those costs may go with Angie, and some of those costs may go away.

Speaker Change: And everything in that context is on the table, and we're just beginning that exercise right now.

Christopher Halpin: Yeah, it's an active analysis. Part of it is also looking at the corporate functions that Angi utilizes and understanding if the spin happens, what would the needs and level of infrastructure be for that area and those areas post-spin. Also, historically, when we have spun, some of our people go with the spun company to help build out the functions that don't exist at the spun vehicle, as they relied on corporate. Active analysis that we're going through, and we'll likely be coming back to you next quarter when we're setting out guidance for next year.

Speaker Change: If the spin happens, what would the needs and level of infrastructure be for that area and those areas?

Speaker Change: Build out the the functions that don't exist at the spin this fun vehicle as they relied on corporate So active analysis that we're going through and we'll likely be coming back to you Next quarter when we're setting out guidance for next year

James Heaney: Great. Maybe just one quick follow-up on just the macro environment that you're seeing within digital advertising. Obviously, a pretty strong quarter in Q3. I'm just curious what you're seeing maybe by vertical or just generally in the macro landscape?

Speaker Change: Great and maybe just one quick follow-up on just the macro environment that you're seeing within digital advertising and obviously a pretty strong quarter in Q3. I'm just curious what you're seeing maybe by vertical or just generally in the macro landscape.

Joey Levin: We talked about October already being a little bit light. As far as what we can see from the consumer, it seems reasonably healthy right now when we look at MGM, when we look at Turo, when we look at basket sizes in the commerce part of Dotdash Meredith. We don't see the consumer, at least the consumer that we're generally interacting with, retreating in any meaningful way. It seems relatively stable. For October, which we think there was a lot of distractions in October.

Speaker Change: reasonably healthy right now when we look at MGM, when we look at Turo, when we look at basket sizes in the commerce part of Dot Dash Meredith.

Speaker Change: We don't see the consumer, at least the consumer that we're generally interacting with, retreating in any meaningful way. It seems relatively stable, but for October, which we think was, there was a lot of distractions in October.

Christopher Halpin: Specifically with respect to advertising categories at DDM, the slowdown in advertising spend was pretty broad-based. We saw in the last couple of weeks of October ahead of the election. Since then, we've seen categories like retail, technology, and health come back solidly. Food and CPG had a strong September, but is coming back more slowly since the election. Home and travel are both slow, but that's been due to secular slowdowns for a while. One other, entertainment and media continues to be very weak as streamers are still broadly trying to find their way. We expect a number of these to come back in the coming weeks as we ramp up into the holidays and as we say, the Super Bowl for our food properties of Thanksgiving and December, and the team is pushing along.

Speaker Change: The slowdown in advertising spend was pretty broad-based. We saw in the last couple weeks of October, ahead of the election, since then we've seen categories like retail, technology, and health.

Come back solidly

Speaker Change: Food and CPG had a strong September, but is coming back more slowly since the election. And then home and travel are both slow.

Speaker Change: The holidays and as we as we say the Super Bowl for our food properties of Thanksgiving and and December and the team is pushing along

Joey Levin: Thanks, James.

James Heaney: Thanks.

Thanks, James. Operator, next question.

Joey Levin: Operator, next question.

Operator: The next question will come from Youssef Squali with Truist. Please go ahead.

Speaker Change: The next question will come from Yousef Squally with Truist. Please go ahead.

Youssef Squali: Thank you very much. A couple of questions. First, on the data licensing deal, can you talk about the contributions of OpenAI to the core, and just generally, what does the pipeline look like? With these types of deals, once you do a deal with one big platform, typically, you do deals with a whole slew of others. We haven't heard of any yet, maybe just provide some color on that. Joey, on the Angi spinoff, why disclose the idea as a potential event at this point? What are you hoping to gauge before you make a final decision, and potentially timing for that? Thank you.

Speaker Change: Thank you very much. So a couple questions first on the

Speaker Change: Data licensing deal. Can you talk about the contributions of open AI to the core and just generally what does the pipeline look like? With these types of deals, once you do a deal with one big platform, typically you do deals with a whole slew of others. We haven't heard of any.

Speaker Change: yet, so maybe just provide some color on that. And then, Joey, on the Angie spinoff, why just float the idea as a potential event at this point? What are you hoping to gauge before you make a final decision and potentially time in for that? Thank you.

Joey Levin: Sure. I'll start, and Chris can add in some detail on the licensing. Just in terms of what's happening broadly on licensing, we've got a number of term sheets since the OpenAI deal. There is activity in the market, but we haven't gotten to any others or at least of any noteworthy scale to a level of transacting or announcing them. There's active dialogue, and different platforms have different perspectives on it. Some respect intellectual property, and some aren't there yet and might need some assistance on getting there. We'll see how that evolves. There is certainly a number of active dialogues along those lines. On the question of timing, that's both a tactical issue and a legal issue when you start to consider you actually have to make a disclosure around that as a 85% shareholder.

You've got a number of term sheets since...

Speaker Change: a level of transacting or announcing them. But there's active dialogue and different platforms have different perspectives on it. Some respect intellectual property and some aren't there yet and might need some assistance on getting there.

Speaker Change: And so we'll see how that evolves. But there is certainly a number of active dialogues along those lines.

Speaker Change: On the question of timing, that's both a tactical issue and a legal issue. When you start to consider, you actually have to make a disclosure around that as an 85% shareholder.

Joey Levin: That also allows us to start to explore details of that with everybody necessary in the ecosystem or all constituents in that ecosystem to figure out the details. I do think it is highly likely that we get to the conclusion that we will spin Angi, but there are some processes and boxes to check with all constituents to get that done.

Speaker Change: And that also allows us to start to explore details of that with everybody necessary in the ecosystem or all constituents in that ecosystem to.

Speaker Change: to figure out the details. I do think it is highly likely that we get to the conclusion that we will spin Angie, but there are some processes and boxes to check with all constituents to get that done.

Christopher Halpin: Thanks, Joey. Youssef, with respect to the OpenAI deal, if you look at it, there are two parts to that license. One is a fixed component, which we recognize ratably, and the other is a variable component, which will true up at future dates depending on metrics we have there. Right now, we're really recognizing the fixed component. If you look at Q3 2024, licensing revenue was up about $4.1 million year over year. The lion's share of that would be driven by the OpenAI license. That's, on a quarterly basis, a good proxy for the revenue we're recognizing. Then the variable components will be calculated and recognized in the future.

Thanks Joey and Yousef with respect to the OpenAI deal

If you look at

And then there are two parts to that, licensed...

Speaker Change: One is a fixed component, which we recognize ratably, and the other is a variable component.

Speaker Change: We were licensing revenue was up about 4.1 million dollars year-over-year. The lion's share of that would be driven by the OpenAI license. So that's on a quarterly basis a good proxy for the revenue we're recognizing.

Speaker Change: and then the variable components will be you know calculated and recognized in the future.

Youssef Squali: Okay. Thank you both.

Okay, thank you both.

Joey Levin: Thank you. Operator, next question.

Thank you. Operator, next question.

Operator: The next question will come from Ygal Arounian with Citigroup. Please go ahead.

Speaker Change: The next question will come from Weigel Aronian with the Citigroup. Please go ahead.

Ygal Arounian: Hey, good morning, guys. Just to follow up on the last question around the licensing, and you mentioned the letter AI Overviews showing up in about 20% of queries. Can you expand on that a little bit, what you're seeing there trend-wise, how you expect that to play out over time? I know right now you're not seeing much of an impact to traffic. Do you think that stays that way? Joey, you just mentioned the term sheets, but in the letter, you also talked about protecting your IP. Maybe can you just expand on that as well? Thanks.

Speaker Change: Hey, good morning guys, just to follow up on the last question around.

Speaker Change: and mentioned the letter AI Overview showing up in about 20% of queries.

Speaker Change: Can you expand on that a little bit, what you're seeing there trend-wise, what you expect, how you expect that to play out over time? I know right now you're not seeing much of an impact of traffic.

Speaker Change: Do you think that stays that way? Then Joey, you just mentioned the term sheets, but in the letter you also talked about protecting your IP. Maybe we can just expand on that as well. Thanks.

Joey Levin: Sure. In terms of what we're seeing so far, when it's there, we see a low mid-single-digit impact. Sometimes actually it is positive, sometimes it is more than that, sometimes it is less than that. It really depends by category and our content. Remember that only that entire thing, it is rolled out on 20%, but also that is only a subset of our traffic. When you put all that together, the impact to Dotdash Meredith is minimal. We do not know how the UI evolves, and we do not know how penetration evolves. I do expect penetration will continue to grow, and I expect that we will continue to feature decently in that penetration, meaning in the AI Overviews, because our content usually is, me as an unbiased observer, the best. We invest a lot in that content.

Sure.

Speaker Change: In terms of what we're seeing so far, when it's there, we see

Speaker Change: We don't know how the UI evolves and we don't know how penetration evolves. I do expect penetration will continue to grow and I expect that we'll continue to

Speaker Change: featured decently in that penetration because meaning in the AI overviews because our content usually

Joey Levin: We make sure that our content is accurate and well-sourced, and therefore it earns its space in AI Overviews or elsewhere in terms of users digging deeper and getting into our content. We think we're in a good place there. We think we have been holding our ground, and we do expect to continue to. That market evolves quickly, and it's something we're keeping a close eye on. That gets to your second question, which is if people are using our content but not sending us audience or compensating us in some other way, we are going to have to protect our intellectual property to make sure that's the case. So far that has not been the problem. If that becomes a problem, we certainly will protect it.

Speaker Change: AI overviews or elsewhere in terms of users digging deeper and getting into our content. So we think we're in a good place there. We think we have been holding our ground and we do expect to continue to, but that market evolves quickly.

Speaker Change: And it's something we're keeping a close eye on and that gets to your second question, which is if people are using our content but not sending us audience or compensating us in some other way, we are going to have to protect our intellectual property.

Speaker Change: and to make sure that's the case. So far that that has not been the problem, but if that becomes a problem, we certainly will protect it.

Nicholas Jones: Great. Thank you.

Joey Levin: Thanks, Nicole. Operator, one more question, please.

Great, thank you. Operator, one more question please.

Operator: Yes, sir. The last question will come from Nicholas Jones with JMP Securities. Please go ahead.

Speaker Change: Yes, sir. And the last question will come from Nick Jones with JMP Securities. Please go ahead.

Nicholas Jones: Thanks for taking the questions. Jeff, on Angi, monetized transactions per service request continue to improve, but we see kind of service professionals going lower, monetized transactions going lower, albeit slower than service requests. How should we think about that metric going forward? As you kind of turn the corner for growth, let's say in 2026, is that a metric that can be stable, that can continue to grow? Is there a gating factor we should be aware of as we think about kind of the algorithm for growth in this business? Then Joey, on M&A, are there any learnings kind of from the last evaluations really kind of got ahead of everything? Kind of post-election, I think there's folks maybe speculating that the valuations may kind of run a lot higher.

Speaker Change: going lower, monetizing transactions going lower, albeit slower than service requests. I mean, how should we think about that metric going forward? As you kind of turn the corner for growth, let's say in 2026, does that...

Speaker Change: Is that a metric that can be stable? I could see the grow is there a gating factor We should be aware of as we think about kind of the algorithm for growth in this business And then Joey on M&A

Speaker Change: Are there any learnings, kind of from the, you know, the last evaluations really kind of got ahead of everything? Kind of post-election, I think there's folks maybe...

Speaker Change: speculating that the valuations may kind of run a lot higher does that kind of mean you're staring down maybe a multi-year period of really struggling to find any M&A? Are there any learnings from kind of the last time that maybe make it different if that happens this time? Thank you.

Nicholas Jones: Does that kind of mean you're staring down maybe a multi-year period of really struggling to find any M&A? Are there any learnings from kind of the last time that maybe make it different if that happens this time? Thank you.

Jeff Kip: I will start on the first question. There is a few components to what you are talking about. Our monetized transactions per SR are going up as we better manage our SRs against the capacity in our system. With the inflection we expect in revenue growth in 2026, we also expect monetized transactions to start growing again. The other piece you mentioned is the number of service pros. The fact is, our existing base of service pros is effectively outperforming in growth what it used to, because our retention is going up. If you normalize the acquisition over the last couple of years, you would actually see growth in the service pro base. Because we are taking down low profitability service pro acquisition, you are seeing a decline. As we get to, I think you used the word floor, so I will use it.

Speaker Change: I'll start on the first question. So there's a there's a few components to what you're talking about our monetized transactions per SR are going up as we better manage our SRs against the capacity in our system

with the inflection we expect.

Speaker Change: in Revenue Growth in 26, we also expect monetized transactions to start growing again.

Speaker Change: The other piece you mentioned is the number of service pros.

The fact is, our.

Speaker Change: So, as we get to, I think you used the word floor, so I'll use it, as we get to a floor in terms of taking the last piece out of our traffic with moving to consumer choice and consent.

Joey Levin: As we get to a floor in terms of taking the last piece out of our traffic with moving to consumer choice and consent, and then getting to the right size in terms of our sales force and our acquisition approach with our pro marketing, we will effectively level out in 2025 and grow again across all these metrics in 2026. Hopefully I think that answers all the pieces of it and also explains a little bit of why we see the growth even though optically you're not seeing it on the face of our metrics.

Speaker Change: And then getting to the right size in terms of our sales force and our acquisition approach with our pro marketing. We will effectively level out in 2025 and grow again across all these metrics in 2026.

Speaker Change: So hopefully, I think that answers all the pieces of it and also explains a little bit of why we see the growth even though optically you're not seeing it on the face of our metrics.

Joey Levin: I think on your other question, what's key in any environment, probably not telling anyone anything they don't know, but what's key in any environment, whether valuations are down or valuations are creeping up, is having an edge in the things that you're going after, and that's certainly what we have looked for and will continue to look for. If we go back to the last big acquisition, biggest acquisition we did, which was Meredith, while the timing was not ideal and we got some things wrong as it relates to the COVID benefit that both our business and Meredith's business were seeing at the time, what has turned out to be true was the strategic value of that transaction.

I think on your other question, what's key in...

Speaker Change: any environment, probably not telling anyone anything they don't know, but what's key in any environment, whether valuations are down or valuations are creeping up, is having an edge in the things that you're going after. And that's certainly what we have looked for and will continue to look for.

Speaker Change: If we go back to the last big acquisition, biggest acquisition we did, which was Meredith, while the timing was not ideal and we got some things wrong as it relates to the COVID benefits that both our business and Meredith's business were seeing at the time.

Speaker Change: What has turned out to be true was the strategic value of that transaction and the only reason that that has That that we're doing okay in that transaction right now

Joey Levin: The only reason that we're doing okay in that transaction right now, not what we originally hoped for, but the reason that we're doing okay in that transaction right now is because we were able to deliver that strategic operating execution difference in that business with bringing what was an unmodernized digital business into the modern world to the point where we could start to take share as a publisher. We had a meaningful macro headwind on that business, which we underappreciated the potential of that, but the strategic element was essential to the survival and what is now winning and taking share in that category as a digital publisher. We'll continue to look for an edge, and when we find an edge, that is something that enters the realm of possible, and that's what we continue to look for.

Speaker Change: unmodernized digital business into the modern world to a way to the point where we could take start to take share as a publisher. So we had a meaningful macro headwind on that business, which we underappreciated the potential of that, but

Speaker Change: But the strategic element was essential to the survival and what is now winning and taking share in that category as a digital publisher.

Speaker Change: So we'll continue to look for an edge, and when we find an edge, that is something that enters the realm of possible, and that's what we continue to look for.

Nicholas Jones: Thank you.

Nicholas Jones: Thank you, everyone. Thank you, operator. Wish everyone a good day, and thank you for your time.

Speaker Change: Thank you, everyone. Thank you, operator. I wish everyone a good day and thank you for your time.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: and the American Heart Association. For more information, visit www.fema.gov or call 1-877-432-7175. For more information, visit www.fema.gov or call 1-877-432-7175. For more information, visit www.fema.gov