Angi Inc. (ANGI) Q4 2020 Earnings Report, Transcript and Summary

Good morning, everyone. Glenn Schiffman here, and welcome to the IAC and ANGI Homeservices Fourth Quarter Earnings Call. Joining me today is Joey Levin, CEO of IAC and Chairman of ANGI Homeservices; also Brandon Ridenour, CEO of ANGI Homeservices; and Anjali Sud, CEO of Vimeo will be joining the call. Welcome, Anjali. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relations section of IAC’s website. I will shortly turn the call over to Joey to make a few brief introductory remarks, and then we’ll open it up to Q&A. Before we get to that, I'd like to remind you that during this call, 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 such 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 Homeservices' fourth quarter press releases and respective reports filed with the SEC. We'll also discuss certain non-GAAP measures, which include adjusted EBITDA, which we’ll refer to today as EBITDA with simplicity during this call. I'll also refer you to our press releases, the IAC shareholder letter, and again, to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material and non-GAAP measures. Let's jump right into it. Joey?

Thanks, Glenn. I just want to correct one mistake Glenn made there in the opening comments, which is in reference to a call. He's stuck a little bit in the past right now. I want to welcome everybody here to our video. Those of you who'll be reading the transcript you're missing out. We've got the beautiful smiling faces of all of our analysts Anjali, Glenn, Brandon coming from Denver. And this is not just a new way of doing things. It's also a great display of what is really central right now, or the exciting story at IAC right now, which is Vimeo. And the fun part of this is not just that we've got everybody on video and we've got logos here and our names and chirons and things like that, which is pretty cool using Vimeo's Livestream technology, but the other piece is this is just the beginning of this videos journey with Vimeo. So after this it will be edited, it will be shared, it will be archived, it will be part of our corporate library and we'll have access to that forever on Vimeo. And it's a pretty cool display of what can be done. And obviously we're seeing that happen quite a bit all over the world now in really fun and interesting and exciting ways. And I'm sure we'll talk about that today. And the other thing I wanted to say is we had a great year in 2020, and we feel very good about how we did on a lot of different levels, a lot of different ways we measure ourselves. Of course one big one is revenue. And growing through 2020 is quite an accomplishment. And in any given year, we entered the year and we have big ambitions over the course of the year to accelerate. And where finished the year growing 27% year-on-year in aggregate at IAC and the individual stories within IAC are really what matter there. But that growth in aggregate is something we're really excited about. And the way the team operated this year through all the things that were going on was really, really impressive. So that's the story I want to get I know we've got a lot of people on here and we've got a lot of questions. So let's get to questions quickly. And Mark Schneider why don't you lead us off there?

Great. Thanks Joey. So for our first question, we'll go to Eric Sheridan from UBS.

Thanks, everyone and happy new year to the whole team. Hope everyone is safe and well. Maybe two questions if I can. Joey for you, maybe you can help explain why a spin-off of Vimeo was the right choice in entirety for both Vimeo and IAC? And maybe lay out some of your views about how you plan on repositioning IAC ex-Vimeo on the equity side for the long-term on the other side of the spin? And maybe, Anjali, if I could sneak maybe one in for you. Obviously, a super interesting year for Vimeo on the demand side. How should we be thinking about you aligning investments in product innovation against what you learned in 2020 against what you're trying to do on, sort of, a five year view and grow Vimeo as a platform? Thanks.

Sure. On the IPO full spin versus partial spin so you saw we raised capital in the private markets for Vimeo. I think that's all the capital that Vimeo needs for a while. And that was quick and easy and no real distraction for the team. And getting that done in that way I think was -- allowed us to do what's important, which is focused on growing the business and Anjali team to focus on things like product and sales and marketing and not the fundraising side or the capital market side. And that got done the sort of function of an IPO or raising capital. Then as it relates to partial versus entirely -- what we wanted to do was get Vimeo out there on its own to have its own currency, to be unfettered, to be a clean clear story on its own and a complete spin is what accomplishes that. At any given point we get this question a lot of, well are you -- is now the time on account of value, or is now the time on account of lack of value or things like that? What -- the focus for us is getting the business out to be clean and clear and operating the best unfettered. And we think right now that Vimeo can do that, can stand on its own, can stand well on its own. And there's no reason to hold back a piece IAC. And IAC shareholders, of course, participate in all that regardless in a very clean way. The next question important one, of course, what's next for IAC? We -- any time where we've done a spin and for a few of these the immediate next question is, okay, what's next? And every time also it's a little bit of -- I don't see a lot of what's left in the cover there. And even that was as recently as the match spend and people not quite seen the Vimeo story is clearly as we thought as amazing as it's played out, and even surprised us. We've got a great collection of businesses right now at IAC ex-Vimeo. ANGI you're all quite familiar with is just a huge and business a huge category with a huge leadership position. And we've got a lot we're doing on the product side that we're very excited about to open up more of the market. Dotdash is starting to really come out of its shell and growing 33% last quarter and being a real business with real -- real moats we think in the publishing category, which is something that previously didn't -- I didn't think was possible in recent history a lot of people didn't think was possible. We've got Care, which is relatively new for us but we think can be a huge marketplace and a huge $30 billion -- $40 billion category. And I think there's ways to expand that category to the hundreds of billions. And again, a huge leadership position nobody really close there. And we've also got -- as you know we get this question a lot but a large amount of cash nearly $3 billion of cash that we're going to put to work. And we're going to put that to work with no rush, no urgency to buy things and the urgency to buy things in any particular market. But generally with the same priorities we always have which is; first, the businesses that we know that we own are going to be the first priority on capital because we can have a real fundamental advantage in acquiring something. And I think that applies both to new businesses in our existing categories and to share repurchases. Obviously we understand our own business. Hopefully we understand our own business pretty well. And then looking for new categories and I think generally with strong preference for control positions. We do have a couple of recent examples that have worked out in minority positions. But generally we're going to be focused on control positions and hopefully, we'll enter a few new categories and likely on the earlier side of things, but we'll see. And we've got a pretty good stable of the whole range, meaning we've got early stage businesses and Nursefly and Bluecrew that we're really excited about right now. And we've got later stage businesses in ANGI and Dotdash. So we're really excited about all of those. I think if we've got them in the portfolio right now, it's because we believe they have real potential.

Hi, Eric. So to your question about incremental investment and product innovation of Vimeo over the next few years. And the thing that we've learned since the pandemic is, how much bigger the market opportunity is than what we thought. And we really believe our TAM is every professional, every team, every organization in the world who now needs to use video to reach their customers and employees. And we've had so many organizations and businesses knocking on our door in recent months asking to use Vimeo in ways that we don't yet have the product for. So it's an early market. I think product innovation is where we will be focusing our long-term investments. And some of the things that we're trying to do is, we want to be the single corporate video solution for any organization of any size to share content internally and externally. We have a great position now in certain parts of that. We can power townhalls and trainings, but there's so many other ways that video is proliferating throughout organizations and everything from sharing product demos and creative walkthroughs to rethinking how webinars work to making every interaction with video more engaging. And so we see lots of opportunity and you'll see both our near-term and our long-term investments really designed to solve these needs. We'll also be investing in areas like sales and marketing, on the sales side in the near term, expanding our sales force both domestically and outside the U.S.. We see a big opportunity to increase our marketing spend particularly on mobile, where we have an opportunity. We've been historically very web focused. And you'll also see us do things like diversify our acquisition channels by investing in areas like partnerships and in our free product. So it's an early market. I think we have a great head-start with a leading all-in-one software solution, but we want to turn that head-start into a definitive lead and we're excited with the capital and the focus to do that.

Great. Our next question we'll go to Cory Carpenter at JPMorgan.

Great. Thanks Mark. I had two questions on ANGI. First for Brandon, could you give us an update on where you are just in terms of addressing your supply constraint challenges and how impactful you think some of your product initiatives could be this year? And then as a follow-up for Glenn, it would be good to hear your comments on some of the puts and takes to the January metrics that we got in the shareholder letter, and then also an update on how you're thinking about the trajectory of the business through the year. Thanks.

Yes, sure. Thank you. So the business performed pretty consistent with our expectations in Q4 and into January. A lot of the factors that have affected us since the start of the pandemic are still present. Our traditional business was resilient, I think in the face of these externalities. But we've seen two things. I talked about these consistently over the past year. One is we saw a pullback in small business advertising spend. And put simply small businesses were paying a little bit less than they were before, spending a little bit less to meet new customers. And the other thing which I said, we had to accomplish was to grow our sales force. And we end the year with the biggest sales force in the history of the company. That is up 30% from the trough we experienced in the middle of last year, as a result of just externalizing our workforce and figuring out and learning how to onboard and train sales reps. So as we enter this year we have a large sales force. We're off to a great start. And the benefits of those incremental sales reps will accrue over the course of the year to provide more capacity. The other thing is just when and how does the spend from our existing customers normalize or get back to previous levels. I think that's a really difficult question to answer. The way we're approaching that is, I think it makes rational sense that it normalizes, but we're not banking on that. We believe we can reaccelerate our traditional business whether that happens or not irrespective of the timing of it. If it does happen it will provide obviously a nice tailwind. But, through larger sales force and through our own internal activities, we believe very firmly that we can get that traditional business accelerating from where we are today. Separately, we're very happy with the benefits fixed price delivered throughout Q4. When you look at the sort of the modest acceleration in the overall business, most of that is a credit to the growth in fixed price. Not only has it sort of exceeding our expectations but it had a nice counter-seasonal effect where it's really quite strong in Q4 relative to the normal seasonal patterns of our traditional business. We expect that growth to continue strong throughout this year. It does bring meaningful capacity to the market the ability to serve more customers. So we're excited to see that grow, and sort of be a counterbalance to the ebbs and flows of the way our traditional business works. And then on the product front, we have a lot going on both to supply just to address supply challenges, but also meaningfully to pursue our most important goal, which is to develop a very large and strong direct to brand consumer audience. And simply put, we are trying to build the largest audience and most loyal audience of homeowners in the industry and we think that is the fundamental thing we need to accomplish to build a very strong long-term business. We've talked about over the course of last year, lots and lots of innovation that we were able to bring to market in terms of new features. And as we look forward to this year, we're very much in the early innings of fixed price. I know it's grown. It's $160 million, which is a bit ahead of where we thought we would be. We've got over 200 projects, but we're very much in the early innings. There's a lot of innovation yet to come both in terms of refining what that product experience is like, refining our ability and optimizing our ability to price super accurately in every local market, and then ultimately to -- through scale improve the quality of the ecosystem. Every bit that we grow larger, the product grows stronger through the benefit of more coverage, more providers, more history on the providers, which leads to higher fulfillment rates with our customers, which in turn leads to happier customers that repeat at a much higher rate. I think you probably all saw in the letter, we released some metrics that indicate the behavioral changes we're seeing in consumers who engage with these new products. The early results are very strong. Our path ahead is about getting more and more customers into these experiences and that will be a big focus for this year.

Thanks Brandon. Just to translate that into numbers and the puts and takes for the year. Revenue in January was as expected. You'll recall last year we changed from net revenue accounting to gross revenue accounting for pre-priced or fixed price business and if you look back on the fourth quarter, that provided a lift of about $22 million to our revenue. So, the fourth quarter grew revenue about 6%, again, similar to January and as expected. We still expect as we talked about on the last earnings call, a 9% to 10% revenue growth for the ensuing quarters until probably the third, more likely, the fourth quarter as all the initiatives that Brandon spoke about begin to kick in. That's on the sales. Obviously, that's the scaling of fixed price. And that's on the other product innovations that we've been talking about for a while. In terms of the monthly metrics, I'll ask you as we report the monthly metrics this year to have one eye on the monthly metrics this year and one eye on the monthly metrics last year. Because obviously, last year there was a lot of volatility in respect of how SPs behaved due to COVID, how consumers behaved due to COVID. So, February was our strongest month of the year last year, we grew 21% and March obviously was flat and April was even down. So, you will see some volatility in the monthly metrics. But again, we are very comfortable with the 9% to 10% quarterly growth, again, until the third and fourth quarter when we expect to hit our 20% targets and then given all the work that Brandon and his team are doing accelerate into 2022.

Our next question if we can go to Brent Thill from Jefferies.

Morning. For Anjali, if you could talk through the confidence in the Vimeo trends, they're not temporary and how you're anticipating a post-pandemic recovery?

Sure. Look we're obviously watching the demand trends carefully and they are holding. Our sales pipeline is strong. January was the strongest we've seen, even stronger than the peak of the pandemic in March. Our days to close on our sales cycle have stayed short. And on the self-serve side, our highest tiers are growing over 200% year-on-year in bookings. So, certainly from a demand perspective, no signs of a slowdown. But the bigger thing that we see is the use cases and our customers using video in ways that we would expect to ensure and in ways that are helping them drive better outcomes for their business. And there we see it very clearly. You've got companies like Starbucks and Lowe's training their store associates using video or Nike training their retail partners like Foot Locker in Europe. And then you see those organizations be able to reach their associates in ways that are more engaging more scalable at a fraction of the cost, you don't see them going away from that. Same with fitness studios, performing arts venues, cultural institutions, they're finding that they can access larger audiences than they ever could before in some cases 10x-ing the number of audience that they have. And so we just don't see a rationale for why they would go back from that. And you see small businesses, who are able to get higher clicks, more customers from using video than a major text. And by the way that's in an environment, where a lot of small businesses are shut down. And many more hopefully after the pandemic will come back. So, just it gives us a lot of confidence that video is going to settle. We don't know exactly where from a demand perspective, but certainly at an elevated level than what we saw pre-COVID. What that means for our growth trajectory? Also, hard to predict. Before the pandemic, we have said, we expect to grow between 20% and 30% in terms of revenue. Obviously, if you look at some monthly metrics that no longer applies as a range. How much higher than that is what is hard to predict. But again, certainly expect to be growing faster than we anticipated before pandemic started.

The revenue recognition dynamics of this business as you know the SaaS-based subscription business that deceleration from where we are today, north of 50% to the north of 30%. That will be staged over the next few quarters. It will probably bottom out in the fourth quarter. Maybe, it will come close to the 30% in the fourth quarter of this year. And then, we do expect, given all the product work we're doing, given all the investments we're doing across and we do expect to again accelerate from there into 2022.

Thank you.

Our next question we will go to Ross Sandler from Barclays.

Hey, guys. Just one for Glenn and then one for Anjali. So Glenn, yeah, nothing more exciting for IAC enthusiast than reading 487-page spin documents so thanks for dropping that during earnings season by the way, but a question on the spin mechanics. So it looks like IAC will get 88% and Vimeo will be spun out. There's a $6 billion post-money valuation right now, or about 161 million shares so about 1.6 million or thereabouts Vimeo shares for each IAC share. Is that correct in terms of the ratio? And then what's the mechanics from here in terms of the time line? And then the second question for Anjali. I thought one of the more interesting data points was that a 25% of Vimeo revenue comes from subs that you up-sell to a higher tier a higher price tier. So can you talk about how you're working to convert more of that 200 million free users into the 1.5 million pay. And then within that 1.5 million, how you move them up that would be great.

Let me know the first one. Ross, that's impressive. But there's another 150 pages. I believe, it was 620 or 630 page document. But in terms of timing of process from here we refiled the S-4 earlier this week. We – as we respond to SEC comments, we'll probably refile it again in the next week or two, when we'll drop into year-end financials for Vimeo and IAC. And then hopefully we'll navigate through the SEC process throughout the month of February. That should tee us up for mailing to shareholders in March, and then have a shareholder vote potentially the end of March, early April. And then hope to affect the spin sometime in April, worst case early May. So, early second quarter is the timing. You – as I said there's a great read of the document. We do own after the two capital raises, we do own 88% of Vimeo. We have about 146 million shares of Vimeo, 86 million shares of IAC. So the spin ratio will be 1.6 based on these current estimates obviously that could evolve. So every shareholder of IAC will get 1.6 shares of Vimeo, again based on the current numbers and the current calculations and then, based on, the $6 billion post-money valuation that Vimeo last raised capital at, that obviously is a $35 stock price for, Vimeo.

Ross, on your question about up-selling our free base, our free users into paid customers we see a huge opportunity to do that. And a lot of our product investment is designed to unlock that. So, a couple of things that we see, so today, I think about 60% of our paying subscribers start as free first. And then about 60% of our enterprise customers come from that free or self-serve base. So already you kind of have a freemium model. But, if you actually look at, what you can do for free on Vimeo using video. We see an opportunity to get every one of those free users, to be creating content. So one of the things we've done is, we've launched our Vimeo create app and are offering a version of that for free to our user base. We recently launched a screen recorder tool, called Vimeo Record, also free for our user base. And this is a way in which, we're looking to really drive sort of bottoms-up product-led growth by having, employees, small businesses, just creating content which is usually the biggest barrier to getting people to use video. And then from there, expanding to branding and customization then up selling to a higher tier, or security if you want to put your content, in a secure portal, or expanding team size. That's a big opportunity. You'll see us do a lot, to really be a sort of per-seat or team-driven model in the future. So we've got quite a few levers to kind of move that base. And if you just look at the base itself, nearly 70% of Fortune 500 companies have an account on Vimeo. And we have less than 4,000 enterprise customers today. So, just huge opportunity, and we think the biggest unlock will be product, and having the right mechanisms to both, get people creating content for free and then, the reasons to upgrade.

Our next question will be from John Blackledge at Cowen.

Great. Thanks. So two questions, one on Vimeo subs. Just curious, what the mix of new subs was in 2020 business versus creative pros? And any color on the overall sub mix, ending 2020, again business versus creative pros? And then, within business, the mix of enterprise versus SMBs, which I think Anjali just referenced, enterprise subs and how that could trend in 2021. And then on, Care.com, if you could just discuss the engagement metrics that you referenced in the letter and then, perhaps frame the drivers of the business in the next three years? Thank you.

On the Vimeo sub question, the vast majority of our new subscribers in 2020 are businesses. Within that, there's a good mix of smaller businesses, all the way up to large organizations. But we very clearly -- I think every year we've kind of seen that mix shift away from pros, towards businesses. That has certainly continued and in some ways accelerated, since the pandemic. And we expect that trend to continue. And then in terms of enterprise versus SMBs, our sub volume is much, much heavier towards the small business. We don't – if you look at our customers today, we don't have – from the enterprise side, which is these are – this is anyone who's our sales team has spoken to. That's around 4,000 customers. But, again if you look at the actual users in the base, a lot of free and self-serve customers are large organizations. And the way we're sort of thinking about it is how do we – if we have one user or buyer within an organization using our tools, how do we actually expand from there in a very seamless way so that other departments, other buyers and other teams can discover our products and use them. And so what you'll see on the enterprise side is both trying to land new customers within our existing base and through our sales team but then also trying to expand within each organization so that Vimeo share, if you will, of how they're using video across that organization increases. A – Joey Levin: Hey, John, on Care, there's – probably the best example is it also gets the big change we made in product. But what we've started to do with caregivers is they're all certified. And what that means is it's actually harder to become a caregiver. There's more friction in the process of becoming a caregiver. And that as you'd imagine leads to actually a decrease in caregivers on the platform, which should say initially bad news. Good news is the caregivers who are coming in are much more engaged and the interactions that we're now seeing between the caregivers and the families is much more fruitful. So we can deliver fewer applicants to a given job and get more success in that job being fulfilled. It's happening actually to quite a meaningful degree, meaning there was a period where you would get dozens or even hundreds of listings for a job when you had list it. And now that's down to a handful, which is way easier for the caregiver meaning their hit rate is higher; way easier for the family meaning they have to sort through less and speak to fewer people and get success on that and be confident that the caregiver they're connected with was background checked and certified in the ways that they go through our process. And so sometimes actually we spend a lot of our time in our products trying to reduce friction is an area, where we actually added friction to drive engagement and that seems to be working well so far. Overall the metrics I – just I'm sure a lot of you would be in the same camp. Think about my family. We haven't had a caregiver in the house in a year. And in a normal year that probably would have been 30 times or 15 times or something like that. So we see less – we actually see again less engagement from families right now given that the need for childcare in going out and things like that is happening less. But in retention we're holding. And the reason we're holding retention is I think people see the value in the product. They are optimistic that they can start using their product more. And – but right now there's just less need for it. But it's – I think very encouraging to see retention holding. When we think about the future of Care in the next few years, it's continuing to drive that engagement and driving that engagement driving frequency, which means being relevant more often. So picking up on those themes, making it very easy so we've talked about this concept in other products, make it very easy to do something like instant book. So you're going out, you will want somebody – you need somebody quickly and knowing that the caregiver has met certain parameters that you set forth, where you can instant book. Or you can see the schedule of both the family and the caregiver, you can match those and those schedules are accurate and up-to-date and reliable. When we have products like that, I think it drives subscription because you can add real value in the subscription. I think, it drives engagement for both sides of the marketplace and things like that are going to be important. The other thing that's really big, I think over the next few years and you'll see us start to talk about increasingly which has been a real pleasant surprise for us is, we talked about a little bit in the letter is care work and the enterprise product. I think that is just absolutely relevant and a necessity for most enterprises today and starting to think about how they can help with childcare or senior care for their employees. And we're seeing real growth in that business, exciting growth in that business. And I think, we're going to continue to innovate there in ways that will open up what I suspect would be a much bigger market than exists today.

Thank you.

For our next question, we'll go to Brian Fitzgerald at Wells Fargo.

Thanks, guys. Maybe this for Glenn and Brandon. On ANGI fixed price or preprice is roughly 10% of the business now. Where do you think that gets to longer terms? And then in terms of the long-term margin structure, is that predicated on fixed price hitting certain thresholds? Then a quick housekeeping one. Can you remind us right now, that the 20 -- 200 products that are fixed price, what portion of the TAM do you assume that that addresses? Thanks.

Yes, great question. So yes, we're -- I think we finished at about 11% this year. I would say, our internal target and our ambition is to get this to about half the size of the business. And the reason for that, it's a little bit arbitrary, but the reason for that is that, we believe that the two lines of business, our traditional business and the preprice business are really synergistic. As the preprice business grows, it really will not only does it serve our customers better, but it ultimately increases our buying power, allows us to invest more in growing participation in the marketplace and then both product lines really benefit from that. Separately, as I mentioned earlier, the bigger the prepriced ecosystem gets, fundamentally the better the service gets, the higher the quality, the better the reliability and ultimately the better the transactional economics get as well, simply because, we're fulfilling at a higher rate and with a higher level of quality. So, I think getting it to half the size of the business is certainly our internal ambition. In terms of the time frame to get there, it's tricky because our traditional business is large and we do expect that traditional business to keep growing. So, we're looking at somewhere over a five to seven year time frame, I think is a reasonable guess. Obviously, you're projecting out pretty far on that. In terms of the 200 projects, I think that is right around -- I think that's in the ballpark of only one-third maybe or so maybe a little bit over of the total addressable market for home services. Within that 200 projects, a lot of those are I think we said are around $50 billion of TAM, which is only about 10% of the addressable market. Those are the ones that we have very high competence and we understand the economic sub. And the other part, which I talked about over the course of last year were these higher dollar projects that were averaging more about $5,000 per ticket. I think last time we talked, I said we were more in the early experimental phase that we had some promising signs on the consumer side in terms of their willingness to buy, but we were still figuring out, what it looked like to fulfill those kind of projects and what the economics would be. Where we sit today, our confidence has grown substantially. We are -- that is growing pretty quickly. Obviously, when consumers will buy, we've gotten comfortable with our ability to fulfill. And our real focus during this year is getting that higher -- the more valuable line of business contribution margin positive. We feel optimistic. I think we moved from -- and this is an experiment to, this is probably going to work and it could be pretty big, because it opens up a lot of the additional addressable market.

And then in terms of the long-term margin structure, yes, I think fixed price does impact that. And I think the way to think about our opportunity, it's a $400 billion to $500 billion market and in our traditional business, that revenue opportunity used to be our take rate. Now that we have fixed price or pre-price, now that we have financing, now that we have additional products, we talk about subscription in the letter, I think, we're now going after the full $400 billion to $500 billion opportunity. So the margin opportunity may be more muted on some of the larger consideration jobs, but, obviously, the EBITDA opportunity is substantial. If we go back to our traditional business and the lower consideration jobs on fixed price, yes, our margin targets of 35% are still absolutely achievable. I think, I've done this a couple of times. But to frame it up, sales and marketing are 50% to 55% of revenue. I think this past year, it was 52%. Product and development and G&A, 20% to 25% of revenue. This past year it was 25%. You apply -- if you look at that against our current 10% to 15% margin and I think you have 5 to 10 points in the G&A and product development category and you have 10 to 15 points in the sales and marketing category. That gets you to 35%. But again, as we scale the medium consideration jobs, where our pro-pay is a lot higher, materials are a lot higher component of the total. That's the $5,000 job, that's the $10,000 jobs. The 35% is a bridge too far. But again, we've reframed our entire opportunity to go after the entirety of our TAM, the $400 billion to $500 billion

Thanks, guys. Appreciate it.

Our next question will be from Jason Helfstein at Oppenheimer.

Yes. Thank you. Two questions. First for Anjali. Maybe talk a bit about the behavior of your cohort. So when you think about your 2019 cohorts, the way they act in 2020, what drove the increase in the value of those cohorts, when you think about what they did, any pricing changes you made, the way you were able to drive usage? And then second, Joey, maybe, I want to dig a bit more into the use of cash, $3 billion. I mean in the letter, you did talk about a wish list for Dotdash. Historically, the content digital media has been small for you. I mean, should we expect you guys to move much more meaningfully in that if there are assets that could be bought, or could it be more things to bolster or accelerate, things like the Care.com business or maybe perhaps more investments in gaming to follow what you've already done? Thanks.

So, on the Vimeo cohort behavior, we're seeing two trends. One, our existing customers from prior cohorts are paying us more today than they were before, so our net revenue retention on enterprise has been increasing for seven consecutive quarters. And that's coming from the investment we're making in the products, expanding the use cases and sort of optimizing our sales motion. And then, we also see that is new cohorts, in general, are paying us more than in 2020 than the new cohorts were in 2019 and 2018. And that's because we are seeing greater demand for our higher-priced offerings, areas like Livestream. And as we shift the mix of our subscribers, more businesses looking for advanced marketing tools, that's analytics, customization, we just see that there's more desire to pay willingness to pay for those features. And that's why even on the self-serve side our two fastest-growing plans are our two highest-priced ones. And then the other piece of course is just general retention and product engagement. There we've been watching this very closely since the pandemic began. And we see no indication of deterioration in retention. Product engagement has been holding really strong. And in some areas like live streaming has been higher among recent cohorts. And so generally looks like a very solid healthy cohort behavior. And there's also tons of room for us to go. And this is where we look at again the use cases we serve right now. We have so many customers asking to use Vimeo and video in a bunch of other ways. And the quicker we can get some of the things that we're working on and our road map out into the market, the quicker we'll be able to expand that net revenue retention even further.

On Jason, M&A and the cash. So Dotdash is a good place to start. We definitely are looking at businesses there. And I definitely think we can find some opportunities, nothing imminent right now. But what's driving us there is really just the success of the business standalone and the success of the business and the acquisitions they've done so far. By the way, if we wanted to call this a software business, which is not, but if we wanted to call this software business, their top 25 advertisers, a 100% of them renewed 2019 to 2020 and spent more. So we will talk about like net revenue retention, they're over 100% at that business, which is pretty impressive for a publishing business. And the reason that's true is because they have -- they perform. The ads perform for advertisers. And we're still doing that with the fewest ads in the competitive landscape. That starts to build a real competitive moat. We're investing more in content than others and we're monetizing it less, while performing for advertisers. So we can keep that formula going, which I do believe we can. We can continue to add into that. The main way we're doing that is going to be organic growth, which is adding more content with the same level of quality, with the same level of freshness without using all those same tools. And we want to in any given period be investing significantly more in our content than any of the competition. But we find areas where and we've been looking for them and we continue to find areas where we can add on a publication, a site a brand where we can kind of put this same system to work. And we've done that to a relatively small degree. So far probably the biggest acquisition there is $20 million or $30 million or something like that. I think we can go bigger. It may be that turns out there's nothing available. Maybe there's nothing available in our price range. But I do think that there's a lot of brands in this area that could use help and where we'll try and bring that to bear. But I don't see it likely that that's going to be a very large portion of the $3 billion of cash just given what's available. So, that goes back to the other things which is where we prioritizing the cash besides Dotdash. Care is a good one although we just did an acquisition a Care, which seems to be working out very well. That bolsters the Care of work business adds a bunch of customers and revenue there and where we think we can cross-sell that. Not a huge acquisition for us, but a good one. My guess is it's probably not a lot more acquisition of Care, as we digest that one and focus on the organic growth. And then gaming is another area. Look the numbers at bet MGM right now inside of MGM are mind blowing. I mean, they're unbelievable growth what we're seeing. The numbers that we saw in Michigan are really unbelievable. And that was a huge proof point for MGM because we have a huge off-line -- MGM has a huge off-line brand in Michigan, in Detroit. So that was a start. That was a market where we entered in the very beginning, which is obviously important. And it's a market where the whole system should work. And what we're seeing so far is, it is working. And that's not just confidence for MGM that's also confidence for us in the category that this tailwind of a new market growing of it being accepted and explored by a whole new base of users is something that is really interesting for us for our capital. We talk about MGM, looked at this acquisition recently, which was public and we talked about we'd be willing to put capital into it, we were willing to put capital into that kind of thing. And we're still open in this area. Whether that's through MGM or otherwise, we're definitely still open in this area and it's fun to see a category transforming so much and growing so much. And it's fun to see especially MGM success which was a big part of our thesis. Obviously, the recovery on COVID at MGM who knows is anybody's guess. But that MGM in a safe balance sheet perspective, but then there is always this option and that option seems to be really exciting in there right now. I think that probably answers your question, Jason.

Yes, that's it. If you want you can call Dotdash ad tech because that's back and load right now. So there you go.

Our next question, can we go to Yoni Yadgaran at Credit Suisse.

Hey, guys. Good morning. So two questions for Brandon on ANGI if I may. So the first one is on the supply side. So you guys have called out seeing some phenomenal kind of engaging metrics for early consumers using fixed price. On the SP side, are you guys seeing similar kind of benefits to retention? What kind of like engagement are you seeing with SPs who are opting into your fixed price network versus your core lead gen business? And then second question you guys intra-quarter have called out some kind of price increases due to overwhelming demand on fixed price. We'd love to hear some more details around that the magnitude of those increases and how that maybe impacted unit economics of fixed price?

Yes. Great question. So thanks, Yoni. On the SP side for fixed price, it's a completely different offering. And for a provider the dynamic is exactly the opposite of our traditional service. And the traditional service providers are paying us. But with fixed price we're paying providers and we're going out and offering them a job. It's their choice as to whether that job is appealing and whether the price point is appealing or whether they have the availability. But there's really no downside for them. They either find it attractive and opt to do it and we pay them or they don't and they pass it up and perhaps take us up on the next one. As you can imagine that dynamic makes it much more attractive and much easier to bring providers into our marketplace for these kind of jobs. And in general, the way we think about retention for providers is, as long as we have a steady flow of demand for them it tends to promote activity, right? And if we go a long stretch, we have a job for you today, but we don't have another job for you for two months then a lot of times those folks will go stale. And it's not so much that they're cutting the service, it's just that it's the nature of sort of keeping a constant flow of activity and how that promotes engagement. So in general the cost to acquire these providers is very low. As long as we have a steady flow of demand retention is very high. And quite frankly, we really think about it differently than perhaps you would for an advertising business where retention really isn't -- pro retention isn't necessarily the main driver or the biggest issue. It's really about having enough pros and enough coverage and keeping up with the growth in demand. And as long as we're growing at the pace we're currently growing, it is a human-driven task to go out and continuously get more and more providers to keep up with that growth. And that's really the gating factor. It's just scaling. In terms of the price increase on fixed price, I guess touching on exactly what I just said, we're constantly balancing an incredibly fast growth in consumer demand with our ability to keep up. We're just going out and scaling our provider coverage. And in particular last year, because of some of the volatility created by the pandemic and at one point thinking that things were falling sort of off the table and then seeing an incredible resurgence and reacting to a pretty big imbalance in our ability to keep up with providers we adjust the prices up. We will adjust those down as appropriate given our ability to fulfill. And right now, I'd say that balance has improved a bit. We continue to get better at it and gotten better out through the course of the end of last year. But that will be the dynamic for a while. As long as we're growing transactions in fixed price on the consumer side at a very high rate, we'll be stretching to keep up in terms of growing provider capacity over 200 projects and 400-plus markets. It's an enormous sort of scale challenge. And it's why I don't -- it's not going to away for a while because we expect to grow fast for a while.

Thanks, Glenn.

Thanks.

Our next question can we go to Ygal Arounian from Wedbush.

Hey, thanks guys. One question for Anjali and one for Joey. On Vimeo, Anjali, you touched on it a little bit on the e-commerce side. You guys have partnerships with Shopify with GoDaddy. We've been hearing more and more about live streaming opportunities for direct-to-consumer companies around selling products. Can you talk about the opportunity there around e-commerce a little bit more specifically? And then Joey, the color around MGM and online gaming was helpful. Can you talk about -- now that we're a few months into the relationship with MGM and how that relationship has worked you've kind of brought to the table what they brought and what you guys have kind of collaborated on together? Thanks.

So for maybe on the partnership side, we really think of partnerships as an acquisition channel and also a way to open up our market by exposing more businesses to the power of video on the platforms that they're on. And so yes, we've announced native integrations or partnerships with GoDaddy, Shopify. I think more recently Emails and Hubspot were the last -- the latest 2. We've got others coming. We are investing in partnerships. And really the key -- the model that we're looking to scale here is natively integrating parts of our capabilities directly into these platforms and then having the ability for those customers to have a direct relationship with Vimeo when they want to do more. And we are seeing I think promising signs there, though it is still early and definitely a growth area for us. Within that, there's a couple of different buckets. There's live. There's website builders. There's marketing CRM software companies and then there's e-commerce for sure. And truthfully, we're looking at all of them as really interesting areas to go into. E-commerce for sure is one of the use cases that we are seeing traction. And our Shopify app is getting really great reviews, great engagement. And there what we are allowing an e-commerce store owner to do is just very quickly, automatically generate videos for their product detail pages, just using the existing content that's on those pages and then the ability to edit and customize from there. So I think you'll see us do more in e-commerce for sure in helping businesses use video to sell their products, increase their conversion rates, et cetera. But it's not -- that's one of the use cases across video that we're focused on and our partnership strategy is broader.

On the MGM relationship, it's I think fantastic. And we are -- leadership at MGM is great. Bill Hornbuckle is I think doing a wonderful job with the business. And he's very keen on our help in digital, which is obviously our experience. The -- just hired -- MGM just hired a new CFO, Jon Halkyard who's got great experience and seems fantastic. And it's a company with a very engaged Board. So they're -- they've been wonderful to work with. And our job there, our view of our job there is just to help and be available when they need us. And if that means looking at things on digital on a piling grade, if that means helping recruit talent, we help bring some people into the company and will continue to help bring in people into the company, in areas where we have a good network. Hopefully that continues. The -- really when you think about it, it's just I think helpful to have a very big shareholder with deep pockets and a long-term commitment, because we can have very open and valuable conversations with MGM leadership and management that says where we can be supportive, we can put capital behind things, we can put our whole organization behind things in terms of teams and work. And I think that's been hopefully, I mean -- you can certainly ask them, but hopefully that's been additive and productive. And it certainly has been from our perspective and we hope that continues. I mean, when we're in something for a very long-term with that amount of capital, we're going to put a lot of attention to it and again just do it in whatever ways that we can be helpful where they want us and hopefully that continues to work as it has been so far.

Great. Thanks so much.

Can we go to Kunal Madhukar at Deutsche Bank.

Thanks Mark. Thanks for taking the questions. A couple on ANGI if I may. One, with regard to fixed price versus the traditional marketplace business, it looks like the marketplace business was flat in 2020 year-over-year. Wanted to understand if you are deliberately funneling customers along the fixed price route in order to get scale in that side? So that's one. Second, as we look at the guide that Glenn just talked about in terms of 9% to 10% growth in the first two quarters and then getting to 20% by the fourth quarter. As we look at like the comps, the comps get easier in the second and third quarters and then it gets slightly tougher in the fourth quarter. So as we look at the guide versus the comps, can you help us reconcile in terms of what is driving the confidence in your ability to get to the 20% growth in the fourth quarter, and not in the second when the comps get much easier? Thank you.

Thanks Kunal. So in terms of funneling customers to fixed price versus our traditional business, every customer that comes into our marketplace in the projects where we offer pre-priced services is really -- has a choice. They can connect with a local provider and that monetizes through our traditional matching business or they can engage with the preprice on-demand offering and purchase the service directly. The truth is we've had and -- continued to have during 2020 more customers than we can service through both sides of this business. And there's really no -- the reason with our traditional business that was -- growth was pretty moderate last year year-over-year it was largely driven by the fact that small businesses have pulled back on spending and that is really just an indication of their ability to handle more customers. The pandemic has affected those small businesses in a variety of ways. And we just saw broadly speaking those small businesses pull back on the amount of the money they're willing to spend to meet new customers. The best research -- it's a complicated topic. The best research I've seen on the industry says that most of these small businesses expect to grow their ad spend in 2021. As we all know the future is difficult to predict at the moment. But it's not -- that is not an artifact of us funneling people one way or the other. We have an excess of consumer demand for services is the reality. And then Glenn, do you want to take the question on comps and the guidance?

Yes, sure. Look our confidence is born of a couple of things. One it's the growth in sales force that Brandon spoke about earlier. And as we've talked about in the past it takes six months to nine months really for sales force to kick-in. It's also the growth initiatives that we've talked about and fixed price continuing to scale. But the biggest issue is the world has to get back to normal. These SPs whose businesses have been a paired either their ability to hire people, either their supply chain their -- the issues that we've all seen with supply chain and people being comfortable to have SPs come into your home. The world has to get back to normal for us to pierce through that and we expect it will. And then also as Joey talked about in the letter, SPs right now are inundated with demand, of course, some from our platform and some on their own. And as SRs, we think will moderate over the course of the year we think monetized transactions obviously will go up and will be the beneficiary of that. We have a great aggregate amount of demand and a great top of the funnel aggregate amount of supply. And now we've got to remove the friction and now we've got to match that. And our monetization metrics we think will strongly follow that.

Mark, one…

Thanks, Brandon.

Sure, one we can. Sure, one final.

So our last question will be from Youssef Squali from Truist.

All right. Thanks. Thank you. Thanks, Mark for squeezing me in. So two quick ones for me. I guess, I just want to double-click on ANGI with Brandon if I may. So just trying to think through kind of the gating factors to take you from 200 jobs to even a greater number and maybe attacking the entire TAM and the pace for that. Can you speak to the contribution margin of that business of the prepaid versus or pre-priced versus the rest? Are you getting -- are you at a point where you are already at somewhat a parity between the 2 or does that not even factor necessarily in the equation for you to aggressively push on the accelerator there? And then on the -- and maybe one quick question for Anjali. The team has a history -- and you've touched a little bit on that earlier, but I want to dig a little deeper. The team has historically talked about the Vimeo opportunity as a 20% to 30% grower over time with about a 20%-plus segment EBITDA margins overtime. As you become independent, as you go out and address your own set of investors, what is the message I guess as a SaaS company - a lot of SaaS companies talk about rule of 30, rule 40, rule of 50 which is your growth rate, plus your operating margin or EBITDA margin. Can you just speak to how you look at it and how will you guide basically once you have an opportunity to do so? Thanks.

Thanks. Good question. On the ANGI question, so for fixed price, we have a lot of projects covered that are lower value, lower ticket priced. And we feel extraordinarily confident about the long-term margin profile of those project types as they mature. And they cover in excess of $100 billion of TAM alone. So there's a tremendous amount of room to run in terms of growth just in those project types. There are higher-value projects that I referenced earlier. They are around $5000 a ticket. And we've been more in the experimental mode with those. But at this point, we feel pretty confident that we can drive those – drive growth there with good economics. We'll still prove that out during this year. In terms of getting to more TAM, it's really in this latter bucket. We started with a subset of projects and are going out and getting good at them, if you will. And as that playbook proves successful, we'll essentially go out to more and more of those larger projects and continue to offer more of a pre-priced offering. So in terms of how much the $400 billion $500 billion do we ultimately get to? I don't know for sure, but I certainly feel comfortable and confident that we're going to get to well beyond half of that as our addressable market with pre-price and perhaps well beyond half. It will take time and iteration to get good at each of the project types. It's not a cookie-cutter process where the exact same method works for every project type. There's some learning integration involved.

Yes. Then on contribution margin, in aggregate, our fixed price or pre-priced business is contribution margin positive. We passed that in 2020. Obviously the path to profitability is the investments we're making to scale all that. But importantly, the contribution from our fixed price business is greater than the contribution we get from an equivalent SR. That's what excites us. That's what helps us reframe this opportunity about going after the entirety of that $400 billion to $500 billion market. Anjali?

Look, I think we think about the business like any SaaS company would. We were -- I mean, it was a rule of 40 SaaS business in 2020. We were a rule of 50 SaaS business in Q4. Hard to say what near-term 2021 will look like as we lap the pandemic. But in terms of long-term growth, on top line, as I said, our original range of 20% to 30%, we think it's conservative. It's hard to say how much higher we'll be above that, but we certainly think we'll be better off than we were prepandemic. And then on margins long-term, I think we've said around 20%. Do we think we can do better than that? Yes. Is there a goal in the near term to be profitable right now? No, we don't see any reason to do that. We're investing in growth. And we are focused on our unit economics. LTV to CAC is strong right now. We are increasing gross margins. We've crossed 70%. And I think there's room from there. So, we'll keep focusing on improving margins and keeping our unit economics solid. But otherwise, early market, lots of opportunity for growth, and it's all going to come down to building the right products for our customers.

Youssef, one other thing I'd add. As people think about Vimeo, I'd also focus on the free cash flow, because despite the investment year we're having this year at Vimeo and the investment year -- I'm sorry, the investment year we had in 2020 and the investment year we're going to have in 2021, as you'll see in the S-4, we still generated over $30 million of free cash flow. And that's not given the revenue recognition dynamics, given our bookings that number is not going down. So I think that's an interesting way for people to think about calibrating the EBITDA and the throughput with the revenue growth.

That’s great color.

All right, everybody. We've run over on time. Thank you for joining us. It's fun to have watched the entire sunrise, and Brandon's background here in Denver, and we've got a new day starting. Talk to you all soon. Bye.