Good morning, everyone, and welcome to the IAC and Angi Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. At this time, I'd like to turn the floor over to Christopher Halpin, Executive Vice President and CFO of IAC. Sir, please go ahead.

Thank you. Good morning, everyone. Christopher Halpin here. And welcome to the IAC and Angi, Inc. third quarter earnings call. Joining me today is Joey Levin, CEO of IAC and CEO and Chairman of Angi, Inc. 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, and 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 very brief introductory remarks and then we will open it up to Q&A. Before we get to that, I'd like to remind you that, during this presentation, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar statements. These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in IAC's and Angi, Inc.'s third quarter press releases and our respective filings with the SEC. 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 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 non-GAAP measures. With that, I will hand it over to Joey.

Thanks, Chris. Welcome, everybody, and welcome back to our simplified earnings call format. As Chris said, I am very pleased to be here in two different capacities, CEO of IAC and now CEO of Angi. I'm running Angi right now because, given the performance of the business, we all agreed it was time to make a change. I love the opportunity for this business, and I want to make sure we nail it. I've only been in the seat 30 days, so I'll have more to share in February. But the big strategic vision has not changed. We're here to bring homeowners and service professionals together. We're here to make that process more consistent, more reliable and less hassle. That means, we'll continue to offer a mix of advertising, leads and services, but some things will change. And the thesis – the theme around change is simplicity and balance. The exposure and presence of services in the organization is going to be more balanced. I think we've overcomplicated the product, not just in services, but I think we've overcomplicated the product a bit and I think we need to simplify, both for homeowners and for service professionals. I think we're also going to be more disciplined on expenses. Our OpEx growth the last few years has outpaced our gross profit growth and only part of that is marketing related to the rebrand. I think we can get back to a much better balance there. We also have a lot of talent in this organization. And I think everyone's ready to be energized and uplifted and focus on delighting the customer. I've spent time in New York, I've spent time in Denver, I've spent time in Indianapolis, and I've met a lot of people who are really excited about delighting the customer. And I think we have a tremendous opportunity to do that better than we've done in the past. As far as the rest of IAC, we have work to do at Dotdash Meredith, but nothing we've seen yet has undercut the fundamental thesis. And I know you all have a lot of questions. So let's get to them. I just will ask your forgiveness in advance if I won't be able to answer all your Angi questions right now as I work into the details of the business and nail down a concrete plan. If I can't answer it now, I will have an answer by February when we're together again. Mark, let's start with the first question.

Okay, thank you. Operator, let's go to the questions.

[Operator Instructions]. And our first question today comes from Eric Sheridan from Goldman Sachs.

Joey, I want to come back to your sort of comments there to kick off the call. I think with the changes of Angi, I wanted to maybe hone in on two issues. Number one, why do you and the Board think you are the right person to run that business at this point in time considering you're already running IAC on a day-to-day basis. So maybe going a little bit deeper on the decision process there and why you feel you're the right person to take over that challenge at this point in time, number one. Number two, as you referenced, there's a lot of ambition and a lot of market opportunity at Angi. And as you said in the letter, we've been through a lot of CEOs over the last half decade, how should we be thinking about your broader business philosophy? Is Angi going to be run for growth? Is it going to be run for a balance of growth and profits? How should we be thinking about you striking the right balance there to amplify returns when measured against the market opportunity?

In terms of why me, and I guess I can weave in the answer to your second question in that. First, I've been involved in this business in one way or another for a very long time. I know the things we've done have worked. I know the things we've done that haven't worked. And so, I have, I'd say, a significant working knowledge of the category, the product, the customers. Second, some of the fundamental things that we need to accomplish at Angi are very consistent with things we've accomplished at other businesses, how to handle search, how to handle monetization, things to optimize for and conversion. And I think that experience is going to be very relevant to Angi here as it would be to other Internet businesses. Third, I believe in this business. I think it's important to have a leader who believes in the business and I have believed in this business for a very long time. And I know that we can create enormous value here. We also have to move quickly. I think that we've made some recent mistakes that we need to fix. And I don't want to say I was the CEO of convenience, but I did happen to be available very quickly to do this. And I think that that allows us to make the change that we want to make faster than a longer process. And the last thing is, and this gets to your second question is I think the organization needs to be more disciplined. And disciplined means balancing the short-term and the long-term. Any leader I think can optimize for the short-term and any leader I think can optimize for the long-term. I think the right manager, the best managers and the right operating philosophy is to be balancing the short-term and the long-term, I think we have to deliver for 2023. And I think we have to deliver more profit for 2023. And I think we're totally capable of doing that. But I also think we have to focus on the long-term and make sure that what we're doing for our customers, our homeowners and our service professionals is something that's going to keep them around working with us for a very long time and we have to balance those things. I think that is totally possible to do. I think we perhaps drifted from some of that balance in short and long-term. I think we drifted in some of that balance from profit and growth. And I think that we can run this business a much more balanced way, which will be healthy for everybody in that Angi ecosystem.

Our next question comes from John Blackledge from Cowen.

Two questions. First on Dotdash Meredith digital revenue. Can you just discuss the ad trends in 3Q that led to the ad declines, particularly around brand versus performance, and also key verticals? And then, what did you see in October that leads you to believe that digital revenue could be flat in the first half and then turning positive in the back half of the year? And then just second question on the EBITDA, if you can unpack the new guide of $240 million to $250 million and kind of bridge us from the $300 million. Is it all revenue shortfall? And then, thanks for the color on the 2023 rev trajectory. Just any thoughts on EBITDA in 2023, perhaps framing an EBITDA margin range would be helpful.

It's Chris. So we spent real time in the letter trying to frame this out, which I'll refer to as we go through it. There are two dynamics to Dotdash Meredith digital revenue that are just key overhangs on our performance this year. And that ties both to third quarter trends, what we're seeing now and where we are on Dotdash EBITDA to your second question. The first is the integration, and specifically the migration of the Meredith digital properties to the Dotdash platform. And then the second is macro in overall ad market. I'll take those one at a time. On the migration, we said in the last quarter, we were overly aggressive on our expected timing of the migrations. As a reminder to those who are newer to the story, this is the acquired properties. Meredith was about two-thirds the size of Dotdash. In a serial fashion, moving those properties over to the Dotdash platform, and that means much faster site speeds, reduced ad inventory, and eliminating old content and producing better content. And we'll go, I'm sure, into more depth on this call. Those delays pushed us from an expected completion, say, around the 4th of July of all the major sites to where we are now, which was we completed the migrations by the end of September, early October. Two things happened. One, because the sites were not migrated, we could not drive the traffic increases we expect from migrated sites as early and capture as much of that in this year as we expected. The second is we were not able to run as we call it the Dotdash playbook and integrate performance marketing and e-commerce into the Meredith sites and all the additional revenue sources that we expect to drive. That was one overhang…

And our next question comes from Cory Carpenter from JPMorgan.

Joey, I wanted to ask for an update on what you're seeing in the macroenvironment across the portfolio, maybe both on the consumer and the enterprise side, and how this informs your outlook into the holiday season? And then, secondly, on Angi, just hoping you could give us an update on where you're at with the roofing turnaround and how this could impact growth for the rest of the year?

Sure. Mostly what we can see is the consumer is still spending. The clearest things we could see in travel, which I think have been well covered, we see Turo and MGM doing phenomenally well where that's direct spending. But also where we see in Dotdash Meredith consumer spending through e-commerce performance marketing type stuff is that they're still spending on goods. Now some of that spend has shifted from certain kinds of goods to other kinds of goods, but still spending. People aren't opening crypto accounts anymore. So that kind of thing has come back. But the general spending is still happening as far as we can see really everywhere on the consumer side. There's some things in Angi that make it a little bit harder to read in terms of how we're adjusting our marketing demand. I would say that demand has lightened at Angi generally. But again, there's a bunch of noise in that, both when looking at comparable, sort of exceptionally high comparables in the prior year, and specific changes we're making around our marketing. So, it's an imperfect picture, but I'd say still reasonably strong on the consumer side. On the enterprise side, you heard what Chris said on advertising and what we talk about generally on advertising. We think spending – certainly, people are pausing right now. When there's uncertainty in ad markets, people hold their spend. Whether we settle in at a high market or a low market, I expect spending to come back on advertising, but it's the uncertainty piece that I think is driving a pullback in ad spend. And we can see that across other of our businesses too. On care, it is interesting, in that we're seeing utilization go up on the consumer side for – sorry, as it…

Corey, the only thing I'd add for the group on roofing relative to the timing of the storm at the end of the month of September, essentially, the patterns were the last 10 days or so very little activity in the roofing in terms of actual installation or orders as people, A, managed their own safety, but, B, held off doing any activities until they understood what their roof would look like after the storm. And then following that two week period where there were much bigger priorities in those markets than organizing a roof reconstruction just based on the health and safety activities going on. From a revenue perspective, the hurricane would be a headwind in both September and October. There's not a very large backlog that Joey spoke about, and that will be worked out through the next, say, four plus months. And it's really just around fulfillment and staffing.

And our next question comes from Brent Thill from Jefferies.

This is David on for Brent. Two, if I may. For the first question, could you maybe just talk a little bit about the sale of Bluecrew to EmployBridge, maybe any color you can provide on the cash receipt and the equity you have with the combined company on that would be helpful. And then second, I want to ask on capital allocation. Do you guys have any updates on how you guys are thinking about assets in the public markets versus maybe the private markets? We saw that you guys bought some MGM and bought back some stock during the quarter. Any color on how you kind of thought about pairing the two would be helpful.

It's Chris. I'll start on Bluecrew and then hand to Joey on capital allocation. We have sold the business into EmployBridge, which is the industry leader in light staffing. Proceeds were about $50 million in cash, and then equity in the pro forma company, where we are minority shareholder with a board seat, we're very excited about the combination of combining EmployBridge's scale with Bluecrew's technology, software and client base. Also, we were investing heavily in that business. As we disclosed in the letter, it had an EBITDA loss of $26 million on an LTM basis, which you can pro forma out following closing. With that, I will hand it over Joey.

I'll just add that I think that Blue Crew/EmployBridge combination is a really interesting one and it'll be fun to see that vision executed on a bigger scale. Capital allocation, we are always, as you know, looking at what to do with our cash and evaluating external opportunities against internal opportunities. The landscape of things we consider hasn't changed. So we prioritize our internal businesses, both through the P&L and through tack-on M&A where we think we have a significant advantage. And then, we look externally and, of course, we look at share repurchases, and there's a big surface area for share repurchases for us right now, in the sense there's IAC, there's Angi, there's MGM to some extent and there's Turo to some extent. All these things are things that we evaluate very regularly and will continue to evaluate regularly. We're not going to make a prediction right now or a proclamation right now on which ones we'll buy and when or whether, but we'll just you that we continue to evaluate that very regularly. And that's a very important part of our capital allocation process. I think, generally speaking, public markets are pretty attractive right now. I think that you can buy things that have risk where you can get a significant reward for taking that risk. And I think that's pretty interesting. I think the private markets are still not there yet. And they've always lagged. And they'll continue to lag. And eventually there will be an adjustment. You probably don't want to be a private company who needs capital right now. But if you are a private company who doesn't need capital, that's a lovely place to be right now, because you get to make up your valuation and nobody else gets to do that right now. But I if there's opportunities, I think they're more likely public, but who knows, we'll continue to look at both. And that's kind of how we've always been and will continue to be on capital allocation.

Our next question comes from Ross Sandler from Barclays.

Just a couple of follow-ups on Dotdash Meredith. So, on the growth rates for next year, how much is baked in in terms of the digital ad market, industry growth into your forecast? So, if the ad market continues to tank, how much sensitivity do we have around that forecast? And if we look at the Meredith properties, it seems like most portfolio will be kind of in that 10% traffic growth zone based on that chart in the letter. And I know you're shifting some of the ad sales from programmatic to premium and performance, as you mentioned. So, could use bridge traffic to revenue and kind of what kind of monetization you're baking in to that forecast.

In terms of growth rates and tying to industry, we said in the letter that we expect to get back to flat in the first half and then growing for the full year without an improvement in the ad market. And that confidence in – this ties to your second question as well of the linkage between traffic and revenue. That confidence ties to some specific factors to Dotdash Meredith, the integration and where we are. One is that the migration was a challenging journey. But we are predominantly on the other side of it, heavily on the other side of it, and feel like the drags that occur, the integration related drags that occur on volumes, on ad serving, etc., will lead to easier comps year-over-year. The second is that we expect to grow sessions on the migrated sites now that we can run the Dotdash playbook, which, at the end of the day, audience times price is the revenue model on the advertising side. So, we expect consumption in audience to increase as we push these sites forward and they perform better with faster sites, fewer ads and improved content. The third is that [indiscernible] just core opportunities to like-to-like improves CPMs across the portfolio, as we move the Meredith sites on to the platform and have better ad serving technology, have better pricing models, etc., in just certain conventions that we can impose. And then finally is ecommerce and performance marketing, where the Meredith sites have trailed. I think there the [indiscernible] have been dying to get their hands on those Meredith properties and brand names to do the Dotdash performance marketing playbook and we can go from there. Overall, we are not sanguine on the ad market, especially in the first half of the year. And so, we're focused on our netting, improving our sales, driving the consumption increases, and we're really in that fine tuning mode of content ad serving ecommerce on the Meredith sites.

Our next question comes from Jason Helfstein from Oppenheimer.

Joey, can you just talk about the shortfall on the last, call it, 12 months or 18 months at services versus leads and what have you learned that gives you confidence in the current strategy as opposed to kind of making another pivot?

Jason, I guess the services we mentioned in the letter, we've done a billion dollars in services revenue. That is a tremendous amount of revenue to do in this category. Not a lot of service professionals have gotten to that volume. We did that across a lot of tasks. And we did that across a lot of geographies. What we learned in that process was there's some areas and types of tasks that we, I think, can do very well. And there's some that are harder to complete. What we also learned in that is that there's customer experiences that work out really well for customers, and some that work out less well. And we are now taking that learning and honing down to what we think is a great consumer experience. That consumer experience when done perfectly melds very well with the ads and leads experience. Meaning a homeowner comes in, a homeowner makes a choice, a homeowner understands the choice clearly between one path and the other, and gets the job done on the way that they want to get a job done. I talked about for a very long time the fact that consumers in this category can be very different and can have very different needs. There's a consumer who says, I just want you to do all the work, Angi, and there's a consumer who says I want to do all the work myself because I don't trust anybody else to do it. And when I say do the work, I don't mean lay down the tiles. I mean find the person who's going to do the work and negotiate with them and figure out price and decide to how to evaluate whether they're capable or not. We have those consumers. And those consumers are very passionate about which one of those paths they want to pursue. And I think that we now, having served a lot of services, can do a better job honing which customer should go down which path and help them make that decision. That's probably the biggest learning. And that's also likely to be the biggest change in terms of how we present those opportunities to homeowners and how we present those opportunities to pros. I think, I guess, embedded also in your question is what's the outlook for both of those businesses. Both of those businesses have substantial upside relative to where we are. It is possible that, in services, we readjust what we're doing there in a way to start from a different area to grow again. And we're working through that as it relates to our 2023 plan. But we are – I believe both of those businesses are very good businesses, can very much serve homeowners and service professionals and can grow substantially from where they are over time.

Our next question comes from Dan Kurnos from The Benchmark Company.

Joey, if I can just stick with more structural and I think we've gotten enough data now to suggest the general monetizable queries and actions across network sites. They're just way down. So forgetting the macro for a second, I know you said you don't think there's anything structurally wrong at DDM, which obviously we've generally agreed with. But there has clearly been a shift in recent times to retail media. And I'm just wondering how you're kind of viewing sort of intermediaries versus direct to what's becoming increasingly digitally native organic traffic as it impacts DDM. And then, on Angi, you kind of just answered this question, but for what it's worth, locals even saying that home improvement is up like mid-teens as a category right now. So just structurally how you're thinking of growing ads and leads as a share of a pie which seems to be one of the few bright spots in a rather messy macro backdrop.

I'm not sure I understood the first question, but I'm going to try, which is I think that the digital media properties had an absolute torrent of traffic, of just floods of traffic in 2020, 2021 and that has abated. I think that was the first question, but I'm not positive. Is that…?

I'll rephrase this as we go. I think there's kind of a view out there that digitally native brands, Amazon, everyone, they're kind of taking share just through organic direct traffic rather than consumers utilizing intermediary sites. And I'm not obviously implying that [indiscernible] more of the network pocket, but just trying to understand how you think structurally about that shift.

We don't see that. And I think we see the exact opposite of that, which is, number one, that consumers are looking for intermediaries to help make these decisions. And as those intermediaries are adding value, and that's validated by the behavior we're seeing on the people who want the end result of that traffic, meaning the folks who are paying for our ecommerce traffic or performance marketing traffic and increasingly eager to engage with that audience, as we're helping them make decisions and divine [ph] intent. So that is not a trend that – obviously, you worry about Amazon in any capacity and the big tech giants have lots of levers to pull in all kinds of areas. But generally, we think that we're in a good place there relative to homeowners and the partners on the other side. Ads and leads is, I believe, a very good business and a very long term business. I think that, number one, it's generally – we've talked about this before. It's reasonably hedged in this market in the sense that, as demand comes down, interest among service professionals for our product goes up. That's a good thing. That's probably the opposite of the services business, which is in an excessive demand environment, the services business is a very important solution. And so, those things are somewhat opposite. But I love the ads and leads business and the services business and believe both have significant growth from here. Was there something more specific in the question?

I think I could probably follow-up. It was really more just around market share, given real strength and kind of local and some other channels we're hearing…

That one is – I think we've got work to do on share. And that's something I'm very focused on making sure that we fix.

I think, Dan, that speaks to Joey's comment about the need to focus more beyond services where there are attractive market opportunities available to Angi in ads and leads, and that can be driven through real focus and prioritization, given what we see in the broader market.

Our next question comes from Justin Patterson from KeyBanc.

Sticking with just the Angi business, could you talk about the confidence level in terms of fixing traffic acquisition? This hasn't been the first time that there's been challenges with that. I realize it's now one brand in there. But talk about just some of the levers you have to improve that over the coming quarters and how we should think about that timeline.

Yeah, this is an area where I have a lot of confidence. And you're right, Justin, we've made some mistakes on here in the past. I think that the mistakes have been actually kind of similar. So in the case, going back a while where we combined Angie's List and HomeAdvisor, a lot of stuff changing traffic in that and some things that weren't happening underneath the surface. I think that the rebrand was a similar story, which is we did the rebrand. That was a massive shift in traffic and brand exposure, and a lot of small things got consumed in the story of the big thing. And I'm really focused on the small things, which is what matter in generating traffic. And I think if we execute against the small things, we ought to deliver significantly in traffic. The reason I believe that is I've seen us do it in other places, and this now has very, very high priority in the organization. If you talk to anybody who's interacted with me at Angi over the last few weeks, they will tell you that same thing back, which is we are focused on fixing this and we are doing all the things necessary in the organization to make sure that we are getting the traffic back. The things that win in traffic long term is, obviously, having the best content and having the best experience. We've seen this over and over again in search engines. Sometimes they get it wrong for a while, hopefully long term they get it right and we can deliver getting it right. The things that matter for getting it right in this category are – we have full listings of service professionals. We have ratings and reviews on service professionals. We have closed…

Our next question comes from Logan Wright [ph] from RBC. Our next question comes from Tom Champion from Piper Sandler.

Joey, the letter highlights the sum of the parts and it seems like clearly there's a disconnect with the assets in totality and where the stock is trading. What do you think is the primary source of the disconnect? And what kind of addresses that, ultimately? And maybe one more, if you could just update us a little bit on Vivian and some of the investments made since the capital raise?

I think the primary source of the disconnect is execution. And then the other source of the disconnect is – as is the case in any sum of the parts, what people are focused on is the ability to access the parts. And there's probably a perceived time or gap between now and ability to access the parts. That's something I've talked about a lot. That doesn't really worry me. And everything that we have, we maintain that optionality. That option has value. The value of that option doesn't really decline. And so, we don't feel real pressure to exercise those options. But the thing that we have done in realizing value in those things over time is we have certainly demonstrated an ability and willingness to exercise those options in tax efficient ways. Right now, that's not a high priority focus of ours. The focus for us is execution against all of our businesses. And then those options will become available or more exercisable over time and that usually shrinks the discount. The discount is something that I've talked about a lot and that I find interesting in an opportunity. And the bigger the discount is, the more exciting the opportunity is there. Same question with Vivian capital raise.

Vivian is doing great. Two things going very well for Vivian. One, it's in a tremendous market, which is the healthcare market. And healthcare labor is a significant supply/demand imbalance. And we are serving that. And I think we're serving that very well. We are also delivering a, I'll say, bespoke product for the category, meaning most of the platforms that have most of the share are delivering generic products that cover lots of categories. What Vivian is doing very well is nailing a category specifically. And this is – started as travel nurses, and it's going broader to more health care. But the thing that it accomplishes is it serves the job seeker with exactly the data that they need in that category. And it serves the employer with exactly the data that they need in that category. And being in that position is, as I say, a good place to be in a market where there's a lot of employers looking for workers there.

The only thing I'd add relative to the sum of the parts and the stub or nonpublic value thesis, Dotdash is a major element of value there. It has been a disrupted year through the migration as well as the advertising downdraft. We really tried to provide insight and color on the performance and dynamics there and bifurcate what is integration merger-related versus macro. And we will look to continue to do that. But we also believe across care, Vivian, Turo and elsewhere, there are tremendous value sources in the IAC family that the market is not recognizing.

And our final question today comes from Youssef Squali from SunTrust (sic) [Truist].

That's Truist. So, a couple of questions. Maybe, Joey, can you maybe just contextualize where you are with Dotdash Meredith relative to your initial expectations, both operationally – obviously, the $450 million segment EBITDA for next year is now off the table. But how far are you behind your initial expectations? In the letter on Angi, I think you talked about your intention of being more balanced. I'm assuming that means between services and ads and leads. Practically, what did that mean? Are we just talking about the marketing spend and conversion that you've talked about in addressing a question that was asked earlier? Or is there something else beyond just the go-to-market strategy with the marketing?

I'll do them in reverse order. The balance of services versus ads and leads actually runs all throughout the organization. First, just how we expose the various products to consumers and when we expose the various products to consumers. That will change and be more balanced. Second is, how it exists inside the organization. Right now, or historically, I'd say decisions were made to prioritize services in all kinds of organizational decisions, and that will be more balanced. The organization was operated in a way that was, I would say, services first. And I'd say going forward, services is very important. And services is a great service for homeowners, but it will be services, ads and leads and it will be homeowner first in terms of how to think about our operations and how to think about the customer experience. The second question was Dotdash Meredith and how far behind we are. I think, realistically, we're probably one to one-and-a-half maybe years behind schedule. I think there's, one, the delays we've talked about extensively in the integration and that was probably in aggregate a six-month delay. And then I think that the ad market on top of that has certainly not helped. And I think just generally being delayed in the integration, led to exposure of more issues that need to be addressed. So I think, in aggregate, it has put us on maybe that – roughly that timeline. Again, I really don't think there's a single thing that we've seen yet that says the fundamental thesis is flawed. But the surrounding environment is a tough one. And that's made all this slower and harder for us and self-inflicted wounds over the last six months have added to that too.

Well, thank you all for joining us this quarter and look forward to talking to you next quarter when hopefully we'll have a lot more to share.

Ladies and gentlemen, that will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.