Welcome to the Angi First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andrew Russakoff, CFO. Please go ahead.

Thank you, operator. Good morning, everyone. Andrew Russakoff here, CFO of Angi Inc., and welcome to the Angi Inc. first quarter earnings call. As a note, I go by Rusty, so everyone should please feel free to refer to me as Rusty. And joining me today is Jeff Kip, CEO of Angi Inc. Angi has also published a shareholder letter, which is currently available on the Investor Relations section of Angi Inc.'s website. We have also made some changes to our metrics disclosures this quarter and have published a short deck on the website to provide more helpful context and explanations. We will not be reading the shareholder letter or presenting the metrics primer deck on this call. I will soon pass it over to Jeff for a few introductory remarks and then open it up to Q&A. But before we get to that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities laws. These forward-looking statements may include statements related to our outlook, strategy and future performance and are based on our current expectations and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q, our most recent annual report on Form 10-K and in the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. We'll also discuss certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our earnings release, shareholder letter, our public filings with the SEC and, again, to the Investor Relations section of our website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now let's jump right into it, Jeff.

Thanks, Rusty, and welcome, everyone, to Angi's first quarter earnings call and our first as an independent public company. I'm going to offer modestly longer introductory remarks today than we would normally, given our release of the new operating metrics that Rusty just mentioned. Overall, our first quarter performance was solid. As many of you know, we implemented homeowner choice in the quarter. Homeowner choice means that every lead sent to a pro on Angi is sent because a homeowner has specifically and affirmatively taken action to choose that pro in our user interface. A year ago, about 40% of our leads were automatched and, today, essentially none are. We could explore some automatched leads in the future for customers who want that product, but today, we have none. For context, homeowners are happier when they're able to choose the Pros who contact them and are significantly more likely to hire a pro with whom they have selected versus pros with whom they've been automatched. Since we implemented homeowner choice in January, we have seen our homeowner Net Promoter Score, key metric for homeowner satisfaction, near positive for the first time since we started tracking the metric. The metric was below negative 30 two years ago. A positive 30 NPS move in that kind of time frame is a significant accomplishment. I've got to tip my hat to the entire organization for their hard work over the last couple of years. Further, our pro win rate, the percent of the time a pro wins a job on a lead they pay for jumped 10% from before homeowner choice to after. And that is a key indicator, too. Pros don't come to the platform to chat with homeowners, they come to win work. Both metrics are key indicators that we're getting…

[Operator Instructions] And our first question comes from Eric Sheridan from Goldman Sachs. Please go ahead.

Thanks so much for taking the questions, and thanks for all the detail in the shareholder letter and explanation. The first one would be on the macro environment. When you think about the macro environment you're operating in right now, I want to know if you could contrast elements of consumer wallet spend against the services landscape you're trying to operate in when compared to the broader competitive landscape for those dollars, just to click down a little bit on the broader landscape today. And then second, when you think about the margin framework you're laying out for the remainder of this year, how should investors think about the investments being made in product and platform and the transition that's impacting margins this year relative to the yield or the output that can produce the type of growth you're talking about in 2026 and beyond?

All right. Thanks, Eric. This is Rusty. I can take these both. On the macro, as you're all well aware, virtually every business is prioritizing macro. And in home services, just like in other industries, it's typical and rational for consumers to pull back on large and discretionary purchases in recessionary environments and instead focus more on necessary maintenance and work that will prevent larger expenses down the line. And that's what the survey data is suggesting. So for our business, in early April, we did see a modest bump down in homeowner volume along with some mix down in job size, leading to what we think is an impact versus our run rates of three to five percentage points, as pointed out in the shareholder letter. And so we've incorporated this into our outlook for the rest of the year. For some broader context, in our position within the industry, there are some countercyclical dynamics that do tend to factor into the mix for us. The fact is we're a small fraction of the overall industry, and our biggest competitor is still word of mouth. So what general macro weakness means for pros is that pros are seeing their order book shrink and their calendars open up and that it's coming generally, meaning from all directions, including their bread and butter referrals and repeat customers. When that happens, they need to fill that void with additional sources of demand, which in turn, naturally drives them to rely more on us. And when that happens, it leads to easier customer acquisition, stickier customer behavior and increased share of wallet. And so if you look back into some past cycles, we have typically seen some combination of pro acquisition increases and cost decreases and higher lead consumption per pro. And this…

Great. Thank you, Rusty.

Great. All right. Operator, next question, please.

Next question comes from Cory Carpenter from JPMorgan. Please go ahead.

I had two. Maybe just tying together your comments, Rusty, on macro and, Jeff, what you said earlier about the home -- where you're at in the homeowner experience. Could you just speak to what's giving you confidence in the revenue trends continuing to improve through the year given those dynamics? And then secondly, now that you're a standalone company, it would be great to hear your capital allocation priorities.

I can take those. Thanks. I think in terms of -- I think we sort of laid out our confidence in our revenue trends with a significant improvement in the trajectory of proprietary SRs and leads plus what we anticipate to be solid growth in our revenue per lead, we're going to be able to get to improving revenue comparisons year-over-year and thus sequentially improving our declines. There's some benefit in terms of compares in the third and fourth quarter as we started to implement some of the principles of homeowner choice. So we think we're in a good position in terms of the rest of the year and then heading into next year, where, again, we think that the network channels flatten out. So when you're growing 80% of the business and flat in 20% of the business, you get growth. So that's how we're thinking about that. In terms of use of capital, I think there's a few categories. Obviously, we just bought back a reasonable chunk of shares. And our approach is to, from time to time, as appropriate, buy back shares to account for dilution either backward-looking or forward-looking. And we've demonstrated that we will do that over time. In terms of other capital allocation question, which is likely what's our acquisition approach? As we said before, we're still in the process really of digesting multiple acquisitions in the American business that we've acquired over time. We've got a significant amount of work there to do. So we do have core opportunities that mean adding another big chunk would require additional integration. That being said, even though we're focused on our core operations, if we thought there was something to do that was accretive to our shareholders and a positive use of our capital and strategically critical, we wouldn't hesitate to take a look and maybe even do it. I don't think that our stock would be a major acquisition currency. There's some limitations with what you're able to do around a tax-free spin-off. But I think that's generally how we think about our capital approach over the next couple of years.

Thank you.

The next question comes from Justin Patterson from KeyBanc. Please go ahead.

Thanks. Good morning. Jeff, you've made a lot of foundational changes to Angi in the experience for consumers and pros. As you look over the course of '25 and into 2026, what do you view as the next product initiatives to take more friction out of the ecosystem and improve jobs done well? Related to that, how does AI change your view on the product experience you can provide and potentially introduce some operating efficiencies over time?

Great. Those are great questions. So we anticipate that we are going to continue on our most core initiatives through the next several months. And those are getting the conversation with the homeowner to ask the right questions to get the right job details to get the right match. We're doing that both through significant iteration on our set of questions, which we expect to be materially done in the second half of the year. And just to reference your second question, we've added an LLM-based AI helper in that homeowner path, which is going to help increase and already is increasing the quality of the match without actually hurting conversion. The team has done a great job with that product. And so we have a very high focus on making sure we get the job details right from the homeowner in a way that the homeowner understands to be able to match to the pro so that the pro gets the work the pro wants. I think the second piece there also drives matching, and it's the single pro product initiative we've been talking about. One-third of our revenue is coming from the old Ads product. Ads pros have less specific choice over the tasks they opt into than the Leads pros given the nature of the platform and the product. They're also required to take certain sets of ZIP codes, certain territories without having the flexibility to pick and choose. We're moving all of those pros and all of the new pros into a situation where they are able to pick and choose upfront. This is going to drive multiple things. First of all, the homeowners are going to get contacted more. The contact rate is lower with the Ads pros because they get some leads that they…

Thank you.

The next question comes from Stephen Ju from UBS. Please go ahead.

Okay. Great. So I was wondering if you can give us some color on the cross currents of what might be affecting your revenue growth, particularly in international as that seems to have swung to -- sorry, a year-over-year decline. And secondarily, on -- thanks for the disclosure, by the way. The monthly active pros, it seems like that number has basically hit a trough or is in the process of hitting a trough as you churn off those you acquired previously. So it seems like directionally, the number of pros you're acquiring right now, and I guess the implied churn is starting to converge. So I guess it's sort of inevitable that, that will hit a trough and start hopefully accelerating. So just additional color there. Thanks.

Right. So I can take these. So first of all, in terms of international, there's a couple of pieces there. The first piece is our Canadian business was in a bit of a tough shape on its old platform. It was a high consideration negative ROI, high outbound sales model. And what we've done is we've moved that business to the international platform, which is a lower consideration, but very high ROI pro acquisition and higher-margin business. And so what we are doing there is we are churning off that high value but lower customer experience subscription value. We've eliminated our sales force. We moved to online acquisition. And so the revenue is coming down, but the profitability has already jumped materially. This is something at smaller scale we've done in each of our European businesses over time, and we've gotten tremendous margin leverage and profit growth there, along with some solid revenue growth over the last few years. That is mathematically because we're dropping that revenue significantly, that's mathematically pulling international down. There's also some impact from regulatory matters in Europe about a little over a year ago, we started having to take newly acquired pro-IDs, which is a conversion hit. And potentially, we were getting some pros on the platform who didn't have the proper ID and weren't uploading it, but we've taken some conversion hit in our new pro acquisition. And then as of the beginning of this year, we had to roll in ID checks for all of our existing Pros. This is the Digital Services Act in Europe. It's a Know Your Customer for marketplace businesses. And so we have taken a 5% to 8% impact on our network just based on this conversion on the ID, which is a temporary slowdown, which effectively will…

[Operator Instructions] And our next question comes from Dan Kurnos from The Benchmark Company. Please go ahead.

Great, thanks. Good morning. Jeff, can we just follow up on that for a second, the pro pool? I mean if we think about the rich history, data history that Angi has, and we think about either reactivations versus attacking new pros, as you build the pool, should we think of kind of like a smaller, more concise, but more engaged and, call it, like top 20% of pros is sort of the near-term target here and that your customer acquisition cost is substantially lower. And then on marketing channels, Rusty talked on it. But again, now that you guys have this reset, love to hear how you guys are thinking about attacking paid channels in kind of different ways, especially given low organic brand recognition. I know you guys are talking about TV, but I'm more curious about attacking social and other channels as you guys start to see SRs recover.

So I think what you got to there, Dan, is a pretty good way of talking about what we're doing on pro acquisition, which is we've significantly reduced the sales base. We've reduced our pro acquisition less, but we've materially increased our capacity per acquired pro. And to your point on lower acquisition costs, that's why when we say our net margin, we mean what's the lifetime value of the pros acquired minus the cost of that sales force in any marketing. So the fact that we're up nearly 150% year-over-year is actually the data behind the hypothesis you just suggested that we're concentrating on higher value, higher capacity pros and spending a lot less money doing it, and we're generating a lot more forward value, which, again, as I said earlier, I think is exactly what we want to do. You're also right, we do have a rich database of pros who've used us at one time. And frankly, the move to the new model gives us an excellent opportunity to reengage and attack with reactivations that we think will help us a great deal over the next year or two in terms of our acquisition. So we expect smaller sales force, fewer Pros, but that number flattening out and then growing in 2026 and more capacity per pro. So we see capacity growth, but probably not raw volume growth that way. In terms of your comment on paid channels, what you're suggesting is, are we attacking paid channels? Are we getting better yield? Are we getting better acquisition there? This is exactly how we brought our proprietary lead growth back to neutral and the decelerating declines -- am I saying that right? The decreasing declines through the fourth quarter in SR growth and our expectation that we grow that in the coming year. So we have had actually tremendous success at turning and growing our SCM acquisition, believe it or not, I realize Google is the traditional source, but we are really materially growing that source year-over-year. We've also had success getting into display networks and now META's ecosystem and acquiring a significant number of jobs at good ROI. We have a very strong paid marketing team who's delivered excellent performance over the last year or two. And we are -- we have been able to really step up our acquisition in proprietary channels despite any impact on the kind of organic ecosystem. So we're pretty pleased with that. It's a key part of our success to date, and it's a key part of our success going forward. And again, I sort of have to tip my hat to the teams that have been involved in there across product tech, marketing and elsewhere.

Super helpful, Jeff. Thank you very much.

All right. Operator, I think we'll take one last call if you can queue it up, please.

Let's just ask how many calls do we have -- how many questions do we have left in the queue?

We have one more, sir.

Perfect.

And the next question comes from Ygal Arounian from Citigroup. Please go ahead.

Maybe just since this is your first quarter standalone, if you could just talk a little bit about how or if the strategy changes at all now that you're more independent, what kind of flexibility does it give you now that you didn't have in the future? And then on the self-serve platform for sales, just if you could expand on kind of how much -- what your expectation is for how much that can grow the pro count or how much efficiency you could drive as that comes on to the platform?

So in terms of our strategy with IAC versus without IAC, there's really no change. What we've been saying and executing on the last couple of years is the same today as it was a couple of years ago. We know that the North Star experience, the place where we get world-class NPS from our homeowners and high retention from our pros is when a homeowner on our platform hires a pro on our platform. And so we have been driving all of our experience towards improving that success rate. That's not going to change. We have to serve our customers, and we have to serve them with positive unit economics, and that's the core of what we're doing. I think we're very fortunate to be part of the IAC ecosystem. IAC has always looked to its companies to set their strategy and drive performance within their umbrella. And I think we're going to be continuing to do the same thing here. And obviously, we were lucky to have Joey as our Chairman as part of IAC and Joey is our Chairman post IAC, and that will continue as well. In terms of flexibility, the one piece you get is you get a more liquid publicly traded stock. That's great in terms of employee liquidity and stock-based compensation, and it's also of some value as a potential acquisition currency. Again, that's not something we're thinking aggressively about. There's limitations on what we can do there in terms of the spin-off. And the Board would also want to feel that the stock was in a place where that made sense as a currency. So I think longer term, yes, there are advantages. Shorter term, there's nothing that really changes in our mindset. Obviously, as I said earlier, whether it's cash or…

So I think with that, we can wrap the call. I want to thank everybody for listening. Thank you, operator, for helping us. Thank you, everybody, for your questions, and we look forward to talking to you next quarter. Thanks. Appreciate it. End of Q&A:

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