IAC InterActive Corp. (IAC) Q2 2021 Earnings Report, Transcript and Summary

Good morning everyone. Mark Schneider here and welcome to the IAC and Angi Inc. Second Quarter Earnings Presentation. Joining me today is; Joey Levin, CEO of IAC and Chairman of Angi; and Oisin Hanrahan, CEO of Angi. 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 will open it up for Q&A. Before we get to that I'd like to remind you that during this presentation we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar statements. These forward-looking views are subject to risks and uncertainties and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in IAC and Angi's second 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. Now let's jump into it. Joey?

Thank you, Mark. I do want to start by thanking Mark Schneider here who everyone on the call knows very well because he answers every single one of your e-mails and phone calls probably instantly. And you all know he has an encyclopedic knowledge of IAC. He's been here I think as long as I have maybe even a little bit longer. But he's always been behind the scenes. Today he is on the screen. You get to see his smiling face. So we're lucky to have Mark here. I know there's going to be a lot of important questions today, so we're going to want to get to questions quickly. But I'll just quickly take stock of where we are relative to where we've been. And going into COVID, Match and Vimeo were both still part of IAC. And they are now off on their own doing very well, $50-something billion of value off separately. And what's left in IAC is lots of small businesses and ANGI Homeservices. And when I look across those businesses every single one of them -- I think almost every single one of them is better off coming out of COVID -- I don't know if you can quite say coming out of COVID yet, but is better off today than we were going into the pandemic. And that's probably hardest to see at Angi but we're going to talk about Angi a lot today and what we're doing and how we're building that business for the long term. And that's really, I think quite an accomplishment a great testament to the businesses that we have and the people that we have working here and I'm very grateful for that group of people and what I think we can do from here. So we're excited about the future. We'd love to talk about what we're doing. And let's start with the questions.

Great. So our first question will be from Dan Salmon at BMO.

Good morning everyone. I've got two questions. First Joey, can you take us another layer deeper on the brand transition impact from both Angie's List, Angi and then it looks like the more significant impact on the HomeAdvisor brand during the quarter and specifically why did that have such a significant impact on EBITDA? And then second, if you could just spell out a little bit more about the contribution from Total Home Roofing in the July growth versus where the organic trends are in that business currently. And perhaps just a few high-level comments on your reasons for buying this business? Thanks.

Yes. I'll let Oisin and Mark both jump in here. But to answer the first part on the brand consolidation. Number one, I do think it's important to talk about why we did the brand consolidation. It is -- we were spending on multiple brands. That is obviously inefficient. But also our -- the brand where we were generating the most revenue was we felt not a brand that was ultimately long-term sticky. We've talked about this before where you talk about the business HomeAdvisor. You talk about the success of HomeAdvisor. You talk about it's a leader in the category, it's the best products most revenue. it's the most service professionals. And you'd finish that conversation with somebody and they'd say, Oh you mean, Angie's List? Now the good news is we own Angie's List too. But the bad news is, for all the hundreds of millions or billion dollars we put into the brand, it was not a sticky brand. It was too generic. It was too literal. And there was a brand that we owned that really owned and defined the category which was Angie's List. Now it was a list, which is I think as a concept is outdated and so we had to update that to Angi. But that's something we think we can own, and we think we can own forever and we think can define the category. And it's a much more ambitious concept than using a literal brand. But what practically happens in that, is two things. Number one, we updated the angieslist.com domain to Angi. And so that just -- we've done this multiple times before. That is a V-shaped curve and we are seeing that shape. And the traffic goes down pretty severely and then it comes back up over time. And that -- we did that at Dotdash across multiple brands. We did that actually when we went to Service Magic from -- when we went from Service Magic to HomeAdvisor. So we have seen this. We have sister companies, who've done this, who we've talked to which is Expedia did a big one relatively recently with Vrbo. So this is a relatively well-worn path, it's hard. The thing that as you point out, we didn't appreciate -- or we should have appreciated but we didn't, was how quickly HomeAdvisor without the brand support would lose audience in Search and that has been more severe. We thought it would hang on. As I said in the letter, it's actually reinforcing the decision because that brand just didn't have the stickiness to it. It needed that constant support. And I think that the spending on the new brand is going to be much stickier and lasts much longer and be more enduring. But because it didn't have the brand support, the audience we were getting from Search fell off more quickly. And that gets to your margin question too, which is the SEO the organic search traffic that comes in is very high margin. And so when you lose some of that then that drops down to the bottom pretty quickly. Oisin should -- there's a bunch of other stuff in there including the acquisition. And Oisin should jump in on this.

Thanks, Joey. Look I think you hit the important part, which was we're absolutely committed to where we're going with the Angi brand. And the thing that gave us even more confidence was the rate at, which HomeAdvisor declined when we stopped spending on it. So the constant investment in the HomeAdvisor brand was propping up organic search, it was propping up SEM, it was propping up a bunch of channels. And once we took that investment out of HomeAdvisor particularly on TV and we invested in Angi, we saw a faster degradation than we anticipated. The upside is the shape of the curve we're seeing on brand for new Angi is better than anticipated. So what we're seeing is we're transferring the brand equity from Angie's List over to Angi in terms of, how we measure unaided awareness in terms of, how we measure aided awareness much, much faster than we thought. So on a dollar per point of awareness basis, we're performing somewhere between seven and 10 times better on new Angi, than we are on or than we were when we first transitioned from Service Magic over to HomeAdvisor. So we're really excited about that. Obviously, it had an impact on EBITDA. In terms of the question on Total Home just to zoom out for a second. We've effectively got two things -- or two businesses inside Angi right now. And if you think about the macro environment, one of them is a business where pros pay us to access customers and the other is a business where we pay pros to do work. And at a time where I think it's unprecedented in terms of the change in the macro environment where we saw this massive contraction in pro supply as a result of COVID and this massive increase in consumer demand happening at the same time, that we're asking pros to pay us to access customers, that business is challenged at the moment. So irrespective of the brand transition we're going through, it's challenged. Obviously, we believe this is temporary. We understand that the macro environment is particularly volatile given COVID. However, we think it's our responsibility to lean into the other business at the same time where we actually have huge product market fit. So where we're paying pros to do work, that business is performing unbelievably well. So you saw the growth rate is 120-odd percent Q2 versus Q2 last year. You saw the July number of 160-odd percent. And in terms of the Total Home or the Angi roof -- now Angi roofing acquisition that contributed to the growth in Angi Services. On an overall basis July would have been flat on growth versus June without the Angi roofing acquisition or the Total Home acquisition. Just to talk about, why we did that for a second? It's kind of got to do with why we're overall investing in Angi Services. It's a desire to bring on more supply and build a better customer experience. Our pros want one thing, to help grow their business. Our customers want another, which is to get the job done. What we've done at Angi roofing – or what we're doing at Total Home is we're going deeper into the roofing category and we're building out real expertise to be able to help people get their roofing job done. So today, you go to Angi using Total Home or Angi roofing, we can actually quote you the job really quickly, buy the materials, dispatch the roofers. We don't employ the actual individuals doing the work. We contract with individual teams. But that's allowing us to bring on more supply, because it's specializing the work they need to do ever more. So we're really excited to go deeper in this category. It's a great category, as I've spoken about before $10,000 AOV really, really high rate of financing attachments. About 20% of their jobs are financed, so it allows us to get deeper into financing. And if you think about the application of technology, we can apply a lot of technology to allow us to price those roofing jobs in advance using aerial LiDAR or aerial photography. So, again, it's really bringing it to this point, where it's a seamless end-to-end experience on Angi using Total Home, or using Angi roofing. I need to get the nomenclature right. Hopefully, after this, we'll only call it Angi roofing. But overall, we're really excited about where Angi Services is going.

And just a couple of things to add, when we did the IAC has gone through a couple of its businesses things like this brand consolidation before, and when we did the Service Magic and HomeAdvisor transition almost 10 years ago that took roughly 16 months before revenue returned to growth following the commencement of that. And similarly, at Dotdash, when we did the verticalization several years ago, on average it took about a year for each of those verticals to return to revenue growth. So these things do take time. On the July revenue, as we said in the shareholder letter, we do expect that sort of organic run rate to continue for the next few months, so sort of in and around that 7% we saw in May, June, July. And then you layer on the acquisition. And just to help people size that acquisition compared to total Angi, it's relatively small. It's a little outsized in terms of growth. Just remember that, this is in our Angi Services bucket, which recognizes revenue as gross. As Oisin said, these are $100,00 tickets or more type jobs. And then seasonally, obviously, the summer months for roofing is very strong. So with that, we'll go to our next question from John Blackledge.

Great. Thanks. Couple of questions. Dotdash, the revenue and EBITDA growth was strong again in the second quarter. Could you discuss the quarter? And then we saw the top line decel in July. If you can Joey maybe offer a view on Dotdash's second half growth? And any color on the longer-term growth vectors for that segment? And then just two other quick ones. Care.com any update on the progress there since the acquisition thoughts about kind of the longer-term opportunity? And curious when we might start to hear more about that segment more regularly? And then just any update on the CFO search would be great?

Sure. Thanks John. Maybe I'll do them in reverse order, so I don't forget. CFO we are – got great pipeline of candidates. The good news on the CFO search is – Glenn was I think an exceptional CFO, and it's big shoes to fill. And so we're – we've got a high standard for what we're looking for. But we have time and we have flexibility on that. Again, I think I don't want to give a time line on when we'll fill it, because there's maybe some candidates, who could fill it quickly, and maybe there's a chance it could take longer. But we have a fantastic finance staff here we've built over many years, who are all I think exceptional in their field. I've talked about Mr. Schneider already. We've got a head of accounting, who is exceptional. We have a head of treasury, who's exceptional. Same for internal audit for tax and so when we think about – when I think about all those finance functions and confidence level in making sure that things are running smoothly and we're all well protected, I have absolute certainty in that. And so, we're going to make sure, we find the right person to add value to that equation in terms of capital deployment and being a real value-add on the executive team and I'm confident we'll get somebody great. On Care.com, in terms of breaking it out, I don't know. That is sort of the next step in evolution for the business. When we think about businesses in IAC, we like to put them in emerging for a while and then graduate from emerging to their own segments and then hopefully long term, eventually graduate into being their own business off -- stand alone on their own. But right now, business is doing very well. I think, I've talked about before that the Enterprise business was the most positive pleasant surprise for us since we acquired it. That's a meaningful contributor to the business growing very nicely and is a -- I think is a beneficiary of an important tailwind right now, which is employers increasingly taking on the responsibility or believing they need to take on the responsibility to help their employees with child care. And it's unequivocal that there's a direct correlation between taking on that responsibility and diversity in the workforce. And it's of course unequivocal that the importance of diversity in that workforce has positive impact on a business. So, when people now realize that and a lot of that has become even more clear over the course of COVID, in terms of both government realizing that and employers realizing that, I think that's going to be a tailwind for the -- a continued tailwind for the Enterprise business. The -- but that aside, the core business of Care is growing faster the fastest since we've owned it and probably the fastest since -- for a while before that. And that's a product of a few things. We've got improved -- as I mentioned in the letter improved conversion and retention. Those are key to -- key building blocks to the business. And of course, when you get those things going that builds LTV. And when we get the LTV going, that enables you to do more marketing. So we've got marketing substantially up in that business right now too and that becomes a virtuous cycle. So, that's all encouraging. The other piece is, it's not just in child care. We've all or at least I have sort of defaulted to child care as the definition of Care.com, but senior care is an increasingly big and important component and I think also has a demographic tailwind behind it. Number one, people want -- an aging population. Number two, people wanting to age in their homes or in their family homes, as opposed to in nursing homes. And certainly, COVID didn't help the brand of nursing homes generally. So, I look at all that and say, we're doing very well. We're excited about it, are not in a rush to break it out as its own segment because we like kind of the anonymity of Care being able to work with a lot of the tools behind the scenes and not worry about any particular metric right now in terms of public performance. But it ought to get there. I can't see a reason, why it won't. And the product development is probably going to be the biggest driver of that, meaning getting some new products launched, getting some momentum behind that. And once we do, we'll probably want to break it off on its own. Dotdash was your other question. Dotdash is also as you point out doing very well exceptional quarter. It did decelerate, but we always expected it to decelerate in the back half of this year. You could see that in July. Just to give you some context. Like the Display Advertising business in Q2 of '20 was down 8% year-over-year. Everyone cut back their spend. That went back to growing 9% year-over-year in Q3 of '20. And so, that's a big difference in the comp for this year from Q2 to Q3 and that's something to pay attention to. And we expected that deceleration. The business is exiting. Again, I don't know, if we can say exiting COVID anymore, but it is exiting COVID at a faster growth rate than when it entered on a higher base, which is fantastic. And so that's important. We're going to keep investing in content in that business. I think, that's our competitive advantage. I think we're -- our content investment is up 50% year-over-year this year, and I hope to continue to grow that faster than revenue for a while. And underlying that the -- there's a few trends that do help that are completely independent of the pandemic. One is what's happening to privacy and data privacy and some of the tools for tracking users and how those things have become weaker on the Internet over time or in particular on mobile over time. And I think that trend continues for a while. Dotdash is a beneficiary of that, because Dotdash doesn't need that data. Dotdash is selling to advertisers, a product, which is we know somebody is doing X because they're reading about doing X, they're looking for information on doing X. Do you want to reach a reader who's doing that? You don't need to know their name. You don't need to know their age. You don't need to know where they came from on the Internet or some other things they were doing. You need to know exactly what they're looking for which is obvious. We don't need any data for that and I think there are a lot of advertisers who appreciate that now. Number one, they appreciate it because they can't spend the dollars elsewhere where they were tracking on a different basis. But number two they like to be able to target audience with effective dollars without having to violate personal space or worry about privacy concerns. And I think that's really important and we can see it in the advertisers. So this – I love quoting this stat. I think I quote it every quarter. Top 25 advertisers – I was just looking at that again this morning. From 2019 to 2021, the top 25 advertisers those same 25 names are spending 139% in 2021 of what they were spending in 2019 and I think 123% or something like that of what they were spending in 2020. And people like this concept of net revenue retention. We've learned it from Vimeo. And if you think about Dotdash in that context it's pretty amazing. And again, the reason is what I said. It's what they offer but it's also it performs. And they can see that – advertisers can see that it performs and so they stick with it. So that's all very encouraging. In terms of long-term growth rate, I like to think of it as 20% north of 20%. And I don't know exactly how that plays out in the second half of the year but I think that that's a bogey for us. And the things that drive that are more content and getting not more ads so that is something that we're not pushing but getting more content, getting more efficient on the ads, getting better performance on the ads. And then in each vertical we can get deeper in terms of how we deliver a customer to an advertiser. So in categories like finance and Investopedia or brokerage or credit cards or things like that, there's a lot of revenue to be found there in getting – delivering a more qualified customer to an advertiser. And because we are – sit at the top of the funnel I think we have the opportunity to do that. Mark do you want to add to that?

Yes. Yes I'll add a little bit on the second half expectation. So why we look at that north of 20% as sort of our target and what we think is for an online publisher a really healthy number just look at some of the – I'll update some of the data points that Glenn called out in the last call. So now we've – 10 of the last 12 quarters we've grown – Dotdash has grown over 20%; six of the last nine quarters over 30%; and 13 straight months of over 20%. So we do think that 20% – north of 20% is a good way to think about the business. And as Joey said, the comps do get tougher. Last year Q2 grew 18% and that accelerated to 26% and then 33% in Q4. On margins for this business, remember that 2020 was a bit of a pull forward in terms of margins for Dotdash. Like a lot of other businesses at the onset of COVID they kind of pumped the brakes on investment. For the year – margins were 31% last year. That was up from 24% in 2019. And this year we're leaning back into content. Joey mentioned that we're – we expect to grow content – our content spend – investment 50% year-over-year. So I think you should expect to see some contraction as that sort of cycles through over the back half of the year as we lean more into it so some contraction over the second half of the year. For the full year we should be relatively flattish in line with that 31% we did last year. But to get there you have to have some contraction over the back half of the year. So for our next question we'll go to Cory Carpenter at JPMorgan.

Hi, thanks for taking the questions. Good to see you on here Mark. So on the Angi Services, how do you think about the sustainability of the recent growth and what continues to drive further penetration? And then Oisin maybe if you could talk a bit about some of the progress you've made on your product initiatives like Angi Key, HomeAdvisor Pay and consumer financing? Thanks.

Thanks, Cory. So just on Angi Services to start, as you pointed out the growth accelerated to 127%, up to $73 million for Q2. Just to understand for a second the different components of Angi Services. You've got three different businesses inside there. You've got a retail business where we partner with the largest retailers of the world -- or some of the largest retailers of the world to sell in store or online on their sites. So you go and buy furniture and we sell furniture assembly alongside the furniture. The second part is the Book Now business where you come to Angi, and you make an instant booking for a service you fully pay. And we show up and do the work. And then, the third part is managed services -- or managed projects, where we give you an initial quote online you put down a small deposit. And then, we organize to complete the job by phone. And you pay for the job completely. So the average ticket on that one is closer to $7,000 to $10,000. All three of those experienced pretty significant growth. As you can imagine, the levers are different in each one. We're really only scratching the surface on Book Now, and on managed projects in particular. So the early read on those is the NPS is really strong both for customers for homeowners and for our pros. And we're seeing significant pro engagement, significant customer engagement. If you think about it on a category level, there's, probably 10 categories, we've identified already where we think we could build a $0.5 billion business in each category where we look at it and say "Okay, in roofing alone it's a $45 billion category in the U.S. There's no reason why we shouldn't be able to build a very large business in that category." So the levers for future growth there -- the levers for future growth are really verticalization going deep into each category. In the Book Now business, we've started to build out those category teams already. We've got about half a dozen of those teams that are now nearly fully staffed in terms of category managers for that -- for those individual sub-verticals. We've done enough product work to make that experience better. And the levers are really around added to completed better job pricing. More accurate request by the customer allows us to do an even better job, spins through into repeat rate for the customer, repeat rate for the pro and overall just makes that business better. On the managed projects side, again, we're deep in one category with roofing to start. We've got a number -- we're across quite a few categories already, but we're really going deep on roofing. We're also going deep into fencing as a category and really looking at saying, "How do we make sure that in that category we build a great experience?" You pointed out Angi Key and payments. The payments product up to $26 million I think in Q2, 70-odd percent growth Q1 to Q2. So we're really excited about that. I think it hit $3 million in a week in July. And the way I look at that is, I look at it and I think where are we really getting deep with the customer. Where are we really completing the loop and actually looking at it and saying "How do we know that we've completed the whole transaction for the customer?" And if the pro is getting paid, or they're using Angi service, we know that for a fact. So I look at Q2. And actually when I think about jobs, that we know that we've completed and we know we processed the payments on, I look at the $26 million. And I think about the $73 million I think those are jobs that were either fulfilled by Angi or we actually completed the payment and made sure the pro got paid. So I think that's a really significant deepening of our relationship with the customer and deepening of our relationship with the pro. And it flips back around from the pro paying us to us making sure the pro gets paid. We've got more pros that we're rolling out payments to. So it's not across the entire pro base yet. So we're -- we recently, as you know re-branded HomeAdvisor to Angi Leads, and Angie's List, to Angi Ads. There are a number of ad pros that don't yet have access to payments so we're continuing to roll that out. So we'll expect to see continued growth in payments as we go deeper into it. Financing is also an important part of payments. Again, very early on the data but I think it tripled in terms of financing volume again on tiny numbers Q1 to Q2. And again, the roofing business gets us deeper into financing as well. So it's all this virtuous loop of getting closer to the customer, managing the payment, getting into financing and really, really getting to a place where we know that the job is getting done for the customer. Angi Key was the -- I think the last part of your question. Again, great growth month-over-month -- or sorry quarter-over-quarter, up to 140,000 members now. The price point on that is up to $29 so $30 a year. We're still a pay-to-save program. I think there's a lot more we can do there in terms of value add. As I think, you're asking your question of where are we taking it, what does it look like, I think some of that has to do with helping the customer, helping the homeowner have access to more information. Some of it has to do with educating the customer perhaps elevate levels of service. I think financing also plays an important role into that, so could we think about financing for Angi Key members at preferential rates. And then I think there's a lot of more tangential things to do with the home that we could do with Angi Key as well that we're early on we're exploring. But we think it's a really powerful idea. It really fits the long-term vision. The long-term vision for Angi as you know is how do we have a single brand that most of our people are members they use our mobile app and they turn to Angi to get everything done inside their home. And you think about services, you think about Angi Key, you think about payments and you think about our broader marketplace business that really broadens and gives you access to all the services, they all fit together. And I think you're hitting on all the important building blocks that go into that.

I'd just add one small thing to that last sentence from Oisin, which is you would go to in that world that he describes with all those features that he describes, what's important in there is also you go to Angi first because it's faster, it's easier, it's reliable, it's going to deliver the service, it's going to deliver the service at a fair price. But the point is you go there first. It will make more sense to go there first than it will to go anywhere else first and get a list or have to sort through things or have to read reviews or have to pick from 10 or whatever it is. You will be going first -- setting up the infrastructure that it makes more sense to go to Angi first it's more efficient to go to Angi first is a significant portion of the groundwork we're laying right now.

I think that's a really good point. And I might even push further to say you go there first for the discretionary things for the urgent things. But actually because you have a relationship with us, because we know your home, because we know it probably better than any other professional, any other company, we can actually anticipate and take care of the background maintenance for you. So you go there first for discretionary things because we've built a great brand, we've got the mobile app you're a member and you engage with us and trust us. And hopefully we anticipate the maintenance for you and we can actually take care of it behind the scenes or we can proactively prompt you to say, hey would you like us to do gutter cleaning at this time of year? Would you like us to do sprinkler blowout at this time of year? Can we do these things for you in an automated or a magical way? So I think it's -- obviously the economics get a lot better. We've talked before about the key drivers for Angi long-term economics around zero accept rate customer repeat SP retention. And the more we can bypass some of the demand channels that we got to pay for today and take customers directly into the Angi ecosystem for the long-term, firstly the better business -- or firstly I would say the better customer experience we build; and secondly the better business we build.

So our next question will be from Brent Thill at Jefferies.

Thanks. Joey a lot of questions around capital allocation, $3.5 billion, no buyback on IAC for a while. Can you just give us your perspective on where the stock is at relative to the activities you want to do on the core side of the business?

Sure. We have at the -- at IAC, it's a little under $3 billion and I think the portion you guys are thinking about is at Angi. And the priorities are basically the same they've always been. We're definitely going to prioritize our existing businesses for M&A. I think I've talked for a little while now and continue to believe that Dotdash and publishing would be a priority there because I think we have a great team that is building a great business that's proven their ability to do acquisitions, integrate acquisitions and add value in those acquisitions and it's scalable. So I want to add there if we could find the opportunities, which I do believe exist. That's one for sure. And all of our existing businesses are going to prioritize over new businesses for acquisitions, but we continue to be in the hunt for new categories to get into. I don't think we'll -- as we've always said, I don't think we'll look for that’s the company type of acquisition. But I think that finding businesses that generate real cash flow and where we have a unique angle is something that we're going to -- that we are looking for and continue to look for and is a priority. The last one you mentioned is share repurchases. That's always in the consideration set. It will continue to be in the consideration set. And it's basically a variation on putting more capital into our existing businesses, because it's just effectively buying more of them. And so that's an easy one. And it's definitely something that we always have looked at and will continue to look at. We -- also same story on the Angi side as it relates to share repurchases and acquisitions. I don't think Angi is going to get into a brand-new business with capital, but looking to do smaller acquisitions like the roofing one where we can tuck something in and really make a difference, and also consider share repurchases if it makes sense.

Great, thank you.

So our next question will be from Jason Helfstein at Oppenheimer.

Thanks. I just wanted to dig a bit deeper into Angi. How much are you willing to draw a line in the sand to kind of hold revenue growth, let's say at 7% to 10% for the foreseeable future, given that the headwinds you're facing at HomeAdvisor, from a traffic standpoint, will take time? And obviously, it's a balance there so just help us understand kind of how bad it could get over the next several quarters. Thank.

I'll start, and then Oisin jump in. But we're not holding any lines. It'd be crazy to hold any lines, because it's not -- we can't. There's nothing so sacred where we'd say we'd do anything for 7% to 10% revenue growth. What we're saying right now is that's what we're seeing on the organic side and that's now bigger as a result of the acquisition. That's what we're seeing and we don't see a reason why it should be worse than that. But we're in a very volatile environment for two reasons -- probably more than that. But for sure, there's still a lot of ups and downs as it relates to the pandemic and people's willingness to do work and availability to do work things like that. And we created our own volatility with this brand thing and so some components of that are out of our control. We know what we're seeing today. We know what direction, it's generally headed in various pieces, some up, some down and so we've made assumptions on how those hold. But things can change for the positive or the negative there and that's always going to be the case.

Yes, I'd echo that. We know where we're going. We know what we're trying to build. We like the destination as Joey said in the letter. I'd just put slightly more context on it. We've essentially got two businesses that are performing very differently, because of the macro environment and because of the brand. So the services business in the current environment has fantastic product market fit and is growing like crazy obviously a smaller part of the business but growing like crazy. And you've got the lead business that is challenged from two perspectives. One is the brand and two is the pandemic. And we believe the brand is temporary and we will be in a stronger place in the other side of it. And the pandemic hopefully is also -- I think we all hope, it's very temporary. And I -- you look at the math of when those two lines are going to cross of when a smaller faster-growing business is going to help with the overall, but we're focused on the long-term. We're focused on what we want to accomplish overall. We're not focused on how do we hold a line in a particular place. If this quarter said anything it's, hey, what we're all about is making sure we're making the right long-term decisions. We want to make sure that we're set up for success. We have absolute confidence that if we build the right product for the homeowner that helps them get the job done, we build the right product for the pro that actually helps them grow their business, we'll be in a stronger spot. We are, in addition to the brand change on the HomeAdvisor business -- I'm sorry on the lead business, we're also making significant investment there in actually making the product and the experience better for pros. So, we've got a pricing test that's out in a small number of markets right now that significantly changes the ROI calculation for our pros. Very early, very early results, but they broadly seem positive at this point. We're obviously investing in payments to close the loop. Again, the read on pros that use payments, significantly higher retention, significantly more engagement. And overall, we're looking at verticalization of that business too. So we talked before I think, loosely about verticalizing that sales force. That's something we're actively going after again with a view that as we verticalize the sales force, we build a better experience for pros that will engage with the product more. The thing that's given us confidence on that is an onboarding program we've run for our ad SPs where we put them through a pretty heavy-touch onboarding test that's yielded really good results on win rate, really good results on 90-day retention. And again, we're really saying, how do we not just say, Oh, the pandemic is there. Let's -- it will pass, but how do we say, let's make the ad business and the lead business higher ROI for pros, and how do we make sure that we come out the other side of this in a really strong place. And all the while we continue to have the other option, which is how do we create our own supply, which I think with Angi Services and some other things we're doing, we feel like there's opportunity. And we've proven we can do it in certain categories, and we're excited to do it in more skilled categories. So I don't want to lean into lines in the sand and -- other than to say, we're focused on the long term and we're focused on what's right for the customer, what's right for the pro. We know the TAM is huge, and we're more confident than ever before that we're getting towards the right product.

Thanks.

Our next question will be from Ross Sandler at Barclays.

Thanks, Mark, and welcome to the call. Joey, just if we look past Care.com and Mosaic in Emerging & Other, what are the next like set of brands that you're most excited about that are in that group? And then what's the bull case on those up-and-coming brands? And then going back to Investopedia. So given the huge uptick that we've seen in just interest around retail trading and crypto and all these new areas with Robinhood, et cetera. Is there more that you guys can do in that business to tap into that other than -- you have like a lot of kind of greenfield how-to videos and definitions and stuff like that. But is there other things that you've thought about that could tap into that growing retail trading group? And is Investopedia material part of Dotdash at this point? Like where does it stand relative to the $300-odd million that you're going to do in that segment this year?

Sure. So on emerging the next tier after Care and Mosaic is what we've called future of work. And we have two businesses in that area both tiny, but both growing very nicely and both still unproven. So, one's called Bluecrew. The other is called Vivian. It used to be called NurseFly. We've changed the name to Vivian. They are the concept in both of those businesses is that matching employers with employees is a thing that can be done meaningfully better with software overtime and that in a number of categories qualifications for a job are binary. And so the historic tools for that resumes and lists and interviews and things like that are much -- are basically not that valuable. And what would be more valuable is software and data. So somebody's ability to show up, ability to show up on time, ability to lift a box, or lift a certain weight, or operate a certain machine, or things like that where qualifications are binary, or the qualifications can be taught within 20 minutes or something like that. And in those things we think the software is better and we're certain that software is better. So every customer we go to now in those businesses when they start using our solution, they love using our solution. And they immediately can recognize the difference between our solution and what existed previously in the market. And that's leading to very high-growth rates in those businesses. Now I say it's not proven as a business yet, because it's still expensive for us to deliver that product and we're still net negative investing in those -- both of those businesses, and that's both in terms of fixed cost. And the sort of contribution margin you could argue in either of them is probably positive, but there's scenarios where it could be negative. And so we're now -- we now need to continue to scale those businesses and deliver those businesses. And they're each in multi-hundred billion-dollar categories with incumbents that I think leave plenty of room for new competition. And we're seeing also that some other players are now getting funding in there. We've heard -- we know one just raised a lot of money at a big valuation. We know another one is trying to raise money -- a lot of money at a big valuation -- sorry three of them I can think of now, which I think is fantastic for the category because that's more people out there educating the customer on what's possible, that's more people out there pushing the limits of innovation and challenging each other on innovation. So I think that's very good and we're pretty excited about that. But again, these are very small businesses today with lots to prove. And that's an important place for us to be playing. The other thing in there -- in Emerging & Other that I'll mention is what we call Newco which is our new incubator. And we're building new businesses there. We've got two businesses that are real-ish, meaning we've now got a product that's out in the market that's being tested. And we've got -- we're going to continue to build more. And I've said this before, I think we're going to focus that from here on businesses that use blockchain to build the customer experience. When we -- the work we've done around blockchain is very clear that it's going to transform many categories just make it more efficient to operate or interact with different sides of a marketplace. And we're therefore really excited about investing in those things. And we think about the last incubator we had was focused on mobile, when mobile apps became a thing that we launched an incubator very early in that called Hatch which was entirely focused on building mobile apps. And that's where Tinder came out of. And I think we're going to focus Newco on the blockchain and we'll see what comes out of there. Our first two businesses have nothing to do with blockchain, but they're pretty interesting. And we'll continue to innovate. Your other question was Investopedia. I think in terms of -- there's four big segments of Dotdash: finance, health, lifestyle and beauty. Finance, health and lifestyle are all roughly equivalent and beauty is a little bit smaller than the other three. They are -- they're all important categories. I think it's true what you said of Investopedia and I think this is true of others too is we do have the ability to go deeper. And we do have the ability to build real businesses benefiting from some of the trends of people trying to find information. So the example you have in Investopedia of retail investors and some of the momentum behind retail investors I think is really important and has been fantastic for Investopedia for sure. And I think that there are similar trends that we can point to around beauty for example and people taking control of their beauty. And the -- slicing beauty into more narrower and narrower products to serve different customers, I think it's something that we benefit from in terms of being able to leverage influencers. I think it's something there that we benefit from. In each one of these categories, we absolutely can go deeper. We absolutely can deliver -- we can deliver a product to a customer that gives them exactly the information that they're looking for and deliver advertising surrounding that that is very, very qualified for the -- that delivers a customer that's very, very qualified for the advertiser.

Our next question will be from Justin Patterson at KeyBanc.

Great. Thank you. One for Joey and one for Oisin. Joey, on Care.com, it's been a unique period with some tailwinds in Enterprise and some headwinds elsewhere. How should we think about just what normal growth should look like going forward as well as the investment levels to support that? Then Oisin, I wanted to tackle the Angi rebrand from a different angle, the pros perspective. How are they reacting to the new brands? Was traffic adversely affected? How are you ensuring that we don't have a new capacity problem for them? Thank you.

Thanks, Justin. You're right, it was a tailwind -- in terms of Care, it was a tailwind for Enterprise and a headwind for consumer. And I think that the consumer is now coming back. We can see that very clearly. Again, latest COVID data may change all of that. But we can see very clearly records on -- daily records on subscribers -- new subscribers at Care. The -- in terms of investment, the business is profitable today. I think it will be profitable for a while forever, its hard to say forever because maybe there's an opportunity. But it is right now, I think at the level of investment necessary in that business to do the things that we want to do allows us to maintain profitability there. In terms of the growth rate, I don't know, Mark, do you want to take that one?

Sure. Look, I think we are – again, we're early with our ownership of this business. We owned it for about a year. We think that the TAM here is $300 billion. It's – the penetration is less than 1%. So we think there's a long runway here. You look at other marketplace businesses north of 20. Look that is potentially a long-term number here. Now, we're nowhere near, where we want to be in terms of our penetration and product and investment, so we've got a long way to go. But we think and we've said that, this is a TAM that is growing. And the opportunity here could longer term be as big as what we think we have with Angi. But we've got a lot of work to do to get there. So it's a little hard to give long-term revenue and long-term margins given our earlier stage, but if you look at other marketplace businesses you can get a sense. Yes Oisin?

I can – you want me to hit the rebrands?

Sure.

So, just to talk about the rebrand on pros. We started the rebrand by moving Angie's List to Angi for both ad pros and Angie's List customers. More recently in the last month and a half, we flipped over HomeAdvisor to read as Angi Leads for pros. So the pros now are either Angi ad customers or Angi lead customers. There's a few things going on there. One is the pro sentiment towards Angi is better than the pro sentiment towards HomeAdvisor. So that's a net win right out of the gate, where pros feel a – they feel better about the Angi brand than the HomeAdvisor brand, in terms of their association with the brand. The second is, we've got overlap with customers who are Angi ad pros and Angi lead pros. For the first time, we've invested in having a dedicated point of contact for those pros. So they now each have a single point of contact to help them manage their accounts on both ads and leads, which is – sounds obvious, but is a step forward for them so they go to one place, when they got questions concerns. And then the third is, the third opportunity I'd say is, we've obviously got different sales forces selling those different products and how we think about being more integrated on that is a pretty significant opportunity. There's a lot of product work to go on to make it happen, where today you still do have two distinct accounts, two different sets of customers that come to you or leads that come to you through those accounts. But I think now that, we've got them under the same name effectively, there's a pretty big opportunity to integrate those more tightly before we take on the next phase, which would be getting those same pros access to Angi Services jobs in the future as well. So I think we're on a path here. It's clear, we're making incremental steps. To me, I feel very impatient on any given day, or week, or month that we're not moving fast enough to get to a place where we've got it all in a single place, where all our pros can access all our products at a single location. But I know that, the team is doing phenomenal work to pull that together. And the fact that we've rebranded at a pretty fast clip on the pro side on ads and leads, just speaks to our commitment to do this. We know it's the right thing to do. We know it's going to ultimately lead to better ROI for our pros and a better experience overall. So I think, we're getting through the pro-rebrand and I think there's a bunch of upside. And as you know SP retention is a significant lever for the business. And if we move that through a combination of better pricing, better brand connection and ultimately a better product as well so there are things we're doing below the surface to actually make the product and the experience better for the pros as we move into this new brand we could see upside from it.

Great. Our next question will be from Brian Fitzgerald at Wells Fargo.

Thanks, guys. Maybe two quick ones. With respect to the rebranding effort maybe from an SEM SEO perspective as we reopened there's been heightened demand for kind of bottom-of-funnel performance ad formats to get ahead of that resurgent consumer spend. It sounds like you may be seeing this, kind of, in Dotdash too. Was that impacting the speed or the efficacy with which you guys roll out your kind of exercised rebrand playbook? And then second one was just on Key. 50% of new customers opting in getting a discount on the first job that's a great deal. What's the impact that's having on repeat rates? And how are repeat rates performing versus what you thought they would going into the Key rollout?

Yes. I'll take the Key and work backwards from there and perhaps Joey can chime in on the SEM part as well. So just to hit the Key part we released the data in a number of different segments. So we compared it to service requests someone who just does services, someone who does services as a Key member and then Key member with the app who starts with services. We're continuing to roll that out; obviously, at 140,000 members now. We released the data the first time in the last letter that showed a significant outperformance. It's degraded slightly, but it is still incredibly strong in terms of the gap between service requests -- a service request customer and someone who is at the opposite end of the spectrum. So it is a 3x delta. So if you think about the person who downloads the mobile app engages with Angi Key and has a booking that's a 3x delta which is really, really strong. And we're excited to continue to roll that out and get to scale on that. And again, I think, it's super early on Key. It's super early in terms of like the value prop. It's still pay to save. I think I alluded to some of the things early on that we could take on with Key, but it really should be the beginning of a relationship with the homeowner around how we help them manage their home. And the fact that they've invested in us by buying the Key membership should give us confidence to go and invest in them and get to know their home and think about what other things we can do. In terms of SEM and SEO, I think, we're seeing more volatility in terms of algorithm updates on SEO which is definitely having an impact in terms of how people are thinking about SEM and how they're buying SEM. The biggest thing as you know that we're seeing is as we've taken dollars out of HomeAdvisor's TV brand what we've seen on the -- what we've seen in terms of click-through rates has changed what we've done as we decided to push further into the Angi brand.

Yes. I'm not sure I totally understand the question on SEM. But part of it was did any of this impact the timing of when we chose to roll things out. The answer is no although we did view it as convenient that at a time when we were at risk of reducing our demand funnel meaning the brand change and the domain change, reducing our brand funnel that was a convenient time to do it on account of there being less supply available given the supply crunch in the market. So, it would be less impactful on the business overall. That was one factor. The other thing which again may be your question may not be, but I think in general when we look at SEM and we look at the way the market is and the market share of Search, I think it is safe to assume generally that the cost of SEM in all categories for all businesses continues to go up over time because that's the way it works when you have that kind of market share concentrated. I think that's not -- it's not ideal for the world. But I do think that as that happens what you see happening is as the price goes up that gets passed through to constituents that play in the search marketplaces. And then that ultimately gets passed through to the customer and that's the reality of that world.

Yes. Thanks guys. Joey that's exactly what I was looking for. Appreciate it.

Okay. Thanks Brian.

So, I think we have time for one more quick one. So, let's go to Nick Jones from Citi.

Great. Thanks for taking the questions. I guess just one is there's quite a bit of confusion around what the impact of the Delta variant is going to be. I mean how are you thinking about the risk kind of going into the rest of the year if people kind of pull back from letting people into their home? And then maybe second on Angi Key. Is this I guess more is this driving more proactive requests in its early days? Thanks.

Yes. So, as you pointed out I think it's really hard to predict what's going to happen with the Delta variant. What we've observed thus far is when people are in their homes, they lean into spending more on their homes and it has been a huge boon for the services side of that business. I think as we all observed, it's left us challenged on the supply side. But I think there's hope that we'll see continued hope that we will see us come out of this huge imbalance of supply and demand over the next few quarters. In terms of Angi Key, yes. we are seeing increased both bookings and service requests on an incremental basis from the users who become Angi Key members. So, they both create more bookings so for Angi Services and they submit more service requests overall. And again that's amplified further when we get those users to download or get those homeowners to download the mobile app which is a really important driver for us or a really important push for us as we think about the rest of the year. And as we think about 2022, we're really thinking about how to make sure we get more of our homeowners into that segment of Key members who have our mobile app.

All right. We've run over time here. Really appreciate everyone spending their morning with us and look forward to talking to you next quarter. So long.