IAC InterActive Corp. (IAC) Q3 2021 Earnings Report, Transcript and Summary

Good morning, everyone. Mark Schneider here and welcome to the IAC Angi Inc. Third Quarter Earnings Presentation. Joining me today is Joey Lavin, CEO of IAC and Chairman of Angi, Oisin Hanrahan, CEO of Angi and Neil Vogel, CEO of Dotdash. Similar to last quarter, supplemental to our quarterly earnings releases. ICS published its quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relation section of ICS'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 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 IC and Angi'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 will 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 record affiliations for all material non-GAAP measures. Now let's just jump right into it. Joey.

Thanks Mark. Hello everybody. Thanks again for joining us as always. Busy, busy quarter for IAC as they usually are. We have -- we announced the Meredith deal and so it wasn't long, we saw you last. We've been deep at work trying to figure out how to get everything right for a time when we can close that deal, which we're still hoping to do by the end of the year. And all the other businesses are humming along right now. It's Angi, we will, I'm sure, we'll talk a lot about today, but the services business is in a really great place and we're making progress on the rebrand and care.com is doing really well. We didn't talk about care yet, but care is growing really nicely, hitting all-time records, which we're excited about and our little businesses are doing well. Bluecrew and Vivian, are breaking growth records, which is incredibly exciting and even Daily Beast is at a really nice revenue growth quarter. We are all in different locations today. So hopefully we get all the logistics right, but we are feeling good about the business where we're headed and I know we've got a lot of questions. So we brought machine [ph] of course, from Angi and Neil again from Dotdash. So we could talk about all the big things going on and I'm here of course, to talk about anything IAC. So Let's get started on the first question.

Great. Our first question will be from Cory Carpenter at JPMorgan.

Thanks for the questions. I had two on Angi, maybe first of Oisin, could you just give us an update on the rebrand in Angi services and then second, either for you or Mark 3Q for Angi was better than you guided, so hoping you could discuss the drivers of the upside there, any changes to your expectation going forward. Thanks.

Great. Thanks Corey. So let me back up for a second. So we started this journey about nine months ago to really put the homeowner and the pro at the center of everything we're doing at Angi and overall, we're incredibly happy with how that's going. So you referenced the -- you referenced the services business. We've obviously crammed a lot of change into this first -- into this first year. I think last quarter was no different. So the services business up 160% year-over-year, about half of that organic, half of it from our roofing acquisition still continues to perform in line with expectations. We actually pulled out -- we pulled out the plan that we made. We pulled out the plan that we made in Q4 last year for where we wanted to take the services business in our upside case, our mid case and we are -- we're in line with the upside case of where we wanted services to be. So we're really happy with the things we're proving out there. The three things that we always talked about, the first was, are we going to get anyone to buy this at scale and what does that look like? The second is, can we fulfil at scale? And the third is can we drive margin? And we've obviously proven that we can get people at scale to buy it. So the conversion rates on site are in a really strong spot. We've proven that we can get contribution margin from -- the contribution margin last quarter was better than expected, frankly and the fulfillment it's good. It needs some work. So in certain categories, it's great, in certain categories, it needs work and we're going to take some of that margin and reinvest it back in -- reinvest it back into the business to make sure that we continue to drive an amazing experience for the homeowner and amazing experience for the pro when they use Angi services. So overall, we're super happy with how Angi services is going. I think we're still just getting started, frankly. Obviously it's a sizeable part of the business. If you flash forward, you think about the major categories within Angi services. I've said this before, there's probably a dozen categories or so that we could build billion dollar plus revenue businesses just within that category alone. The TAM is enormous, we're no longer just going after the -- we're no longer just going after the advertising spend of those small businesses. It is the full TAM of everything a homeowner spends on their home. So we're really, really excited about how that's going and expect to continue to see things progress well there, as we continue to build out the team. In terms of the rebrand we published in the letter that we are generating more revenue from the Angi brand than any than -- than ever before and then the HomeAdvisor brand. If you think about -- if you think about that journey, you flash back a year ago with the majority of our revenue is coming from the HomeAdvisor brand. We've worked tirelessly and the team has done an amazing job to rapidly transition our homeowners to that Angi brand. We now have 50% plus aided awareness for the new Angi brand, which for a new brand, I understand it's drafting off the old Angi list brand, but for a new brand less than a year old is phenomenal, especially given the volume of media dollars we've spent on it. And we've, continued to work to drive up that brand to make sure that the experience is great to make sure that we're driving you to a single mobile experience for that brand. And I think there's, still some work left to be done. We obviously still have the HomeAdvisor brand that is helping us consume SEO real estate and consume mind share for people who don't yet know Angi, that we're working to transition. And we still have some other legacy bits and pieces. So we've got the handy brand in retail, and we've got some other stuff going on that we've got to gradually work over to this primary brand. So overall we're turning the corner on the brand. I think it is a milestone that the majority of the revenue now does come from the Angi brand. And I think, we'll continue to see the impact of the rebrand into '22, but overall we're starting to feel -- starting to feel more and more positive about where we've taken that brand and where we can go with it. In terms of the guidance on where we've been and where going yeah, we've put this stake in the ground that it's most important to us to do the right thing for the homeowner and the right thing for the pro and not to focus on short term EBITDA. We've guided to revenue growth in or around where we've been in this 15% to 20% range, including the acquisition. And, we've said we take it to EBITDA flat, EBITDA neutral. Some quarters might do a little better. Some quarters might do a little worse, but overall that's still the outlook. Our long term position is we obviously want to take as much market share as possible and get this to over 20% growth rate knowing we've got a $0.5 trillion TAM out there.

Yeah. Just, just add on a little to what Oisin said, remember that we said last that you should expect for the foreseeable future sort of our organic growth number to be in that May-June range, which was roughly 7% give or take and then layer on the Angi roofing acquisition. So I think you've seen since then, July to October, that range between 15% to 21%. So consistent what Oisin just said, and that's what we expect for the foresee future as we navigate this brand, the rebranding as we continue to navigate out of this pandemic and then on the bottom line. Yeah, so in and around breakeven, Q3 came in a little bit better, but we're going to continue to push and as Oisin said, push back that investment into the experience to make that product as the best as possible.

So our next question will be from Ross Sandler at Barclays,

A question for Neil or Joey on the Meredith. So guys, how should we think about the cadence near term in 2022, given that digital advertising and you guys have some challenging comps in the first half. Second is what are the like lowest hanging fruit opportunities around traffic or monetization? You talk a lot about this on the last call, but maybe what are we going to go to first and are these more iterations or are they potentially, pretty quick needle moving revenue opportunities and then lastly, the print business, what's the overall strategy for meredith's print business. Thank you.

Oh, sure. Joe, I can take it first. So the first, the 2022 margin and the lowest hanging fruit, that's all sort of a related question. And I know as Joey said, and we said, we have a lot of work to do, and we think we can do most of it in 2022. So that's going to make 2022 financials, maybe a little bit tricky to read. As, with all the other things we bought, we've tended to, we take a small step back before we take some big step fours, and obviously we're buying something very big here. So there's going to be some steps back. We do that to address the low hanging fruit, and let me finish up on the margin. I think in the long term, we would expect the margin of the whole business to look like our margins to look historically. The low-hanging question is I think one of the things that I just most excited is the low hanging fruit or the things we know how to do very much aligned with what we've historically been good at. Like we're going to make their sites much faster. We understand a formula for content improvement in the way that we've done things changing how they use ads and the mix of ads they use and some of the ad load stuff. That's all very easy for us. So there's going to be like an initial phase of changes that we can do very quickly, that you'd qualify as low hanging fruit that I do think are going to make a really big impact, but then as we get more into it through 2022, and then on ongoing, this model is the same as our model. It's, just work, it's doing the right things. It's making the very best content for all the things they cover and essentially taking their brands, which will be our brands, which we think are some of the best brands in publishing and putting them in their proper place on the internet. And again, I've said this before, I think I've actually said this to you, Ross. Like there is no reason why the spruce is twice the size of better homes and gardens online. That doesn't make any sense. So the opportunity to get better homes and gardens to its rightful place online is some combination of this low hanging fruit and the really hard work we have to do. And that's going to start sort of immediately at closing. It's going to take us through 2022, but heading into 2023, we're very confident with the numbers we put forth. We're confident where we're going print. Print again, I think we've been fairly straightforward with what we said we're going to do with print and print historically, they've been focused on a very traditional rate base model which is print a lot of magazines and sell ads against large audiences. The days of that have -- the best days of that have probably passed that. We're not the guys that are going to change the secular advertising decline on print. However, their magazines are beloved and they're incredible and the editorials amazing. So what we're going to do is we're going to work on the magazines are making as good as they can be, but we're going to focus the economic model on being much more of a consumer model, which means it's some combination of subscriptions and advertising leaning much more on subscriptions and other things like newsstand a little less on advertising, which means circulation's going to go down in a lot of these titles. And that's all part of sort of like the evolution of media, how to make these things healthy in the long term for food and wine and for Southern living and for people. And for all these properties, print is going to be a long term part of this mix. We just want to do it in a way that's right for 2021.

The only thing I'll add to that, I agree with everything Neil said. The only thing I'll add to that is from ISS perspective, the what, what we've said to Neil and team is that 2022 is a rebuilding year and should be a rebuilding year, which means get everything done in 2022. So as it relates to the financial that year, I'm not particularly Bo I mean, obviously we're going to want see underlying metrics and progress on all the objectives that, that we've laid out. We've got a very, very clear path on what we're doing, but as it relates to the financials for 2022, we're very, we're much less focused on what that looks like. And looking towards 2023, because we don't want to push big decisions out. We don't want to push big changes or efforts out. We want to get everything done relatively quickly and reflect all those transitional costs in 2022.

Great. Are now next question will be from John Blackledge at Cowen.

Great. thanks. Maybe a couple questions for Joey, Joey, what does IAC look like kind of post the Meredith deal? How should we think about capital allocation and maybe an update on the CFO search?

Sure. So I think probably best way to think about pro forma cash is somewhere in the neighborhood of a billion and a half. We have, we have about $3 billion of cash right now, and we've said we're going to raise $1.6 million of debt for the Meredith transaction. And then there's probably another realistically couple hundred million of costs that all in once you get through everything, all the, the costs related to clean up on Meredith that that will come through over the course of a year. We also have -- we've talked about this a little bit. We have a warrant with respect to Touro that that is another potential use of cash, which we would expect to exercise at some point. And so with that all in, we think about right in the neighborhood of $1.5 billion of totally free cash to spend and remember there's no debt at the parent level so that we also have greater spending capacity than, than just that billion and a half. And there's a lot of currencies that we can invest in or that we can issue or, or, or go any direction with. we've got the, I see currency, of course, there's the currency there's MGM there's maybe at some point though and so all these things are areas where we can think about cash going in one direction or the other, and that provides us a significant amount. I think, of flexibility and the priorities are going to be the same. They've always been meaning number one is investing into our existing businesses that could look like what we're doing with Angi right now, where we're reinvesting most of the P&L that could look like reinvesting in our existing businesses through share repurchases. And that could also, and I think that probably the significant portion of our time I am right now is spent on looking at new things and we see a lot of new areas that are fun. We, in a small scale, we've got we're building businesses with NewCo. We've built a few businesses already, and we've got a great list of businesses that, that we're trying to build with NewCo. And, and again, we're always looking for new things. And so that's going to be a factor for our cash too. Second question with CFO search the there's two kind of what I view both actually is great news on CFO search. One is we're seeing phenomenal candidates. I've met with another half dozen this week, and a lot of interest in the role. And the other good news is we have the luxury of being able to take our time to make sure we get the right fit. You all have met Mr. Schneider who's a phenomenal doing a phenomenal job in FP, a and investor relations. We have Mike Schrman, who's doing an exceptional job and has been with us for a very long time as controller and NextStop is our treasurer and the list goes on. We have a phenomenal finance staff, and so I'm not worried about where we are. It's not to say we don't need a CFO and want a CFO and want to get one quickly, but we have an exceptional finance staff that, that keeps the trains running very well with high confidence for all of us internally. And we're going to make sure we find the right person for the role and take our time doing it.

Thanks, Joey.

Our next question will be from Brent Thill at Jefferies.

Good morning. Dotdash has been decelerating on a tough comp in the October growth rate was, was also a deceleration on, on an easing comp. Just curious if your confidence still on the organic 20% sustainable growth and any commentary you can provide on the tailwinds they're experience from an IDFA front.

Sure. I'll take that. The first thing is that IDFA, there's no tailwinds. I mean, one of the, one of the things we talk about a lot in our business is we don't need person identifiable information to do what we do again, if someone is coming, looking for diabetes information, we know pretty much what we need to know about them. If they're trying to figure out, I think it's Joey wrote in the letter, what color to paint their children's room. We know everything we need to know about them without knowing any of that. So when none of the apples changes have provided a headwind, I think if there is a headwind, it is, as you said, it's a hard comp I mean, at this time, and, and it's primarily in the, in the transactional commerce business this time, last year, people were not shopping in stores at all. It was all eCommerce. I think at this time last year, there was no there weren't any supply chain issues. Both of those things are fairly big headwinds. I feel good about the 20% long term target. I think we had an exceptionally good time period last year. I think things are just, I guess, evening out a little bit, but I think in the long term, I think 20% is something that we're pretty comfortable with.

Yeah. Just to add on a little to what, to what Neil said, remember that the, the comp last year we grew 33% in Q4, which is the high point of the year. So it is a tougher competence. It's something that we've been discussing throughout the year that the comp would get tougher on a two year stack that growth in October, would've been, closer to 40% relative to where we came in. So still a really healthy number. And then I would just also highlight that sort of the macro invite. You saw some of our, some other businesses report, Amazon or us commerce business only up 3%. So that just illustrates what, what Neil was saying about the, the, some of the headwinds that, that up against our performance marketing business, but still up over in and around 10%, the last couple of months,

And just a quick follow up for Joey on search, it's doing really well. Can you walk through what you're seeing on side?

Yeah, the search business now is, is primarily performance marketing in the sense that we go out and, and acquire users and we monetize them when they get to our site. There's two components to that. There's our efficiency in acquiring users where we had a technology upgrade that got us better at the acquisition. And then and then on the monetization side, that's been good pretty steady, but we found as a result of some of the work we've been doing on some new channels for marketing, where we go out and find users with a new ad unit significantly historically we've generally acquired users from search into a search experience. Now we've opened up the ability to acquire users from display advertising. And so that get opens up inventory on a lot of publishers where we now can, can market there and, and drive back to the ask site for monetization. And that effort really started at zero at the beginning of this year is going very, very well. And, and it's something that, that will continue to wean into and grow. It doesn't change my overall view on the segment, which is it's a segment that has some ups and downs. And, but for us has been a reliable cash flow generator, and we think can continue to be a reliable cashflow flow generator.

Thank you. And Brent, just to talk about the numbers a little bit, just to help you understand sort of the trajectory there. So growth for total cert was 57% in Q3 accelerating throughout the quarter was 78% in October. We do expect that expect that to, to moderate, going forward. The comp slash year again, Q3 2020 ask media, which grew 80% in Q3 and over a hundred percent, the last few months was down 7%. So it was a, it was an, an easier comp versus the 40% growth that we saw in Q4 2020. So we do expect that to, to moderate somewhat, but still, still healthy based on, all the things we're doing and, and what Joey went into. The other piece of search is desktop. And, and as there, the big piece of that is our B2C desktop applications business, which we've effectively stopped marketing earlier this year. So you have the dynamic of the tail of that revenue continuing, but that will continue to erode over time. And but no marketing really against that. So that is why you're seeing sort of the, the profits that search jumped the last couple of quarters. We do expect continued healthy profits from search given what's going on at ask, but, but certainly not at the, not at the levels we we've seen in, in, in Q3 long term.

So our next question, we will go to Brian Fitzgerald at Wells Fargo.

Thanks guys. On Meredith, you talked about the site speed, the brand search some of the complement complementary around monetization wanted to ask about audience composition. Do you think the audience is a little older, more female and want to ask if it, if it helps you tap into wallet share and categories like CPG?

I think the answer to all of that is, yes. I think one of the things we're, we're really excited about, and, and you can do this in any of any of the, sort of the verticals in which Meredith competes. And we compete also, and just, just take food for instance, right? And you can take the, the food brands that are the Meredith food brands, food and wine is a high end brand and a piece of the market that we don't occupy. All recipes is user generated content in a piece of the market. We don't occupy. And you can go down the line and you compare it to like where the spruce sits, which is sort of like your local supermarket or where Sirius heat sits, which is like Brooklyn hipster food almost to, to every brand. They have sits in a place in the market where we don't sit. So it is very, very complimentary. You can take that and, and you can start to look at some of the sales clients and a lot of this, we knew beforehand, but the people we sell to there is surprisingly little overlap. Like there is a lot less overlap than one would expect. we do very well in sort of endemic pharma and endemic finance. And we do okay in lifestyle, they do tremendously well in lifestyle, and don't really play as much in some of the areas in which we play. So it's all very complimentary, complimentary audiences, complimentary advertising partners, even the way we do commerce is different. They're very focused on commerce that deals, and we're very focused on commerce that's product review based, which we're going to make the whole company focused on. So one of the things, the more we learned and the reasons we got excited is exactly it's almost like this is like a, a plant question for me. I like it so much that like, everything is complimentary and that's what we're really, really excited about. Even take a step further, we're very good at making money transaction, and they're very good at making money selling ads. And that's something that Joe highlights in the letter is being very complimentary. It, it's a, it's a, it's really, really nice fit. It almost fits together like a perfect puzzle piece.

Okay. Appreciate it, Neil. Thank you.

Thanks. Our next question will be from Jason Stein at Oppenheimer.

Hey guys. Thanks. want to ask a bit more about Angi total roofing first, can you, how, what is that growth kind of maybe just perform us. So how much did your top funnel benefit that asset? And to the extent that that was successful, is this a playbook, should you own, should you buy three, four more of these and other verticals? And then just another question on Angi, you said transacting service professionals is up 7% get, the business kind of growing pretty minimally. I mean, just is there, certain service professionals you're moving in while others may be moving out. So those are two questions. Thank you.

Thanks. So just in terms of how we're feeling about of roofing overall, we're incredibly happy with how roofing's going. The early read is that it's doing exactly what we wanted it to do. So obviously you change ownership and you want to make sure that everything is doing what doing, what you thought it was going to do. So that's happening the, the two dimensions in which we're expanding that business one is geographically. So we're in three new markets. Q3, we'll be going into two more new markets, Q4. We are driving the majority of the top of funnel in those new markets from Angi. So Angi is the primary source of leads in those three new markets, Q3 two new markets, Q4 and overall we're seeing comparable conversion rates to what they were seeing in the existing markets. The early read is that it is going in, in the right direction. So we're very, very happy the team, very happy with the existing perform or performance in the existing markets, happy with the early read. So I think there's no reason at this point to believe. We won't be able to expand that out into many more markets next year. I think there's a lot we can do with that. So by getting deeper into that funnel, it exposes us to more players in the supply chain, the manufacturer, the distributor financing partner gives us a lot more exposure to the different parts of the value chain that go into go into roofing. So we haven't even started to really to really play there yet. But I think you can expect as we scale that business out, we're going to wait or we are going to wait for those. The, the first two markets we've expanded into to mature a little bit, hit some critical mass, and then we will we, we will expand that number of markets again next year, assuming everything continues to go on track with roofing.

The follow up on that was, are we going to do the same thing in other categories? I mean, as, as Joey pointed out, this is a material change for the business, but a relatively small financial transaction for us to buy that, to buy that business. We are actively exploring the same thing in other categories. I think I've reference before some of those categories that we think could be billion dollar standalone categories, things like fencing, things like driveways, things like exterior painting interior painting to a degree and we are actively looking at actively looking at how we might repeat that again, while we're developing the confidence that developing the confidence that this playbook is the right one for us. I think our early read tells us that, yes we're going the right direction with it. If you zoom all the way out on this, this was effectively the, a playbook that we've had with handy where handy was small in a small number of categories. And we've expanded handy out now to be Angi services in the book now business in, a hundred plus categories across the nation. So I think the early read is very positive and we are likely to continue down that path in terms of transacting, SPS. Look, we made a commitment nine months ago to say, let's put the customer in the pro at the center of everything in terms of what that means for the pro. That means when we bring on a pro, we want them to be incredibly successful on the platform. So we've done a lot of work to change how the sales team is structured in terms of compensation plan, in terms of verticalizing that sales force. And that's started to play out it's starting to play out in the types of SP that we're bringing on in terms of how we throttle their spend in the first, 60, 90, 12, 60, 90 days up through the first six months, how we expose them to features on the platform, how we gradually increase their exposure. And I think all of that is proving to be super positive. So that's some of what's going on in terms of us bringing on fewer higher quality and by quality, likely to be successful in the platform SP and we're, are the early read again on, on that data, is that by doing that we're seeing higher levels of retention, higher levels of ongoing engagement with those are from those SPS. And I think the ROI for SP is going to be much higher.

Like we said, the things we're trying to get done are for the homeowner want help them get the job in their home done for the SP what we want to do is want to help them grow their business, and we're not successful long term, unless we truly help that SP by delivering them great ROI. So that's some of what's going on in the lead business in terms of transacting SP in addition to that, yeah. Obviously we're facing supply constraints and that's, that's, that's putting a dam in terms of engagement. There's also stuff going on in the services business in terms of transacting SP where we are seeing a concentration in some cases in larger SP, which is resulting in fewer SP counts for the volume of service work that we're doing. So the mix shift of all that is changing what it means to have a transacting SP so you can look at the transacting SP and think, yes, we're driving towards higher quality, larger transacting SPS, who we know are going to be more successful in leads and more successful in services. And ultimately what we want to get to is SP that are buying across or transacting across leads, ads, and services, where it's right for them.

So for our next question, we'll go to [indiscernible] at Wedbush.

I have a couple ancient questions too. So first there's just been a lot of talk, especially this quarter around supply chain constraints especially in Andrew's line of business, is that having an impact on you guys at all, especially on the Andrew services side lot labor costs taking longer to, to finish jobs, waiting, waiting for construction materials, then you talked also a bit about expanding contribution margins, any color you could add around that. Is it coming from certain categories where are you along that path? How much more improvement is, is there less? Thanks.

Great. So in terms of the supply constraints we're seeing it in pockets and Angi services. However, the product market fit that we have, there is so strong that it's growing through it so effectively at an 80 plus percent or around half the, the 160%. So call it 80% organic growth rate in that business. The product market fit is so strong. It's basically growing through the supply constraint. Yes, there's, stuff on the margin that's impacting it. So some of that business is sold through our retail partners. Some of our retail partners obviously have supply chain constraints. We've all read about the backup on the ports, particularly in California, that's affecting that some of our pros are having issues, getting materials that's affecting that, but the product market fit is just so strong on Angi services that it's almost not being noticed quite so much. Yes, it's happening in, small parts where we're experiencing more of the supply constraint issue or the supply chain constraints is actually on the lead business where the lead pros are and the ad pros are scaling back in certain cases, their willingness to continue to invest in leads and ads. When they know they're struggling to get more pros on board when they're struggling to get tools, machinery, equipment, etcetera. And they're not growing their business as fast as we would like. So the two stories are pros are joining the Angi services at such a fast rate that you don't notice supply constraints. Whereas on the AED lead business, we do see the supply constraints affecting the rate of which people are able to add capacity in terms of the expanded contribution margin. Look, we're not get into the specifics of the exact numbers, but the contribution margin year over year change was, was significant. We are seeing it across the board, particularly concentrated in the earlier categories that we launched. So the categories that have been around the longest the densest markets, the places where we've built up to a small a certain number of jobs per geo, we see the expanded margin. We see expanded take rate, lower ops costs, lower customer service costs, lower refunds claim rates, etcetera, all contributing to expanded contribution margin, where we're also seeing interesting data is on the expansion of revenue that we're getting when we expose our, our customers to Angi services in the service request path. So, for every time we expose Angi services, we're generating about the same amount of lead revenue from a service request as we were a year ago, but we're seeing a significant increase in the amount of revenue we're generating from Angi services as a result of ex expanded kind conversion on site. So increased conversion on site increased and more accurate average order value, so better pricing and then the third one is increased fulfillment rate. So the three of those put together are expanding the monetization of an services whenever we show services on. So all of that is coming through and also contributing to greater density and ultimately more contribution margin.

Great. Thank you. Our next question, we go to Dan Salmon at BMO.

Okay. Good morning, everyone. Maybe for Joey first, just to, I just want to go back, you, you mentioned the broad strokes of the Meredith deal a moment ago. I just want to come back and ask specifically since the announcement, any, any updates on, on any details, how is the process going specifically, anything that more, or that you've learned? And then second for Neil, the letter walks through, three kind of distinguishing characteristics of dot dash, right? And I think we call that, curation trust and privacy. It seems like those things are particularly relevant this quarter. So could you just walk through those three and unpack a little bit and why those are score important as differentiators?

Sure. I'll let Joey do your first question first and I'll do the second.

Yeah, the second question's much more interesting, but, I'll let you do, I'll let you, I keep an interesting one. I'll let you both actually, just on how we're doing so far we're really happy about everything we've learned so far. We've got, obviously we can only go so far until we have clearance to close, but people are starting to at least get to know each other. And we're doing as much research as we can to have a plan in place for when up we close. And I do think that, that we are as tightly planned in this one, as we've ever been in any of them. And that's a testament to the amount of diligence and work we did in advance of getting to a deal and a testament to ongoing work, people are doing right now is so that when we get to closing, we will hit the ground running and, and we know what needs to happen and who needs to be, and what seeds, et cetera. I think that's a great head start. And Neil, you want to hit the, the three teams,

Hey, Dan I can actually do like a full hour on these three things. I'll try and keep it short truth, privacy curation. Those are sort of the words Joey used, but that's pretty much how we look at things and I'll, I'll do them in reverse order. The, the curation part, which Joey talks a lot about sort of like being everything, to being something that that's the key to what we do. And the old problem that like about.com has, and even like to of the Meredith brands have this, you can't be everything to everyone and you need to be experts in things. And the way we've built our brands and the way Meredith brands are set up is we can be the experts, the single source of truth, trust expert for something that's seemingly unimportant as like how to do smokey eyes when you have a date to go on. But that's very important for the woman who needs to do smokey versus like, how do I deal with this health diagnosis, which I got, which is also, which is fairly high stakes in a different way, or what do I do to roll over my 401k, curating and providing the very best answer on the internet or in whatever medium we're playing, whether it's print, whether it's something else is the fundamental of our business and is the fundamental thing that has gotten us here. And part of pure rating is doing the other things well, right? Like having a site that fast and not too many ads and all, all these things, and that ties right into call it truth and trust. And we don't do content 10. We're not like a newsfeed. We're not fake news. We're not like conspiracy fee. We're, we're none of that. We are content written by experts with true knowledge of the topics they're talking about. And we're doing that combined with Meredith at a scale. No one's ever done it before, which is A, very good for users, because we're going to have the resources to make the best stuff, but be great for advertisers. So you, I be able to spend at scale against intent driven segments, where what somebody wants at a level that we think we can take some money away from the platforms and the Facebooks of the world who don't have that. And the combination of cure and the trust and the truth gets through straight to intent. And that is what we do best. Even in people in entertainment is sort of the defacto go to source someone checks when they read something, see if it's true or not. So across everything we're doing those are really the themes that went through it. And the, the last bit about privacy is something that we've been focused on for a very long time. And we haven't been right about everything, but we haven't right about this. We never thought that something you couldn't build a business around a cookie that never really made any sense to us that it's like the -- my dad looks at a pair set of golf clubs online and falls him around for a week. It freaks him out. Like that's not going to be a thing. But what we always knew is that context and content would work and that's, what's worked in media for the last a hundred years, right? Like an enthusiast magazine has always done great. Still does great. Like a food magazine still does great cause what it is. So we don't need to track people to know what they want. And one of the beauties of Meredith is they have lots of lock in data and lots of first party data and lots of subscription data that we don't have, but data that people want you to have. Because they're really interested in this thing and they're most cases paying for something. So between our ability to target via content and Mari ability to target via content and first party data. And we'll, we can learn from there. We really look at privacy as an advantage, and you'll see, there's a bunch of other media companies with some fairly big headwinds cause have changed just apple or whoever has made. That's not really been a factor for us at all.

More of a couple comments, one just looking at the selection of faces on this call, you might need to explain what smokey eyes is, Neil, but that's makeup. just so everybody knows

The I'm deep, I'm deep in this, Joey. Yeah.

The, the one important thing for us, the trends that we're talking about here, those three trends in particular are a thing that we've believed in for several years. And that's informed dash strategy for several years right now in execution for several years. And it's only now a lot of those things are coming to the forefront. In fact, for the last little while, those things were, were pretty unpopular. But now, now those things are coming to the forefront and that, that's why we're another reason why we felt confidence in leaning in with Meredith and making this bet is, is we see those trends. We've seen those trends, those trends have been proven, and we think those trends have a significant runway still ahead of them right now.

That's great. Thank you.

We'll make sure we all have our makeup done better for next quarter.

Go to Bernie. We'd love to see anyone with the smokey eyes on this call.

Our next question will be from Michael Ng at Goldman Sachs.

Hey, good morning. Thank you very much for the question. I was just wondering if you could talk a little bit about how we should think about gross margins for Angi over the next couple years. Particularly as services becomes a larger part of the mix. And then could you, you also talk a little bit more about the progress on Angi ancillary initiatives like Angi pay and Angi key. Thank you very much.

Sure. So in terms of the, the margins, I, I think in terms of the core ads and leads business, we've said we, ultimately expect that to get towards 35%. The, the, the makeup of Angi services is going to be different. So within Angi services, you've got smaller jobs, the $200, $300 jobs where we have a, a significant again a significant opportunity to generate margin where the take rate is strong. The operations customer service cost is mostly something that we can automate and we expect to be able to get to expect to be able to get to good margins on that. And then we've got the larger, the larger jobs, the you $10,000 jobs where we will see lower percentage margins. Ultimately though we, we put it all together and this isn't about driving towards a particular percent of margin. This is about margin dollars. And this is about us saying that we had a business before, which was focused on focused on, a very sub small set of that half a trillion dollars, a TA or $500 billion a TA. And now what we're saying is we're focused on the entire thing, and we should be able to generate far larger margin dollars by focusing on that. And if we, we do the right thing for the homeowner, we do the right thing for the pro. We ultimately think that we ultimately think that the margin dollars payoff the, that we build around the business, the degree to which we the degree to which we will be very differentiated from the competition will allow us to get to strong dollar margins over the long term. What exactly that looks like in terms of margin percent. It's not something we're focused on, we're focused on what the ultimate dollar margins will look like. Your, sorry, I'm blanked. Your second question was on the, and yeah, yeah. So we, we, we've got a number of other things going on as you, you pointed out we've got Angi key membership, we've got payments, we've got financing. All of them continue to grow pretty nicely. So the Angi key membership, as a reminder for people is you pay $30 or $29 a year, and you get up to 20% off hundreds of everyday home services that increases consumer retention rates increases likelihood to transition over to the mobile app. And that the, the, the data that we showed before in terms of where that's tracking for retention rates continues to hold and we're pretty happy with pretty happy with the fact that the member who generates or the member who downloads the mobile app spends an awful lot more than the average consumer, so that that's in a, in a pretty strong spot, the rate at which we're adding members continues to hold. So we're very happy with the growth and the membership payments. We had previously rolled it out to our lead pros. We've more recently rolled it out to our ad pros. So the rate at which we're adding rate at which we're adding consumers and pros to the payment experience continues to grow nicely. I think we had our first our first $600,000 day yesterday, or the day before in terms of volume of payments that we're processing. So really happy with the, the consumer feedback on it, really happy with the pro feedback when pros use payments and generate revenue from the platform that we, we process for them, their retention rate is materially ahead of our other pros. So very happy with how that's going. And the third one is financing. So we're, financing is still small, relatively it's growing, rapidly in terms of the, the, the growth rate we're in the, for the quarter high single digit millions of dollars of finance that we've provided to our provided to our homeowners. Again, satisfaction rates on that are really strong. Pros love it because it allows them to allows them to engage customers. They might not have been able to engage customers love it because of the convenience financing, where they're, where they're at the point of sale. The three of those things combined are not yet having a, a material impact on the business, but if we hope that as we get into 2022, when they scale that we will start to see some impact in 2020, late 2022 from at least one of those initiatives overall, I think you think about where we're going holistically. We've got to make sure that we have a deep a deep knowledge and a very robust payments platform. I don't know any large consumer marketplace that's been built recently that doesn't have payments as a core part of the product. So we're going to continue to push on that financing, obviously, very topical important. And the early read we get from membership gives us the confidence that it's the right thing for us to do. And I think on membership in particular, it, it's a, it's a pretty light program right now. It's, it's pay to save it's, the it's the Angi equivalent of two day shipping, or the Angi equivalent of a Costco like membership pay, pay to pay to save. I think in the combined weeks and months, you'll see us make that a little richer. One of the first things we'll be we'll, we'll be starting to roll out in terms of making that richer has to do with, has to do with a tech based service, where we'll give people access to a home expert who can, will give our members access to a home expert in a trial to allow them to communicate with someone who will make bookings on their behalf, help them out with issues that they've got for their home. As we start to build that program into something where you really will turn to Angi key or Angi key for everything inside your home. So early read is super positive on all three, still.

Our next question will be from Nick Jones at Citi.

Great. Thanks for taking the questions, I guess, one on Angi and one on dot dash Meredith I and Angi how, how much of the kind of requests are related to kind of people who have purchased new homes and, and is there kind of a risk that if the housing market cools off that requests might slow down? I think buying home generally triggers people to kind of think about doing repairs and then I'll, I'll have a follow on dot dash.

Yeah. In terms of the in terms of the volume of request, look the bigger driver of request value almost, and the volume of dollar flowing through the platform is just the size of home and the age of home and people's ability to invest in it. So yes, you're right. That people buying new homes does trigger a percent of the, the, the service requests. However, the bigger drivers are just the size of home, home, age of home and capacity to invest. So that's the, the, the driver of service requests on the other side of the platform, we know that our pros are so supply constrained right now that their willingness to pay for SRS is, is a function of how much demand they've got from other sources. So we don't feel particularly exposed to a shift in a shift in housing demand in, instead, I would say that if we see a normalization of consumer demand, it will probably be very beneficial for our ad business and our lead business, as those pros experience, experience less of a, less of a supply constraint. Overall, The other thing I'd add and Mark Schneider probably has the number, but I think 60% of our, our service requests are in are sort of necessary jobs. So somewhere in that ballpark and the, yeah,

Yeah. We said, I think we've said historically, roughly two thirds are nondiscretionary.

Yeah. And nondiscretionary, that was the word I was looking for. Thank you. And then the other I'd say is just when home sales slow, and there's less turns that also has a, a natural hedge in it, which is people do more work on their existing homes. We've seen that historically. I mean, it's really hard to, to predict any of these things and COVID changed a lot of things. So maybe historical trends won't be indicative, but that, that's what we've seen in the past.

Great. Yeah, we'll have a report coming out in the coming in the, in the coming quarter that shows a significant change in the percentage of time. People are spending at home and a significant change in the percentage of dollars that they're spending on their home which we think again reflects the, the change in consumer behavior to focus on the home, which we don't think is, is going away anytime soon. Great.

Thanks. That's helpful. And then, on dot Meredith, there's some interesting charts on the shareholder letter on, on page four and, and it sounds like, kind of making Meredith properties faster is kind of a key thing you're going to work towards. So that, that sound like kind of taking the entire library and replatforming into the dot dash tech stack. When you think about maybe improving SEO, which I think in some cases is due to kind of the, the code actually on the content and how you format the content. Is that kind of rejiggering like the entire library, or is it more on kind of all future content? And it's going to take some time for those benefits to kind of trickle through

Couple answer to that, and its probably a little bit more in the weeds and some people won't, but I'll give you the answer anyway, but tech Tech's actually quite good. They just, they just actually built a new one. So I'm not entirely sure. We're going to migrate, we're going to migrate everything over. We may, we may use some of their things and that's going to sort of like be consistent with a lot, they're very smart over there and they actually just completed a migration of all their brands on one unified tech. That's pretty good. So we're going to, we're going to work on all of that, but what, what I would say, and this answer is works for SEO and it also works for everything else we do. And, and we've said this many times, we're very focused on search because we're very focused on algorithms and if you're going to be a publisher today, or if you're going to be on the consumer internet in any way are going to be in travel are going to be in anything algorithms are going to be between you and your users and what the algorithms we care about are the algorithm that care about where they send users. That means Google. That means Pinterest. That means apple news. That means Flipboard. That means the, the sort of like the different algorithms within Google. We, we care a lot about. So when, when we look at a new site consistent with what we've done with other things we bought, it's very, very comprehensive and we are as so with the oldest piece of content as you are with the newest piece of content. So because a user doesn't care and algorithm doesn't care, they just want to know what's on that domain. And what is it covering? Is it the best thing? And that's our focus. So when we make new things, they're obviously going to be made probably with is and different things and me is done historically. But one of the really, really big opportunities is these brands and these websites are the, some of the brands are a hundred years old. The website's obviously a hundred years old, but they're 10, 15, 20, 25 years old. And the opportunity to go back and get a look at some of that content and apply some of the things we know now that they wouldn't have known then to some of the, to some of their content and that some they've been working to update. And some they haven't is a really, really big opportunity. But I think the key takeaway for this question is what we do and what we do to brands when we do to websites. And actually we're going to do to print magazines is comprehensive. It's not cherry picking and, and again, there's one of the things we say, which we, we stole from, from a, another publisher, it's like not all of our content that we have makes us money and we don't care about that, but all of it supports the content that makes us money, which means that if you're going to have a health domain, there's obviously going to be some topics that are very big and some traffics that are very small, the small topics have to be treated with the respect and the care of the big topics, because the person who uses that or the advertiser that sees it, it doesn't matter to them that it's a small topic. It matters to them that that's their topic. And we look at all domains that way.

Our next question will be from Justin Patterson at Keybanc.

Great. Thank you. And thank you, Joey, for clarifying smoky eyes. I actually had to Google that a moment minute go. So if I can, so first one for ocean you're brought in at your first chief data officer would love to hear how you're thinking about just ways to leverage data on the Angi platform over the next few years and how we should think about that. Those benefits manifesting. And then for Joey would love to hear about top priorities for care.com looks like trends are going well. So what are the next areas to lean into for growth? Thank you.

Thanks. I'm curious if my wife, my wife will have smokey eyes for our date tonight. That's the, the logical conclusion of this. So in terms of data, I, I look the, the feedback I've gotten here has been everything from how did you not have achieve a data officer before to this is obviously something we should be doing to, how can we put more money into investing in investing and using our data. We have so much opportunity in data that it is almost embarrassing. So the use of the use of our data to accurately price our leads and ads for our pros is a huge opportunity. Right now. We set pricing for our leads approximately once a year. We don't, don't really change that. That's a very obvious and very easy way that we can very quickly very quickly start to realize some benefit. The second big opportunity is bringing our products together in the most thoughtful way from a data perspective. So when to show an ad pro, when to show will lead pro when to show services right now the, the there's some logic behind it, which is intelligent, but it is not dynamic. Doesn't respond to the availability of supply. It doesn't respond to availability of demand and the likelihood that we'll have future budget from pro. So that's a, a second significant opportunity. And then the third is the third is on consumer experience. So the more we can know about your home, and we know a lot about your home already, you've put in multiple service requests, we can obviously access public databases to, to know a lot about your home. The more we can deliver a customized experience to you that makes it easier for you to care for your home. So I think there's a huge opportunity for us to become the repository for all of your information about your home in a way that, reinforces Angi as the place to go to take care of your home. So the more we know about your home from you from other places online, the more we can the more we can thoughtfully help you taking care, take care of your home. Taking care of your home is a huge task. As we all know, biggest financial purchase for most people biggest spend item overall. And the average person needs a dozen plus things done in their home every single year. Most people don't even know what those dozen things are. Those dozen things are not the same in, in Florida, in Miami, as they are in in, in new England, in Portland, in Maine pick anywhere, it it's a different dozen thing. So we got to be very thoughtful down to a zip code level, down to a home level, down to an address level on how to use the data and I think those are the, the, the three big opportunities it's pricing, it's matching, and it's actually delivering a truly unique experience to the homeowner. And I think we're best place to do it. So if anyone out there we've got more data and we've got this opportunity to bring it all together and build an amazing profile for you as a homeowner, that helps you helps you take care of your home.

And Justin on care, the biggest factor right now is just back to the core business and, and blocking and tackling on the core business where we've been able to move conversion on boarding flows data gathering that makes the matching more efficient between both sides. That makes it more likely that when you make a posting you'll, you're going to find people applying for that job and that you'll have good, robust applications that make sense. And that a lot of that's why subscribers are up, I think, close to a third in this quarter. I still think we have more to drive there. I think we we're benefiting in there at the moment from just people back to work and people back to going out and things like that that are, are naturally helping them business. And, and on the flip side, easy comps in the prior period. But beyond that and again, there's still more work to do there, but beyond that there's enterprise there's instant book, which is similar to, to what we've done at Angi and there's daycare facilities, which is a new hopper opportunity for us where we're just starting to do some experimentation. And then there's also tying it all together with consumer and enterprise and home pay. And I think one of the big macro trends that, that we've found in care and, and we're excited about in care is that this notion of the enter rise starting to take a meaningful role in care in their employees lives. And it makes a big difference on getting the right people into the workforce. It is a, the, the, the burdens on women as against men in childcare are very significant in this country. And meaningfully less significant in a country like Sweden, where there's subsidized childcare and the workforce participation is basically equal between genders. And so I think a little bit of Mac, a little bit of macro tailwind, I think potentially some regulatory help there, which would be a phenomenal thing for this country. And then just execution on these things where enterprises are starting to, to realize the benefit of this service and, and enroll in this service. I think all those are going to be drivers for the next little while.

Great. I think we've reached the top of the hour. So Joey, do you have any final thoughts?

That's it. Thank you all for joining us. Really appreciate it and see you next.