IAC InterActive Corp. (IAC) Q2 2022 Earnings Report, Transcript and Summary

During this presentation, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar statements. These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in IAC's and Angi Inc.'s 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. Please also refer to our press releases, the IAC shareholder letter and to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures.

Good morning. Thank you for joining the IAC Q2 Earnings Call. I'm joined here today by Joey Levin, CEO of IAC; Oisin Hanrahan, CEO of Angi; and Neil Vogel, CEO of Dotdash Meredith. We are going to go into a statement by Joey and some early comments, and then we'll go directly into Q&A. With that, I will turn it over to Joey Levin.

Good morning, everybody. Thanks for being here. I'm grateful to be here in the office with my colleagues, building businesses. Grateful to all of you on the phone and video for joining us. And I'm very upbeat on our businesses right now. We have our biggest business, Dotdash Meredith. We are on the path we set when we [indiscernible]. We are taking the steps we plan to take and generally seeing the intended outcome. We're not moving as fast as we'd like, and I don't think we have the support from the ad market that we expected, but we are getting things done that we expected to get done, which is most significantly migrating Dotdash -- migrate Meredith in the Dotdash platform, that we've done in days. And that puts all of our weapons in place where we can really start executing from there. The biggest thing we'll need from here is driving traffic, and this is something we've done many times before in this business and something that we expect will happen as soon as we get the migrations done, and that business should be growing from here and taking share. We know we have the best product in the category. We know we're delivering for consumers in the category, and we should continue the growth there. At Angi, the focus on profitability, I think, has been very healthy. We've been seeing losses come down in Services every month while the business is still growing. And even as we've tempered growth meaningfully, we're so far outpacing the market growth, and we expect to continue to do that. And I like where we're headed both at Dotdash Meredith and at Angi. And of course, we have lots to prove, but we're headed in the right direction. And when I look at the rest of the businesses, I think . Care and MGM and Turo are all growing, I think, with big clear opportunities ahead of them. And as far as the macro environment, we shared the data that we've been seeing, but we don't really have a prediction. I think signs we see suggest that other businesses are bracing for impact. But there's a lot that can happen over the next few months that could impact what the consumer does and how the economy reacts. And for us, we can control our businesses and we can control how we execute. And we intend to execute well internally and grow our businesses regardless of the environment. And we're in a position where we think our businesses can thrive through that. So I know everyone has got a lot of questions, so let's take to those questions.

Our first question is from Cory Carpenter at JPMorgan.

I had two on Angi. Oisin, maybe bigger picture, could you talk about the trends you saw through the quarter?

Go ahead, Cory.

Can you hear me now?

Yes.

Yes.

Okay. Two questions on Angi. Oisin, maybe just bigger picture, if you could talk about the trends through the quarter in the Ads, Leads and also the Services business. And on Services, specifically, hoping to hear more about the optimization you're making around unit economics and how that impacts growth. And then second, I think probably for Chris, just pulling it all together, how should we think about the right level of overall growth and profit for Angi in the second half of the year?

Thanks, Cory. So let me start at the top. Overall, we're incredibly happy with the performance we saw in Q2. I think if you rewind a year ago, when we started the rebrands, and you said we'd get the Ads and Leads business back to growth. At this rate, I think that would have been a great outcome. So we're very happy to be here, very happy that we've got the Ads and Leads business in a strong place of growth, and we want to continue to see that improve. The drivers of that growth primarily were around pro engagement, pros' willingness to pay, pros becoming more active in the market, which has been incredibly helpful. In terms of Services, we have had an incredibly strong run on Services, again, Q2 with the focus, as Joey said, on profitability coming to the forefront. We made some trade-offs within that business that, for the most part, have been very, very positive, where the profitability in that business has -- I'd say the profitability in that business has led to overall increases in profitability for Angi overall. When you click down and you look at some of the underlying things, we've definitely had some challenges, particularly in Roofing. So as we've lapped the Roofing acquisition, I think it's important to, say, unpack a couple of things so we can put the overall growth rate together. If we remove Roofing from the Services number, we get to a 34% growth rate for the underlying organic growth rate of Services. That would obviously tell you that Roofing shrank in July, taking us down in growth rate. Just to put some more numbers around that, we did $15 million -- or $14 million, sorry, average in Q2 revenue for Roofing. That's down to about $9 million in July. And you comp that to last year, it was about $11 million in July. So you can see that we've had some pretty significant operational challenges in Roofing. Those have been primarily around pricing where in our other categories, we turned the pricing dial and we dialed in, and we got to the right number on Book Now, on retail, on managed projects. We've had much more success. On Roofing, we stumbled a little bit, and that's caused us to hit the brakes a little bit in terms of growth. We expect it will take us a couple of quarters to get growth back on track on Roofing. So overall, you put all those pieces back together again, you've got our largest business, Ads and Leads, growing mid- to high-single digits. You've got our net of service -- or net of Roofing Services business growing in the 34% range in July. So assume that stays around there, and we get our Roofing business back to growth. Over some period, we do expect to get back into the 15% to 20% range. And again, this is with increasing profitability. So you look at the underlying profitability across all these business units, we're incredibly happy with the trend, incredibly happy with how it adds up. And you can see that's why we overachieved on profitability in Q2, and we expect to go forward and have increasing profitability from here.

Thank you, Cory. With respect to overall profitability, we were very happy with where Q2 came out, $9.7 million of adjusted EBITDA for Angi. That is inclusive of a $2 million lease impairment, so run rate profitability of the business is higher. One of the things that we were cheered by was 10% overall growth -- gross profit growth across the Angi portfolio. Some of that is due to growth at the higher-margin Ads and Leads business, but it's also a function of the take rate and margin improvements that Oisin and team are driving across Services. When we look for the rest of the year, high-single-digits Ads and Leads revenue growth will again drive revenue to the bottom line and continued margin improvement. At Services, we said last quarter that we are past peak investment in Services. And we said in the Q, we expect to have continued sequential improvements in Services investment throughout this year as we go. So where we -- our view on overall adjusted EBITDA within Angi is for higher aggregate EBITDA in the second -- in the third and fourth quarter than what we produced in the second quarter. And we feel very good about the profitability picture and momentum in the business.

Great. Our next question will be from Ross Sandler at Barclays.

I guess a question for Neil. We can obviously see what's going on with the broader digital ad space and the deceleration. But if we look at MDD Digital, the 7% decline, how much of that is just the macro environment versus self-inflicted? Or said differently, what would that down 7% have been if you had not demonetized and replatformed some of the sites in 2Q? So that's the first question. And the second question is, just looking at the monthly trajectory, it seems to trend that MDD Digital could be down low double digits to 15% or so in the back half. And that, combined with the over $300 million in EBITDA comment, points to about a 30% EBITDA margin for that Digital business. So how much do you see the margin expanding in 2023 once all the replatforming is done? What kind of incremental margin might we see at MDD Digital given the new run rate?

I think I remember all that. I'll unpack it. Thanks, Ross. So the first thing is about the ad market. And the ad market is definitely challenged. I think self-inflicted is actually a good word because a lot of this is self-inflicted. I think if you had to guess, I'd say it's probably 50-50. It's really hard to unpack. There's a secondary thing going on, and Joey talked about it, is we've been a little slower on the migrations than we would have liked. It's all for a good reason because we want to make sure we get them right. And the Internet is complex. It's hard hiring people and all that stuff. But we feel very, very good about where we are now. So if you look at the ad market, it's hard to look at it as a whole, right? You got to unpack it a bit. I think we have some pretty good diversity, and you saw that through the pandemic. I think health is decent. Finance is decent. Travel is actually excellent, which is not that big of a category. Beauty is good. I think you'll see a lot of the concentrated problems for advertisers around retail. Those problems have been well talked about by you guys. Food and CPG, which links together, the assets that we bought, the Meredith assets over-indexing those categories based on the brands that they are. So there's a little bit of a knock-on effect of us being a little later than we wanted to be on some of these migrations means we're going into a tougher period without our full arsenal of tools. So one of the things we have in the pandemic with Dotdash is when things got tricky, we still did okay because our stuff really performed. Because we haven't quite moved over the Meredith assets as quickly as we could, we didn't have the performance sites fast enough. So it's a little bit of a knock-on effect. Yes, I'm probably overexplaining it. But I would say, it's safe to say 50-50. I mean we're 75% of our traffic is migrated now. We feel very good about where we are, and the rest of it should be done by the end of the next quarter. We are very optimistic. What I would say is the pool of assets in the offering that we have put together, this combination of scale and incredible brands and intent-driven performance traffic is something we're still learning how to use. And we're having -- now that we're migrated and we can show some results to advertisers, we are having a lot of very interesting initial discussions. We've had large advertisers tell us, we're talking to Google, we're talking to Meta, we're talking to you because we can deliver at scale and we can deliver on performance. We deliver in a brand-safe environment, and we deliver against the publisher and against content with a different kind of offering. So what we're saying, the market is bad. It's probably 50-50, but we like our chances from here. The second question is -- has to do with margins and growth. I'll start, I'll let Chris finish. I think you'll see -- for the rest of the year from us, you should see monthly improvement. Now it may not be sequential. It's going to be lumpy. If you remember, we said the last few times we've spoken, this is still a transition year, and it's turning into be all of that given the challenges in the market that we couldn't have foreseen in January. But I think what you'll see is an improvement. And as we get into the fourth quarter, on a monthly basis, you will see us sort of turn the corner and get to profitability. In terms of margin, I'll let Chris take that to answer that one for you.

Certainly. The margin we are most focused on, obviously, is Digital profitability and EBITDA margins. You've seen -- you'll see steady improvement over the year. Fourth quarter is always the biggest revenue year seasonally for the business and also highest margins, just given the scale on a fairly fixed cost base in the Digital business. We feel good -- very good, as Joey articulated in the shareholder letter, about the level of cost savings that we've identified and driven in Meredith through the integration. Parts of those, though, however, are obscured just by the lower Digital revenues than we had hoped for at this point, given some of the headwinds that Neil just spoke about within the advertising market. As we get back to growth and continue to scale Digital revenues, we look forward to increasing EBITDA margins. Dotdash historically was in the low to mid-30s. There's every reason to believe this business, on a stabilized basis, can get back to that level. And when we think about getting to $450 million of EBITDA, well, as we said in the shareholder letter, that is not in the cards for next year on Digital. The key there is getting to about $1.3 billion of revenue and then mid-30s EBITDA margins, and we will be at that $450 million. So it's really now in our mind as we get back to growth and get through this period when we get to that $1.3 billion of Digital revenue and achieve the $450 million of EBITDA. Probably we're 6 to 12 months delayed on that, given the ad market and a few of the migration slowdowns. But as Neil said, we are confident we'll be there by the end of Q3.

Our next question is from Eric Sheridan at Goldman Sachs.

Maybe a few, if I can. In terms of looking at the shareholder letter, I think the thing that stuck out was first on the macro side, your bifurcation of the market between enterprise and consumer trends. Maybe flesh that out a little bit in terms of what you're seeing and how you're preparing some of your consumer businesses for what your assumption is about how the consumer spending habits might change in the back part of this year and into '23. Second, off the letter, bought back stock for the first time in 4 years. But there was also sort of an implication that the M&A market might move back more in your favor when you see compression in sort of public versus private valuations. Would love to get an update on the broader capital allocation strategy versus what you're seeing in your own stock versus the broader M&A. And maybe if I could just sneak in one last one on Care. I thought it was interesting to call out elements of how demand might pick up in September when you get back to work, back to school. Any elements of how you're planning for an improvement in demand and investing behind Care broadly as a platform?

Sure, I'll take -- I think I'll take all of those. As far as the macro environment, the -- this has been a very clear disparity we've seen so far. And the presumption is that corporations are ahead of the consumer on this, meaning they're expecting the consumer to get worse and, therefore, preparing for that. We don't know if that ends up being the case or not. But being prepared just means that we're being much tighter on expenses and being much more focused on margins so that we have that flexibility if consumers start spending less, and that's entirely possible. It also means thinking about our products in the context of what that means in the consumer spending less. We've talked about Angi. That's not a terrible situation for Angi because as service requests come down, the service professionals are more interested in our platform and more interested in what our platform can deliver. And therefore, we have to make sure the Ads and Leads product is servicing that part of the market and is well prepared for it. And as you go through business by business, but the main theme is tight on expenses, tight on margin, leave ourselves room for consumers to spend less so that we can operate in that environment. As it relates to M&A or share repurchases, always both are on the table. Today, both are on the table. The M&A is evaluated against the share repurchase. And as this -- not only these things happen to be highly correlated, meaning as the M&A market gets cheaper, so does our share price. And we'll look at both of those things at the same time and then make decisions. So the benefit in share repurchases is, of course, we know those businesses very well and how they're doing and what their prospects are and what their issues are. And so we can do that well. But we are interested in buying a new business for IAC, and we're going to continue to look there, and we have the capital to do it. So looking there is very much something that we're -- looking at M&A is very much something that we'll be active in. And I still think that the public markets, as far as opportunities, are much more attractive than the private markets. It just takes time for the private markets to catch up, and they haven't really yet. So the companies raised enough money, but they don't have to worry about it for a little while. And so I think the opportunities are certainly much more in the public markets today. As far as Care, we -- the back to school has always been a big moment for the Care business, also important actually for Dotdash historically and Meredith, but is a big moment because that's when seasonally a lot of people are looking for Care. And it's very hard to see trends right now given the impact of the pandemic. And so it may be that some of that was pushed out a little bit where we saw the demand come down and/or not accelerate as much as we expected in July. That seems to have started to actually come back in later in July and early August. So it's very hard to read the trend. But the things that will matter in driving that business is product, how quickly a user can -- a family can find a caregiver and how easy that match happens. And the work we've been doing over the last 2 years is to improve the efficiency of that, and we've seen that getting better every day. Instant book is a great example of that product, which is now live, where people can find a caregiver instantly for a specific time on a specific date. And we think that things like that can drive frequency onto the platform, which is good for both sides of the marketplace. When you can find and book somebody instantly and, more importantly, when you know that you could find and book somebody instantly, you'd go to the platform more often. And so that product is now live, and we'll see how that goes. And the other product that's new right now and contributing in the second half -- or new-ish and contributing in the second half is matching families with daycare centers. And we're already seeing momentum on that product, too. That will start to contribute. And then the Enterprise business has also picked up momentum recently. Seasonally, the back half of the year is where we'll really see that. But we now see employees in Enterprise is increasing utilization and started to phase the increased utilization meaningfully. And we think that will be a nice driver of the revenue for the business in the second half.

Our next question will be from Jason Helfstein at Oppenheimer.

Just want to dig a bit more. We're getting questions from clients just on Angi and the monthly trend, if you can unpack it. And so was the slowdown that you saw in July, just maybe kind of reconcile that versus June? Do we think about the business being kind of a high single digits in Ads and Leads in the back half? Can it be low teens? And then just maybe help us understand some of the marketing decisions you're thinking through, Oisin, as you're kind of thinking about growth versus margin for the back half.

Sure. Thanks, Jason. So in terms of the Ads and Leads business where, obviously, a bunch of stuff going on in terms of lapping the rebrand, we've got the Angi brand continuing to be -- continuing to grow pretty aggressively, outperforming, I think, the expectations that we had. So the consumer demand coming in, and that brand continues to be strong. The HomeAdvisor brand continues to be a drag in terms of consumer demand. Net-net, you put that together with the pretty stable revenue that we get from the Ads business, and I think we expect things to improve from here. So I think overall on Ads and Leads, we're more positive than we were a year ago when we started the rebrand and certainly more positive than we were a quarter ago. And overall, that's flowing, as Chris has said, down into profitability because our business is -- continues to be incredibly profitable. You put that together with the Services piece, as I unpacked in the beginning, the Services business had a serious headwind on Roofing. That took us down from the 34% into the 18% range. As that fixes itself and we fix the Roofing business, it will take us a couple of quarters to do it probably, we expect to get back into -- ultimately get back into the 15% to 20% range at some point in the next year. So overall, we feel like the trade-offs we're making on growth versus profitability are the right ones. We certainly dialed the levers more toward profitability, particularly in the underlying businesses for Services. So those are our Book Now business, our retail business, our managed projects and our Roofing business. So each of those individual business units, we've definitely dialed more toward profitability, and that's had an impact on the growth rate. But we think it's the right thing to do. In terms of marketing, we haven't yet deployed any meaningful marketing dollars against Services. All the marketing dollars we deploy continue to be against the Ads and Leads business, and the Services business simply still drafts off the excess demand created by the Ads and Leads business. So those 3 products together, Ads, Leads and Services, you put them together, they still represent the best product in class in terms of how to serve pros and how to drive business. There's nobody else with those 3 products. We absolutely believe that the combination ultimately drives more revenue, more market share and eventually more profitability. And overall, I think we're making the right trade-offs between growth, revenue, growth in revenue, profitability and how we're deploying those marketing dollars. I think the question that typically comes is when will you deploy marketing dollars against Services, and that still remains to be seen. It still isn't something we need to do. If we get to a place where consumer demand is much more in balance with our pro supply across the 3 businesses, then we will lean into that. We haven't had the need to do that just yet. But it is something we continue to evaluate all the time.

The only thing I'd add with respect to Services monthly trends is it was a stark hit in -- to growth in July from Roofing. As Oisin said before, Roofing did about $9 million of revenue in July. It had been averaging $14 million a month across Q2. And that is not, in our mind, macro. That's not due to any decline in demand. We just got ahead of ourselves in aggressiveness on price and some other operational challenges that Oisin and team are focused on. And really, that -- the focus on price started in early June. So we have a known goal there, but we feel very good about the overall growth rate of the rest of the Services portfolio. We feel great about the long-term growth rate of Services. And we just got to get Roofing chugging as evidenced by the $14 million revenue earlier in Q2, which was up substantially on a pro forma basis. So that's the point of focus right now, along with continued growth and profitability in Ads and Leads.

Score fewer own goals.

Correct. Always a good strategy.

Yes, we'll work on that.

Thank you, Chris. Our next question will be from John Blackledge at Cowen.

Maybe two on Dotdash Meredith for Neil. Could you provide some further color on the Digital optimizations of the Meredith brands, which brands have been converted and then kind of what results are you seeing? And then secondly, any color on the brand versus performance mix at Dotdash Meredith? How is brand versus performance relative to the pro forma Digital down 7% in 2Q and down 12% in July?

Sure. So let's do the migration one first, first question first. And the -- so take a step back, remember, the migrations are to unlock 2 things for us. One, it unlocks all the audience growth , our full web ability to make these great sites. The second thing is it unlocks performance, meaning we get the ability to have extremely fast sites and fewer ads that perform better, which means better ROI for advertisers whether they come in programmatic or premium, and it unlocks our ability to do commerce. We've migrated now, and I have the list here, 7 sites: Health, first; People, most recently; Parents; InStyle; Travel + Leisure; Shape; Better Homes & Gardens. And they skewed towards most recently, I mean, People, we did last week. So we can look at the curves that we've seen in the past with what we've done. And if you take a basket of Byrdie, Investopedia, Brides and Liquor.com, which is a good cross-section of the different types of sites that we have and we'll migrate here, if you look at traffic growth or audience growth, let's just keep it a simple traffic growth to keep the math easy, in 4 months, we typically see on average, and they're all bumpy so you blend it up, call it, 10% to 15% growth. A year, you blend these out, we're at about 30%. 18 months, you're close to 50%. And that is from -- on the more performance site, you just build a much better experience. You do all the things that we've done, and it's worked. The site that we launched first, Health, is very comfortably on this curve. The others, because we've been a little late, are a little harder to read because they've just been too recent. I would say Parents is probably on this curve as well. We did that one in late May, but almost everything else was done in June and July. So early reads are positive. I think the one thing that we can say with confidence is these brands have exceeded our expectations in terms of when you make changes, how consumers will respond, how algorithms will respond, how advertisers will respond. But these brands have a superpower. People, Better Homes & Gardens had its 100th anniversary. It is a significantly more substantial brand than Spruce, which we made the largest home site on the Internet. So the baked-in opportunity there is really compelling. So that's sort of like on the scale side. On the monetization side, to answer your other questions, there's 3 ways that we make that we create yield: one, we sell premium ads; two, we do a lot of programmatic ads; and three, we do performance marketing, just commerce in various transactions, helping people source goods and services. Programmatically, July 1, we essentially put the 2 stacks together. So we are brand new and we are learning. What I mean by we are learning is we now have this incredible scale of this really valuable intent-driven content. And every time you migrate a site, it gets more powerful because the audience gets better and the ads get more performing. As we go through that, it's almost like starting from scratch. We have to learn what ad units to use. The ad setup on all the old Meredith sites is totally different. So what units are we using? What ad types are we accepting? How are we doing floors? How are we cording with demand sources? So we are really learning, and we are very optimistic of our ability to take up yields programmatically. Premium, I mentioned in the first answer, we have this incredible opportunity. We have something other people can't replicate. Nobody can do our performance at scale on these brands. It is our job to tell the story, and we are out now telling the story. Ad integrations are hard. We knew it was going to be hard, and it is definitely hard. But it's also really fun, and it's working. And it's fun to be received by clients. And it's fun to be received by the big agencies, and the reception we're getting is outstanding. Now there's obviously the headwinds of the market. But frankly, in the longer term, and it's not going to be in the next month or in the next quarter, but in the longer term, I believe we should outperform the market because we have an offering that is significantly better than the rest of the market. We can address branding. We can address performance. Our sales guys are learning how to sell this. We have to bring the hustle across the portfolio, but we're doing that. We feel very good about it. And the third thing we're going to do for yield, why we feel very good about this is the commerce piece of our business and the transactional piece of our business. And remember, we talked about this when we did the deal. The primary way that we've done transactions in commerce historically has been sort of like very detailed guides, ratings, reviews, best on sort of things. Meredith, despite all of the brands they've had, had never really engaged in this sort of commerce. The only thing that they really leaned into was sort of like the news and deals commerce. How do I buy what Jennifer Aniston wore last night on People Magazine? But on the -- but the real opportunities on these incredible sites, the Real Simples or the Peoples or the Better Homes & Gardens, the Food & Wines, how do we do our type of commerce there. And as soon as we have the migrations done, we unlock our capabilities as we get going. So that is a long answer of saying we feel very good about the supply side. We feel very good about the demand side. The market is obviously bumpy and a drag on that, but we just got to execute. It's fun. It's fun to put it all together. The second question was, how do we view ads and performance marketing? What I would say, generally, what Joey wrote in the letter seems to be true. It's not totally predictive. What?

I hope so.

Yes. No, no, it seems to be true for us, and actually, it is true for us, where the transactional business in categories has held on fairly well year-over-year. The ad stuff has been more challenged. I would say we have some specific things baked into our results like we had a huge business helping people open crypto accounts last year. That's obviously not going to happen. So we had a couple of outliers that have maybe nicked us to the downside. But overall, the commerce business, the transaction business, the primary business has been fairly strong.

And just a few points that we'd add to the overall arc of Neil's summary of the business. One, as we go month to month -- and obviously, we produce monthly metrics, so you have great insight into our trends. I think across these, you're going to have noise month to month, so days, holidays, et cetera. But as we move throughout the year, our comps at Dotdash Meredith do get easier in the fourth quarter, the -- especially at the Meredith properties, which were quite slow at the end of last year, probably due to distraction due to the acquisition, which put us behind where we wanted to be entering this year. But we are -- for all the reasons that Neil highlighted, we are seeing where we feel good about revenue improvements as we go along. Key will be overall environment in the fourth quarter and where people are on holiday advertising, holiday spend. But we feel momentum against the comps in that period. The other is on a profitability basis, the cost savings that we have driven phase in as they are annualized each quarter. And so we do expect to see continued margin improvement in the fourth quarter.

Our next question will be from Youssef Squali at Truist.

So a couple of questions for me. Maybe staying with Neil there. Can you maybe just talk about the base case for growth for Dotdash Digital? As you exit the year -- I think before, we had talked about 15% to 20% as you exit and then maintain that through 2023. So how are you thinking about that now? And then on the Print ad business, up 3% into the quarter. That was nice to see. But can you speak to the puts and takes there? And how do you think -- how sustainable is that positive growth there?

I mean I'm just happy we got a great question.

I have to ask.

Thank you. I appreciate that. So Print, again, I think we said when we bought this thing that we were going to approach Print differently, and I think we have. What Print can be for us, it is not going to be an economic driver of the business, but it's a very important brand driver for everything we're doing. And we've seen that in Food & Wine with its continued success. We've seen that in Better Homes & Gardens. We had Harry Styles on the cover. It really helped rebrand Better Homes & Gardens, and it carries over to everywhere else. It is a brand leader. Now it can be a nice, profitable business, and Chris can talk about how we look at it and what we think that the EBITDA can do. But what we did was we made the hard decisions very quickly. We shot a series of properties, as you know. We got down to 7 titles. We have outstanding publishers. We have outstanding editors. We've improved each of the products, like you'll see the new better weaving for paper quality. It's a little bit more of a luxury good. I mean, again, I don't want to talk too much about Print, but more paper books were sold than electronic books last year, I was just told. And people still buy vinyl records. People love these things on -- and they're doing really well, and they're good brand leadership. The fewer properties has definitely helped the ad business, but also a higher quality, and it's working. And frankly, when you go from 15 to 7, you get to keep an all-star team of people. The people we have are essentially the all-star team. So that's been really positive. And frankly, it's been a really positive morale thing for our company because what we've said and keep saying is we have brands. We have the best brands in the world, whether it's TikTok, whether it's print, whether it's Instagram, whether it's the web. That's what we have and that's what we're doing. And if we were going to do something, we're going to be the best at it. And I think that's really internally been a big win for us. Talk about base case for growth for the year, I think we mentioned it a little bit. I think we're going to see, hopefully, monthly improvement -- or not hopefully, we will see monthly improvement for the rest of the year. Again, as Chris said, it's going to be bumpy. It's probably not going to be linear given decisions we're making, given, frankly, IAC's patience with us and encouraging us to do the right thing, do the right thing, don't take the short cut, which has been very freeing for us. You guys understanding, it's a transition year, it's been very helpful. But I think by the end of the year, we should be back to growth, and the 15% to 20% is in play for next year. And I'll let Chris give you more color on that.

Yes. I think with respect to Print, we have always positioned it as we'd like the EBITDA from -- adjusted EBITDA from Print to cover our corporate expense, give or take, in any quarter and year. With the profitability trends that we are seeing and the strong performance in Print on an adjusted EBITDA basis, there's a lot of noise in Print given the restructuring that occurred in February and ongoing nonrecurring costs associated with that. But on a recurring adjusted EBITDA basis, we feel good about that coverage of corporate and are cheered by the momentum we see in advertising in Print for the core titles in the portfolio. More broadly, on the cost structure, we're just -- we just look to see continued scale in Digital. The -- one of the key things we look at is the marginal profitability of $1 of Digital revenue. Our targets are to get to maintain 50% to 60% and north of that drop to the adjusted EBITDA line. And we feel good about what we're seeing. The key there as then is, as Neil said previously, is to drive the consumption, the engagement and the premium sales. So that is the business plan, keep bringing Digital revenue in, maintain that incremental profitability on $1 of Digital revenue and have it drop to the bottom line. And we are very much in that path.

Our next question will be from Daniel Kurnos from Benchmark.

I guess we'll stick with that. Boy, you might get 2 Print questions here. The -- just maybe even for Chris, too. We know that Meredith's national portfolio tends to reprice kind of going into year-end. So it's a sort of a big setup here. You guys have clearly taken an aggressive stance on cost reduction there. So if things get a little bit worse, I guess, I'd just like to hear your answer on, do you believe you have -- you're not going to be impaired by anything that happens in Print and your ability to invest in underlying DDM? And attached to that, I think when you guys made the acquisition, I may have referenced that you might find a few more dollars and to see cushions in the sort of underlying synergies. And you've already started to acknowledge that. So you gave some good color, Chris, just around the -- to get to the $450 million. But I mean, if those -- do we think of that incremental synergy as additive to that? Or that's just broader DDM and not necessarily Digital-related on the synergy? And then I have a follow-up sort of more operationally for Neil.

Sure. So well, let's talk about the Print question. The answer is no. What we are doing for Print is we are making products and properties and assets that help our brands. And I think we have significantly derisked the Print business from where we started. I mean we'll print -- in 2023, we'll print probably a little bit fewer than half the number of magazines we printed in 2021. So we are -- I think we are very realistic on what we think Print can be. We think Print could be a very nice business, and we are being extremely judicious with expenses. We're making smart investments. If you're going to do something, you have to be good at it. But I think we're approaching it with the type of rigor you would expect if you followed us or if you followed IAC for a while. We feel pretty good about it. The second, see cushions question, I think you're someone who's probably followed the company for a while because, even before we bought it, because that is correct. And I think we said there would be about 50 in synergies. We're -- I think we're plus or minus 100 now. Is there more? Is there less? I don't know, but we are approaching this with a lot of rigor. And look, it's -- you get fresh eyes on something that hasn't had fresh eyes on it for a long time, we find things. And that's where we are. So I'll let Chris take the rest of it.

Yes, I'd say we wouldn't make any decision with respect to an investment in Digital that we have a view having medium- and long-term value for that core business and not do it because of headwinds in Print. That's just not how IAC thinks. It's not how Dotdash Meredith thinks and our belief in the long-term value that's being generated there. With respect to cost savings and long-term profitability of the business, I think I understand your question. Certainly, those were a key element of the $450 million EBITDA target, and they are, just because as you drive efficiencies and you drive margin scale, that is a key boon to profitability. But we knew 2022 was going to be a noisy year with restructuring pulling some of the Dotdash title -- the Meredith titles back when we migrate them to allow them to run even faster, as Neil has articulated post migration. Layered on is the ad slowdown that we've all experienced really in May, June into July as a number of companies, especially in retail and CPG, put on the brakes. But we have significant confidence that while all those cost savings are not appearing right now in the P&L because of the digital compression or the digital slowdown in revenues, they will as those dollars come back because we have real cost scale in the business. And we have a tight machine at Dotdash Meredith Digital. So I think we're answering that question, and I'll go back to you for the follow-up.

Yes. No, that's helpful. Neil, just kind of part fair, part unfair. Just you gave some good color on sort of the e-comm, which we knew was underpenetrated at Meredith. And I really want to get a sense from you. The unfair part is you're not even done with the migration yet and asking you a question about whether or not you're finding a way to leverage Meredith's licensing capabilities. But clearly, you have more to go there. And then secondarily, a little bit more on the fair. We've seen a lot of guys aggregate sort of the reviews angle, I think, of the market. You guys clearly have a differentiated scale and have taken market leadership in a number of different verticals. I'm just wondering what you guys are doing to sort of to differentiate and how you look at this marketplace and go to people and say, hey, look, we can provide incremental traffic and/or purchase or sales to you at a downtick. So just maybe some incremental thoughts on growing e-comm.

The second question first, which is my favorite question. We can actually sort of combine them. But a big driver of why we are so excited about this transaction is Meredith has not historically done the type of commerce transaction sourcing that we've done. Remember, our -- the way we got into commerce was not we decided we need to get into commerce. It was because our brands at Dotdash were very trusted. And the next step of making the blueberry pie is bringing out what blender you need to make it and then we thought we should start to recommend blenders. From that sort of like humble start 3 or 4 years ago, which happened very organically, we now have 50 or 60 test kitchens -- I'm going to get this number slightly wrong. Like 10 or 15 video and photography studios, fully blown out product testing labs and a north of 200-person crew of people that rigorously measure, test and try every single thing that we recommend. So our advantages, we're good at the Internet, and we are very rigorous at all of the things somebody wants to trust to make a purchase. Now for whatever reason, people don't trust retailers. They don't trust their views on retailers. They don't have trust to make straight with them. So this middle layer that we are now has become increasingly important. And what we have set up to do, and we actually got Joey and Barry to go see it, what we do in Birmingham, Alabama and Des Moines, Iowa, it is incredibly rigorous and it is our advantage. The advantage of scale and our ability to do these things at scale and to test every single thing that we put on the Internet with pictures and with videos is a real, real advantage. Now we've done that at Dotdash. That's worked. We have barely scratched the surface at Meredith. We have not started to roll these things. Actually, we just started to roll these things out in a few other properties as they've migrated. Like Better Homes & Gardens, we think, has a massive opportunity. I mean part of the reason The Spruce has been so successful and some of the other guys in the space have not paid attention to it, the space is big enough for 2 or 3 or 4 or 5 of these guys on so many categories. So we feel really, really good about this opportunity. It was a big driver of what we're interested in. It works. When you look across the portfolio, it works at Travel + Leisure, and it works at Food & Wine, and it works at Real Simple and it works at People. It works everywhere. So we feel really, really good about it. And I think that probably got both your questions in that one answer.

That was close enough, and you got to print. I'm sorry, Joey, I don't have a search question for you.

Our next question will be from Brad Erickson at RBC.

This is [indiscernible] on for Brad. Just a couple of quick questions on the July growth metrics. So you guys did the 10% total consolidated. Do you guys have that number ex Roofing? Just kind of curious on that one. And then any sort of one-off items in July, aside from what you've already mentioned that you would extrapolate? Or could we kind of consider the July growth rate as a proxy for the rest of the quarter? And then just on margins, how are you guys thinking about second half EBITDA? I know you guys said it would be slightly above '21. Just kind of curious if you had any more color on that margin expansion.

Yes. Ex Roofing, overall Angi growth would be just over 12%. And that is driven by -- we talked about the decline. Do you want to take that question?

Yes. So just to unpack that a little more, ex Roofing, the overall Angi growth, as Chris said, would have been 12%. Ex Roofing, the Services growth would have been 34%. We expect the Services business to continue to grow in or around that rate, perhaps a little faster, perhaps a little slower. Obviously, the monthly metrics are volatile. And as we recover in Roofing, we'll get the overall growth rate back up. In terms of the -- sorry, the other part of the question was around...

Can you repeat the other part of the question?

Logan?

Yes. Sorry, I was just saying, is it fair to extrapolate kind of July trends through the rest of the quarter? And then the last question was just on the 2H EBITDA. Is that still kind of in line with your original guidance, slightly above '21?

Yes. So the trend that we're seeing right now is for increased profitability from where we are. We've said that '22 profitability will be better than '21. We've obviously overachieved in Q2 in terms of profitability we expected. And we continue to see positive trends, as we discussed, in Services where we are past peak investment. We expect profitability to improve. And the Ads and Leads business, as we get it back towards high single-digit from mid-single-digit growth, as we talked about before, that pretty much drops -- that drops rapidly to the bottom line. So we're very happy with the profitability we expect for the balance of the year, and we expect things to improve from here.

Our next question will be from Brent Thill at Jefferies.

Joey, on Care, with it only growing 10% in Q2, can you provide your view and aspirations for longer-term growth over time?

Yes. I look at it as a very large market that we're still underpenetrated. And so I think sort of second half of the year, we go towards 10% to 20%, and I think we try to accelerate from there. A lot of that will depend on getting enterprise going with new sales and the impact of the instant book business. And again, it's not so much that we drive dollars and instant bookings, but it is we drive frequency and we drive subscription product from people having the ability to find instant bookings on there and how that impacts user behavior. But that's what we look for because we think we're in a very big market with a lot of room and a leading product.

And the only thing I'd add, as we disclosed in the letter, first 4 months of the year, you really had consumer growing at plus/minus 30% and enterprise flat. To Joey's point, we will lap the challenging COVID comps of early '21 in Care. We'll get it back to growth, and it will be less of a drag on the business. So first half was tough, but we feel good about the long-term opportunity in the enterprise space.

And just a quick follow-up on the capital allocation. I mean it was good to see the buyback come back in. But many would ask, you have 7 million authorized shares. Why not be more aggressive? Is that you're implying you want to do a larger transaction? Is it implying that you're still worried about the core business? Still, I think there are some questions, why not lean a little harder here?

I think you can always ask that question. There's always room for more, and we ask ourselves that question when we look at it. I certainly would not read into it that we're worried about the businesses. I mean you heard from Neil and Oisin today, the businesses are in a good spot. There's a tough macro environment, but the businesses are in a good spot. We know exactly what we need to do at Dotdash Meredith. And we have, I think, the best product in most of the categories where we publish. We know exactly what we need to do in Angi. And we have the leading product in that category and the full suite of products in that category. And we're starting to drive profitability in that business. So we like with where the businesses are right now. Overall market, I'm probably negative on just from the underlying things that we see going on in the world. But -- and so that's why we're sort of patient on spending money. But comp in our business is great right now. And share repurchases is something we always have evaluated and will continue to evaluate. And again, at any point, when you talk about how much we bought, we always could have bought more or less. And it's hard to read anything into that specifically.

Can we go to Tom Champion at Piper Sandler?

I'll be quick. Oisin, maybe you could just talk about demand specific to home services. How do you think the consumer is holding up? And maybe you could reconcile that with maybe deprioritizing spend on the home. Just curious if inflation is having an impact. And then just last one quickly. Any update on Angi Key subs in the quarter, where that ended up?

So I'll hit them in reverse order. Thanks for the question. Angi Key, over 300,000 Angi Key members right now, continue to be very engaged, continue to have out, I guess, retention and engagement characteristics above where we would have expected them to be versus normal consumers. So very happy with that. We are continuing to build out that product and expect to add more features to it. We're testing a couple of new things on it. But it's still a pay-to-save membership program that we're very happy with. In terms of overall demand, I think the point that Joey made, which is we have this suite of products, is really important. So we got this Ads and Leads product -- or Ads and Leads products where we make money when pros need more work. And we've got a Services product where we make money on the back of consumers driving towards convenience of purchase. You put those 2 things together in a slower environment, our Ads and Leads product actually does better. So as pros need more work, every incremental SR that we have is worth more money to them. And that's a really important topic that perhaps gets lost sometimes. But as the macro environment slows down, whether it's because homeownership or home transactions slow down a little bit and home services slow down a little bit, it's really important that we maintain our share of the overall home service requests. But a moderate slowdown in home services is actually really good for the demand for our pros using our product, and we've seen that. So we've already seen that in the last couple of months where our pros are more engaged, they're active for match more. So that means they're turning their leads on more. Their willingness to pay per lead has gone up. And overall, we think that moderation in demand is a very positive thing for the largest part of our business.

The only thing I'd add, also being newer to the business, we knew April and May would be substantial comps in terms of the demand across the U.S. for home improvement and overall services. We said in the letter sort of 5% to 10% top of funnel, a little bit lower conversion. It feels that's just reduced activity around home, macro pressures, those would be probably less of a factor in that magnitude given how elevated last year was. But the other part of this is the health of a 2-sided marketplace, as Oisin has commented, and more of a match between supply and demand accrues to the benefit of the Angi marketplace. And now we've just got to keep improving product and experience and capturing pro demand. With that, I think we will wrap up the call. We thank all of you for your time, and wish you a good day.

Thank you all.

Thanks.

Thanks.