IAC InterActive Corp. (IAC) Q1 2023 Earnings Report, Transcript and Summary

Good morning. And welcome to the IAC and Angi First Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Christopher Halpin, CFO and COO of IAC. Please go ahead.

Thank you. Good morning, everyone. Christopher Halpin here and welcome to the IAC and Angi Inc.’s first quarter earnings call. Joining me today is Joey Levin, CEO of IAC and CEO and Chairman of Angi Inc. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter, which is currently available on the Investor Relations section of IAC’s website. We will not be reading the shareholder letter on this call. I will shortly turn the call over to Joey to make a few brief introductory remarks. We will then open it up to Q&A. Before we get to that, I’d like to remind you that during this presentation, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar statements. These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in IAC’s and Angi Inc.’s first quarter releases in our respective filings with the SEC. We will also discuss certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we will refer to today as EBITDA for simplicity during the call. I will also refer you to our releases, the IAC shareholder letter and again to the Investor Relations section of our respective websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now let’s jump right into it, Joey.

Thank you, Chris. Welcome, everybody. Thanks for joining us this morning. Feels good to be playing a bit of offense again here. I think we have meaningfully turned a corner on earnings. I think the back to basic theme is working here. We have really focused internally for the last quarter or several quarters, and I think that’s starting to show up in our numbers, and that’s allowed us to focus on allocating capital again, too. You saw we put a lot of capital to work this quarter and really all of it focused internally on the things you know really well. I think that’s consistent with our back to basic theme and consistent with what we are seeing in our business which is -- we are getting things working. We are getting things working in terms of profitability, we are getting things working in terms of customer experience and we are getting things working in terms of preparing for the future and starting to win competitively and that feels really good to be on that team. I know there’s a lot of things we did this quarter that people are interested to hear about. So let’s get to questions quickly. Thanks, Operator.

[Operator Instructions] Our first question comes from Ross Sandler from Barclays. Please go ahead.

Good morning, guys. Yeah. I just had two questions. First on the buyback and then second on Dotdash Meredith. So, on the buyback, I think, everybody on the call is curious as to the why now. We -- what we see the math on the course of being negative, and obviously, Angi’s and DDM are turning the corner here in the first quarter or first half. So just could you walk us through the thinking on what goes into that decision and what we should expect going forward? And then on, Dotdash Meredith, it looks like the progression here is happening according to plan with the January negative 20%, going to like June positive. Any surprises or anything you would flag in terms of areas of weakness or strength within that business? Thanks a lot.

Sure. Ross, I appreciate the question on share buybacks. I think, in a sense, you have answered it a little bit in the question. It is the things that you said. One is it’s the negative implied value and we think that’s a compelling investment thesis. Two, it’s the state of the business is. So we feel more comfortable buying back shares when we are generating cash and when we are growing earnings, those are important milestones for us and it is the overall environment that we are in and kind of how we feel as a business. But we are -- when we look at what we have in aggregate, that is a compelling combination of things for us. As far as where it goes from here, we never really can or would answer that question. I would say the usual, which is we consider it regularly, we will continue to consider it regularly, and when we see opportunities, we will prioritize share repurchases over other things and we will -- the bar for something other than a share repurchase is a very high bar right now. But we are with our capital, we are always looking at lots of things and we will continue to look at lots of things, and when we see opportunities, we will seize them. But right now, that opportunity in the first quarter, I think, was very compelling and we seized that there and it was more compelling than it’s been in a very long time.

Yeah. Thanks, Ross. And then, on Dotdash Meredith, as a reminder, the Dotdash playbook that we are running on Meredith is about bringing the sites over, speeding them up, cutting out both old content, as well as ad clutter and driving traffic and performance. As we highlighted in the shareholder letter, broadly across the key Meredith titles, we feel very good. A lot of green on the page and we are now seven months to 12 months into migration and we are seeing that, not only on an absolute basis, but also strength in similar categories between Meredith titles versus Dotdash titles that would be similar state -- that would be steady state. We get the question, so I will take them head on. People is yellow, that is nothing about the migration. That’s purely because last April, May, there was the Oscar swap, as well as the Johnny Depp trial. So traffic has been tougher there recently, but we had an excellent first quarter, once we lap the Johnny Depp verdict, we expect to return to strong growth there. Feel very good about that property. InStyle has been challenged since we bought it, but we feel good about the game plan there and really getting rid of a lot of low calorie impressions. Parents we are working on. We have a game plan there and shape is very small. The rest are very strong. That’s on traffic. The other key part of the thesis is performance marketing and e-commerce and that continues to be excellent. The whole thesis of taking the Dotdash e-commerce and performance marketing assets to the narrative sites and driving them through the Meredith brands is playing out very well. We highlighted, we were up in performance marketing across the Board in March for the first time in a while and we just expect to continue to move from strength-to-strength across the portfolio. So feel good there. Operator, next question?

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

Hi. Thanks for the questions. I had two on Angi. Joey, could you just talk about where you are seeing the greater efficiencies that led you to raise the profit side and then how much more room you can still have on the cost side? And then on revenue, the letter talked a lot about focus on quality and sort of cleaning up the platform. How long do you expect it to take to work through this, does it change your expectations at all for growth this year? I think previously you talked about kind of flattish growth in 2023? Thank you.

Sure. On profit and on the cost side, I don’t expect we are cutting further costs from here. I think we did a lot on that and I think that, that’s worked very well, not just in terms of generating more profit, but in terms of operating more efficiently. I think with fewer people, we are actually getting more done faster and that’s good. So I think we are in a good place there. We have talked about areas where we will start to reinvest like marketing, in particular, television marketing on the cost side, but that has gone very well and we are pleased with where we are there. The quality things that we are doing are going to play out over the course of this year, and probably, to think about where we will continue to invest really is more on the revenue side. So what I mean when I say invest on the revenue side is get out of certain revenue that we are doing. I alluded to some of these things in the letter, get out of certain revenue that we are generating that I don’t think is long-term good for our ecosystem. I think that leads to probably little declines over the course of 2023 in revenue. I will let Chris take you through the numbers there. But I think we will invest more of the revenue or reinvest more of the revenue and the customer experience. That’s things like sending fewer emails, moving away from certain marketing channels, doing less of certain kinds of sales or allowing service professionals to buy fewer products so that they can retain longer and have a better experience and generate a better ROI on our platform. Those -- we have a lot of those changes happening throughout the organization that we put in place over the course of Q4 and Q1 and that will continue to come into place over the rest of the year and I view that all that investment happening really over the course of 2023 to grow in 2024. The -- most of the cost cuts we did on sales are also complete. That also -- and we have changed our offer mix and so that also has an impact on what we do in revenue, but again, driving more retention and pros to spend more over their lifetime with us. Again, we get the benefit of that in 2024, but that hurts us over the course of 2023.

Sure. And thanks, Cory. In terms of outlook on revenue and profitability, what we are expecting is that aggregate revenue across all service lines on a net basis. So treating -- looking at 2022 as if services was booked net for the full year. We expect revenue to be down 5% to 10% each quarter for the remainder of 2023. That decline will be most pronounced in Q2 as we had a number of lower -- a sort of a spike in lower value revenues during that period last year and stripping that or that push towards quality. And then we would expect revenue in Q3 and Q4 to be at the down less in that 5% to 10% range on a year-over-year basis. On a profitability perspective, we expect Q2 on an adjusted EBITDA basis to be similar to Q1 in terms of whole dollars. We tend to spend more marketing in Q2 on things like TV. So margins are a little lower, even though seasonally revenue was higher in Q2 and Q3, we expect a little bit of lower margins on immediate marketing spend and then we expect margins to be solid in Q3 and Q4, and drive profitability and free cash flow there. So as we are getting rid of a lot of these lower quality revenues, expect declining revenues in the second half of the year -- the last two quarters of the year and really setting us up for growth in 2024, but we can still have good performance on margins despite that revenue headwind.

Yeah. The only thing I’d just add further to that is, the way we are talking about internally, the folks on the Angi team is, I have said to everybody, I want to turn off revenue that is not going to be good for our customer experience and long-term customer relationships. If we are building lifelong customers, let’s build the lifelong customers and make that healthy. We have got room on profit to do that and I want to prioritize the customer experience over revenue right now and we have got plenty of profit in there to work with. And that’s been our priority and that will be our priority over the course of 2023 to go and grow from there. But I think it’s -- I view it as a very healthy thing and I view it as us being in a very healthy place as a business with those decisions.

Thank you. Operator, next question?

Next question comes from Brian Fitzgerald from Wells Fargo. Please go ahead.

Thanks, Joey. Thanks for your thoughts on AI in the letter. We wanted to ask if you could highlight some of the key opportunities you see for the use of AI in your businesses and if you could share any thoughts on how you can differentiate and also defend your content and IP from generative AI competitors? That’s the first one. And then second one was just on Dotdash Meredith on the new intent-driven Quick Heal’s product. Are you looking to drive monetization lift on your general interest sites using insights gained elsewhere within the network or is there an audience extension opportunity across the Internet as well? Thanks.

Yeah. I will do the Dotdash one first and then I will come to the AI one. The -- we are not so focused on audience extension there. We are focused on proving and showing intent in the product that we have. It has the key features that advertisers are looking for today, which is anonymity or you don’t need PII, you don’t need cookies and you have one of the hardest things to come across, which is intent, while not having those other two things. And the fact that we can deliver that, we are branding that, we are organizing around that. I think it’s very helpful towards sales, but the focus on that is internally. Obviously, there is -- there are opportunities for audience expansion and there are components where that can happen. But I think that we have a lot of inventory that we can sell across our sites and that’s going to be the priority and focus of that today, but not to say that those things aren’t possible. And that comes out, I think, in the next few weeks and so that will be exciting. We will see how that goes. In terms of using AI in the businesses, there’s a bunch of places where we are using, probably, where it’s happening fastest and most robustly right now is in code. Meaning people writing code and using pieces of code that they can get through these systems or helping them write code faster. That -- if you talk to pretty much any developer in any company, they are using it and they are getting real value from that really quickly, which leads to efficiencies there. There are other areas like customer support, where we have ideas or we are experimenting, but they haven’t quite gone live with those things yet and then just organizing processes around content creation. We are certainly not having the AI radar content, but you can start to organize and outline things and figure out how to prioritize things or use AI to learn what kind of content works, what kind of content works better than other content and analyze data, which is a data analysis project at significant scale and that’s working -- starting to work for us. When I think about -- I alluded to this in the letter, the marketplace business is, this is, I think, maybe one of the most exciting things, although, we have nothing live here yet. But one of the most exciting things is to use these models to learn our proprietary supply database and learn from our demand, the demand that’s coming in and figure out how to make better matches. Anytime you figure out how to make better matches that has significant yield for the business and making better matches is a data analysis problem and these models are built for big scale data analysis and I think that that will be -- could be very valuable. The other thing that I alluded to in the letter, I think, is really important is, take Angi, for example. We have what we call a Service Request Path. On the Service Request Path for Angi, people come in, we ask them a question, their zip code, then we ask them what kind of job it is, and we ask him some details about that job and that is a multi-step process. It is hard to get a user anywhere through a multistep process. What the Chatbots are doing right now is they are creating this natural conversational UI where users are getting comfortable with those things, which is like a gift from heaven for us to be able to get people to use that UI more comfortably and to have that be smarter and more interactive. So we have actually built on already at Angi. It’s not live yet. But we have built that. We are putting more work into building that to get something really exciting there and that will be fun. But using that conversational UI to get better data from the homeowner on what they need done, and then, therefore, match them better on the service professional side. And you can make the same thing on the Care side and on Vivian and Turo that same thing works and I think that, that could be a lot of fun and really impactful for the business.

Awesome. Thanks, Joe. I appreciate it.

My pleasure. Thank you.

Thank you, Operator. Next question?

Next question comes from John Blackledge from Cowen. Please go ahead.

Great. Thank you. On DDM, any way to frame the DDM EBITDA margin trajectory in the second quarter and then into the second half? And could you clarify the lease impairment charge in 1Q? And then just also on the land purchase, what was the kind of rationale there? Thank you.

Sure. Thanks, John. So I will start with the lease impairment. That relates -- it’s a one-time non-cash charge. That relates to two floors in Meredith’s office space in New York that when we bought the business were shuttered. They are not used for any purposes right now and have been on the sublease market. We had -- at the time of the acquisition in purchase accounting, we had fair valued those floors and made a sublease assumption. All the cost associate -- or the cost associated with those floors flows through our existing P&L. We have came to the conclusion we needed to take a further impairment on that space given the substantial step down in the commercial rental market in Lower Manhattan. And so $44 million -- $70 million total charge, $44 million of it is above the adjusted EBITDA line with the rest is depreciation. That’s -- we will still look to sublease that space, but no real impact on the business. When you think -- when we look forward to our reaffirming our adjusted EBITDA guidance for the year at DDM of $250 million to $300 million, that is excluding or adding back that lease impairment, especially since it’s non-cash. We don’t expect significant other one-time charges this year unlike last year where we were going through the integration. On a forward basis on EBITDA margins. One thing to always remember is, Q1 is the lowest activity revenue quarter of the year, as well as the lowest margin quarter of the year and Q4 is consistently the largest. What we looking forward and we talked about the phasing in the letter, but we expect Q2 to be pretty consistent with Q2 of last year on an adjusted EBITDA basis, adding back one-time expenses and the like. We expect to have some good scale both in margins and profitability in Q3. Last year in Q3, we were going through the integrations, we had a lot of inefficiencies on our ad stack and cost structure. And then Q4, given where we are headed in the growth in e-commerce and our expectations of both traffic and revenue growth, assuming the ad market just stays as it is. We are not anticipating improvement, we expect to have strong profitability there and our goal is to get to 35% plus digital adjusted EBITDA margins. So that’s how we think about the year. With respect to the land purchase related in Blackstone, don’t need to be worried. IAC is not going into the real estate market. This was a specific situation when the headquarters was built just under 20 years ago, it is on a 75-year ground lease to a parcel of land that was owned by a New York property firm. That -- the ground lease payment that we make there has been fixed at a low level since opening in the mid-2000s and we were headed towards a large step-up in fair market value. Even though the broader commercial real estate market is soft right now. You can imagine, since in the last nearly 20 years, there have been some significant increases in commercial real estate values. That step-up would have -- at the fair market value would have flowed directly through our P&L. So first off for us, we could buy the land and avoid a significant increase in our ground rent. Secondly, combining the building with the land increases our optionality around realizing the value when it’s just a building on a ground lease, it’s hard to do much in the form of either a mortgage or other transactions to extract value from the property and it just gives us greater flexibility and optionality around assets on our balance sheet. And then, finally, it was a disrupted market due to rising interest rates and broader tough capital markets for real estate and I think the market knew we were the best buyer. So we felt good on an opportunistic basis. But that is the context and we think it will create value for our shareholders.

Thank you.

Thanks, John. Operator, next question?

Next question comes from Brent Thill from Jefferies. Please go ahead.

Good morning. Joey, on emerging and other, could you dive a little deeper into Care and it looks like there was profitability in that segment just understanding what’s going on there? And then the question around why more Turo at this point? Thank you.

Sure. I will do Turo first and a bit on Care and I will let ask Chris add in on Care. Turo is a perfect business for IT. It is a marketplace business with disaggregated supply and disaggregated demand that is delivering a great customer experience in between. It is a -- and the question in that was when we first invested is it an economic model that works, because between insurance and other things and trust, can you make that equation work. And to prove they can make the equation work and you can see it in the financials they filed with their S-1. It is a -- and it is one of these businesses where scale improves the product, not just the price. So the more people that get on there, the better it is for host and the more hosts that get on there, of course, the better it is for guests. And I really -- they are a significant category leader and I expect that lead to continue to expand and when you see a business with those kinds of dynamics and you have the opportunity to know more and you know the good and the bad, you -- we took that opportunity. I am -- when I look at the size of the market that they play in and their market share and the way that they gained market share, I think, that’s really attractive and I think that they have the potential to play in some other markets that could also be really attractive and so that’s a business we want to own more of. And just lastly, it’s an exceptional management team. I mean, Andre Haddad, the CEO of that business is a product person to the bone and he is an avid user guest host of the product and constantly trying to improve the customer experience. And when we see that, that also gets pretty excited. It gets pretty exciting. And he’s someone who wants to continue to do that for a very long time and that adds to the story for us. So it’s really add every feature that we look for in a business and when we saw the opportunity to own more, we took that opportunity. In terms of Care, Care is very much a back to basic story. It’s doing the incremental work on cost and on revenue to get a little bit better every quarter. It’s also a category leader. It’s also a marketplace business and just moving the small things is what’s happening there. We haven’t had yet a huge breakthrough on the product. We haven’t needed and we would like a huge breakthrough on product. We haven’t needed a huge breakthrough on product, though, because there’s been lots of basic work. A new product -- the new product is starting to roll out a little bit or some upgrades in terms of the user experience are starting to roll out and then we will keep innovating from there.

Yeah. And thanks, Brent. Just relative to profitability, you should think of an emerging and other as Care of the lion’s share of profit there. Also Mosaic is profitable and then you have got some smaller businesses that are in investment mode. In the first quarter, as Joey said, some good execution and some good cost management on a year-over-year basis. There were a number of initiatives that had over proliferated in 2022 that we phased out during the year and really focused on back to basic big value drivers. On a go-forward basis, you should just bear in mind, Q2 tends to be a lower quarter of profitability for Care and emerging and other as a result, as we invest in marketing, TV, others going into the summer season and into ahead of back-to-school. And that’s also some elements in Q1 related to employee -- household employee tax income that leads Q1 to be profitable. So Q2 will be lower and then we see real strength in Q3 and Q4 there. We like the state of the business, good gross margins, continued margin scale that we can drive. On a revenue basis, Enterprise has been solid, even in what is a tight corporate spending environment, return to office is a tailwind to utilization of the service of the Enterprise Backup Care Service. And then Consumer has been slower growth, top of funnels been challenging. And we see some market opportunities to improve our marketing and conversion, but we love the business long-term as a grower, industry leader with a huge opportunity to convert off-line to online and we expect to keep pushing forward there, including through innovating the product and improving the marketing, as Joey said. So we feel good. We just got to put our head down and keep executing.

Thank you.

Thanks, Brent. Operator, next question?

Next question comes from Jason Helfstein from Oppenheimer. Please go ahead.

Thanks. So you talked -- two questions. You talked about SEM conversion improving Angi, how do you think about this impacting revenue? And just maybe your thoughts about leaning into SEM with obviously paid marketing as this is working better? How -- just how are you thinking about that and timing? And then the second question, you highlighted performance marketing improving in Dotdash. How are you thinking about convincing brand advertisers, that historical Meredith brand advertiser to act more like a performance advertiser, which to some extent, they are already doing in retail media, right, on other properties. Is this just a tough time to convince them in a lower ad market to do that, when you are thinking that’s more of a 2024 catalyst. So broad thoughts on how you kind of effectively get what’s now kind of retail media budgets coming into the new Meredith Dotdash? Thanks.

Yeah. One thing on that, Jason, I will cover both, and again, Chris add in. But the great thing about performance marketing is you really don’t have to convince folks on that, because it performs, the harder one is the brand marketing where the line between spend and return, it requires a lot more machinations. The performance marketing is very straightforward. So you really just have to get people to sample of spend and then they can scale as much or as little as it works. And generally, it works because of the intent of the audience. So that’s pretty straightforward. We really just -- the big thing there is just getting it up on the sites and getting the units there and things like that. On SEM conversion at Angi, this is really important. So I mean one of the things that I got in there focused on was seeing the conversion have been a relatively steady decline for close to two years and now reversing that decline. But one of the components of doing that is, so we have now stemmed and reversed that decline in conversion. But one -- the first thing we do when we did that is, start to capture the margin and make sure that we can capture the margin. So now we have proven that. The next step is the scale and we want to scale carefully and smartly and there’s a couple of components scaling. One is making sure that you can find the spend at the same efficiency, which I am reasonably confident -- highly confident, I should say, we can do across the search engines. And the second is to make sure that you have the supply side and the rest of the Angi ecosystem working to absorb that and we got to get all that working in concert. And the third piece is making sure that as you do all the spend that you are prioritizing the spend channels that have the best customer experience and have the best margin, so that you are not trading off the same. You can sell -- if a service professional wants to buy one lead, do you want to sell them that best lead rather than a worse lead. So the things that we are doing surrounding this are building the technology or deploying the technology or making sure the technology works so that we can get all of that optimized together. That is a lot to optimize and we want to make sure that we get that right when we -- as we scale this and that will happen over the course of this year. So, again, margin first. I think we have proven that now we look towards scale and that will begin to happen over the course of this year. Do you want to add anything on?

I just think on -- Joey said it well, in broader ad market trends, this ties to the new product that Joey talked about that Dotdash Meredith is launching where if you have a campaign management program that can target the segments you are looking for give you real return path data and performance metrics, that’s much easier to sell than a broad brand campaign and that’s in the Dotdash DNA and now through the integration we can run it across all the Meredith properties and Dotdash together and take advantage of massive scale in our categories. In terms of the overall ad market, which was a bit in your question, it continues to be a story of different sectors or verticals finding strength or weakness as different times due to a lot of macro factors. So health, pharma is excellent, beauty and style, it has really come back, travel is good, retail is even pretty solid and we expect the comps to get easier in a number of these as you go. And then you have got real weakness in finance on a year-over-year basis, media, technology, streaming those areas. And home may show signs of life but has been soft. So we will continue to kind of manage through what’s a choppy market, but we feel very good about our portfolio and where our offerings sit.

Thanks, Chris.

Thanks for your question.

Next question comes from Eric Sheridan from Goldman Sachs. Please go ahead.

Thanks so much for taking the questions. Two, if I could. First, going back to the capital allocation section of the letter, Joey, I’d love to get a little bit deeper on your perspective of capitalizing on what might be short duration mismatches around asset prices or opportunities that present themselves and how you think about prioritizing, capitalizing on those opportunities versus striking the right balance of continuing to invest long duration against some of your larger sort of addressable market goals in some of the businesses and striking the right balance from a capital allocation policy standpoint? And then maybe number two is a follow-up, we have talked a lot about the four priorities you laid out for Angi going forward. As you pivot from the second of the four services and cash flow towards the first two customer experience and SEM, SEO. Can you frame up how much of that are areas where you need to invest either at sustained higher levels or incrementally versus you think the dynamic of moving towards those first two initiatives is more about execution going forward than putting capital behind the problem? Thanks.

Yeah. Thanks, Eric. On asset prices, I don’t know the answer to that question. We are -- I would say that it’s not like we are trying to buy or trade securities. So that’s not really in our wheelhouse. Chris talked about the land purchase and that’s something that sort of we do for a cleanup for a very long time, and I guess, some events made that possible. You could call that asset prices, interest rates, a bunch of other things made that possible in a way that was much more attractive than it would have been a year or two years or four years ago, frankly, and so that was helpful for us and we think unlocks the value for us, things like that. But we are not looking at, I don’t think, trading securities. When we look at companies and we think there are many companies that are or have recently been attractively priced. The counter to that, in particular around public companies, as we talk to them is that, there’s not like probably transactions to be done at reasonable premiums to those companies right now. We haven’t seen that happening. We haven’t seen much appetite for that. So even though the public prices are lower, I don’t think that -- I still don’t think that people have gotten comfortable selling to what would have been the historical reasonable premiums to those things. I think people are looking for much, much more aggressive premium and then it gets to be a relatively less attractive asset. I mean one of the things with buying our own stock or buying Turo’s stock or MGM buying its own stock is those things don’t require premiums and you can sort of take advantage of what we think is where things trade is relatively attractive. So I hope that answers the first question, although, I am not sure whether it does. As far as the second question. The investment in customer experience and SEO and SEM is, I don’t think there’s more we need to do on the cost side. I do think there is more we can do on the revenue side in investing in those things and that’s what we are going to be doing over the course of the rest of the year and it most certainly is execution. We have the product team right now that we think can build -- the product and technology team that we think can build what we need to build and improve what we need to improve. Can’t really do all that at once and just adding more people to it, I don’t think it speed us up. So the things that we are doing right now is just trying to get things tested and launched as quickly as possible and improve that customer experience. But, again, a component of that is going to be turning off certain elements of revenue that we think will lead to happier homeowners and happier service professionals over time, spending more with us and staying longer with us over time and we will do those wherever we think they are good for the ecosystem.

All right. Next question.

Next question comes from Stephen Ju from Credit Suisse. Please go ahead.

Thank you. So, Joey, I wanted to follow up on the services line for Angi. So taking a step back, even before the pandemic, I think, there was always a thought process around how difficult it is going to be for the business of scale for certain categories and geographies. And now that we come through the supply and demand imbalance into the pandemic and now that you have also spent some more time on the operations on a day-to-day basis. Do you think the overall opportunity here is smaller, and conversely, are there certain product advancements you were able to achieve that now make what you thought was impossible previously are now possible? Thanks.

Yeah. Thanks for the question, Stephen. It is a -- I absolutely believe in the services business as a critical component of Angi’s future. And is it bigger or smaller than previously? I guess it depends who thought and which parts of it or when. But it is, I will just say, a big part of Angi’s future. And that’s for a few reasons. One, where we can deliver the service as well and I think in the areas where we are focused today, which is the lower consideration areas, where we can deliver the service as well, it is a great customer experience. And it’s not just the revenue that we generate in that customer experience, but one of the things that we are thinking about for Angi in aggregate is the whole customer journey and offering services on our platform is actually good for the entire ecosystem of Angi, meaning ads and leads to. So a homeowner who comes to our platform now who can see services and get a lot of information that’s very helpful to them, which is when they can get a job on a price at which they can get a job done and doing that part of the journey is actually helpful regardless of whether they transact via services in that moment. They may come back and transact again later. They may come back and find a service professional to do the job through ads and leads. They may -- there’s a number of things that they can do in that. But us offering that service on our platform, I think, is very important to the aggregate customer experience. What we would like to do is start to grow it again, but to grow it again smartly sort of one category at a time where we think we can deliver that customer experience, which we need, which means price to service remotely and have a very high confidence level that we can fill it with a very high customer satisfaction rate. And when we can do those things, we will expand into other categories and we will do that economically rationally. The current state of services, which is smaller is a result of coming out of some categories that weren’t working for us and where we couldn’t deliver the economics experience and the customer experience that we wanted to do and getting back to the one that does. But now that we have that, I think, services have a very bright future. Again, in services, less focus on growth, 2023 over 2022, 2023 was a meaningful pullback relative to 2022. So we are not going to see growth in that business to see declines in that business over the course of 2023, but getting to a healthy base that we can grow from, I think, is essential. The other piece I will say is, we have reduced exposure of the services business over recent history to our customers and we are now experimenting with ways where we can increase that exposure, but again, in ways which you think are overall more compelling for the ecosystem and we will see how those go over the course of this year.

Next question, Operator?

Next question comes from Ygal Arounian from Citigroup. Please go ahead.

Hey. Good morning, guys. Just Joey on the MGM and in the letter you talked about nearly $3 billion of liquid shares there and as we kind of think about where you are here? And just maybe refresh also on how you are thinking about the MGM opportunity, the plans there, the potential source of cash or assets to get to something else, if it’s not a longer term strategic fit? And then on Dotdash Meredith, the strength in e-commerce really great interesting to see, given still some weakness around the consumer and consumer spending. Can you just spend a little bit more time talking about what’s been working there? Is that a result of the integration with Meredith or is the integration or the benefits from the integration more still to come? Thanks.

Yeah. Thanks, Ygal. I think the second question was most -- it was hard to hear, but e-commerce at DDM, which that also Chris said. In terms of MGM, look, obviously, we are very happy with that investment and how that’s worked out over time. It’s a phenomenal business, it’s a category leader, it’s a phenomenal management team that’s winning competitively in a phenomenal market, which is primarily Las Vegas, where it’s the entertainment capital of the world and it’s growing. It’s getting every major sport there, it’s getting all kinds of new fun things to happen there and MGM is a very clear leader participating in all of that. The other great thing is the business has a ton of cash right now, the OpCo/PropCo thing they generated all the -- where they put a lot of cash on the balance sheet has worked out very well in terms of share repurchases and we are happy to see our ownership stake increase, but also to see the business with such a healthy balance sheet right now and continuing to generate great free cash flow. And they are using that free cash flow on some smart capital projects and some share repurchases, which also improves the yield for a shareholder like us. I also think the business is still fundamentally undervalued. You can look at it in terms of the -- what you get in free cash flow as a shareholder, but you can also look at it in terms of all the things on the horizon for MGM, which I think aren’t really reflected, number one, digital. MGM’s a one of three meaningful players in digital are at a 50% interest in one of three meaningful players in digital and that continues to go well, both in terms of revenue growth and in terms of a pipeline to profitability. There’s Macau that has come back and come back in a meaningful way. You add more people with more money sort of held back for longer, so when you look at what’s happening in Las Vegas in the U.S. or when you look at what’s happened in travel in the U.S., that sort of pent-up demand is now just completely unleashing and I think in a more powerful way in Macau, which is really exciting there. You have Japan where MGM is really going to be, looks like the only player in that market or at least the only player for a while in that market, and that could be a very attractive market. And the -- and you have New York opening, you have a pretty wide potential to open, you have pretty wide range of things that can unlock real value at MGM and so we are still excited to be a part of that business and I will tell you about everything the team is doing to capitalize on the opportunity in front of them.

Thanks, Joey. And on performance marketing at a Meredith. There are two key elements. We talked about this in the last few letters. One is e-commerce for goods and the other is performance marketing for services. So take a step back, Dotdash has always been excellent at integrating performance marketing or partners, goods and services really natively into the content or in context. So it’s a review of kitchen items having links right there or having the relevant product in an Investopedia article have quick links to a variety of savings accounts or money market funds when someone’s already searching for that information. The key part of the combination of the companies was bringing those tools to the Meredith sites that have tremendous brands and a lot of content. But, A, having more highly germane integrations of links to execute e-commerce and services activities. But also increasing the amount of content that is produced on the Meredith sites related to those commerce opportunities. We call that the evergreen commerce content and management has been actively building those across the sites. So we said e-commerce for goods across the DDM portfolio was up over 30% in Q1 and really increased every month sequentially on a year-over-year basis and we expect to have just continued momentum there. E-commerce performance marketing for services is predominantly for financial services, which was, as we have said, brokerage, crypto, insurance heavy a year ago. Those markets are struggling. But the good news is they declined steadily across 2022, so they will be -- the comps only get easier there and we are cautiously optimistic products -- interest rate products will drive some growth. But we are very bullish on continuing to grow that performance marketing line and it really is bringing the Dotdash approach to a lot of the Meredith’s side. Thank you. Operator, next question?

Next question comes from Youssef Squali from Truist. Please go ahead.

Great. Thank you. A couple of questions. Going back -- Joe, going back to Angi. So over the last two to three plus years, we have made a few pivots from a business model perspective. Now to refocus on maybe LTV. Going through the letter, it seems like you guys have thought through it pretty well, but it seems very intuitive to us what you are doing. But, I guess, practically, what gives you the confidence that doing less is more that acquired fewer customers sending them fewer emails will ultimately drive revenues? Just trying to get a sense of whether you can share maybe some proof points with that, some AB [ph] testing that maybe you guys have done that could give investors more confidence. And then, Chris, on roofing, looks like that business turned profitable. Can you speak to the sustainability of profitability in that segment going forward? Thank you.

Was the second -- Youssef, was the second question on roofing.

Yeah.

Yeah. Okay. I will do both.

Okay.

And yes, during the quarter on profitability in roofing, whether it’s sustainable, I don’t know. It’s a very small business. I think it is, we have learned a lot in the roofing process. I am happy, we have learned a lot, but it probably wasn’t the smartest move we ever made and we got to figure out what to do with that from here. So I wouldn’t -- it’s not a huge area of focus in terms of what that does. I think it is breakeven, give or take, a little bit in every quarter. I am confident in that. I am confident we are not losing money like we did last year in that business. But we -- I think we got to figure out what the plan is for that business. But it will not, I can say, with very high confidence, it will not be a meaningful needle mover in any direction from here. As it relates to the rest on Angi, you said, it’s totally the right question and one that we ask ourselves every day and I will give you some of the things that we look at. One, just like a really fast one is bad debt raise and credit rates among service professions, like, when we are delivering a better experience with a better ROI for service professionals, we see lower bad debt and we see lower credit rates. And when I talk about each of these things, I am talking about kind of where we are relative to the worst, which was probably Q2, Q3 of 2022. All that has improved meaningfully sequentially from there. We look at retention and we look at retention by cohort. So we look at pros who have been with us 28 days, 56 days, 91 days, 180 days and we look at that relative to the ad product. We look at that relative to the lead product and we have been steadily improving those and across those lines really across all of that in March and then again in April after generally heading in the right direction for a little while. Now these things do take time. So like we are talking about very small increments in this, but the key for us has been changing the direction of the slope and that’s really important. So we have seen that. The other thing is repeat rates. Repeat rate on the homeowner is one of the toughest, most stubborn things that exist in the business. We had that declining and we now have that -- we have arrested that decline. And so the question is, can we get it to growth? And that remains to be proven. I think that some of the other things we have done, or first of all, racking design and other things we have done in other areas, intuitively, treating the customer well leads to better outcomes, but we have to see that one prove out over time. And I generally have the belief that, this is no leap of faith that you deliver a better customer experience, you have better customers and they stay with you longer, you have a better business. There is a question in there, which is, well, can you -- can that work economically? And the answer, I think we have proven that, that can work economically and so now it’s continuing to get those things better to continue to turn those methods. And those are a handful of them. There are more. I will give you one more, which is, price. So one of the things that we are doing on price is we have generally been more reducing price for pros. But what we have seen is that pros are actually spending in aggregate generally the same. So we were -- we sort of had a double whammy of injuring ourselves, which is we were charging more, which is burning the pros out faster, which are leading to worse matches over time between homeowners and pros. So now we can charge less. The pros spend the same. The Pro gets more out of that spend. They match it more homeowners and the homeowner gets more out of that spend, because the homeowner matches with more eager pros. And that’s like a great time for the flywheel and a great thing for the ecosystem and we are just looking for things like that and generally finding things like that, that are overall improving the system. So I do have a lot of confidence in what we are doing and I do have absolute confidence that doing the right thing by your customers is going to yield good things for the business over time.

Thanks.

Thank you, and Operator, one last question.

Next question comes from Justin Patterson from KeyBanc. Please go ahead.

Great. Thank you. Perhaps to build on just a final point around Angi. Could you talk a little bit just around how SP satisfaction has changed with this new versus old cohort and then perhaps just comment on some of the spending and retention differences you are seeing with them? Thank you.

Sure. So, again, one big indicator of satisfaction is bad debt rates and credit rates, which have been improving steadily and meaningfully relative to where we were in Q3. And in terms of retention, I guess, important to think about, I will focus on the lead side for a second. About 60% of the pros have been with us greater than a year. That’s a fantastic stat I think. And those pros systems, they figure out how to make the system work for their business and we have figured out how to make this system work for our business and that’s working. I think that we are -- we have seen the most change is in the other 40%, so which break down some been with us a month, something with us three months, et cetera. And what -- that’s where we have had most of the volatility and that’s for most of the challenges and what we have done throughout the business have shown up. And what we are starting to see in that area is the younger pros are retaining better and we measure that just on, sorry, you can measure retention, but you have to measure it cash collected in the first 28 days or 56 days or 90 days and those things improving. And when you see those things improving, those books will make up a bigger portion of that, call that, 40% that’s not the greater than a year. And the other folks -- and will build over time and the other folks will make up a smaller portion of that and we get to an overall healthier ecosystem of service professionals in the network. I am not going to go through specific churn numbers or specific retention numbers, but they are generally in that area heading in the right direction. And the better young ones, new ones, I should say, are replacing the more challenged older ones.

Thank you. Well, we will wrap up the earnings call now. We thank all of you for joining and wish you a good day. Thank you.

Thanks, everybody.

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