Angi - Earnings Call - Q2 2020

Transcript

Speaker 0

Good morning, everyone. Glenn Schiffman here, and welcome to the ANGI Homeservices Joining Second Quarter Earnings me today is Joey Levin, Chairman of ANGI Homeservices and CEO of IAC and Brandon Ridenour, CEO of ANGI Homeservices. Joey and I will also address any questions you may have on IAC's second quarter results and its investment in MGM. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. We will not be reading the shareholder letter on this call.

It is currently available on the Investor Relations section of IAC's website. I will turn the call over to Joey shortly to make a few brief introductory remarks, and then we will open it up to Q and A. Before we get to that, I'd like to remind you that during this call, we may discuss our outlook and future performance as well as the prospects for IAC's investment in MGM. These forward looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar such statements. These forward looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed here today.

Some of these risks have been set forth in IAC's ANGI Homeservices and MGM's second quarter press releases and our respective reports filed with the SEC. We'll also discuss certain non GAAP measures, which as a reminder include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our press releases, the IAC shareholder letter and again to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non GAAP measures. Joey, let's jump right into it.

Speaker 1

Thanks, Glenn. The big news this quarter, on top of I think being a very strong quarter for IAC generally, is the, MGM investment. And we've gotten, as you'd imagine, a lot of questions and and curiosity around that. And the the big thing I think I I wanna hit on is while the form of this investment is a little different than what we've done, historically in the sense of it's a public security, it's a minority investment, the concept is totally consistent with what we do and what we've always done, which is be opportunistic and seize opportunities when we see them. That means, and opportunities of a theme.

We look for very large market. We have that in gaming, for sure, $450,000,000,000 globally, maybe onethree of that in The U. S. And still less than 10% penetrated online, which could segue to the next one, off line to online transition and natural tailwinds. That 10% penetration definitely getting bigger.

It's definitely getting meaningfully bigger. Maybe, we'll we'll pick the wrong horse or maybe we'll the the execution won't be there, but there's no question that the the 10% gets bigger over time, and you benefit from those natural tailwinds. The other thing is scale dynamics here. It's not a typical marketplace business, but this business, the customer experience improves in this business, actually both our offline business and our online business as more customers are there. It improves for every individual customer.

And lastly, which is something that's always been important to us and certainly important to us here is great value. This is a time where there's a, we think, a temporary dislocation. We do believe we don't have any idea when the world comes back to normal, but we do believe the world eventually comes back to normal. And we do believe that when it comes back to normal, this business is incredibly well positioned to benefit from that. But there's a a value opportunity right now.

The key question is whether they have enough capital to get from here to there, and and we're highly confident that that they do have the capital to to get there.

Speaker 2

So when we

Speaker 1

look at all that, that that combination of offline to online, their real competitive advantages, value, and we say this is an opportunity for IAC, and this is very consistent with opportunities for IAC, that we've we've taken advantage of in our past, and we we drew some analogies in the letter. I know I won't I won't repeat here. The second thing I wanna cover is this monthly metrics experiment we've we've got here, which is we're we're publishing the figures monthly. And you saw we we we now have numbers out through July. And I think that's, important to understanding the business, understanding the flow and the rhythm of the business and giving you all the information that we have and and not no longer need to rely on proxies for that information or some people being able to to buy certain data sources or things like that with information we can just publish it so everybody can see.

The only thing I'd I'd caution everybody is, again, we said this in the letter, we said this since we started, is we don't manage the business for a month nor a quarter or a year, but certainly not for a month. And, months can be volatile. There's all kinds of things that could be in prior year period or current period. And I wouldn't, obviously, people will trade on whatever they wanna trade on and and focus on whatever they wanna focus on. That's not up to us.

But I'd say that the monthly numbers can move around. We'll do our best to explain them. But I wouldn't be we're not overly concerned about any particular month. And so I'd just encourage you to understand that that's the way we think about it and we can explain what's going on, as well as we know, when we know it. So with that, I will turn it to questions.

Mark Schneider has also joined us. You can't see him on the camera here, but Mark Schneider, our head of investor relations, is more than six feet away from us over there, working the keyboard.

Speaker 3

Thanks, Joey. We're gonna start with our first question from, Ross Sandler at Barclays.

Speaker 4

Hey, guys. Thanks for doing the call this way. Really appreciate it. So maybe we can start with MGM. Knowing you guys, you've probably looked at the digital gaming space for a number of years, and there's been a bunch of interesting transactions.

So the question is what drew you specifically to MGM? Was it the licenses, the, you know, loyalty program that they have? And given their partnership with with GVC, what does IAC bring to the table that they maybe don't already have? And then, Glenn, lastly, what's what's the cost basis on the investment? Thank you.

Speaker 1

Yeah. Ross, it's a little bit of all of that and more. And in I'll probably do that in reverse order. But in the question of what do we bring to the table that they don't already have, the answer is we don't know. When we entered travel, we didn't bring anything to the table in travel.

When we entered home services, we didn't bring anything to the table in home services. When we entered dating, we didn't bring anything to the table in dating. What we looked at is who is what do we think the future looks like? And I talked about that in the opener a little bit of is 10% penetration going to be the case ten years from now? And our answer with high confidence is no, it will be meaningfully higher than that.

And when we get into it, we'll learn more and we'll figure out where we can help. There are some general dynamics that I think that we're very familiar with that we hope to share with MGM and try and be helpful in terms of things we've seen on conversion channels we think that have been valuable to us, things we've learned in direct marketing, things we've learned in performance marketing, what kind of metrics we view as successful metrics in certain channels and what kind of metrics we view as unsuccessful metrics in certain channels. And those general learnings have been helpful to us as we've entered new categories. But we'll learn. And so one of the things that's great about MGM and what they're doing in digital is they have this partnership with GVC, and GVC seems to be quite capable.

They're a top three player in, I think, 20 countries or more than 20 countries now. And they have scaled these businesses. They built the technology. They spent the marketing. And so they know what they're doing, and you did what what they're doing.

And when you pair that, expertise with the assets that MGM has, which we think are incredibly valuable in this area, we think that that's a winning combination. And so we look at this theme and say, how do we enter this category with a winning combination? Very little known fact is we actually did enter this category years ago. We had the timing right, the execution wrong. We had after DraftKings and FanDuel, we had also ran a third player in the market called Draft Street, which we built from scratch, invested in and went nowhere.

I think we sold it. I can't even remember sold it. It's probably a generous term. I think we gave it to one of DraftKings or FanDuel. And that wasn't our best execution we've ever done.

But we followed the category for a while, and we've looked for the opportunity. What MGM has uniquely, and again, also with the joint venture, is we view that the off line and the online are a complement to each other. A lot of times in a category you think the off line incumbent is going to move too slowly, is it doesn't have the technical bones to do it and has some expense infrastructure that is drag rather than a benefit to the online. You can think about that in areas like retail, where there's a big retail footprint that's expensive or you can come up with lots of analogies there. In gaming, our view is that the entertainment experience, the in person experience in a hopefully a post COVID world, but that experience is not replaceable online, and that experience is a tremendous complement to the online experience.

Think about just one little benefit that not a little benefit, but probably a big benefit that MGM has in this category. They're doing millions of room nights. They're interacting with those customers on check-in. That gives them an opportunity at a margin positive way to create a digital footprint on the device of their customers and a digital interaction point on the device of their customers. When you think about the billions of dollars that we spend on marketing across all of our brands to make that digital footprint and then generate a revenue event or generate a positive customer experience in there, that's a very, very expensive channel for us.

MTM has that with all their customers when they're checking into a room at a margin positive time before they've even started with a digital experience. And we think that that is a real significant overlap and a real asset. And we think that there's lots of assets along those lines. And when you think about the pure digital players having to deliver exciting fun physical experience as against the physical players having to deliver a digital experience, I really like MGM's position on that and what they can deliver for the consumer. So that is pretty unique in the market.

They're the only ones, I think, who've been very aggressive in that combined area, and they're playing to win. And that's why we like them, and that's why we're backing them, and that's why we're excited about it. And and hopefully, we can add value over time in in the ways that we've been able to add value with lots of these businesses over time. But, at at the start, it's a great team with a great vision and great assets to go after a category that's very large with tailwinds.

Speaker 4

And then just some of

Speaker 0

the housekeeping items. We own 59,000,000 shares. We paid $1,018,000,000 for that. So our basis is about 17.25 or so. And we're left after that investment with $2,900,000,000 of cash.

So don't forget to put that 59,000,000 shares in your sum of the parts. And then also from a housekeeping perspective, you saw in our balance sheet that was in marketable securities in this quarter. Going forward, it will be in long term investments our posture. And it will be on a quarterly basis mark to market. So you'll see the ebb and flow of that investment going through the other income per end's expense line in the income statement.

Speaker 1

Which basically means net income will be useless from here on out. And not that everyone really focused on that particular metric, but I do view that as a relatively useless data point now.

Speaker 0

There will be volatility for sure.

Speaker 3

Our next question, we'll go to Corey Carpenter at JPMorgan.

Speaker 5

Great. Thanks for the question. On Angie, Brandon, I was hoping you could give us some more color on what drove the demand and supply trends we saw in July, maybe how those track versus your expectations, and then also how it informs your thinking, into the back half of the year. Thanks. Thanks, Corey.

So, obviously, we finished q two strong, with May and June in particular being strong. In July, we saw a continuation of those same trends. In particular, if you just look at overall revenue, globally, revenue in July was about flat to June and is actually up a bit in North America. That's relatively in line with how we expect the business to perform on a sequential basis and and was in fact perhaps incrementally better than our internal views. From an operating metric standpoint, SR volume and consumer demand continues to be elevated in July, relative to the post COVID post COVID trends.

And on the SP sales front, you know, we continue to see a blistering pace of new sales originations. The last four months, including July, have been the the highest four months in the history of the company. And then, and and and particularly with July, you know, were up 53% in in USP sales year over year. So July was, in fact, a strong month and really a continuation of of the trends we saw in the late '2. When you look at the year over year sort of headline number, as Joey alluded to earlier, there's a number of things that can affect that.

Last year was a particularly volatile year, with weather. And if you guys recall, the first half of the year saw a really damp and wet spring. So July was a bit of an outlier in terms of, strong growth and and makes for a for a difficult comp. Where we sit today, you know, I I think that the consumer demand trends as we've seen them are are both strong and likely to to sustain at this level for the foreseeable future. What the key for us and and what's been most difficult is that we have seen the the provider side of the equation under some pressure as an industry.

And and and what I mean by that, we we run a a monthly or weekly sentiment survey. And right now, more than two thirds of SPs say their business is being negatively impacted by COVID. About forty percent have, indicated they're operating at a lower level of capacity. We track this every single week, and we did see you know, we are seeing did see incremental improvement, you know, throughout June and July. It's a little slower than I think we would have hoped.

I personally hoped coming out of the lockdowns that we would see, you know, a very fast resumption of, of former, you know, served capacity levels. But we're seeing that as more of a week to week, you know, few points a week type of recovery. And the reason for that, as reported by SPs, is, they're dealing with supply chain issues in certain categories. They've had some challenges hiring. So there's good and bad here.

I think the good on the provider side is that, I don't believe you have to see an end of COVID nineteen to see these businesses come back to full capacity. On the other hand, I think it's going be an incremental process that takes place over the second half of the year.

Speaker 0

Just a couple of numbers, Corey, to support what Brandon said. Our SRs in July at 24% growth was actually the third highest monthly growth rate in SRs since 2018. So I think that's nice and elevated. Second of all, Brandon talked about the volatility. As you know, last year, we grew revenue 20%.

The dispersion of the monthly growth rates went from 15% to 26% throughout the year. So as Brandon said, it depends on the year over year comps. Mondays, for example, are a big day for us. And last July, we had five Mondays in the calendar. This July, we had four Mondays in the calendar.

And the 26% growth rate actually was July, and the difference between the 15% and the 20% was over a three month period. You asked about the back half of the year, and we expect it to accelerate clearly off of the July levels. And we're optimistic the third quarter will slightly accelerate off of the nine percent that we clocked in the second quarter. And then the fourth quarter,

Speaker 1

we expect to

Speaker 0

continue to accelerate. Why? Because as Brandon said, we think our COVID induced supply constraint where the SPs are to some extent impaired, we expect that to lift during the year. And as it does, our ability to monetize each transaction and continue to add value to our SPs, we think that will increase during the year, especially given the strong sales performance of which Brandon spoke.

Speaker 3

Okay. Our next question will be from Eric Sheridan at UBS.

Speaker 6

Good morning, everyone. Brandon, maybe I'll follow-up on Corey's question and pull the frame out a little bit. When you see the environment you're sitting in right now, how do you think about aligning your strategic priorities about what's in your control versus what's out of your control on both the demand and the supply side when you sort of try to align those investments against your medium to long term goals for you trying to take the business? Thanks.

Speaker 5

Yeah. It's a great question. You know, our our goals and and and sort of pipeline of initiatives haven't changed from the beginning of the year. Obviously, COVID, has presented some additional supply challenges, but our our two primary goals remain, first, creating a stickier relationship with homeowners, a more durable relationship. And then second, obviously, we need to bring more provider capacity to the marketplace.

What you know, when I think about the key investments we're making, first of all, we have, plans to rapidly grow our sales force in the second half of the year. We were intending to do that in q two, but as we moved our workforce remotes, we had to learn all over again how do you actually, hire and onboard salespeople in a remote fashion. So we've been working through that for the last few months and are, deeply scaling that at this point. We continue to scale fixed price. That is a huge lever to bring more capacity to the marketplace.

This is another situation where, you know, the later later later days of March, it's you know, we pulled back perhaps on our pace of scaling providers. When if we had had perfect foresight, you know, we would have actually ramped our investment. We've corrected that as of late q two and and are, you know, working feverishly to bring on as many providers as possible. We also have a number of new monetization models that we've already got live and are testing. It's hard to say exactly which of those are gonna work.

But I think the theme here is that we're gonna bring a number of different tools, you know, and and methods to the marketplace to get SPs engaged as we have, as we all know, an enormous amount of consumer demand that's currently going unmonetized. On the consumer side and provider side, we've introduced a new payments platform, HomeAdvisor Pay, over the last quarter. That has, grown really, really rapidly, and we can you know, we intend to continue to see that scale over the remainder of the year. We'll soon layer on top of that a financing option for consumers that, you know, frankly, we're very, excited about. We don't really believe that consumers have had, you know, an at your fingertips financing option when it comes to home projects and home services ever available to them.

So I think this is a first of its kind offering. And, you know, we continue to to focus very heavily on on driving engagement with our mobile app. We have set several records over the last few months in terms of mobile, you know, active mobile app users, crossing the the million user mark, I think, two or three months now. And, over the last three months, we've grown that audience by 85% year over year. You put all those things together and you can kinda see the the the story, which is we're trying to drive deeper engagement, more long lasting relationships with consumers, and we're trying to offer, you know, features and benefits that drive up the value proposition.

We're seeing that resonate with the things we've already launched, and we've got a lot in the pipeline to go to go forward. In terms of what we can't really control, you know, we can't really control supply chain issues in the industry. We need to you know, we need those to be alleviated somewhat in order to unlock additional capacity. We know these businesses are out there, working, actively to try to recover from the things that are sort of hindering them related to COVID. But I you know, we feel like they're solvable.

We're seeing them be incrementally solved. And, while that's outside of our control, I think we feel optimistic that, that recovery will continue over the back half

Speaker 7

of the year.

Speaker 0

Eric, another great data point this quarter that we think bodes really well for the future is our SRs from new consumers to the platform grew 25% this quarter and actually accelerated through the quarter. That used to be about flat. And that shows us that either we're taking share from other solutions in the marketplace or we're driving offline to online conversion, given all the great product work that's going on with Brandon and his team. And that is really interesting because that creates tomorrow's repeat use and that creates tomorrow's customer as well. So we think have an opportunity here to steal a march on our competitor, it, you know, some competitors, be it someone else or offline.

Speaker 5

Yeah. I'll I'll just add to that. We we we do a sentiment survey every week, at scale with SPs. And surprisingly, about 50 of them are telling us they're seeing lower consumer demand. And that obviously does not match up with what we're seeing, in terms of our marketplace and and the overall level of consumer demand.

So we believe that we were really sitting at the nexus of two different trends. One is, obviously, people are focusing more on their home. But as they look for solutions and services, they're, I think, disproportionately coming online and looking for digital, you know, digital means to accomplish that. So those those are obviously both very positive in terms of providing a structural tailwind for us.

Speaker 3

And our next question will come from Brad Erickson at, at Needham.

Speaker 2

Thanks. Just a couple of follow ups for Brandon. We've kinda talked about this a little bit, but wanted to go a little deeper on the SP constraints. I guess something like 50% of SRs went unmonetized this quarter. Is there any concern that if that level of zero accepts persists that you're maybe losing some of those customers maybe forever?

And then second, just related to Google, are you going after when you think about HomeAdvisor, is HomeAdvisor going after the same types of SPs that Google is? Or do you think there's maybe been sort of a separation in terms of the types of SPs and draw value from a platform like HomeAdvisor versus Google? Just any thoughts there would be great.

Speaker 5

Yeah. Those are both great questions. You know, so so first of all, whether or not we monetize a request doesn't indicate whether or not we've satisfied a customer. And even if we're not able to monetize, we still have a deep reservoir, you know, the deepest reservoir of of providers to draw upon and to connect consumers with. So the fact that we are seeing such significant growth in consumer demand and such a elevated level of service request today is is is sort of filling our database and filling our, our our our CRM pipeline and our email pipeline, and we'll drive further growth for the remainder of the year and into next year.

If we weren't if we weren't able to satisfy those customers, that might be a different story. But monetization really is not an indication of whether or not we make those customers happy. And in fact, with the offering of fixed price, we now offer, think of the percentage off the top of my head, but of the, you know, 200 to 500 projects, we're always offering a solution. Even if folks decide not to engage or or pull the trigger or they still had a a good experience, they were still offered a viable outcome. I would think of that a little bit like, if you go to Google and search, you know, you don't necessarily need to see an ad at

Speaker 8

the top, or Google doesn't need

Speaker 5

to monetize for you to have had a successful outcome in finding what you're looking for. And we treat it a little bit the same way, which is we're gonna try to make that consumer happy and fulfilled even if we even if we aren't able to monetize. So the the fact that we have, this huge influx of demand is is gonna is gonna pay off, for quite a while for us. I think when it comes to Google, you know, it's it's a very different product. You know, if you think about the way Google's product generally works, they are reacting to something like a search for plumbers in Denver.

It's it's a it's a level higher than us. It's less targeted, and, they don't really offer the same types of capabilities around targeting ZIP codes or targeting individual project types because that's not the way people search in Google. I I generally think that the folks the the types of, service providers that are attracted to Google's offer to those folks that really wanna get an inbound phone call, more than anything else and that want to compete in an environment where there's less price competition. I do think there's some segmentation that's happening naturally, but I don't have the data to to back that up. And we haven't really seen, you know, as evidenced by our our sales productivity and and and for record sales months, we haven't really seen that competition put pressure on us.

And it's not to say that we won't ever in the future, but I do think the products are sufficiently different that either, either the market's so big that we just don't bump into each other or somehow we're tapping into to different SP segments and and not really overlapping as much as one might think.

Speaker 3

Okay. Our next question will be from John Blackledge at Cowen.

Speaker 9

Great. Thanks. On Vimeo, the the mid teen ARPU growth, was a was a great outcome, particularly with the enterprise ARPU, as a key driver at plus 20% year over year. Could you guys discuss the enterprise adoption during COVID-nineteen and the enterprise demand signals thus far in the third quarter? And then should we expect the enterprise ARPU growth levels to be sustained in 3Q and as we head towards the end of the year?

And Glenn, if you could just talk about the gross margins at Vimeo, what you saw in the quarter, that would be great too. Thank you.

Speaker 1

Enterprise is doing very, very well right now. And the product works, and certainly, the the timing works. When you think about it, just using IAC as a microcosm, and this is where as as harsh on our own businesses as we are in external business. But but going into COVID, I was saying to the Vimeo team, if anybody at IAC tried to expense $10,000 for town hall software, I'd say we've we've got a big problem with that individual paying $10,000 for town hall software. And, now if somebody says we don't have the best town hall software, I'd say, well, we've got a big problem with that individual if they weren't able to find us the best town hall software, you know, independent of

Speaker 0

of price.

Speaker 1

And I don't think that changes. Right? Now we're we're accustomed to this. We've got this format in this call where we're all using video. We're not using Vimeo for this, but but where we're using video.

This is just a better way of doing it. We're gonna do that going forward. Town halls, we never had had everybody in the same room. We you could do it in one location, but you can't have all locations. And we're gonna continue to do that forever, and we're gonna wanna use the best software to do that, the the the system that is flawless, the system that has all the the features that you want.

And I think that is true of most enterprises now. So what we're seeing is we're going into these enterprises where we already have somebody or a group of people using it, and they're using it in just charging it on a credit card or using it in disparate ways. And we're going to that enterprise and saying, we can now be your video solution where everybody can access it. Everybody can access it from one place. It's at one reasonable price, but that is generally higher than or sometimes meaningfully higher than it's been for one person using it in one spot.

And giving the enterprise access to multi seat licenses in a place is a very natural thing for us to do, a very natural place for us to go, and it's working. Again, I do believe that's sticky. Once you've gone to software for video to solve these problems, want that. The physical isn't going to replace that completely. It will replace some small instances of it, but you're going to want this as a supplement forever.

And that's what enterprise is benefiting from. We can see it in the length of the sales cycle, which I think in like late March, early April was literally cut in half. That's come out a little bit, but it's still meaningfully better than it was, going into COVID, which going into COVID, it was actually a very relative it was a thirty day sales cycle. Now we're maybe at a twenty day sales cycle. At the peak, it was at probably fifteen.

And that and and the amount of spend is there. The ARPU is hanging in there, and we continue to add features. So I view that as something that that I think is reliable for quite some time from here. I think that answered the bulk of the question. Oh, there was some stuff about ARPU and gross margin.

Speaker 0

Yes. On the numbers, enterprise is clearly our fastest growing line of business. This quarter, it actually grew greater than 70%. And then bookings were triple digits. So we have a nice runway there.

And as you articulated, one of the reasons why it's growing at that clip is because of ARPU. And I think we had a case study in Anjali's recent presentation, it might have been at your conference, where we talked about a retailer that used to be spending $660 with Vimeo on the self serve because 40 percent of our enterprise customers have graduated from self serve. So this retailer used to spend $660 with us. We converted them to an enterprise customer, as Joey talked about, that more people in that organization said, Wow, this is a great solution. And now we're getting 660,000 from that enterprise customer.

And that has lift ARPU that will lift ARPU. In terms of gross margin, we laid out, I think, about two years ago, the target of 70%, we're and closing in on that. And, we're making such progress there that we think, 70% may ultimately, prove to be conservative.

Speaker 3

Great. Thank you. Our next question will come from Youssef Squali at SunTrust.

Speaker 5

Great. Thank you

Speaker 10

a couple of questions maybe on MGM again. How do you affect change by being a minority investor in a public company, like like MGM? You've been you guys have been known best as basically taking over entire companies, extracting more value using your tried and true playbook. Just trying to understand how how you guys do that as a as a minority shareholder. And then, will you, as a minority shareholder, actually need a license, be licensed by gaming authorities or or you don't need to?

I know there is a certain threshold. I don't know what that threshold is. Maybe you can help us with that. One of the things we've heard is that it was just very expensive and burdensome process, to go through that has traditionally stopped other companies from from getting into this space. So any clarity there would be great.

Speaker 1

Sure. The second one, yes, we're going to it it varies by state, but the

Speaker 2

so there's

Speaker 1

some rules at a 5% ownership threshold and some other rules at a 10% ownership threshold. But in each state, basically, we're going to have to go through a regulatory process, which is, we understand it, quite burdensome. And we are prepared for that, and that will go through in its course. Not other than the hassle of it, we're not particularly worried about that, but that is a process that we're going to have to go through.

Speaker 0

On your first

Speaker 1

question, as it relates to minority investment and affecting change, again, our goal here is not to affect change. Our goal here is to be helpful. And I think that we can be helpful in a number of ways as a minority investor. MGM did say that they intend to advise the board, which we think is fantastic, and we think we can be very helpful in that way. And separately, can help through access to our people, our businesses, our learnings.

Remember, one of the things I always say with our internal businesses, whether we own 100% or less than 100%, is the biggest synergy between our businesses, the biggest synergy that that exists in IAC is we never force the businesses to work with each other. We we do force the businesses, and it doesn't need to be forced because everyone wants to do it, is to to share data, share information, share learnings. People like sharing what they know, and they like learning from others, especially in areas where where, people have been successful in in showing off things that they've done well. And we I had a call with the CEOs of IAC's businesses yesterday, and I said we should treat MGM in this area in the same way in the sense of it's a totally open book. Share anything you want to the extent there's anybody who wants to learn something of anything that we're doing, which they may not, but to the extent they do, we're a totally open book.

We've got $1,000,000,000 into this investment. That's more cash capital than actually we've invested in any of the other IAC businesses, that are currently in the portfolio. And using that information. We should use that information liberally for anyone's benefit, for sorry, anyone in MGM's benefit wherever we can. So that's something that we certainly can and will do, and hopefully that's helpful.

And as we get more involved, as we learn more, we'll try and find other ways to add value and help the business reach what we think is enormous potential, again, not dissimilar from other areas where we've tried to help businesses, involved with ICE reach enormous potential.

Speaker 3

Thank you. Great. Our next question will come from Jason Helfstein at Oppenheimer.

Speaker 11

Thanks. Two questions. One, if you could talk a bit about the Vimeo product pipeline for the second half, any color on kind of what the team is working on? And then second, maybe just broadly on acquisition direction, Joey. So you did Turo, minority investment.

You just did MGM, minority into a public. Should investors expect you to get back to kind of, again, historically what you've done, which is more like share.com, finding something that you can control that, time works in your favor to kind of fix broken or, businesses that have more opportunity. Thanks. Yeah.

Speaker 1

Again, I'll do it in reverse order. Short answer to your second question is yes, you should expect us to focus on buying businesses, buying entire businesses and taping those businesses, that's where we would put the we would expect to put the bulk of our capital and potentially share repurchases and all the other places where we have historically put cash. I think that is more likely than minority investments from here. Again, anything's possible. We always say anything's possible.

We always say we'll be opportunistic and look for things, but I do think that it's more likely more and more capital goes into those things, which you've seen more historically. In product at Vimeo, there's a very robust pipeline. One of the things that we're focused on right now is how to verticalize the product a bit in certain categories. So to go deeper in faith, to go deeper in fitness, to go deeper in education, whatever it might be, the areas where we're going to prioritize is make sure that the tools that we're building are really work for verticals. We're not building any bespoke tools for any individual customer, but we are starting to think about what are tools we could build that make really help in the relevance for a vertical.

We want to do that because we think that's really good for our customers. We want to do that because we don't want to open up the competitive opportunity for someone else to come in and and and start, picking up verticals. So we're doing a bunch in that area. There's also with the world now in remote, a lot of the tools are there there's new tools that are relevant. So for example, one thing we're using right now is screen recording and things like that where you can access more of the enterprise or find new entry points into the enterprise.

We've got products along those lines that we're working on. And one of the other things we're talking about right now, this is more generic, but because we are generating more, I'll say, cash flow at Vimeo, we are we can be investing more every quarter. And so we're very focused right now on Vimeo in how can we put more in, where can we put more. Every month now, every quarter, there's more dollars to invest there before we even before choosing to go negative, there's more dollars we can be investing there. And so we're trying to grow the product pipeline right now and grow the product resources to release more products and invest some of this incremental benefit that we're seeing at the business.

Speaker 11

Okay. Thanks.

Speaker 3

Great. Our next question will go to Benjamin Black at Evercore.

Speaker 12

Great. Thanks for the question here. Could you guys talk a little bit about the marketing environment at Angi? Does it remain as as favorable as you mentioned just last month? And, you know, if the sum of the supply tightness remains intact, how willing are you to lean into marketing investments in the back half of the year?

And then and then on fixed price, you mentioned it's available on 200 tasks or so. I'd be curious to hear how high that could go? And do you think fixed for what do you think about fixed price revenue contribution at ANGI over the next, call it, twelve to eighteen months?

Speaker 5

Yep. Great question. So so the marketing environment, I think, just broadly remains really favorable, and that's that's a combination of of, I think, just generally lower rates across most channels combined with organically higher levels of consumer intent and consumer demand. And so, when you look at, you know, things like the TV environment, I think rates are favorable 20 or 30%, about where we thought they would be. And you see the similar you see similar levels of of favorability in in other channels as well.

We definitely pulled back in q two. It was just particularly early in q two. It was obviously a highly uncertain environment. But by June, we had begun to, lean in and ramp up, particularly on TV. But I would say, you know, the answer to this question is for most channels, we manage them clearly on an ROI basis.

And so, we will spend as much as, you know, as the channel will will return on a profitable basis. With a channel like TV, you know, it's a longer payback period, and there are secondary and tertiary benefits that, you know, that are long lasting. We started to lean in in June. I think we'll continue to spend there, for the remainder of the year, particularly if rates remain, you know, in the ballpark where they are now. So that that will be a difference on a go forward basis relative to, you know, to the expense line in in second quarter.

For fixed price, you know, we're on 200 tasks. That makes up about 30% of of the request we get. Meaning, 30% of the customers that come and submit a request are exposed to a fixed price offering. What we've been doing over the course of of this year is launching into some much higher priced, categories. And we did that in q one originally, and, you know, our our our first proof point was to figure out if if consumers and homeowners would actually, you know, buy a project online that costs $5,000.

And we were able to really, figure out quickly that there was there was a desire for that amongst consumers. There was a willingness to, you know, pull out a credit card and purchase a project at that level. And that's all we really needed to know to know that there is a market there in these higher priced projects. Obviously, and I I think I've said this before, you know, the first section of projects we went after have a a global well, a TAM in The US of about $50,000,000,000. But the next step we're tackling have a TAM of about $200,000,000,000.

These are things like installing a wood privacy fence, installing a deck, so on and so forth. And the the nature of of these projects are such that we have to go project by project and figure out how to accurately price, you know, price in an upfront manner, these more complex projects. We're working through that now. We're we're seeing, growth that I think is is certainly at or above our expectations. And in terms of how far it goes, you know, the the truth of the matter is is we have to do each project and see see how it works because they're also very different.

The contribution over the next twelve to eighteen months, I you know, we, in our internal plans, we expect this to grow rapidly and be a meaningful contributor to our growth rate over over, not just the next eighteen months, but, over the next five years. In terms of how high it'll get in the next eighteen months, I don't think we've been specific on that, and, I'll leave that open for the moment.

Speaker 0

And look, in terms of our investments in marketing, of which Brandon spoke, as well as fixed price, that's why we stand by our EBITDA posture for the year, and that is we do not expect margins to go up this year. We're going to continue to invest to take share throughout the marketplace. And then just to frame up the opportunity that we see in fixed price and the opportunity when our supply constraint gets lifted. You saw we did 9,400,000 service requests this quarter, and on a latest twelve months basis, about $29,000,000 You saw our zero accepts were 50%, just divide monetized transactions by service requests, okay? If we only get from that 50% to 40%, our historical average, and our goal is a lot lower than 40%, that's 940,000 SRs.

You saw we monetized SRs at $30 a clip. That's nearly $30,000,000 of quarterly revenue. A vast preponderance of it, if not all of it, falls to the bottom line. So that's our opportunity going forward. That's why we're so focused on product.

That's why we're so focused on marketing. And that's why we're so focused on penetrating the category because that's our opportunity, and that's just one quarter.

Speaker 3

Our next question will be from Michael Ng at Goldman

Speaker 7

discuss your views on the, incrementality of online betting? And if it's if it ends up being somewhat cannibalistic, is that a net positive for MGM? And then, second, Joey, to your earlier point, you know, it's clear that online gaming penetration should continue to increase over time. Do you think MGM is well positioned to capture more than its share of online gaming relative to its traditional, gaming base?

Speaker 1

Yeah. I do think a significant portion of that actually is incremental, but it's it's who knows? I think, there there is always potential for cannibalization, but I do think it's meaningfully potentially incremental. And their ability to take share is, again, what I I said earlier, I think that the combination of offline and online in this category in that whole experience where, somebody who's who's playing customer of the company in a digital capacity has the ability to enter a physical place and get some benefit of their digital play, I think is a real advantage. And we expect that to accrue to MGM's benefit in share.

That is when you think about the the category, it's all the same sports. It's generally roughly the same lines, odds, payouts, things like that. So, how do you differentiate? You gotta differentiate with a customer experience, and we think that MGM has lots of tools in its toolkit to differentiate meaningfully in a customer experience. And that's the thing that that excites us there.

So so we would hope that they, can take real share there.

Speaker 0

And our next one

Speaker 1

is a follow-up. Oh, sure.

Speaker 7

Could you just talk about, your long term plans with the MGM stake, in success, you know, three to five years from now? Do you expect that stake to increase over time? Is there an opportunity to do something with the online betting joint venture? I would just love to hear your thoughts around that. Thank you very much.

Speaker 1

Sure. It's an important question, and it's I don't have a great answer for it in the sense of we haven't thought that far ahead. We've said that we are once we're in this, we're in it for the long term, and in it for the long term could mean anything. If before, COVID, MGM was very much focused on repurchasing shares with the excess capital that they've generated in the the asset light strategy. So if there's a time where MGM has the ability to repurchase shares, then we'd hope that our ownership would accrete over time.

And who knows, lots of other things could intervene in there that could accelerate or decelerate that or really anything can happen. So we're totally open to the range of options here. And only thing I'll say is we are we're certainly not flipping it. We're certainly not in this to try and flip for a quick profit.

Speaker 7

Great. Thank you very much.

Speaker 3

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

Speaker 8

Thanks, guys. A quick one on ANGI and then one on Dotdash. Any update on consumer intent or comfort levels, that you're seeing with indoor jobs versus outdoor jobs, discretionary versus nondiscretionary? What's been the trend there over the last couple months? And then on Dotdash, we saw a number of advertisers pause advertising coming through Q2 as they made adjustments to and and made sure they weren't clashing with, messaging with current events.

Can you can you talk to the trends there? What you're seeing in terms of resurgence in brand, maybe substituting out of performance? Thanks, guys.

Speaker 5

Thanks, Brian.

Speaker 1

Go ahead, Peter.

Speaker 5

Yeah. Thanks. The this will be brief. The we've seen a strong recovery in in really every category of work, but it's definitely disproportionately over indexing in outward work, and then, required work. Some of the big projects like bathroom remodels and kitchen remodels and large indoor discretionary projects have returned to, you know, I'll call it flat to up modestly year over year, from a consumer demand standpoint, which I think is great given the context and given the fact that, you know, there's close personal contact, related to those projects.

But it's it's lagging where we would have otherwise thought it would be, you know, in our general 20% sort of growth goals. So we're happy with the recovery, but it's not, you know, it's not it's not quite where we think it would be otherwise. And and there does continue to be some impact there that will resolve as the fear around COVID results.

Speaker 1

On Dotdash, the thing I can't speak to the broader ad market, or I can't, because we see some data on that. But Dotdash has certainly defied my expectations and odds generally in the category in that they have they continue to generate advertising dollars, continue to see real interest from advertisers. Obviously, there's no travel advertising right now, and so that category is basically short term gone. But other categories have more than made up for it. So this business is growing ad dollars.

It's seeing interest among advertisers. One of the issues that we don't need to confront is we are not in the in at Dotdash, we're not in the news business. So we're not in in controversial stories. We're in, we have this intent based media, which is people trying to get specific things done. And so people are advertising around those specific things people are trying to get done, and there's always providers, advertisers who want to reach the consumer when they're trying to get that specific thing done, whether it's it's, pharma around health or whether it's CPG around cooking, things like that, there there seems to be advertisers there and engaging.

And and I keep waiting for, don't tell him this, Neil Vogel to to say that, you know, we're not growing and we're we're we're struggling with the ad dollars and and it's gonna be rough. And he keeps saying the opposite of that, which is, I think, pretty amazing, a testament to to what they've built and and how the how well they're executing.

Speaker 8

Thanks, Joey. Thanks, Brandon.

Speaker 3

And our next question will come from Aghal Arunian at Wedbush.

Speaker 2

Hey. Thanks, guys. I have two questions. One one on, MGM and M and A and then one on on Angie. Just so historically, after you enter a space, you noted travel, home services, dating, kind of continue to consolidate there, continue to be active in the space.

With taking a minority stake here, in in in MGM, is that is that road map still, applicable to you guys? Can you continue to be active? Does the partnership allow you to take full stakes in in other areas and kind of skirt around the regulatory environment, or you kind of hitched MGM and the path that they go on? And then on AJ, I just wanted to ask about the partnership with Lowe's. You know, we'd love

Speaker 9

to hear a little

Speaker 2

bit more about that, expectations around how that can drive both SP and SR growth in

Speaker 5

the near term and long term?

Speaker 10

Thanks.

Speaker 1

Yeah. Look, I think anything is possible at MGM and more in the space. Our goal would certainly be to help MGM or participate as MGM, is as aggressive as we would be when we believe in a space, and they seem to be very keen on being aggressive and winning. And so whatever the you use all the tools that that are available in being aggressive and winning, and I think that that is a great, vehicle to do it. But we have flexibility and and options, and we'll always maintain flexibility and options.

I think that answers the MGM question. The other one was Angie. Yes.

Speaker 5

Yeah. So so the new partnership with Lowe's is something we're very excited about. It it's new and it's multifaceted, and I'll talk a bit about it. I think first, just understanding it conceptually. If you if you look at Angi Home Services, we've had 29,000,000 requests for service submitted by homeowners over the last twelve months, which is obviously enormous scale.

If you think about that services led, approach that we have combined with Lowe's as one of the premier, you know, retail offers of of supply building supplies, materials, and products for the home, it's natural that there's opportunities to combine combine those two together, and create value. You know, first, we offer fixed price services, I think, in their retail environment. So that's one opportunity for us to drive consumers, through our through our experience via Handy. And then secondly, with the with the partnership we explicitly announced, Lowe's is able to offer a membership to Angi Home Services and HomeAdvisor to their pros, as a benefit of being a customer of Lowe's. So that creates, you know, the intent there is to create some loyalty amongst, service providers to Lowe's and obviously be the the destination they go to get, building materials and props.

Gotcha. And, that, then ultimately drives those providers to Angi Home Services and HomeAdvisor to join at a discounted rate. And so this is a situation where the provider wins. Lowe's is able to build a more, loyal relationship with, those providers, and then, we, hopefully, will be able to expand our network as well. I think we're in the early stages of this.

Obviously, we just announced it. I I personally feel like the opportunity, you know, the synergy opportunities are pretty extensive. Hopefully, works out well and and leads to bigger, better things over time.

Speaker 1

Next question. And we got room for one?

Speaker 3

Yeah. We'll take our last question from Dan Salmon at BMO.

Speaker 13

Great. Thanks, everyone. Joey and Glenn, we know you'll keep, plans for the cash to yourself. But would it be fair to say that another big acquisition is a lower probability now? Or is another multibillion acquisitions still a likely outcome amongst the different options you're looking at?

And then a follow-up for Brandon. I can't remember if you mentioned it today, but at the Investor Day, you talked about having separate sales teams for the traditional SPs versus the ones coming in at fixed price, and that you were planning to integrate those more in the back half of the year. Can you just talk a little bit more about that? I hope I got the details right and the impact you expect from it and how that may relate to the comment you made earlier about picking up sales hiring in the back half too.

Speaker 1

Dan, you faded a little bit, I think I got the gist of it, which is do we have a mega acquisition planned? Are we less likely on a mega multibillion acquisition? I think nothing, massive planned right now. I don't know that it's any more or less likely right now. I think always doing something very large is a very high bar here.

We We preferred smaller things, tuck in things. I think the things that we're working on very actively right now are quite small and add ins to our existing businesses. But we'll be as likely, which is not highly likely, but we'll be as likely now as we were previously to look at things that are larger. I think, again, going to the overall environment, it is things are not generally particularly cheap right now. There's a there's everything has has only gone up for for a very long time.

That is, you know, what it is. There's a whole SPAC situation going on where there's this avalanche of of SPACs taking companies public. So we actually think is long term very good for us in the sense that the the getting a company public via SPAC is not a very high bar because the people who are because the way the incentives work in that system, I'll just say it that way. So there's gonna be a lot of companies that can go public that may not have otherwise been been able to go public. And we view the public markets generally, and we've talked about this or written about this, we view the public markets as generally much more honest than the private markets or much more true than the private markets.

And so I think if all these companies, if all these facts can bring companies that are in or around our area or Internet consumer technology companies public, that that will, over the medium term, not immediately, but over the medium term, give us a much better landscape of, companies to look at, and we'd be excited about a trend like that. I mean, I think it will take a little while to play out, but the the we're we're cheering the the SPAC parade on of more capital being raised and and more of these companies coming out and into the light and and us and others getting a chance to look at them for for good or for bad.

Speaker 5

And just just briefly on the fixed price question. You did have that right. We run the we run these these sales forces separately for fixed price versus our traditional advertising or leads model. It's likely that we'll always run separate sales forces because they they really are very different. And the the challenge of going out and selling fixed price, which is frankly not selling at all, it's offering people, get paid to do jobs, is very different from selling advertising.

So I think those will stay separate. But what what you were touching on, which I think is important, is we do plan to bring these offerings together so that once a provider comes into the ecosystem, let's say they're sold on a leads model, leads advertising model, that they can also receive offerings for fixed price services. And our general, we will bring those things together so that every provider has opportunity to engage in all of these products once in the environment. And I think the key there, the way we think about it is that once you do come into the the, HomeAdvisor ecosystem, you actually will never leave. You may decide to stop advertising on leads, but you stay because why not see the fixed price opportunities that come across from time to time, and you can choose to engage with those when you want and not when you don't want.

So that's the concept. And I think that is, perhaps a, know, last quarter of the year or first part of next year where we begin to bring those things together.

Speaker 1

Great. Thanks, Brandon. Thank you all for joining us again and, again, embracing the new format, which I I really like, and and we're definitely gonna stick with going forward. And I hope everyone stays safe and healthy, and we'll talk to you again soon.

Speaker 0

Terrific to see you. Bye.