Angi Inc (ANGI) 2024 Q3 法說會逐字稿

Welcome to the IAC and Angi third-quarter 2024 earnings conference call.

(Operator Instructions)

Please note this event is being recorded.

I would now like to turn the conference over to Mr. Christopher Halpin, Executive Vice President, CFO and COO of IAC. Please go ahead, sir.

Thank you, operator. Good morning, everyone. Christopher Halpin here and welcome to the IAC and Angi Inc. third-quarter earnings call.

Joining me today are Joey Levin, CEO of IAC and Chairman of Angi Inc.; and Jeff Kip, CEO of Angi Inc.

Similar to last quarter, supplemental to our quarterly earnings releases, IAC is 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, and we'll see then open it up for Q&A.

Before that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities laws. These forward-looking statements may include statements related to our outlook, strategy and future performance and are based on our current expectations and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most Annual -- most recent quarterly report on Form 10-Q and our most recent Annual Report on Form 10-K and in the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. 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 earnings releases, the IAC's shareholder letter, our public filings with the SEC, 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.

And now I'll turn it over to Joey.

Thanks, Chris.

Obviously, the big news today is that we are contemplating a spin of Angi, which if we complete it, would be the first spin out of IAC in four years and obviously join a very long line of spin-offs out of this company.

Besides creating two separate focused companies, this move would allow Angi to stand on its own and have a more liquid currency and a standalone ambitious strategy, whether that's M&A or capital allocation generally. But key to making this possible is the fact that profits and cash flow in the business have improved meaningfully. Consumer experience has improved meaningfully and jobs done well has become a true driving obsession of everybody in the business. And Jeff and I believe strongly the business has revenue growth again in its future and profitability will be stable from here. So we're in a position to do this, a strong position to do this and grateful for the opportunity to have another spin out of IAC.

I'm sure we'll have a lot of questions on all of this and IAC's performance generally, which we think was very good this quarter and people worked hard. We're very proud of the work everybody did this quarter.

And so let's get to the questions to talk about it. Thank you,

Operator, first question, please.

Cory Carpenter, JPMorgan.

Joey, could you expand on why now on exploring the Angi spin? And then second question related to that, which you just mentioned, what's giving you the confidence in Angi returning to revenue growth? Is there any impact you're expecting next year from the FCC's one-on-one consent rule?

Yeah, I'll take the first one and I'll let Jeff do the second, but I can weigh in there too. The answer to why now is, as we've said through many spins we've done in the past, there's not a particular formula or a specific kind of automatic trigger on these things. It's a confluence of things. And one is the business being spun and the other is the impact on what's left behind. And in the case of Angi, the business being spun, the key is it standalone, strong and healthy and capable of being on its own in the public markets. And the business is now comfortably profitable, comfortably generating cash flow. And we think on the right path, strategically, it has all the pieces it needs to really deliver for the consumer and there's a lot of execution ahead in terms of product. But there's also a lot of execution behind it in terms of product and we're seeing that come through on things like retention and customer satisfaction.

So we like the path that Angi is on right now and like Jeff's ability to execute against that. There also is benefits to a more liquid currency. There's more direct investor access. There's the ability to you that liquid currency, whether it's for M&A or compensation. I think being spun off and standalone, those things can help. And of course, this is also a tax-efficient concept in the sense that the spend, if we do it would be tax-free. And any other pieces, it it allows IAC to focus. We've really been on a campaign of slimming down, focusing and we think that that can allow us to do fewer things better. And that's what we plan to do with with IAC.

Yes, in terms of our confidence in the stability and future growth of the business, and we'll start by going back two years to enjoy, took over the business with tremendous opportunity to improve at the time to join the team, committed to improving the quality of the business, the customer experience and returning the business to profitable growth. We've moved a fair amount of lower quality traffic off the shelf. We remove some of our lower quality third party traffic, and we've moved a significant portion of the business. So consumer choice, which I'll come back to in a minute. The result has been that our job's done well.

Rate has grown about 30% in the last year for retention has risen materially each quarter.

Reference that homeowner MBS year-over-year is up by almost 60% in this last quarter. So those are big markers and a tribute to what's been accomplished to drive the long-term experience and growth the business. We've also taken our unit economics apart and put them back together. We've rightsized our sales effort to drive long-term ROI., and we've reengineered our paid marketing to drive material profit growth despite revenue declines. You can see it in the near 30% paid channel profit growth. Last quarter, we delivered profit growth in 2023 despite revenue declines were doing so again, this year will hold our profit again next year.

As Joe referenced, as we make the next major investment in our customer experience by moving really the vast majority of our traffic that comes through our core customer journey to consumer choice. I'll come back to the summer. We've really been progressively moving our business towards consumer choice because we believe it's the best way to drive the customer. Northstar experience of jobs done well in this marketplace. You may recall that our European business, which has an estimated jobs done while rate materially higher than average U.S. operates completely out of consumer choice model, we're accelerating our move in the U.S. consistent with both the European model and the FCC order related to the TCPA that I think most of you are aware of and were thus taking one.

Yes, big step in our two year passive, effectively reducing revenue, but making material improvements in the customer experience and the long-term trajectory of the business. For those of you who aren't familiar with the FCC order, the portion of the order I'm referring to, it requires a business contacting a customer and using auto dialer technology to have one to one consent from the customer to do so you're just going to go into effective January 20 into effect in January 2025 and will be there on our move to consumer choice as well. We really welcome this change. Although we do expect some volatility in the first half of next year, we don't know precisely how the impact going to play out.

But with the size and quality of our network and our ability to provide deep liquidity and one to one consents across that network, we believe we're uniquely positioned to benefit from the new landscape that's going to emerge post order, how we do think that the order will have the greatest impact on our third party channel. However, we also expect to move to yield incremental real leaps in jobs done well, NPS retention and put us squarely where we want to be with our customer experience. It is going to mean another bump down in revenue. I would say we expect our first quarter to be down about as much as the quarter just ended along and in line with what we expect in the fourth quarter. But from there, we do expect a stair step up and grow in 2026 up based on what we know and is in front of us.

We have confidence in that in terms of profitability, we fully expect to hold our profit in 2025. Joey referenced this. I referenced that given everything I've already mentioned, I think the first quarter of 2025, we'll probably bump down from Q4 of '24, similar to the bump down from Q4 '23 to Q1 of '24, but then will improve sequentially each quarter. Along with the revenue. All this together gives us real confidence in the financial trajectory of the business and our return to growth.

Operator, next question.

Jason Helfstein, Oppenheimer.

Just one question and then a housekeeping question on. So just to elaborate on that, I guess for current for Joey and Jeff, I mean many of us have covered and Inhome Advisor you all for a long time. There's always been that big promise of a TAM you talked about in the latter, and it's historically been hard to unlock whether it's just a word of mouth on Google, social media. Appreciate the improvement in efficiency in the business that you may want to do. But I guess why should investors get excited now that you finally figured out how to kind of really unlock the growth that had been elusive for now kind of 15 years basically in this vertical?

And then a follow up, just remind us the basis of the MGM stock and what's the tax treatment if you were to potentially sell that stake?

This will take the second one. But the first one is the fundamental difference right now would hopefully you've been hearing for a while and we see and have shared a lot of the underlying metrics of this is a absolute obsession with customer experience. The folks who have succeeded at disintermediating Google, which is obviously a very tall order for going after things like word of mouth are the ones who have absolute customer obsession in getting jobs done well. And I think that change in our mantra is what's going to drive both Pro retention, that changes the economics of the business and allows us to reinvest in compelling ways and homeowner repeat rate and homeowners and satisfaction, which allows us to reinvest in compelling ways up that that is the difference in that we're doing on our brand and it is entirely dedicated to our home services that doesn't really exist in the market.

And that I think, besides with us and I think throughout the past, there has been probably a overemphasis on more shorter term results and less on the longer-term investment of an obsessive customer experience. And that's that's what we've put in place. That's what we continue to put in place. And if we do continue to do that, I think that we can build compelling direct brand with homeowners that goes after those other portions of the market that you mentioned.

Completely group and then I'm Jason, on the MGM stake, we currently hold 64.7 million shares of MGM. Our basis is just below $1.3 billion is in excess of $1 billion, was $1.1 billion for as of end of last year. We'll probably use where we know we'll use some this year to offset profits. But at the current trading levels of about $1 billion gain, we've got more than enough NOLs to offset. So we think about it, you can see it as the the market value of the shares is the appropriate way to think about our holdings because we can offset any taxable gain right now.

Operator, next question.

John Blackledge,TD Cowen.

On on DDM digital revenue, can you talk about the drivers of the 3Q overall revenue outperformance of notably ad revenue accelerating at a faster pace than expected? Well, performance, marketing and licensing were a bit lower? And then for 4Q, can you unpack the mid to high single-digit revenue growth guide on relative to our we had kind of like low double digit revenue growth in 4Q? And then as we look into 2025, just any color there on DTS digital top-line growth?

Third quarter digital performance was excellent across both traffic and monetization. Digital advertising revenues grew 26%, led by 14% growth in core sessions, and we're happy to see overall sessions were positive for the quarter for the first time in awhile, traffic growth, which was particularly strong in our entertainment food properties and and we continue to see momentum there. Digital or sorry, direct ad sales were strong as well and perhaps even aided a little bit by advertisers pulling some sent spend forward into September ahead of the election. And then programmatic was superb with rates up 30% plus in the quarter. Performance Marketing disappointed it down 7% with continued weakness in financial services such as insurance and brokerage edge that that segment has improved this quarter and we expect growth in the fourth quarter across performance marketing broadly.

And then licensing continues to be solid, driven by both our OpenEye partnership with Apple News up 17% in the quarter. So overall, it added up to 16 percentage total revenue growth our best quarter since we acquired Meredith. And we were also happy with how that flowed down to adjusted EBITDA. We would we would highlight aggregate adjusted EBITDA only grew slightly in the third quarter, but that growth that growth rate has dragged down by 8 million favorable tax release related to the Meritage acquisition that benefited our corporate expense a year ago. Digital EBITDA grew twice 88% this past quarter and our incremental margins were 42%.

When you look at fourth quarter, October month was softer on both advertising spend and traffic than we expected, resulting in digital revenues were only up 7% in October for the month. We knew there'd be some challenges with the election, but consumer distraction and advertiser caution exceeded our expectations. And we'd note for those who are newer to the story that Dotdash merited, it does not sell digital inventory on its titles to political advertisers. So there's no benefit from the election and just headwinds for the properties. Good news for DDM was the lack of the election was rapidly decide added and things are shaping up to come in during November and December with advertisers steadily returning.

We know Thanksgiving is a week later, so so things are tighter in the overall holiday shopping period. DDM is pushing hard across its properties to drive both advertising and performance marketing, but we thought it prudent to grow to guide fourth quarter digital revenue to the mid to high single digits at this point. Now looking to '25 and beyond, we are still confident in 10% digital revenue growth as the baseline for the TDM business. That will be, as we've said before, driven roughly half by traffic growth enhanced by improved monetization.And I'm sure we'll talk about the Cypher, which is a key advantage tool for us in monetization. Individual core may bounce around above and below that 10% target. But we still have confidence in that as the long-term driver of the business.

Operator, next question.

Eric Sheridan, Goldman Sachs.

Two, if I could. First, with the decision to breakout care as reported segment, we don't know if you could hit a refresh on where that business sits today and how you're thinking about the market opportunity set ahead for care in the years to come. And then secondarily, Joe, we were sort of some cross current in the letter, the depressed valuation of ICXMG. and MGM., but you also talked about the M&A environment being challenging from a valuation standpoint, any reset or refreshed view on capital allocation broadly again, would you see as the opportunity set?

I think there should so on care, we've been thinking about this for awhile.And certainly we are especially with and Angi spin. If that happens, breaking out care has its own segment makes a lot of sense. It's a scale business, $365 million of revenue and $45 million of adjusted EBITDA over the last 12 months. I think by far category leader in terms of online digital marketplace, a bigger in terms of brand bigger in terms of audience bigger in terms of providers and families by an order of magnitude relative to any a competitor that we're aware of. And so that is the basis of, I think a lot of potential in the business. When we look at the opportunity, if you wanted just to put some numbers around it near term or even longer term, the site receive 7 to 10,000 jobs posted day and 70 to 100,000 applications a day. And we're only confirmed converting a very small fraction of that into paying customers.

And what that tells you is we have the liquidity both on the supply side and on the demand side. And I think we have the potential and our new CEO has been there about a year. Brad Wilson has been very focused focused on this. We have the potential to improve the product and customer experience, especially using tools like AI and machine learning to get those matches better to use conversational, you guys to get better information out of both the family and the caregiver to make those matters better. And if we can do that, we think we can drive conversion and also do a better job optimizing pricing and packaging there. The other thing that's been a nice tailwind for the business. I think COVID was some volatility in the business.

It might have brought some demand forward in terms of in-home childcare. And then that's a headwind as people move back out of home town here. But one of the things that I think has been a tailwind and will continue to be a tailwind for the business. This is the enterprise portion of the business where enterprises are increasingly taking on the responsibility for their employees to to deliver care childcare, senior care in the same way or similar ways to they've historically been a trend that's only going in one direction for a very long time.

And care should be a beneficiary of that has been and should continue to be a beneficiary of that if we continue to execute there on. The other thing that that is embedded into their that is currently under appreciated is beyond childcare. Things like senior care, adult care and pet care, relatively small pieces of the business today and sort of in the the background relative to childcare. But we could start to innovate on those products and we think serve those markets better. And we've got some things coming out in particular for senior care shortly, which we hope will, which we hope will start to address that. So we're excited about the potential in that business.

And Tom and Brad Wilson, new CEO. He's been executing against that. In terms of capital allocation, Eric, we are and nothing has has materially changed. We've had a discount for awhile and we have not been active in the M&A market. We've been more accumulating cash and spending cash. And I think that's okay until we find opportunities that meet a very high bar, everything is still on the table for. I see as it relates to capital allocation, we talked last quarter various preference as it relates to share repurchases, but everything is on the table and will continue to be on the table for capital allocation. In the meantime, both the cash balance growth.

Thank you, operator.

Ross Sandler, Barclays.

But back to the DRAM guys on decipher, there's a bunch of new information in the latter calm about how that's driving some improvement. Could you just talk about how we approach has changed with OpenEye now powering on some of the numbers launching at the CYPHER stent and how quickly you can pull that out to all your advertisers more broadly as we look out over the next five years, Tom, how can you take this technology to off DDM inventory and how big of an opportunity might be by far?

It's a really important question. I'll start, and then I'll turn it to Chris. But I wouldn't say that the approach has changed with respect to decide right table. We added to decipher with the OpenEye integration is the ability, as you referenced to start to address the OFT EDM inventory. So we are a little while now have had the DM.s inventory mapped nicely to outperform. Generally the market on our intent, given the nature of BDMs inventory and how the data we have that unique inventory in the data that we have surrounding that. And that's driven performance that's driven outsized growth in CPMs.

And some of the stats we talked about about how to decipher advertisers performed relative to non designed for advertisers. What what the OpenEye integration did was take that same mapping that we have inside of VDM and map that to, I think something like 30 million more URLs or somewhere in that neighborhood. And so now we have the ability whether through partnership or we can just buy some of that inventory to sell that inventory to advertisers to increase the size of thereby with us and to deliver a larger scale packages. And that's something that we think we can deliver in 2025.

And we expect to be a driver of growth on bound by the size of BDMs existing inventory? Yes, I think the only additional element there when you think about third party properties that you've got the demand in the supply side right now of DDM.s, existing inventory Decipher can address 100% of our size supply. We significantly increase the supply through the capabilities that OpenEye has brought to the product to score, and then we can now transact across that. Those incremental 30 million websites that are in categories similar to DDM. So the effective supply that we can decipher eyes will only increase on the demand side. And this is Joe.

You talked about this in the letter right now in terms of how our advertisers and agencies by only about half of the 640 million of digital advertising revenue is going through demand channels that were Decipher as addressable. So as of right now, we demand that comes through essentially forward contracted orders from from advertisers and agencies to decipher can be utilized right now about half the revenue is coming from Decipher inclusive campaigns and about half non Decipher inclusive campaigns. We said in the letter, the former we're Decipher is an element are growing 25% and the latter growing about 5%.

So you can see the growth driver that Decipher is, but that's only own about half of our digital advertising demand. The other half are either direct programmatic orders centrally to come up to Dotdash Meredith or programmatic fully programmatic orders across open ordering. The roadmap for Decipher is to make Decipher applicable to those channels. And really increase the addressable portion of the demand.

So it's all in the roadmap and OpenEye was a key step and we continue to grow the supply side. And then we also think we'll continue to grow the addressable demand side through product investment and development.

Operator, next question.

Dan Kurnos, Benchmark Company.

I just follow up on that on. Are you fully as fully distributed as you want to be with within the ad tech ecosystem and do you need to make any incremental investments? We obviously know it's a pretty heavy lift to get married it up to Dotdash standards. But are there is there any more lift you need to do in order to achieve kind of pull Decipher coverage on programmatic? And then Joey on, you know, obviously we've been here forever on this. I used the word, I guess the word D conglomeration. Is that a long term philosophical change for you in terms of M&A companies in the portfolio time to spin increased focus? And what does it mean for things like stakes and Toro and Jim, thanks.

Sure the question of is not a long term change. We've always been the conglomerate in and the conglomerate. And I think right now, we're focused on what focus on fewer things are simplifying and executing strongly against those things. And that's our near-term priority. It is possible in the future that we add new legs IAC. But for the moment, we are focused on on slimming and executing some, but we have a large cash balance. Obviously, we have the, I think, wherewithal to do other things, and we're going to remain curious and remain interested in of other things that are possibilities for.

I see that are either already in the portfolio or could be could be new things. So that really hasn't changed. But I'd say short term, certainly with the step of and he is more slimming than it's been again. Thanks on the on the IDDM. question, if I break it down into a couple of elements, would post kind of, as you mentioned, post combination of Meredith onto the to the Dotdash platform, we feel excellent about our state, the state of our programmatic stack and programmatic integrations broadly. So or the ability for us to transact with the inventory that we don't sell directly and get excellent monetization there. We feel great about the state of our ad tech stack and optimizing price and serving frequency, et cetera.

And Neil and and his team have done a tremendous job building that out. The two continuing efforts, which we've talked about in the past. one is continuing to have Decipher integrate into demand-side platforms. We've talked about the Amazon platform previously and chipping away at others. The key step there is for them to accept non cookie-based, getting an ad buying within their DSP. Some of the for some it can be natural or a a relatively easily executable step. Others, everything they're doing is cookie-based. So it requires them to look at their their algorithms differently, but we're chipping away on that and allows Decipher to go more broadly.

The second is some further integrating ourselves directly into the workflows of agencies and then the large advertisers that transact directly. But through themselves. And for us, that's a focus on developing the managed service capability that um, DDM can offer of where Decipher is increasingly productized and programmatic like on a direct basis. So we've talked about some some ad tech acquisitions may help in that last case, all of them are part of the Decipher roadmap and a core focus of DDM management. And the company is heads down, executing to make Decipher addressable to even more of the ad market.

Tom Champion, Piper Sandler.

Maybe for Jeff. I was wondering if you could elaborate a little bit on some comments and in the letter on the ads Pro product and the lease Pro product unification. Is this a test did did it already happened on maybe something you didn't Europe? And then I'm curious if you could talk to the relationship with the jobs done well metric, any any connection there were on par with the SEC amplify that trend?

So right now, the ads leads business exists as two different products, but also on two different platforms. Fundamentally, it's at the same transaction that happens Pro pays us several hundred dollars for a bundle of leads or contacts with homeowners. So at the end of the day, the sort of business deal isn't that differ, but operating it in two formats with some inconsistencies and set up on different technical platforms is, as was alluded to, sort of the way you do it if you're building it from scratch. So we've set out to get onto a single platform so that we can market consistently run the business consistently and sell one product to our customers rather than multiple products through multiple sales forces.

We have been running a test to understand the efficacy of selling the single product is performing as a better than better than the leads is almost as well as the ads. And we see a path to ending up on the same product. The same product will be a propane several hundred dollars for a bundled leads. So we don't expect this to be disruptive commercially or disruptive from the customer experience or frankly, too our customer base because fundamentally the same business deal. And we think that getting it on the same platform will improve our business, a great deal again by selling one product to our customers and marketing into one customer base in terms of jobs done well, we think this will also enhance the business.

Currently, the difference between our ads and leads product is that adds effectively buy a bundle of zip codes across a single category was leads are able to specify tests within the category and specified zip codes. What that means is that the lead product lends itself better matching than the ad product. And what we will effectively do is take the ad product, which is a commitment product and move it onto the lease platform as a commitment product. But with the matching features, which we think will actually materially enhanced jobs done well for that piece of our customer base.

So in short, we think we're going to drive commercial efficiency and effectiveness and jobs done well. And at the end of the day, I don't think you asked this, but just to cover it, we this is a migration of about the size. We've already performed five of in Europe that are about the form of s.i.x. by moving the Canadian business to the European platform. So this is a core competency and Angi and all those these things are these things are not simple or easy. This is about as close to be a use.

It comes when it when it comes to doing one of these sites.

Operator, next question.

James Henderson, Jefferies.

And can you just get a little bit more detail on the comment that you made around reducing corporate costs on post them and you spend and what specifically are some of those areas? And how much can we expect in terms of savings over the near medium and long term?

Sure I'll start and Chris can add to this, but the we're not putting a number out on a James, but the look at all all corporate costs, everything's on the table in there to figure out what we need in a glimmer. I see that that currently provide services for energy. Some of those costs may go with Angi, and some of those costs may go away. And we're everything in that context is on the table. And we're just we're just beginning that exercise right now. But to grow at IAC, but I do that more efficiently entitled. Yes, it's an active analysis.

Part of it is also looking at the corporate functions that and GE. utilizes and understanding what would it has been happy and what would the needs and level of infrastructure be for that area and those areas post spin. And also historically, when we have spun some of our people go with the spun company to help build out the functions that don't exist at the spin, this fund vehicle as they've relied on corporate. So active analysis that we're going through and will likely be coming back to you next quarter when we're setting our guidance for next year.

And maybe just one quick follow-up on just the macro environment that you're seeing within digital advertising and obviously pretty strong quarter in Q3. I'm just curious what you're seeing maybe by vertical or just generally in that the macro landscape.

Yes, we talked about October already being a little bit light, but as far as what we can see from the consumer, it seems reasonably healthy right now. And we look at MGM when we look at Taro, when we look at basket sizes and eCommerce, a part of Dotdash, Meredith, um, we don't see the consumer at least the consumer that were generally interacting with retreating in any meaningful way.

It seems relatively stable, but for October, which we think was there was a lot of distractions in October. Specifically with respect to advertising categories, the DDM, the slowdown in advertising spend was pretty broad-based. We saw in the last couple of weeks of October, ahead of the election. Since then, we've seen categories like retail, technology and health come back, solidly food and CPG. at a strong September, but it was coming back more slowly since the election and then home and travel or both slow, but that's been due to secular slowdowns for a while.

So and then one other entertainment and media continues to be very weak is streaming is on streamers are still so broadly trying to find their way. So we expect the number of these to come back in the coming weeks as we ramp up into the holidays. And as we as we say, the Super Bowl for our food properties of Thanksgiving and December and the team is pushing along.

Operator, next question.

Youssef Squali, Truist.

So couple of questions. First, on the data licensing deal, can you talk about the contributions of OpenEye to the core? And just generally, what does the pipeline looks like, Jeff, with these types of deals once you do a deal, we had one big platform typically do deals with a whole slew. We have others you haven't heard anything yet. So maybe just provide some color on that. And then do the R&D and the spin off line to float the idea of potentially benefit point. What are you hoping to gauge before you make a final decision and potentially timing for that?

I'll start and Chris can add in some detail on the licensing, just in terms of what's happening broadly on licensing on the to you've got a number of term sheets since OpenEye deal, um, so there is activity in the market, but we haven't gotten to any others or at least have any noteworthy scale to a level of transacting or announcing them.

But there's active dialogue and different platforms have different perspectives on it, some respect, intellectual property and some aren't there yet and might need some assistance on getting there. And so we'll see how that evolves. But there is certainly a number of active dialogues on that lines. On the question of timing that both a tactical issue and a legal issue. When you when you start to consider, you actually have to make a disclosure around that as a 85% shareholder. And that also allows us to start to explore details of that with everybody necessary in the ecosystem are all constituents in that ecosystem to to figure out the details.

I do think it is highly likely that we get to the conclusion that we will spin, Angi, but there are some, um, some processes and boxes to check with our constituents to get that done.

And you said with respect to, um, the opening ideal, if you if you look at it and there are two parts to that license, one is a fixed component which we recognized ratably. And the other is a variable component, which will true up future dates depending on metrics we have there right now. We're really representing the recognizing the fixed component. If you look at Q3 of '24, we were licensing revenue was up about $4.1 million year over year. The lion's share of that would be driven by the OpenEye license. So that's on a quarterly basis, a good proxy for the revenue recognized and then the variable components will be calculated and recognized in the future.

Thank you, operator.

Michael (inaudible), Citigroup.

Wanted to ask just to follow up on the last question around the licensing. And you mentioned the letter AI. overviews showing up in about 20% of queries. Can you expand on that a little bit what you're seeing there, trend-wise, would you expect how you expect that the cloud over time? Right now you're not seeing much of an impact to traffic. Do you think that it stays that way? And then Joey just mentioned on the US term sheets, but your letter you also talked about on protecting your IP. Maybe can you just expand on that as well?

In terms of what we're seeing so far you when it's there, we see a low mid-single digit impact. Sometimes actually it's positive. Sometimes it's more than that. Sometimes less than that. It really depends by category and our content. But remember that only that entire thing rolled out on 20%, but also that's only a subset of our traffic. So when you put all that together, the impact to the data as Meredith is minimal, the the but we don't know how the UI. evolves and we don't now penetration evolves. I do expect penetration will continue to grow. And I expect that we'll continue to to feature decently in that penetration because meaning in the eye overviews, because as our content usually is a as a means an unbiased observer, the best we invest a lot of that content.

We make sure that our content is accurate and earn space in AI. overviews or elsewhere in terms of users digging deeper and getting into our content. So we think we're in a good place there. We think we are have been holding our ground and we do expect to continue to. But that market evolves quickly and and it's something we're keeping a close eye on. And that gets to your second question, which is if traffic is people are using our content but not pending, that's audience are compensating us and some other way we are going to have to protect our intellectual property and to make sure that's the case so far that that has not been the problem.

But if that becomes a problem, we certainly will protect it.

Nick Jones, JMP Securities.

Jeff, on Angi Montage transactions per service across continue to improve. But we see kind of service professionals going all are monetizing transaction has gone lower, albeit slower than our first across. I mean, how should we think about of that metric going forward as you kind of turned the corner for growth, let's say 26 of that is that a metric that can be stable of? I continue to grow as our gating factor, we should be aware of as we think about kind of the algorithm for growth in this business.

And then, John, on M&A, are there any learnings kind of from the loss of valuations really kind of got ahead of everything kind of post-election? I think there's folks may be speculating that the valuations may kind of run a lot higher. Does that kind of mean you're starting not maybe a multiyear period of really struggling to find any M&A? Are there any learnings from kind of the last time that maybe make it different if that happens this time?

I'll start on the first question. So there's a few components to what you're talking about are monetized transactions for us are going up as we better manage our SR.s against the capacity that our system with the inflection we expect in revenue growth and '26, we also expect monetize transactions to start growing again. The other piece you mentioned is the number of service gross up. The fact is our existing base of service. Pros is effectively outperforming in growth, what it used to because our retention is going up.

So if you normalize acquisition over the last couple of years, you would actually see growth in the service Pro based. But because we are taking down low profitability, Surface Pro acquisition, you are seeing a decline. So as we get to, I think you used the word floor, so I'll use it as we had to a floor in terms of taking the last piece out of our traffic with moving to a consumer choice and consent and then getting to the right size in terms of our sales force and our acquisition approach with our Pro marketing, we will effectively level out in 2025 and GrowGen across all these metrics in 2026.

So hopefully, I think that answers all that pieces of it and also explains a little bit of why we see the growth even though optically you're not seeing it on the face of our metrics. I think on your other question, what's key in any environment, it probably not telling anybody anything. They don't know what's key in any environment, whether valuations are down or valuations are creeping up is having an edge in the things that you're going after.

And that's certainly what we we have looked for and will continue to look for if we go back to the last big acquisition, biggest acquisition we did, which was Meredith some while the timing was not the only got some things wrong as it relates to the the COVID benefit that both our business and Meritor this business we're seeing at the time what has turned out to be true with the strategic value of that transaction. And the only reason that that has that we're doing okay in that transaction right now, not what we originally hoped for. But the reason that we're doing okay in that transaction right now is because we were able to deliver that's that a strategic operating execute difference in that business with bringing that what was a fun modernized digital business into the modern world to away to the point where we could take start to take share as a publisher.

So we had a a meaningful macro headwind on that business, which we under appreciated the potential of that. But but the strategic element was essential to the survival and what is now out that winning and taking share in that category as a digital publisher. So we'll continue to look for an edge. And when we find an edge that that is something that that enters the realm of possible. And that's what we continue to look for.

Thank you, everyone. Thank you, operator.

Wish everyone a good day and thank you for your time.

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