Match Group Inc (MTCH) 2017 Q3 法說會逐字稿

Good day, and welcome to the IAC and ANGI Homeservices Q3 2017 Results Conference Call.

At this time, I would like to turn the conference over to Mr. Glenn Schiffman, CFO.

Please go ahead, sir.

Thank you, operator.

Good morning, everyone.

Glenn Schiffman here, and welcome to our third quarter earnings call.

Joining me today is Joey Levin, our CEO; and Chris Terrill, CEO of ANGI Homeservices.

Match Group held their third quarter earnings call yesterday morning.

This will be a combined call to discuss the results of both IAC and ANGI Homeservices.

Similar to last quarter's supplemental to our earnings release, we've also published our quarterly shareholder letter.

We will not be reading our shareholder letter on this call.

It is currently available on the IR section of our website.

I will shortly turn the call over to Joey to make a few brief introductory remarks, and then we will open it up to Q&A.

Before I get to that, I'd like to remind you that during this call, we may discuss our outlook and future performance.

These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar statements.

These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today.

Some of the risks have been set forth in both IAC and ANGI Homeservices third quarter press release and our 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 and, again, to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures.

Now let's jump right into it.

Joey?

Thanks, Glenn.

We had a great quarter, and we have a great outlook ahead right now.

I just want to thank the 6,800 employees from IAC and IAC subsidiaries around the world because it's a pretty rare thing for all the businesses at IAC to really be working.

And that's what we saw this quarter, and that's what the outlook looks like from here.

So we should enjoy that, and we should celebrate that for a second or 2.

And okay, celebration over.

Let's turn it over to questions.

Operator, please queue them up.

(Operator Instructions) We'll take our first question from John Blackledge with Cowen.

So if you look at the 3 synergy buckets when the ANGI deal was announced, it sounds like you're on track or perhaps ahead of schedule after reading the letter.

Maybe, could you tie out the commentary in the letter with how the 3 synergy buckets are progressing, the $50 million to $75 million in cost savings to be realized within 12 months of close?

Second would be the $50 million to $100 million revenue synergies, monetizing Angie's audience against HomeAdvisor's SPs.

And third, perhaps up to $75 million in further revenue synergies over time.

John, it's Chris Terrill.

I'll give you the high level, then Glenn can maybe give some more color.

I would say we were very positive on the cost synergies.

The teams have been great and really hitting some aggressive goals in a complex merger.

And so we feel very, very good there.

Nothing that we didn't expect.

And we've actually found some upside in some areas.

So I think we will be right on target or ahead on that bucket.

The second is monetization in terms of the traffic.

Right now, we are monetizing by -- the ANGI's traffic by putting the HomeAdvisor matching engine in on some of the key pages.

It's not on all of the pages.

But of the pages that we put it in so far, we've had very, very strong conversion, even stronger than we had potentially anticipated.

And we still have to continue to test the homepage.

We've got a very light test there now, but we believe that will be equally effective.

So we believe in terms of monetization of traffic is ahead on some regards to what we thought it would be.

And then in terms of the last bucket, that will take some time to get to where we think it can, but early read is that we believe there's tremendous opportunity for a combined sales force.

There are opportunities to provide a stronger cross-company product to larger SPs.

So we feel good about that, but that's going to take some time to get to where we think it will ultimately be.

I don't know if...

Yes, just to put some more specifics around it.

We had talked about the announcement that the low end of that range, $100 million to $250 million, would be realized in the 2018 time frame.

As you heard Chris say, we're very much on track, if not ahead of that.

You also saw in the shareholder letter that any of the overage that we're seeing, we're going to get that right back into the business for this year.

We'd gladly trade a little bit of EBITDA for a lot a bit of opportunity.

And that's kind of what we're doing here.

As we roll out of 2018, we do see a clear path to the $250 million, the high end.

And jumping in, one of the reasons why we think we're a little ahead on the expense side, all of the actions that we wanted to put in place to achieve the expense synergies, those have commenced already.

Those will be running -- rolling through this quarter.

All of the third-party spends have been actioned, again those are going to be rolling through this quarter.

You'll recall, though, the $50 million to $75 million was after revenue foregone.

So we've assumed -- and you see that, of course, in our fourth quarter revenue guidance.

We've assumed some degradation of the Angie's revenue stream -- streams as a result of shuttering some revenue streams and the expense savings.

So over time, beyond 2018, as we look to arrest and stem that revenue degradation therein could lie a path clearly to upside, but we will start January 1 at our target expense level.

On the traffic synergies, Chris said it well.

And because of the incremental traffic, that's really what's driving our sales force acceleration that you heard Joey articulate in the letter.

And then yes, the third bucket, the zero to $75 million, obviously, we're comfortable with the low end of that range, but we see a path after 2018 to really chip away at the higher end.

We're also seeing some other areas of upside.

There's some upside in marketing.

We will not look to take that this year or '18.

We'll look to invest back in the business.

But going forward, we think there should be scale clearly in marketing.

We'll take our next question from Dan Salmon.

Joey, if we go back to when you renewed the Google deal and level set those businesses, I think, long-term-oriented investors could look at IAC and see a series of steps that could be taken to create long-term value.

And you've obviously executed upon those steps with the Match IPO, the ANGI Homeservices transaction.

And you, yourself went down to Vimeo to see if there was a transformative opportunity there and decided against it, at least for the time being.

But today, I think a lot of investors look at IAC and those next steps aren't as obvious.

Perhaps there's something transformative in Publishing?

Perhaps there's a series of small acquisitions and a period of incubation?

And since you're so conscious of how you manage investors' capital, perhaps it's a significant return if you don't see appropriate risk-adjusted returns in new opportunities.

So could you maybe take it up to the highest level and talk a little bit about how you and Barry and the board think about that basic question of what's next for IAC?

Sure.

It's a great question, Dan.

First of all, the work on any of these businesses, and that'll include Match and ANGI Homeservices, is that it's never done.

There's big opportunities in Match.

There's big opportunities in ANGI Homeservices.

Those businesses are very well organized right now with fantastic leadership teams, fantastic boards, clear strategic direction.

So they -- they're on a path.

They know what they're doing, but there's still lots to be done in each of those areas.

They're in big markets with big opportunities.

So I think, just within those businesses, lots of energy, lots of focus, lots of opportunity.

I think, go to Vimeo, the one thing you said, and I appreciate a lot of what you said, but the one thing you said I'd disagree with is, sort of seeing a big opportunity with Vimeo and then not seeing that, or whatever your exact words were.

Really, what we saw in Vimeo is we were going after the SVOD.

We decided not to do that.

A significant portion of the reason we decided not to do that, besides the capital, besides the competition, was the opportunity that we saw in being a video tools platform in the cloud and the momentum that we had behind that with accelerating growth in revenue, accelerating growth in gross bookings and a customer base that was very sticky, very loyal and looked like it could be much bigger.

And so we are leaning into Vimeo, going after that opportunity.

You saw we acquired Livestream in the quarter, or whatever it was, a few weeks ago.

And that's one step in that direction.

We'd like to continue to do more there.

So we see big opportunity in Vimeo.

In Publishing, we're also starting to see opportunity.

I think I sort of need to split the Publishing business into 2 buckets.

There's the Premium Brands business where we have Dotdash.

I think that's starting to see revenue acceleration.

That's starting to have a story that works, that's starting to have a competitive moat.

So we're getting excited about the opportunity there, but it is still very early.

So I don't want to -- we're in the early stages of excitement there.

I don't want to overpromise.

And then of course, there is what's new, and we're certainly looking for the new leg of the stool, so to speak.

I think on that opportunity, we really are -- there's real lessons to be learned from what happened with Tinder.

Tinder was very little capital -- I mean, almost no capital upfront and a startup inside of IAC.

And that the cost of startups now is so low that I think we're going to continue to find opportunities there and we will lean in earlier stage to things at IAC now.

Doesn't mean we're not going to do acquisitions.

We're certainly looking at acquisitions.

We're certainly looking at new opportunities and I think, in any market, even what I think of as a pretty rich market right now for M&A, I think there's opportunities.

But going earlier stage is something that we're seriously considering and seriously considering in a few different formats.

There's some categories that we like.

We think there's big markets and big transformative ways to approach them.

And we're going to try and do that from the earlier stage.

We'll take our next question from Ross Sandler.

This is Miles on for Ross.

I have 2 questions on the Homeservices.

The trajectory on HomeAdvisor remains strong, but there's a lot of noise coming from the Angie's merger.

Can you talk about what you're likely to see the next few quarters in terms of both one-time restructuring charges and a deferred revenue hit?

How big are these 2 items likely to be?

And when will the first clean quarter be without them?

And then you guys also said that you are seeing better-than-expected service request volume and lower cost of fulfillment with HomeAdvisor UI on Angie's List.

Can you give us more color on what's driving that?

And is this a meaningful uptick from your previous thinking?

Yes, let me take the first one.

We -- in the fourth quarter, we should see about $10 million of a deferred revenue write-off, and our revenue guidance of $210 million to $220 million was after that $10 million.

As we roll into '18, we think about another $10 million in '18.

That will be front-end-loaded.

And as you go through the year, that will grind down to zero as we work into 2019.

So from a deferred revenue perspective, we won't be clean until 2019.

We will do, as we did in this press release, try to lay it out as clearly as possible.

In terms of one-time merger-related integration costs, we think, in the fourth quarter, that will be less than $20 million.

And next year, that will be less than $15 million.

Again, that will be front-end-loaded.

So the first, second and third quarters probably will see the bulk of that $15 million.

I think your other question was on sort of the pieces of monetization and putting the matching engine into Angie's List.

Our -- basically, what we were hoping to do is be able to put our matching engine in, take advantage of a lot of that traffic that was being under-monetized.

The concern, or what we were wanting to manage was, "Does that have a negative effect to the existing Angie's service providers?" The sort of great news and surprising news was that the conversion is so much better.

The experience is so much better that we're actually getting the monetization, but we're driving more profile views and more direct haul to those -- that existing base of Angie's List service providers.

So we're getting the upside of the monetization, and we're actually driving better results for the existing service providers.

That was the big surprise.

Again, it's only on some of the key pages outside of the homepage, but we believe what we've seen in those pages will flow through on the homepage as well.

And that's a positive surprise and a good example of just how strong the synergies are between the 2 companies.

We'll take the next question from Chris Merwin.

I just had a couple.

So you talked about the cost synergies trending ahead of plan and basically how you're going to be reinvesting that in growth.

Sounds like sales force is certainly the most pressing concern and you're also working to optimize the ANGI user experience.

But I was wondering if there are any other growth initiatives that you can call out, particularly product-focused ones?

And then just secondly, for Angie's, wondering if you can help us think through the phasing of revenue and EBITDA growth in 2018?

I imagine it's probably not going to be linear.

And near-term profitability will be impacted probably earlier on as you ramp up sales force hiring before those salespeople become productive.

So just was curious if you can help us think about the shape of the revenue and EBITDA as we move through 2018.

Great.

Thank you.

So I -- good questions.

Thank you and we'll welcome you to the call.

I know you just started covering us.

We're used to questions from Goldman Sachs about arcane lawsuits.

So it's helpful to have you on here.

Why don't we -- Glenn do you want...

I'll start with the second, but I do want to edit one thing out of your first question.

I think you said sales force concern.

I think we're all looking at each other and saying that's a sales force opportunity, but I'll leave that to Chris and Joey.

Look, in terms of phasing in of the revenue in 2018, it's a great question.

You saw on our press release pro forma combined full year over full year revenue growth of 18%.

In the fourth quarter, that's going to dip.

I talked earlier about the revenue degradation that is happening at Angie's List and some of the products that we are proactively shuttering.

And of course, when you take out the volume of cost that we've taken out of the business, it will no doubt impact revenue.

So that 18%, which is pre-deferred revenue, that will dip.

And then that will rebound off of that dip into next year.

But on the revenue side, that will be back-end-loaded as the synergies roll through, as we have more time to address the decline in revenue.

On the EBITDA side, remember, the fourth quarter is seasonally weak.

The first quarter also is seasonally weak, and EBITDA does, in some respects, follow revenue.

So EBITDA will also be back-end-loaded, given the nature of the business and the realization of the synergies.

Yes, I think your other question was on product upside.

Let me break it out in terms of what we can do for Angie's List relative to what we're doing with HomeAdvisor.

I would say there are too many to list, but I'll give you a few of them.

There -- some on the service provider side and some on the consumer side as well.

But let me focus on the most important, which is I think the service provider side and that's delivering more value and more opportunity to the Angie's List paying advertisers beyond sort of the benefit of putting our conversion funnel in, which is part of our matching engine.

That's driving more page views, more calls to existing service providers.

We're looking at how we bring in our on-demand products and what those service providers take advantage of Instant Booking, Instant Connect, same-day service.

We're looking at things like exposure over time for some potential Angie's List subscribers.

On the HomeAdvisor side, we're looking at those combined products to get more coverage to larger service providers, particularly the larger medium- to national-sized guys.

So there are a number of things that we've seen that are very, very low-hanging fruit.

And those are just the first things we've looked at.

There are a series of many other areas that we think we can provide value to those service providers, create a better experience.

And then on the consumer side, there are a number of flow-throughs for those on-demand products for service providers benefit the homeowners seeking help as well.

So I think we're just at the early, early stages of what we can do.

And we see a tremendous amount of opportunity.

We'll take our next question from Jason Helfstein.

Two questions.

First, on ANGI.

I think you guys have continuously talked about this $200 million upside as you can better match customer demand with supply.

And you talked about the 60% of SP capacity in your letter and kind of implied that 40% upside gets that $200 million.

What about the pricing?

Effectively, you're talking about if you do a better job with the win rate, that would imply you have better pricing.

How do you think about that over time?

Presumably, you don't want to just put the 2 companies together and then increase price.

Is this gradual?

Are there new dashboards you launched to help the SPs better understand the value you provide to warrant that price increase?

That's question number one.

And then Joey, just on the $1.2 billion in cash, if there's no meaningful M&A and investments to start companies are relatively small, is there anything that would stop you from buying back stock?

Obviously, you did effectively buy back Match stock at quite an attractive price in the quarter.

And I guess, lastly, on the ultimate spin-off of Match, while you alluded to that there's still plenty of upside in that business, they're clearly hitting on all cylinders, why wouldn't now be a good time to fully spin that asset off and give that asset a little liquidity it seems to need?

So I'll take the pricing question and sort of how we think about Angie's List and where the opportunities are.

Let me tell you, philosophically, to your point, we've had a low take rate, but we always think about pricing on HomeAdvisor side as being sort of geo-based pricing.

And sometimes you're moving prices up.

Sometimes you're moving prices down.

You're always trying to adjust to what the supply and demand characteristics are and you move price where you can.

I think the Angie's List model is a little bit of a simpler model to where the advertiser pays a fixed fee.

But we still want to make sure they understand how they're deriving their value and how they have the tools to get insights, whether that's page views or calls.

I think what will be interesting as we add sort of our on-demand products, areas where you get a direct relationship and you can measure that more effectively, you'll have a performance marketing metric, and we'll charge what should be the fair price for that direct contact to a homeowner.

So I think there's lots of upside in terms of getting more visibility to the Angie's service providers and then putting more of these products in that are better performance-based and allow the service provider to have direct understanding of the spin relative to their ROI.

And on the cash, Jason, we're certainly thinking about all opportunities in terms of what to do with it.

I think your point on buybacks is right.

We did do an effective big buyback of $500 million at Match in the last quarter.

I think we'll -- I'm going to give you the generic answer that we always give, which is, buybacks are something that we always think about.

And we think about that as against M&A.

And we compare M&A opportunities to returns that we can get within buying our own stock.

And we'll continue to think about that.

We are aggregating cash, to some extent.

We did a couple of different financings recently, and that is getting cash for a time when cash is relatively easy to access.

And we may be okay holding that until a time when cash is less easy to access and therefore more valuable.

But again, we'll see and it really just depends on the opportunities that present themselves.

On a Match spin, I'm also unfortunately going to give you the usual answer, which is it is something that we think about, continue to think about.

The float is a good question that we've gotten a lot from shareholders.

The one thing that we've been lucky to do to improve the size of the float is improve the share price of Match.

And therefore, there is technically a lot more dollars afloat now than there was 3 months ago or 6 months ago, but that is something that we think about and will always think about.

Yes, just 2 little facts to throw out there.

Just as it relates to Match, you saw on our press release, or you should see in our press release that we now own 222 million shares of Match.

So as you think about your sum-of-the-parts model, just make sure we get that.

That's one.

And two, getting back to what Chris said, it's all about adding value to these SPs.

And even though there hasn't been material movements in price, our revenue per SP, as you saw in the letter, grew 6% year-over-year.

That's the highest revenue per SP has grown since the early part -- since Q1 2016.

So as Chris said, it's all about providing more value to the SPs and getting them closer to the transaction.

And given that we're growing service requests faster than service professionals, we are, and we talked about this a little in the letter, we are effectively reducing price right now.

And I think that's okay, while we're trying to grow the SP network.

And I think that the biggest limiter on growth is on the SP side at moment, not the SR side.

We'll take our next question from Peter Stabler.

A couple for Chris, if I could.

Chris, you're combining a couple of large SP networks here.

Can you give us a bit of a sense of the go-to-market strategy?

If I'm an SP who has had a couple of years of experience and have a current contract with Angie's, am I going to get outreach from my sales rep on HomeAdvisor products?

Kind of likewise, on the other side, if I've been an SP with HomeAdvisor, am I going to get outreach around Angie's ad products?

And then what if I'm a new touch, right?

What if I'm a new SP and I'm getting my first call from ANGI Homeservices, can you give us any sort of color on what kind of sales experience we'd be encountering?

Sure.

I'd like to think we have done an amazing job in a short amount of time and that we're further ahead than I thought we would be in some regards.

I think that's an area that is going to take some time.

It's very complicated, as you can imagine, to put something like 2 sales forces together that have 2 completely different back ends, different models, et cetera.

So that is part of our longer-term plan.

The good news is we're already starting to see some movement of sales in just sort of -- from one side of the block to the other.

We're starting to think about how we would let them sell to both sides under a unified sales force.

And we are having outreach to larger service providers who naturally would like to have more business and tap into the HomeAdvisor side.

That is an easy thing we can do without having to have a specifically combined platform.

I think it will be a while before you will see a truly unified sales force, where someone can sell either product, just because of the complexity.

But I do think that will -- we will get there over time.

And certainly, from our conversations with service providers -- we just had 1,000 of Angie's top service providers out in Vegas.

We spent a lot of time with them.

There's interest in potentially a combined product.

And if not technically combined in the near term, how do we give them access to HomeAdvisor in a unique way.

So we're in the very, very early stages.

Our goal certainly will be to have a unified sales force over time, but it's going to take a while to get there.

We'll take our next question from Brian Fitzgerald.

Maybe on Vimeo.

We've noticed more advertising on YouTube and other social channels there.

Can you talk a little bit about the recent marketing efforts around Vimeo, the ROI you're seeing from different mediums?

And then maybe, can you just discuss the strategic rationale behind Livestream and your long-term plans there?

Sure.

Vimeo advertising, as we increase the ARPU of these users, our marketing opportunity or our allowable spend increases.

So we've been able to expand the marketing there.

I think it is -- all the marketing we're doing on Vimeo is at a substantially positive ROI right now.

It is a -- all online.

We haven't done any -- sorry, basically all digital.

We've done -- I don't know, what we'd call podcasts.

But we've -- between digital and podcasts that's where all the marketing goes.

We haven't gone to TV or radio or some of the other media we've used for other businesses.

But the online marketing for Vimeo is going very well.

And one of the things we are also doing there is expanding that marketing internationally.

We've always had a great paying subscriber base for Vimeo outside the U.S., but we've done very little marketing outside the U.S. And so now that we understand our allowables, and those have increased, we're out spending internationally now, too, which is encouraging.

I don't -- in terms of breaking it down by channel online, I don't have that in my head right now, but I do know that overall is -- has a strong return.

On Livestream, live was our highest requested feature from our users.

And it not only was the highest requested, but it was the one that users said they were most willing to pay for and were accustomed to paying for.

So when we looked at the market, we said number, one, we're building a solution here, which we did.

But number two, can we move even faster with capital?

And we looked at everything that was in the market and now I'm talking about a company called Livestream, as against the concept of live streaming, the company Livestream was far and away the leader.

It had a turnkey solution that customers liked.

It had a sticky customer base.

And that's why we bought them.

And I think that we're going to continue to integrate the product of Livestream the company with Vimeo the company, and that will be essentially a seamless up-sell to a Vimeo user.

And everything we're doing at Vimeo is finding incremental products for that audience, incremental products that make sense to pay for and delivering those products to these users in ways that is very simple for anybody to use.

And Livestream, I think, is basically the first one of those, but we'll continue to look for more.

We'll go next to Paul Bieber.

I was hoping you could parse out how much of the increased sales force investments response strengthened the core business versus the synergies you're seeing from Angie's List.

So one word was sort of missing.

Did you say how much of it responds to strength in the core business?

Is a result of.

Is a result.

Yes, I think it's a combination of the 2. But go ahead, Chris.

Yes.

Your -- the question is what -- is it more Angie's List or is it more of our investments that sort of drive sales force growth.

The good news is we're getting upside from some of the Angie's List sales force transitioning into the HomeAdvisor world.

And that's tremendously beneficial.

We didn't know if we'd be able to do that, and we've had tremendous success converting those folks.

And they've been highly productive.

So that's a win and accelerates our sales force growth.

Beyond that, we -- we're a little bit slow in the first half of last year being able to ramp up our sales force due to some real estate constraints and getting sales centers up.

Those are up in place.

We've really stepped on the gas.

We've got lots of classes rolling through, and I think that will roll into next year and help us accelerate our sales force growth.

If you look historically at what we've done, we've kind of seesawed.

We've had high SRs, and then we catch up with SPs.

And then we've had high SPs that catch up with SRs.

It's been our trend.

I know it's not always pretty, but that seesawing is how you build up this marketplace.

And so now we're in a search to get more service providers, I think you'll see that strengthen next year, and we'll be the beneficiary of some of it coming from Angie's List, but a lot of it coming from our acceleration investment in the sales force.

Remember, we also, on the HomeAdvisor side this year, stepped up our marketing a lot.

And marketing, of course, is one of the ingredients that drives SRs.

The next question comes from Rob Sanderson.

I've got a couple of quick ones and then a more substantial one.

First, can you comment on how much of the Angie's sales team was retained through the combination?

Can you also remind us the thinking on their premium membership services and the likelihood that any membership revenue streams will continue onto the new company?

And then on take rates, you compare the 3% to 4% take rate in Homeservices against some of the other large marketplaces, rentals, ride shares, e-commerce, et cetera.

Clearly, substantial structural differences.

And the take rate opportunity is going to be very different across these marketplaces.

My question is really whether there's any rule of thumb or benchmark for the cost structure of service providers and how much they typically allocate to marketing and how much of this you could potentially narrow?

And then also alongside that, whether you see opportunity to provide value into some of the other expense items of your service provider partners over time.

So I'll work back and may need some help with the first ones.

But on the take rate, I think your question, "What was the historic take rate for these guys?" I think at the very low end, we've seen it -- the fact that these guys have historically spent 5% to 10%, I think, seeing other things, it can be significantly higher than that.

It just depends on the type of service, are they a plumber, a high-end remodeler, et cetera.

Nonetheless, I think we have a lot of room to move.

And I think, as long as we are delivering value, as long as they're getting high ROI, the real benefit is for these guys to be able to build their businesses, to grow the number of jobs that they do.

And it's a win-win for both of us.

So I think we have the ability to move up on our take rate.

And certainly, as our win rate goes up, our take rate goes down.

So we'll have to move no matter what.

But we're going cautiously and slowly.

I think the goal is to build the business and let that sort of come in over time.

So I don't know if that's exactly what you're looking for, but I think we have a lot of room.

There's a lot of upside in terms of what our take rate is.

One other component of Rob's question there was what do we know about the service potential cost structure.

I think -- and you answered part of that, which is the -- what we think they've historically spent on marketing, but there are other components of their cost structure that our solution can address.

For example, if they have a receptionist or somebody who is responsible for call leads or responding to leads, scheduling service request or things like that, and the closer our solution gets to a transaction, the more they can address those costs on that.

Absolutely.

Philosophically, our goal is to let these guys do what they do best, which is be a good tradesman and if we can take away as much business friction, whether that's getting their next job or doing those jobs more efficiently or effectively, using our mHelpdesk solution or even just using our pro app, that makes them more effective, gives more capacity to us, they make more money.

So that's a huge part of what we're focused on.

Right.

Another piece of their cost structure, and this is the real nirvana, which is I think a long way off, but a lot of their cost structure is transportation or time getting from point A to point B. In a perfect world, we could schedule a service professional's day from starting at their house to looping around to ending at their house with no time in between.

Now again, I think that solution is a long way off, but you can imagine us getting better and better in that as we grow liquidity on the supply side and liquidity on the demand side.

Yes, and again, I think the difference between us and others is the less time these guys chasing customers aren't serious and don't turn into jobs, that is a real cost of their time.

And we believe that we've got the best solutions to get the most high-quality homeowners so that they're spending more time doing jobs and not chasing their tail.

On your first 2 questions.

I'm not sure I got it 100%, but if you're -- on the premium membership, you're talking about at consumer?

Yes, I think on the consumer side -- the question is, "Are we going to support it?" Yes.

We'll continue to support that.

We've modeled that revenue.

We'll continue to go down over time.

We're not doing anything to impact that revenue and there are even some potentially things we can do to add more value there that we're exploring, but we'll continue to let that tail play out.

The first question is...

I think you said Angie's List with sales force.

Is that the question, Rob?

Yes.

Just any comments on, I guess, the sustainability of that team and whether they're still mostly there or mostly departed?

Yes.

So one thing to think about is, we had different sales philosophies.

And we believe our philosophy is a more effective structure in terms of productivity.

And so we have taken some of their structure.

They're sort of setter-closer structure and converted it more into our structure.

And so because of that, yes, you might sort of, nominal basis, look like there are less folks there.

But from a productivity perspective, we believe our sales strategy is more effective, and we'll continue to put sales against new originations for Angie's List and be able to do it in a way that saves cost but drives a high level of productivity.

I think we also have the best person in the world working on this, Craig Smith, President and COO of HomeAdvisor.

And has just done unbelievable work here, getting him access to this incremental sales force is just something he'll do wonders with.

Yes, I concur.

We'll take the next question from Sam Kemp.

So Chris, on the accelerating pace of sales hires, you guys talked about having supply-side constraints, but you're also only hitting 60% utilization with that SP budget.

Can you talk about the puts and takes there?

Is that a geographic issue where you don't have enough supply in certain areas?

Is that because you anticipate amping that utilization via ANGI's?

Or is there some reason that SPs maybe don't want to increase their utilization at a really fast pace?

And then Joey, on Vimeo.

There's clearly, everyone knows, a big desire for original content from a lot of different players in the Internet.

Could you just talk about your appetite towards doing partnerships where you would populate or help populate different platforms with professionally done content?

Sure.

So in cap utilization, I think the simplest way to think about it is, you have roofers in Atlanta, and there's huge demand there.

We may be using 100% of their capacity.

You may have roofers in Detroit who say, "I want to spend x." But we just don't have as much demand there and so we don't utilize as much of their capacity.

So we have our matching algorithm.

We're always trying to fine-tune that, we're always trying to get those 2 things in sync as best we can.

But the reality is sometimes we can't.

And in areas where, particularly top MSAs and top categories, plumbing, HVAC, electrical, we need to add more service providers.

And that's why we're investing in our SP base because we believe we can, by growing that SP base, take advantage of that demand.

We're also, for someone who sets a high cap, but we aren't meeting it, we're spending time -- all the time trying to figure out how do we drive demand in that area.

So it's an imperfect system.

It's nice to see that we've moved up 7 points in utilizing that capacity, but it is very complex and we are constantly working to refine our algorithms and improve it.

And at the end of the day, sheer brute force of adding more SPs in those areas to the top MSAs where we know we have a lot of demand is critical.

On the Vimeo question.

It -- the short answer is, that's not a priority for us right now.

I do think -- I do know that we help the creators on the Vimeo platform get work or get their work discovered or matched with financing.

We don't do that specifically with a system to do that.

We do that by finding and promoting great content on the platform through things like Vimeo Staff Picks.

I know that many creators have told us that we've changed their career by becoming a Vimeo Staff Pick and then their content therefore being discovered and going on to great things in their career.

And we've got a long list of examples of people who have done that.

But we are not a principal in that transaction.

I think that our value we add there contributes to the stickiness of our platform, the value of our platform and the value of our brand and the reason why people come to us and use us, but we're not focused on becoming a principal in that transaction right now.

Not to say that we won't or can't in the future.

But at the moment, that's not the priority.

We really are focused on delivering this SaaS service for our customer base, and what we think is a $10 billion market.

We'll take the next question from Kerry Rice.

Going back to ANGI's Homeservices.

That -- the $50 million in revenue decline that you're expecting, obviously, some of that's coming, I think, from the write-off of deferred revenue, and it sounds like maybe the decline in the premium subscription from the consumer side on Angie's.

Is there anything else that you would kind of call out there?

Is it -- if you were an Angie's service provider and you are also on Homeservices, does that -- one side of that monetization go away?

And then as you think about this as a whole view, do we think about ANGI's Homeservices, or maybe just Angie's revenue troughing out midyear of next year?

Any kind of context around that?

And then as we think about the cost synergies, is the plan in that first bucket of cost synergies to get both Angie's and Homeservices onto the same platform so you kind of have the same back end?

Or is that kind of in that third bucket or not in any of those buckets?

Yes, I'll start with the first and then maybe Glenn can answer -- or the last one, Glenn can answer your first question.

The platforms that -- we're not combining the platforms anytime soon.

Obviously, platforms are extremely complex.

Angie has just completely spent 2 or 3 years re-platforming.

They have a very solid, stable platform that serves the specific needs of their service providers and homeowners.

We have our own unique platform.

So there's -- while we'll keep the brands separate, in the near term, we'll also keep the platforms separate.

Now, we'll continue to integrate almost as if we were big strategic partners with one another, and we'll add things into their ecosystem from a product perspective.

But there's no plan to combine the platforms.

And there's no real need to combine the platforms.

We can do much of what we need to do even from a sales force integration perspective, we can put hooks into our back end, into their back end that allows someone to be able to sell both products from the same screen.

I mean, there are things we can do to make the business integrations the reality that we need without having to sort of slam the 2 very complex platforms together.

Yes.

On your first question, I don't know what that $50 million number is of which you quote.

I don't think we've talked about a number like that.

We've talked about revenue degradation.

But the revenue degradation, yes, it comes from the deferred revenue that you mentioned.

That's one.

Two, we are shuttering certain revenue streams that they had.

Three, there is, of course, going to be a revenue impact to the cost savings that we are commencing, and we'll be at our steady run rate by Jan 1. And then also remember, their SP network has declined year-over-year -- sorry, Angie's SP network, it's ours.

It declined year-over-year.

Their consumer -- Angie's consumer membership has declined year-over-year.

So -- and their revenue has declined year-over-year.

So as we talked about earlier, it's going to take some time for us to -- for us all to turn that around.

We'll take our next question from Doug Anmuth.

This is Cory Carpenter on for Doug.

Two questions, one on HomeAdvisor and your international efforts.

You're clearly going to be busy the next few quarters with the integration, but could you give us an update on how your European markets are progressing today?

How big of a priority that will be for you over the course of the next year.

And then on Applications, in the letter, you mentioned the mobile app business moving to a subscription model.

Just any more color or examples maybe that you can provide there would be helpful.

Sure.

On HomeAdvisor international, the business is going well, but it's really 5 different businesses and 5 different countries, and each one has its own story.

I think that's going to be continued investment for a while.

The key in each of those markets is the building up liquidity on the supply side and the demand side that you can get the supply wheel going.

And that takes real time and real capital.

I don't think we're at sort of breakout levels in any of those 5 countries.

So if -- we're going to have to be patient on that one with investment.

On Applications mobile business, the -- I think our first example there was a coloring book product, which amazes me, but basically, it's black-and-white outlines of things to color in.

And you -- we release a new picture with whatever frequency we release one, and that's a subscription product and something that people really enjoy doing.

I think there is a list--well, I think there's 8 of them now, but those are examples of what they are.

They're fun, light, tchotchke-type products.

I think we have one in weather, as another example.

And they are sort of relatively low-priced and quick, reliable utility.

That is -- and a small piece of applications overall, but I do think very promising and growing.

We'll go next to Ron Josey.

This is Shweta for Ron.

A quick question on balancing supply and demand.

So supply grew 25%, demand 36%.

How do you -- can you elaborate a little bit on how you think about growing supply without sacrificing quality on the platform and at a fast clip?

I think ideally growing both simultaneously is the most difficult part of this marketplace and it's a complex marketplace.

So in many ways, we're constantly looking to accelerate our SP growth.

I think we've said in the past, it is sort of a stair-step function.

You have to get centers built.

You have to get folks trained.

And you have to -- as you go to the next level, you have to have managers, who can manage those centers and new trainers to train new folks.

And so we're constantly investing and growing that, trying to keep up.

I think, in this case, we have a tremendous surge in demand, particularly at the beginning of the year, we had some SEO benefits that came through and some other areas that we are -- we'll take it, it was to the upside, but it may be in balance just a little stronger than we had hoped.

So we're constantly looking to keep those 2 things as close as we can in balance.

But I think, as I said earlier, in the years past, we've tended to be up or down in some of the areas.

And that's just the nature of the marketplace, and particularly a marketplace that is still so young and still moving from off-line to online.

And with still relatively low penetration.

I'm guessing, in 10 years or whatever it takes, we will be at a more stable balance, but right now, you're going to see those fits and starts as we grow in the marketplace.

Operator, I think we have time for one more and we'll let everyone get on with their day.

And we can take that question from Victor Anthony.

So in the Publishing, you talked about viewing the segment more as optionality.

Are there any assets worthy of significant investments?

And just a follow-up on the Vimeo question with regards to Vimeo Live and the acquisition of Livestream.

What is the monetization opportunity with Live video?

And how does this service differ from some of the free social media live streaming services that's out on the market today?

Thanks, Victor.

On -- I'll do the second one first.

Live video is -- actually, Livestream has a significantly higher average revenue per user than Vimeo does.

And it's a product that people understand that they need to pay for.

It uses a lot of bandwidth, and it's a real service, and you want that service to be reliable.

It's dramatic -- the service that we offer through Vimeo on Livestream is dramatically different than, for example, a Facebook or a Twitter product.

Those products, you're trying to broadcast on somebody else's platform, meaning Facebook's platform, for example.

And you're not -- you don't need tools surrounding that to engage with your audience.

Whereas Livestream is, if you have an event or you teach a yoga class or you want to reach employees, you need a platform that you control, that you control who accesses it, that you can control the comments and the way that the things that surround that work.

And you're not looking to monetize that with advertising.

You're looking for the most reliable platform to reach the audience that you need to reach.

So people pay for a service like that.

And it's again, a significantly higher ARPU because there's real bandwidth costs associated with delivering that product at high quality.

On the Publishing question.

I think that there is a possibility that Dotdash emerges to the point of some investment.

I don't -- I think right now it is more than self-funding.

And I think, my view, is next year it is even more than that self-funding.

But if there were an opportunity to lean into it, and the trends continue the way they are -- I mean, we see traffic growing at that business, I don't know, 30%, 40%, 50%, across different verticals within Dotdash, and we see revenue growing 20%, and I think that's going to accelerate next quarter.

So when we see momentum like that in a way that we believe is sustainable with a real competitive moat, we'll lean into it.

But I don't -- I say it only theoretically in a sense that I don't expect that investment near term.

All right.

Thanks, everybody.

We very much appreciate your time and -- today and yesterday, and we look forward to speaking to you in 3 months.

Thank you.

And this will conclude today's program.

Thanks for your participation.

You may now disconnect.

Have a great day.