Match Group Inc (MTCH) 2018 Q1 法說會逐字稿

Good day, and welcome to the IAC and ANGI Homeservices report First Quarter 2018 Results Conference Call.

At this time, I'd like to turn the conference over to Glenn Schiffman.

Please go ahead.

Thank you, operator.

Good morning, everyone.

Glenn Schiffman here, and welcome to the ANGI Homeservices First Quarter Earnings Call.

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

Joey and I will also address any questions you may have on IAC's first quarter results.

Similar to last quarter's supplemental to our quarterly earnings release, IAC has also published its quarterly shareholder letter.

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

It's currently available on the Investor Relations section of our website.

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

Before we 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' first quarter press releases 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?

I just want to thank all the employees across all the IAC companies for a really fantastic start to the year, really as good as we can hope for almost across-the-board; and thank our shareholders for giving us the opportunity to do it.

Let's go to questions.

Operator?

(Operator Instructions) And we'll go first to John Blackledge with Cowen.

Joey, just on Match.

You -- if you can expand on your thoughts from the letter on the Facebook dating service announcement from last week; and then on ANGI Homeservices with the strong, sustained growth in service requests.

In the letter you mentioned some capacity constraints.

If you can just talk about some of the potential solves for the capacity constraints.

Sure, John.

I'll do the first one, and maybe Chris will do the second.

And on Facebook, look, first I think Mandy and the Match management team did a very nice job yesterday addressing a lot of the issues there.

I think we've had competitors for years here.

We continue to have competitors that have come and gone.

Some have been formidable.

Some remain formidable.

I think Facebook is obviously a real company that executes very well, delivers wonderful products, but what we're focused on is continuing to deliver phenomenal products for our users, continuing to innovate for our users, continuing to delight our users in finding successful relationships.

So long as we continue to do that, I think we've got nothing but opportunity ahead for this business.

And I'm as bullish and as excited about this business and about this category as I've ever been.

John, it's Chris.

Your questions on supplier-elated initiatives: If you think about a couple of things, one, if we just, we're always focused on nominal.

We'll always have nominal service providers.

A couple of things that have happened.

One, we had some benefit of converting sales teams from Angie's List to HomeAdvisor, but they have to become tenured.

We also had a big surge, and that surge has to [be continued].

That was one of the biggest surges we had last year.

We're constantly -- every single year as long as I've been there, we're constantly balancing the marketplace.

[And so we] have more supplier, have more demand.

In this case, we have a lot more demand, particularly with Angie's List, driving high-quality service requests.

We're -- so we'll continue to always add nominal, and we're going to focus on that.

And I think you'll -- we'll have a good nominal second half.

We also look at caps and capacity, and over the past few years, we've been so focused on nominal.

I don't think we've appropriately thought about the quality of service requests coming in and what that's done to the initial sales consultation when you set the capacity for an SP.

And so we went back and looked, and we've realized that we could sit down with both new service providers and the existing base and reset their caps that are more appropriate to the quality of traffic that we had coming in over the last few years.

So we're aggressively sitting down and making sure that we have the right cap levels for new and existing service providers.

And then finally, we've got new products we mentioned in the letter, but our opt-in platform, we think, helps expand some of that capacity.

So we feel very good about what that will do for the second half of the year.

And these efforts are highly focused.

And I think we will get ultimately through nominal and through sitting down; with these guys and expanding their spend levels, more capacity into the system.

Yes.

Just to put some numbers around that, John: You saw 13,000 net adds this quarter in the SP -- in our SP count.

That's 50% greater than the fourth quarter.

That's our highest in 4 quarters, our second highest in 8 quarters.

You saw our revenue per SP up 3%.

So while a lot of these initiatives will take hold probably in the third and fourth quarter, we're starting to see the baby steps and the progress against that.

We are also -- I'm sure this will come up.

We're also continuing to attack the unused cap.

We're now down to 38% -- or down 1% there.

We used 62% of our cap, 61% last quarter.

You may, though, see -- as Chris and his team are more successful in raising the budget level, you may see that number stay the same or even decline because it's going to be about revenue, driving revenue per SP and the quality of SPs, as against the raw SP count.

We'll go next to Peter Stabler with Wells Fargo Securities.

So just a couple follow-up questions for Chris and Glenn on Angie's.

Chris, the opt-in platform, about wider geographic region, accessibility and wider related tasks, could you give us a little more color on exactly what that means for an SP, how it changes an SP's ability to source projects?

And then Glenn, on the 13,000 net adds in the quarter, is that a kind of run rate that we should think about going forward?

Do you think you can improve that on a quarterly basis?

Any guidance there would be great.

Peter, so your question in terms of what this does to a service provider and how they would source a potential job.

And think of our existing platform.

It truly is highly targeted.

You come into our system.

We sit down and analyze what we have available in your area.

We look at what you think you can spend, and we try to do the best we can of utilizing that.

And what happens is sometimes we're ahead.

Sometimes, we're behind.

These are 500 different little mini markets where we're trying to balance supply and demand.

We do the best we can, but we don't always perfectly align with one another.

And so what this basically does is it allows service providers to look at other potential jobs and decide which one they could be interested in.

And so it's a very complementary system to the highly targeted matching system that we have right now.

And the fact is, with so many of our service providers using our mobile app, they are used to sort of looking for these things.

They can watch to see what comes in, and if there's something that is of their interests that they think that they're either -- they'll have capacity that's come up suddenly or a job that didn't go through or they have extra time, they can opt into that and take advantage of that job.

So we see that our success have been built on highly concentrated matching that's very detailed and targeted, but there are times based on job, cadence, whatever the case may be -- someone may have even just turned their leads off because they're starting a job but something comes up that they think that they'd like to take advantage of.

And so this vastly expands their ability to determine what they want to do when they want to do it.

And frankly, it helps utilize a lot of our potential sort of unsold or undervalued inventory.

So I'm very excited.

We're at the very early stages, but I think this is going to be an interesting complement to our existing model.

I'll just add to that, Peter.

Imagine in the initial sale you've got a cautious or skeptical service professional.

And that SP is going to say, "All right, I'll try this, but I'm going to do only this one, single zip code because it's 3 blocks from my house.

And I'm only going to do this one simple job because I know I can work on that job and I'll try that system out." The reality is that SP drives a lot further than that one zip code and is capable more than that one job, but they start out in that one very narrow slice.

And what this opportunity does is it says, look, you could take a look at these other stuff.

You're in.

You've got the stuff that you know is your bread-and-butter.

You can take a look at these other stuff.

And that really is a big opportunity both for them and for us and for our consumers.

Yes.

And on the SP -- sorry.

Go ahead.

On the SP question.

We have in the letter our plan for the year, which is we're determined to add a record number of SPs on the platform, but we're equally focused this year on -- as I said earlier, on revenue per SP.

So we think the SP growth year-over-year will continue in and around these numbers in the kind of low to mid 20s; and probably in and around the 13,000, maybe a little lower again as we shift our efforts to revenue per SP.

What we've really seen as the demand has come in from the Angie's List side is it's woken us up a lot to the latent demand we have actually in the supply side.

And the initiatives this year will be unlocking that latent opportunity in the supply side.

And we'll go next to Eric Sheridan with UBS.

Maybe one on Vimeo.

Just you highlighted some new figures in the letter.

Curious how we should be thinking about some of the friction points you're solving for in the business in terms of getting broader adoption of the platform, stimulating growth over the medium to long term; and how we should think about that as a mix between growth and margins for Vimeo.

Sure.

We're certainly favoring growth over margins with Vimeo.

I think right now margins at Vimeo are still negative.

So we're going to be investing in that business.

There's a few areas to invest.

2 biggest are clearly product and marketing.

On product, as we release new features -- and we're seeing this consistently.

As we release new features, users are willing to adopt those features and pay for those features.

Live is a great example, and we've been moving up ARPU nicely -- average revenue per user, nicely over time.

So we're going to continue to invest in new products.

So that means mobile products.

That means features like live.

And then on the marketing side we're still meaningfully underpenetrated.

And I think in the marketing opportunity we've shared a stat about how little we're spending internationally, but we clearly have real interest internationally because something like half of our paying subs are coming internationally.

And our marketing doesn't split that way.

So we're -- and we know our marketing math works, so we're going to lean into the marketing and continue to spend.

And the other place is enterprise sales.

So we have started to get enterprises onto the platform and started to focus a dedicated sales effort against the enterprises.

To date, this is a handful of people.

And in the future, I think that could be a much bigger opportunity, but bringing those enterprises into Vimeo, I think, is a very large market that the product makes a lot of sense for.

We'll go to Chris Merwin with Goldman Sachs.

So the first one is on ANGI Homeservices.

You had really nice overdelivery on margins in the quarter.

And I think in the letter you mentioned the very strong organic demand growth that you've seen which allows you to lower marketing spend as you work to solve for some of the supply constraints that you have now.

So as it relates to the 2018 EBITDA guidance that you've maintained, is it fair to say that revenue is trending a little behind as you work on supply while margins are turning slightly ahead of the original plan?

And then just a second question.

In the letter, Joey, I think you talked about 20% top line growth for the fourth quarter.

At the time of acquisition, I think the 5-year revenue CAGR guidance was 20% to 25% growth, so in the context of that guidance, should we be thinking about revenue accelerating next year or sort of staying in sort of where it is as you exit '18?

Yes, let me take most of that but allow Chris and Joey to comment on the 20% to 25%.

In terms of the way this year is playing out, you'll recall, when we announced the deal, we talked about the traffic synergies, which were what we called the bucket 2 synergies.

And we talked about the synergies coming in 1 of 2 ways.

One, it could be increased revenue as we monetize the increased demand coming over from the Angie's List site.

That turns into EBITDA after you apply the direct expenses obviously against that revenue.

Or that could come in as a result of decreased expenses as we take that free; or that cheaper, if you will; or most cost-effective service request, as against paid service requests or service request we get on the HomeAdvisor platform with marketing and otherwise.

And that is what we're seeing that play out right now.

And until our supply constraints free up towards the back half of the year, it's probably the fourth quarter, we'll continue to see this -- the bucket 2 synergies continue to come through as expense savings as against revenue minus direct costs.

You saw that in our margins this quarter.

Our margins increased from 7% to 16% year-over-year.

That was, of course, driven by the expense synergies; as well as the traffic synergies; and yes, a reduction in the marketing spend.

The reduction in marketing spend, just as a factoid, drove 5 percentage points of that margin improvements from 7% to 16%.

So yes, the bucket 2 synergies played out as margins this quarter.

It will probably play out in the margin line in the third quarter until again our supply kicks in.

And then we'll see it come in, in the fourth quarter in revenue, which is why we alluded to in the letter that in the fourth quarter our revenue growth will pierce through 20%, which sets us up well for our long-term target.

Yes.

I'll say longer term I think we're seeing so much demand coming through.

And now the investment and continued investment and adding nominal SPs, improving capacity [even in] some of the new products, I think, will be a balanced market, much more balanced marketplace going forward.

And so I still feel good about those numbers that we get.

Yes.

And look, remember, when we announced the transaction a year ago and then in our subsequent letter, there were 3 powerful tailwinds that are driving this marketplace.

Obviously, one is off-line to online conversion.

Two is our penetration of the market, and three is our take rate.

And we still have those tailwinds behind us, pushing us forward.

And we'll go next to Jason Helfstein with Oppenheimer.

Two questions.

First, on Angie's; then an IAC question.

So just to follow on that: With the comment about 20% growth or baseline for the future, just reconcile that with a prior comment that you guys made a ton of acquisitions 20% to 25%.

So question being you're going to exit at 20%.

Should we be thinking kind of 20% to 25% for next year?

Or is kind of 20% a more reasonable number?

And then Joey, do you believe you missed an opportunity to spin Match when the stock was at a high; or find another way to extract value, say, through M&A using stock?

And then you made me [breathe] with a comment you made in the letter about having $2.7 billion of aggregate cash, $700 million in free cash flow, this year.

Is there a level at which you'd be buying Match stock?

And then how do you think about buying Match stock versus IAC stock and just in general all the options you have to -- given your capital structure and access to capital?

Sure.

So on the baseline, that just means the bottom of the range, meaning we are there in Q4 but we expect to be in that 20% to 25% range in the future.

Remember, Jason, there is just the simple math of we have the declining Angie's List business which we bought that needs to stabilize.

The other business continues to grow and will continue to grow.

And as that kind of math works its way through the system, then you'll start to get to that accelerating growth after this year.

And that was always our plan.

I think we -- at least we tried to communicate something in that range.

On Match -- sorry.

Yes, on Match, I don't think that this announcement for the share price has any impact on considering spins or previously considering spins.

That's not kind of how we think about when, whether to spin the business.

It depends on really the benefits of -- we've always said, the benefits that the potential new business gets, the benefits of the business that is behind that spins the new business out.

And those are all things that we consider as we consider what the structural options are for the business.

Where the share price is at any given moment is not a huge consideration in that analysis or that math.

As it relates to using our cash, all the items remain on the table.

Obviously the share price has moved quite a bit in the last week or 2, and that warrants a serious look at all of our options.

Again, share repurchase is among them, for sure, but the -- but all those things are on the table.

Share repurchases always have, always will be on the table.

That's both at the IAC level and at the Match level.

The dividends, of course, are on the table.

M&A, of course, is on the table.

And that mix of things is something that we'll do the math around, we'll look at the opportunities around and see what make sense as the quarter and the year progresses.

Yes.

And just to fill in some numbers on your first question.

Obviously consolidated revenue growth was 15% this quarter.

Next quarter, we've guided to 16%.

The third quarter should be a scootch higher than the 16%, and again piercing through 20% in the fourth quarter.

And yes, we do think accelerating from there into our 20% to 25% range over a period of time, for sure.

And look, the raw math of which Joey spoke of is absorbing the Angie's List, quarter-over-quarter this year, Angie's List was down 17%.

Embedded in that is the e-commerce business that this quarter was down virtually 100%.

It was 94%.

And the remaining quarters for the rest of the year, that will be down 100%.

So that revenue -- we shut down the e-commerce business.

That revenue is just going away.

And we've also talked since day 1 about the consumer subscription business that we are de-emphasizing.

So that is also shrinking.

You will note in the letter obviously we said those declines will recede by the fourth quarter, again setting us up really well for 2019.

And we'll go next to Brent Thill with Jefferies.

And Joey, you mentioned in the letter a few or smaller bets you've recently made on some early-phase businesses.

I'm just curious if you could comment on where your excitement lies inside that portfolio and how you think about this going forward versus the balance of these smaller transactions versus larger deals.

Yes, I think we are favoring smaller transactions.

Look, maybe I'd split it in two.

I think the -- for our existing businesses inside of our existing businesses, I think of probably a much wider range in terms of M&A from very, very tiny to big.

And I think sort of the bigger transactions come in the picture with the businesses where we already have a, I think, meaningful competitive advantage because that we can be better on M&A there.

We can be better on transactions there.

We have more information.

We know the category very well.

We know the what to look for et cetera.

And so that, we do more of that in the -- in our existing categories.

In new categories, we're certainly favoring smaller.

That's partially just a result of the market, meaning the risk-adjusted opportunities at bigger sizes just aren't there.

There's a lot of capital chasing those things.

There's a lot of opportunities chasing those things, in particular in the private market.

And those bigger opportunities, I think, are harder.

And we also look back at our track record.

And I think we've created a lot of value in those smaller transactions, Match being an example that started with a $50 million deal or 2 deals that added up to less than $100 million.

What's now ANGI Homeservices started with a $157 million deal.

Those are 2 of our biggest businesses right now, and getting in early really worked.

Vimeo was basically a sort of less -- it was a portion of a $30 million deal, I think.

So we're learning from that history and focusing a little bit smaller.

It doesn't mean we're making lots of small bets.

I don't think we can be helpful or useful in lots of small bets and spraying capital around but focus things where we see a huge addressable market.

And I'll just pick one of the ones we mentioned, BlueCrew.

It's a tiny, tiny peanut of a business today, but it is in a category that is so large, that has such great potential.

And it's so clearly going to transition to online software that that's where we want to make a bet.

Hopefully, BlueCrew actually won't be the only bet we make in that category.

We'll make several and try and get at least one of them right or in aggregate all of them right.

And we're going to lean into that category in particular.

And we'll go next to Ross Sandler with Barclays.

Great.

Just 2 questions.

On the Publishing sector -- segment, Dotdash has had great success in the face of a pretty tough environment for premium publishers with all the changes happening at Facebook with the news feed.

So can you talk about some of the things that they are doing to drive revenue growth?

How much of it is coming from page views versus monetization?

And then Joey, going back to the stock price, in previous letters you've laid out the map on the various ownership stakes.

You didn't do that, I'm guessing, because of all the movement in the last week or so.

Then while some of this is out of your control, how does the company think about taking advantage of volatility like we've seen?

And as the value for kind of the core IAC franchise, stripping out the other pieces, goes more negative, how does that change your thinking around how you're allocating capital?

Sure.

First, on Publishing, Dotdash was for a while doing something controversial, which was not focusing on traffic from the social networks.

Maybe that was because of hard lessons learned in dependence on search for I don't know what, but we were consciously avoiding building a big dependence on social networks.

We've seen things come and go relatively quickly due to social networks.

And the ability to monetize that traffic was very limited.

So we didn't have much exposure to that kind of traffic, in the first place.

The thing that's working phenomenally well with Dotdash is they simplified the business to 3 principles: have the freshest contents relative to anywhere they're publishing content, any type of content they're publishing; have the fastest page, meaning the page loads faster than any of its competitors; and having the least-monetized page, meaning the ad load is not too heavy.

And they -- and of course underlying all of that having fantastic content.

That's what Dotdash did across now, I think, 5 or 6 or 7 verticals.

And that is working phenomenally well.

That's what a user wants when they're looking for the kind of content that Dotdash publishes.

A lot of that -- those queries originate -- or inquiries originate on Google, and Dotdash delivers the best result in those categories for users.

And that has worked phenomenally well and continues to work phenomenally well.

In terms of what's driving the growth specifically, it's a mix of both audience growth and monetization growth.

We found that we can grow monetization by reducing ad load actually.

And the way we've done that is because the audience that comes to Dotdash's properties have strong intent and -- meaning they're reading about diabetes or they're reading about tents for camping.

And those things, it's very clear what users are looking for.

And we're hearing back from the advertisers -- and we had a phenomenal thing happen at Dotdash.

I think it was this quarter, where every advertiser returned quarter-on-quarter because it's performing.

The advertisers are telling us it's performing for them.

And that's a really exciting thing to see happening.

And so I think that's going to continue for a while.

I, for the first time, have sort of been leaning in this direction for the while -- for a while, but for the first time, I think we have real competitive advantages in that business now.

It's really hard for somebody else to come in and publish and have a faster site than us.

It's hard for them to publish more content than us.

It's hard for that content to be fresher, more up to date; and to do that with lighter ad load than us.

And I feel really good about that business.

And I think there is huge potential.

I mean I really think Dotdash now has the model for the modern publisher.

And for us, social is now all upside; and I think we ought to be able to start to capture some of that upside.

On the discount question, you're right, Ross.

We didn't mention it.

You're right.

It's definitely more negative.

And you're right that the part of the reason we didn't talk about it is that the numbers were moving around so much in the days leading up to the publishing of the letter.

It's certainly something we still think about, still focus on and still look at remedies.

Obviously there's structural remedies to that.

Jason did mention some before.

We think about those structural remedies all the time.

The size of the gap is also not exclusive or even necessarily a primary driver of what -- of whether to take action on those structural remedies, but those do remain available to us.

The biggest thing for us, though, I really believe, is just trying to be consistent and trying to continue to execute against our businesses.

If Match continues to execute, if ANGI continues to execute, if Vimeo continues to execute, I think we'll start to address those things.

One thing that we're also doing is showing more figures for Vimeo so that -- and we'll probably start to do that with other businesses too so that people can get a better sense of what those businesses are and whether those businesses are things that they want to bet on or want to assign value to.

And so we'll try and get that out a little bit more.

We have a phenomenal management team at Vimeo right now.

We have a phenomenal leader at Vimeo in Anjali Sud.

And we're going to get her out more publicly too so people can get a sense of what the business is and what the leadership there is and how she's thinking about the category and the future.

Yes.

And just to tie your 2 questions together, frankly.

People often ask us what's the hidden gems or what are the next hidden gems in our portfolio.

And I think this quarter shows that these hidden gems are hiding in plain sight.

You look at the performance of the ex Match, ex ANGI businesses; and I think there are some real potential and some terrific performance there that, hopefully, will do a bit on shrinking that gap.

Okay, we'll go next to Dan Salmon with BMO Capital Markets.

Also, I'll just -- Dan, sorry just to interrupt.

I'm just looking at my e-mail, and Barry corrected me the answer on one of Jason's questions.

Vimeo, we bought for $700,000, not for $30 million.

So I just want to throw that out there.

Go ahead, Dan.

Okay, we'll go next to Dan Salmon.

That's a material correction, so that's all right.

Yes.

I want to make sure everybody had that.

Joey, I'd like to go back to the letter a little bit and in particular last quarter's letter where you spent some time laying out some high-level thoughts on how IAC interacts with large Internet platforms.

And with that as context and with the news we saw from Facebook about entering one of your categories more formally, do you sit back and think about is there an iteration to how you think about the relationship with the platforms?

For example, would you look differently at investing aggressively in a business that leveraged Facebook in the same way that Tinder did originally?

You had some comments a moment ago on how with the Publishing business you looked a little bit more skeptically about originally building it for social.

I'd love to just hear that high-level view.

And then just to follow up a little bit on the Publishing business: It sounds very much like you feel the growth we're seeing is sustainable.

And I know a lot of large numbers plays its role here but that this is -- what you're seeing is not a sort of step change and then a leveling-out from having made some changes but real sustainable growth.

I'd just love to hear a little bit more on that too.

Sure.

As it relates to the last letter and partnering with the platforms, our view has been consistent for a while.

I think we probably learned some hard lessons years ago from our relationships with Google, both good and bad lessons, in the sense that we've built phenomenal success in businesses with real margins, with real revenue, with real consumer value propositions in partnership with Google.

And we've seen that go in different directions, but we always, well, for years, have been appropriately skeptical of the relationship with these platforms.

They're phenomenal partners, but you have to protect yourself.

And every step you take, you have to protect yourself for the business competitively.

And we thought that all along with respect to Tinder.

We thought that all along with respect to all the Match properties, and we'll continue to think that way.

And that was what I was saying in the last letter.

It's I think we have a real skill here.

A component of that skill and working with these platforms is the right level of skepticism and is the right level of knowing how and where to protect yourself.

They're very powerful platforms.

They're very powerful businesses.

They can be very good partners.

They also can be competitors.

And you have to know all those things going in, and I think we do.

And I think that's why we were less concerned by the announcement by Facebook than others seem to have been.

I mean this is something that we had thought about for the very long time as a possibility.

I mean I -- and that is true, by the way, to the current platforms.

That was true of the old platforms.

I remember, going all the way back in the dating business to when the portals were relevant.

This is when the Yahoo!

was Yahoo!

and AOL was AOL and they owned the world.

And I remember when both of them launched dating products, and I remember when both of their dating products were supposed to take over the world.

And subsequently actually we ended up partnering with AOL and then partnering again with Yahoo!

and partnering with MSN in those categories because we could deliver a great product for their users.

And I think we're good at delivering those products.

So that's kind of the way I think about it, Dan.

I've gone on for a while, so now I've forgotten what your other question was.

Publishing performance, the step change.

And then flat, or is the growth embedded in Publishing?

Absolutely growth embedded in Publishing.

I think we -- the big step change was, over the last couple of years, we've completely reorganized the business, taken out a huge amount of costs, new management team, reset in basically all of those businesses.

And now we have things working.

I mean, will it grow 74% year-on-year forever?

No.

I don't think any business can grow 74% year-on-year forever, but I see a lot of growth in that business in the future.

I think we have a system and a formula that works.

We're delivering great content for users.

We're -- in particular categories, and that content is performing for advertisers.

If you got those things going, you continue to publish.

And we'll look for new areas to publish and new concepts and things to publish around, and I do see real growth there in the future.

And we'll go next to Anthony DiClemente with Evercore.

Maybe, first, for Chris, on ANGI Homeservices.

It'd be helpful if you could remind us the barriers to entry or the competitive advantage that ANGI Homeservices enjoys in the space and kind of in the context of the events of last week and whether or not we should be or investors should be concerned about a large platform making a broader move into home services someday or launching a competing product there.

And then a follow-up on Video, on Vimeo specifically.

Really great bookings growth of 29%, outpacing the subscriber growth of, I think, 13%.

So what's going on there?

Are you indexing more to higher-ARPU accounts?

So maybe just a little bit on the subscriber mix.

And then Glenn, on that $125 million of recurring revenue, up from $100 million, what is that number?

Is that where you might exit '18 on a run rate?

Or is that just kind of an -- a number for '19?

Or what's exactly is the $125 million?

All right, to give you guys time to think about your other questions, I'll answer your questions on barriers to entry.

Having been in a lot of platform businesses and marketplace businesses, I will say this is a very, very complex business.

It's extremely difficult to enter.

It takes -- even if you have a tremendous amount of capital, and you may even think you have one or both sides of the marketplace, it's still incredibly hard to match a homeowner with a service provider for the exact need they have utilizing the exact capacity available at a zip code level.

And so I think we have seen lots and lots of well-funded startups try to come in.

We've seen other folks trying to participate in the space, and they found it incredibly difficult and hard.

As a matter of fact, if you just look at -- we're the only company to have had huge scale and profitability.

It's just incredibly difficult, the costs of acquisition.

It is difficult to get a service provider on the phone.

It's hard enough to get them to understand your business.

It's even harder.

To get them then to sign up and stick with your product is even that much harder.

So there's huge costs and investment, and it takes a very skilled workforce to be able to bring in a high-quality service provider.

Then you start doing screening and approving, things like that.

Now you have less access because you only want the best of the best.

And then you start trying to match up at any given time where you have supply or demand constraints and have the ability to go out and acquire homeowners profitably, and it gets even harder.

So I'm not saying that no one will come in, but we've had a lot of people dabble, be it small, medium or large.

And I think they've all found it to be a very, very difficult space to be successful in, for everything from the economics to the actual structural matching.

I mean we've got 20 years of algorithms that do our matching.

The things we're learning at scale, the -- our understanding of cannibalization between channels, how to build products like all of our on-demand products, they're incredibly difficult to do if you do not have scale.

I think, anyone looking from the outside in and trying to reverse-engineer this business, good luck.

It's really hard.

There are other businesses you can do that, but this one's pretty tough.

And that scale allows us to make significant investments here.

We've gotten up the sales force to the 1,400 strong.

And previously we had talked about our operations team calls back, what, 25% of all SRs.

That's now almost 50%.

So a human being is calling -- we have 5 million SRs this quarter, up 38%, so we had nearly 2.5 million phone calls.

A human being reaching out to a customer, making sure the job was done, was done right.

And often, as you know, that leads to another service request.

So this -- our scale, our expense load, our obviously revenue, that gives us a lot of flexibility here.

Also we're talking about new, big Internet platforms coming in.

Amazon and Google are already in this space.

They've been in.

They've dabbled.

They've been dabbling in this space for years.

And Amazon and Google both have been putting out press releases, I think, for years on various things that they're -- they've poked around in that space.

On Vimeo subscriber mix, Anthony, you're right.

We are focused on higher-ARPU subscribers.

That's been the focus of the management team at Vimeo for the last probably year or so.

And so we certainly push gross bookings more so than nominal subscribers.

Obviously both are important and both need to continue to grow, but gross bookings has been the priority there.

And that's a conscious decision.

And -- sorry.

And the $125 million is the 2018 revenue number, full year.

We should do better than that.

And the next, Doug Anmuth with JPMorgan.

Chris, I was just hoping you could give us some more color on the drivers in terms of the 50% upside in terms of service requests just coming out of Angie's List customers.

What's really driving there?

And then Glenn, can you update us on the other 2 synergy buckets that you didn't give as much color on?

Yes.

I think, the upside coming from Angie's, a couple of things.

One, we've been able to, as Glenn mentioned, eliminate -- or almost fully eliminate e-commerce, but what that did is that unlocked our ability to now send high-quality e-mails to the base of users and drive them in to look for the core home-based service requests that are highly valuable to us.

So what you're just seeing is, whether it's organically unlocking the ability to drive higher-quality SRs within the Angie's List system; or the ability to now go out because of our monetization of the traffic, can go out and start to bid on keywords that they were unable to bid on in the past, we're unlocking what I think was a lot of pent-up opportunities.

You also just have, because of the changes we've made, the ability to let a lot of those people who used to bounce out of Angie's List flow through the system, get more deeply into the system and then be able to come back.

So it's a combination of things, but I think there is still a lot of value to unlock there.

And I think, as we've focused on the home services, less on some of the other verticals; and do some good blocking and tackling, we're just seeing good flow-through.

Yes.

And the 50%, that represented about 16% of our SRs for the quarter.

In terms of the other 2 buckets, obviously we said on the traffic synergies we're slightly ahead of the $50 million of traffic synergies we talked about.

On the cost savings, the bucket 1 synergy that you're referring to, the cost savings net of foregone revenue, we're slightly ahead as well.

We've talked about a $50 million number for 2018.

And we're slightly ahead due to continued cost management and slightly better Angie's List performance.

I think, on one of the previous calls, Chris talked about how, for example, we restructured the Angie's List legacy sales force.

And they had a setter closer model.

We now go with one person.

We put in new compensation schemes for them more aligned with the success we've driven out at HomeAdvisor.

And our originations per sales rep have come up dramatically.

Of course, originations are still shrinking, in line with my earlier comments, but we're trending better than our deal model.

And as I think I said on the last call, we have a line of sight to the $75 million in 2019 as we continue to drive originations, attack attrition and enhance retention.

In terms of the third bucket of synergies, that's -- as I said on the last call, that's still a 2019, maybe a 2020, event.

That's the sales force unification.

We had originally said that was 0 to $75 million.

We still think that is very interesting.

We still think that could be one of the most exciting bucket of synergies -- with major margin implications over time, but it's early days.

I think, again on the last call, Chris articulated how that will take time to develop and how there are some challenges therein.

We're starting to test that but again baby steps, and we'll see that in '19 and beyond.

Yes.

And those are complicated systems.

You've got very complicated back-end systems.

The teams are doing a good job of doing some early piloting and testing, but there are some real back-end logistics and challenges left to work through, which will create some time before it comes to full fruition.

And we'll go to Sam Kemp with Piper Jaffray.

So obviously you're benefiting a lot from the free traffic that you're getting from Angie's right now or the lower-cost traffic you're getting from Angie's, but if we just fast-forward a couple years, when you don't have the supply constraints that you're seeing and you think about advertising behind that platform, do you think of -- that's a platform that could have a higher marketing efficiency and perhaps perform better within places like SEM?

And then separately, can you just give us an update on the organic side of the HomeAdvisor international business?

Yes.

So I think you're asking sort of about the flow-through of free traffic that comes in from ANGI.

How do we look at sort of overall marketing costs?

And I look at it in terms of, one, I -- we're still highly efficient on the HomeAdvisor side.

There are still lots of upside there.

I think on the Angie's List side our view is that, as we get better and better at monetizing that traffic, they've got a very strong brand that I think we'll be able to lean in that business over time.

And I think we'll have reduced marketing costs, or we'll have more marketing spend with more efficiency over time.

So I think we'll be able to invest in Angie's List as we improve that platform and as we have better monetization flow through.

And I think there's still a lot of upside on the HomeAdvisor side as well.

I think the other thing we're finding out is, with so much traffic flowing through Angie's List, we now have a giant ecosystem that we can shift between the 2 buckets to make sure that -- if there is an SR that needs to be matched on one side or the other, that he gets matched in the best way possible.

And I think that's -- the most exciting thing in the future is how do you best align all of this demand.

How do you make sure that you're monetizing it in the most efficient manner?

And how do you make sure that you understand the cannibalization for highest margin between all of our channels?

And so I think we're just scratching the surface of that, and I think there's a lot of excitement and interest as to what we can do in the coming years in terms of improving that ecosystem.

Yes.

That liquidity is quite powerful.

In the international businesses, obviously we're in the early stages of developing that liquidity, so on a constant currency basis, we're kind of mid-teens organic growth on the revenue side.

As you know, we're still losing money on the EBITDA side.

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

Okay.

And we'll go to Rob Sanderson with MKM Partners.

So can we just go back to the conversation on the interplay with the large Internet platforms and maybe discuss that through the ANGI Homeservices lens?

We did appreciate Chris's comments on the complexities of this marketplace and heard you mentioned that Amazon and Google have been dabbling here for years, but do you think that this business is perhaps more insulated because it's not a consumer-to-consumer service and requires competencies not in the traditional wheelhouse of the large platforms?

I would just love to get your view on that.

Thank you for the softball, yes.

I mean it's -- absolutely.

I mean I'll reiterate.

I've been in a lot of different marketplace and platforms.

To say this is complex is a massive understatement.

It is incredibly complex and incredibly difficult.

It's hard to get these service providers in.

It takes a lot of time, effort and energy to profile them and to then match them appropriately when they have capacity available for the exact right job that a homeowner is looking for.

There's tremendous friction in the system, and so it's incredibly hard.

I think it's incredibly sophisticated.

And I think we have a tremendous advantage with years and years and years of matching.

And if you look at our matching, our matching platform is what allows us to do Instant Connect and instant book and all the other things we do and allows -- it sets us up for being very powerful in a voice-enabled world.

So we -- big, small, everybody has dabbled in this.

It's just exponentially more complicated than I think everyone realizes.

And your main -- even if you're a consumer-facing business, your main client is the service provider.

And helping them build their business, helping them be more efficient, helping them to have more capacity with our system is incredibly difficult.

And we spend a lot of time trying to understand from very, very complex data-driven models how to optimize.

And so as I said earlier, you just can't look at this space and even try to guess or reverse-engineer it.

If you do not have our data sets, if you do not understand what's happening at the sort of granular level and why it's happening, you couldn't even begin to figure out what you should do or shouldn't do.

So you can bring as much capital as you want.

You can be as smart as you want in the space, but just years and years of understanding, having scale and really having the data to make decisions is really powerful in the space, probably more so than in many other marketplaces where with enough capital and some fairly smart people you might be able to sort of reverse-engineer and become a player.

It's just really difficult in this space.

Thank you all for joining us.

And we'll talk to you next quarter.

Thank you.

And this does conclude today's call.

We thank you for your participation.

You may now disconnect.