Match Group Inc (MTCH) 2018 Q3 法說會逐字稿

Good day, and welcome to the IAC and ANGI Homeservices Report Q3 2018 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 the ANGI Homeservices Third Quarter Earnings Call.

Joining me today is Joey Levin, Chairman of ANGI Homeservices and CEO of IAC; Chris Terrill, CEO of ANGI Homeservices; and Brandon Ridenour, Chief Product Officer of ANGI Homeservices and soon-to-be CEO of ANGI Homeservices.

Welcome, Brandon.

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

Similar to last quarter, supplemental to our earnings -- our quarterly earnings releases, IAC has also published its quarterly shareholder letter.

It is 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 will 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 results -- from the views expressed today.

Some of the risks have been set forth in both ANGI and IAC -- IAC's third 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?

Thanks, Glenn.

First, I just want to welcome Mr. Ridenour to our favorite quarterly ritual, the first of many, I hope, and wish farewell to Mr. Terrill, who, I know, will miss these mornings terribly when he's waking up and spending the days in his pajamas.

We -- I also want to thank Chris.

I mean, we said this in the letter and I said this in the press release, but Chris' run at ANGI Homeservices is really pretty rare air, not just in terms of his impact on value of these businesses, but on consumers.

And I say this one seriously because I think it's really on the country in terms of putting people to work, helping put people to work and especially and near and dear to us, is on the team that he built and the team that he galvanized in doing this.

And that, of course, starts with Brandon, who's now here today.

Since Chris has really successfully rendered himself a lame duck, we're actually going to complete that transition from Chris to Brandon this week.

And I think we all have all the confidence in the world on how well that's going to go.

But let me just turn it to Chris who, I think, wants to say a few words.

Yes.

Thank you very much.

I appreciate it, Joey.

I -- I've been very, very lucky to be a part of 2 huge marketplaces.

It's rare to get one like a Match or HomeAdvisor.

To have both is pretty unique.

And I feel really, really lucky that I had that opportunity.

I appreciate that IAC gave me that opportunity.

Again, it's amazing to think that you can have such 2 huge marketplaces in one company.

I think that's a testament to IAC and the way they think about businesses and the patience they gave to both me and Brandon to develop this, to really invest in it and to lay out our plan, long term, for why we thought this could be a really huge opportunity in a market that's just taking off.

So I appreciate it and thank Joey, thank IAC and everyone that gave me that opportunity.

Second, I've had a lot of personal questions, and people have asked me, why now, why step out?

I think it's a 2-part answer.

One, when I stepped in early 2011 and convinced Brandon to join me, part of my pitch was, eventually, one day, I would step out and hand over the baton to him and let him sort of take it and continue to grow the business.

And so we set out together to map out a plan that was very ambitious with a lot of growth.

And the hope was that I would get to that point where I could walk away and leave him in a great position, and I'm super excited.

He's a good friend of mine.

I think there's nobody better qualified to step in.

He knows the business very well, so that makes me excited to have that opportunity.

The second, for me, is I have always been interested in politics and have political ambitions, not in the traditional sense, but would like to work in that realm.

And I've thought about it for a long time, and I just don't think you can do that these days, at least successfully, without headache and without all sorts of issues as a public company CEO.

So for me, I have some interesting things that I plan to work on, and that is one of the reasons that I'm leaving now.

But I think the company is in great shape.

To use the Match analogy, I think about the early days when we were excited about hitting 100,000 subs and then we were just super excited if we could just hit 200,000 subs.

We'd blow it away and it'd be unprecedented.

And look at how far that business has come.

I think we're in the early days of this business, very, very similar, and I'm excited to hand it over to Brandon.

And I'm here for moral support today, and if you guys have any specific questions for me, I'm happy to answer them.

Thank you.

Great.

Let's do questions.

We're ready for the first one.

Operator?

Our first question comes from Eric Sheridan with UBS.

I guess, 2 if I can.

Joey, on capital, a lot of talk in the letter around how you think about capitalization of the company now, maybe some of the opportunities that sit in front of you.

And the second part of that would be the Handy acquisition, why that asset was intriguing to ANGI, what you think it does on the product side and the platform side looking out and what sort of investments are needed behind that asset to see it fulfill its potential.

Sure.

Thanks, Eric.

Capital allocation is something that we spend a huge amount of time on at the corporate level at IAC, and it's something where we look at all the tools in capital allocation regularly.

This has come up this quarter, I think, significantly on kind of the dividend at Match, and that's something that, obviously, we put a lot of thought into with the Match management, with the Match board.

And our view, in general, and this has been true for 20-something years, is that returning capital to shareholders is a good thing.

And there's a lot of ways of doing that.

You can do that through share repurchases.

You can do that through dividends.

Both of those are tools we've used in the past, I think, to significant degrees and I think that we'll use in the future, hopefully, to significant degrees.

In terms of this particular dividend with Match at this particular time, specifically, we look at it as -- it's a year of Match's free cash flow, give or take a little bit.

And in aggregate, even if we've raised more debt in this context, leverage ratio will be down for that business overall.

And we'll be going into 2019 with probably more financial flexibility than we went into 2018 at the Match level.

And so we thought that this is something that the business would be healthy in terms of optimizing its capital structure.

The business is doing fantastically well.

And it's an attractive asset from a leverage standpoint, and it's an overall attractive market from a raising debt standpoint.

So we looked at all the factors and said now is a good time to think about some capital repatriation.

Of course, the options in that context are really dividend or share repurchase.

At the scale that we thought the business could do from a very healthy perspective, share repurchase was difficult to pull off, and so that's the dividend.

And that's a little bit of the sort of thinking in terms of how you get there.

We're also 10 years into a bull market and not crazy to be distributing some cash in that context and, from an IAC perspective, to be holding on to some cash for a rainy day and thinking about how the markets evolve and being in a position where we can take action in a changing market.

And what we think about in terms of IAC's balance sheet and the cash that we accumulate on the IAC's balance sheet is all the things we've historically thought about.

Obviously, we want to invest in the businesses through the P&L as much as we can.

We want to look at M&A aggressively, and we have and will continue to do that.

We look at share repurchases, we look at dividends and all those things, have it on the table and remain on the table.

And I think we'll have moments where any of those things may look attractive to us, and we'll take some actions.

We don't have a huge acquisition planned right now and -- but we think that we'll be in a nice position to have a healthy cash balance at IAC.

We also think that Match has tons of flexibility.

Match will not be remotely constrained in their ability to do M&A.

There are many tools available for Match to be able to do M&A.

And that company is very active in the market and thinking about what specific opportunities could be done in terms of M&A.

And the same is true for Match in terms of share repurchases or anything else.

Of course, business is going well.

We'll continue to grow well.

And we feel good about the prospects of that business.

So that's a bit of a mouthful, but that's a little bit how we're thinking about things in aggregate right now.

I don't know, Glenn, do you want to add to that?

Yes.

Look, the only thing I'd add to that is we've been talking for a while about the free cash flow characteristics of all of our businesses.

And I think it's a real differentiator that we have our free cash flow conversion.

We talked about -- Joey talked about in the letter that, this year, we're looking at greater than $750 million of free cash flow, I think that was the last letter or the letter before, and we'll probably beat that in terms of the free cash flow our aggregate enterprise will generate.

And hopefully, this puts a fine point on the free cash flow characteristics and the power of all our businesses to generate that free cash flow, in particular at Match.

Brandon, do you want to start on the Handy?

Sure.

So Handy represents a really straightforward growth opportunity for us.

And there's -- there are really 3 areas of synergy.

The first is that Handy offers a number of complementary service types that we don't offer on our traditional businesses.

And so there, the opportunity is to simply be able to promote those new services to our very large audience of American homeowners across HomeAdvisor and Angie's List and, through that, drive bookings, hopefully drive more frequency engagement from our users and ultimately, obviously, revenue growth.

Second category is that there is some overlap where we do share categories in common.

And it just so happens that some of those, in particular cleaning services and handyman services, are our very highest demand categories.

And we have such high demand that it's very difficult for us to keep up with it.

So we're excited to be able to bring on their provider network, which we're going to be able to leverage to fulfill more of that demand, create more satisfied customers and, obviously, through that, drive revenue as well.

And then the third area, perhaps, is the most exciting, which is Handy really has a tremendously innovative servicing platform.

It's a great point-of-sale solution in retail because they're able to price upfront services, like showerhead installation or furniture assembly, at the point where you're purchasing those items.

And so they've got some great initial retail partnerships.

We think that channel is likely to grow significantly over the next couple of years.

And for us, that represents a potential stream of new customers that get to experience our service and, hopefully, through that, we form a long-term relationship with them.

Yes.

In terms of financial impact, Eric, we're looking at a few million dollars of EBITDA losses in the fourth quarter.

And we'll probably be on that trajectory, a few million per quarter, throughout 2019.

It's one of the reasons for the updated EBITDA guide for the year and one of the elements that we'll be investing in, in 2019 to continue to drive growth in the marketplace.

Our next question comes from John Blackledge with Cowen.

Two questions.

On ANGI, could you discuss the decision in '19 to drive the biz towards kind of that high end of the 20% to 25% top line growth bogey while holding margins in check and just how you expect to build more liquidity in the marketplace?

And then on Vimeo, what's the margin profile now?

And is it a biz where you can invest significantly to grow subs within a positive ROI framework?

Or in other words, can you accelerate the scaling of the business, particularly given the interesting and different economics for subs now versus years ago as you laid out in the letter?

Sure.

This is Brandon.

The history of this company has always been about making smart but aggressive investments to drive growth.

As we consummated the merger with Angie's List, we had a period where we had to ingest a tremendous amount of demand at the beginning of that period earlier this year.

And for a while, we were strained on the provider capacity side.

Throughout this year, we have made tremendous progress and inroads in expanding that capacity through both our sales efforts, our efforts to expand our budgets and capacity of some of our existing customers and then, as you may remember, with the opt-in platform, which we've seen a lot of success with.

These 3 have resulted in a substantial expansion of provider capacity, and you're seeing that already translate into revenue growth that's outpacing where we thought we would be this quarter.

And so our intent here is to lean into that capacity.

That capacity really is the ability for us to serve more homeowners.

And so we're going to be making investments that leverage that capacity and lean into growth, as we exit this year and as we get into next year.

And that's where we believe we're going to be at 25%, which is, again, ahead of where we thought we would be next year from a revenue growth standpoint.

And you -- well, I was going to go to Vimeo.

Go on.

Yes.

No, just, look, on the capacity, just to put some numbers around what Brandon said.

You know the efforts that we've gone throughout the year in terms of increasing cap at the point of sale, increasing cap with SPs in-month.

Last quarter, I think we said we increased cap 31%.

This quarter, we increased cap 34%.

You've seen our...

Cap is capacity for a service professional to spend with us.

Yes, sorry.

And you've seen our marketplace revenue grow 28% in the first quarter, 31% in the second quarter and 36% in the third quarter.

And we feel great about how that capacity works through the system.

Brandon also talked about the opt-in product, which has been rolled out to about 85% of our SRs, and 50% of our SPs have opted in to the opt-in product.

So we feel good about that trajectory continuing.

We also talked -- and I'm loathe to use the word synergies because there are kind of no longer synergies because we're really running the business on a combined basis.

But remember the traffic that we're getting from the Angie's List site, that SR path we put on the Angie's List site, which helped margin throughout a lot of this year.

As we've lifted the supply capacity, we think that will begin to help us on the revenue side next year.

And we're going to invest marketing and that could now obviously be rewarded with revenue growth.

And then, of course, with Handy, there'll be slight -- a slight increase in our revenue growth as a result of adding the Handy business into the fold.

It's very small compared to the overall ANGI Homeservices business.

That will be slightly accretive to growth.

And just from a broader perspective, what we're really trying to do in this business is change consumer behavior.

Our biggest competitor here, we think, is off-line word-of-mouth, which is 90% of the market.

And we think we have the product in a place now -- and it gets better every day, but we have the product in a place now where a user experiences a user experience that is compelling.

And the more people we can expose to that experience, the more we think we can shift that off-line to online migration.

And that, I think, is really our priority right now.

On Vimeo, John, it's a good question, and we have been accelerating revenue growth there.

It is something that -- we think we're in a very good position in that business today.

We are able to acquire customers very profitably through marketing.

We are, we've been talking about this and we're still very early in this, beginning with international marketing and making that -- those ads optimized to local audiences in each market where we have customers or we think we can have customers.

And the same is true on the small business or enterprise sales side where we've just now started with an enterprise sales force.

I think we'll have 40 people in there by the end of this year, and we're still just responding to inbound calls.

So we have a lot of interest in this business.

The product, we think, is very compelling.

And we now are in the period of getting the word out as broadly and aggressively as we can.

And our math today shows that we can do more of that profitably.

We -- I turn to, specifically, subscriber growth, one of the things we've been talking about for a little while and continued this quarter.

We grew subscribers 10% this most recent quarter.

But there is a shift that's happening inside of there, where we're moving towards higher-priced customers, more small businesses and enterprises, still very much serving the consumer and the enthusiast, but also bringing that new customer into the fold.

So if you look at our figures now, I think our first-time subscribers at Vimeo in this most recent quarter have a 50% higher average ARPU than our first-time subscribers in the same period a year ago, and that's really emblematic of the fact that we're moving to this -- we're bringing in, I should say, this different type of subscriber at a higher price point with a bigger level of service.

So we're really optimistic about the future in that business.

And of course, you'll be able to see it more closely as we now, starting next quarter, disclose that as its own segment.

And Anjali, the CEO of Vimeo, will be in -- I think doing an investor conference in December, so some of you will get the chance to meet her there and ask her some questions and congratulate her on just becoming a mother last week.

And just in terms of that mix shift, that's going to continue.

We see subscriber growth in and around that 10%.

Maybe 1 quarter, it will be higher or maybe one quarter, it will be lower.

But we'll have continued strong ARPU growth.

ARPU, you saw this quarter, grew 18%.

Our next question will come from Brent Thill with Jefferies.

Just to follow up on ANGI.

You mentioned in the letter a focus on revenue growth at the possible expense of margins.

Can you just touch a little bit about what you mean in terms of the expense of margins near term and how you think the dynamics play out there?

Look, we'll go through full guidance in the February earnings call and our February letter.

I think we said in the letter that revenue will grow faster than EBITDA.

Obviously then, therefore, margin is going down next year.

What we did this year, as you saw kind of all year, is we pulled a lot of margin improvement from '19 into '18.

You've heard me talk about that -- the biggest driver of that was marketing.

As a percentage of revenue, that went down somewhat significantly.

So as Brandon said earlier, as we continue to chip away and solve our supply constraint, which we are solving, given what we earlier talked about, we're going to lean into marketing some more, again, to take a shot at accelerating the business, accelerating our penetration of the market and driving that off-line to online conversion.

That is one of the many tailwinds we have behind us.

On a go-forward basis, there's still some real terrific margin improvement in this business.

We, of course, stand by our 35% long-term margin target that we articulated when we announced the transaction.

That will, of course, as always, depend on the investments we make, investments in international, investments in category expansion, investments in other services.

And in terms of the components of that margin increase, look, we'll continue to enjoy scale as we grow the business.

We saw that in the Angie's List transaction.

G&A, of course, has a lot of scale.

Marketing, of course, has a lot of scale, not, as I said, in 2019 but beyond.

And then you look at the other components, the sales force component, the ops component.

And we think there are things, over time, that -- the Handy SPs, those are all self-serve SPs.

So there are ways of us thinking about the SP universe and going after different segments of the SP universe in a more cost-effective and cost-efficient way.

Yes, we do.

And then on the operations side, we think there's some real scale there, over time.

As you've heard me say, we still call back 50% of all SRs.

A human being dials a phone number.

Are there ways to automate that and make more of a closed loop using technology?

We do think so.

And then, if you recall back to the transaction, we have 2 independent sales forces at Angie's List and at HomeAdvisor.

And we think, over time, there could be scale and margin improvement there.

But I do think we plan to have healthy profit growth in this business next year.

I just think that we should have revenue growing faster given the investments that we see available to us.

Our next question comes from Jason Helfstein with Oppenheimer.

Two questions.

So just first, back to the ANGI 25% guide for next year.

Obviously, that's higher than the prior comments about exiting at 25%.

How much of the higher guide is due to a rebound in the advertising of the legacy Angie listings business?

Or is it success from the marketplace business?

And then given the success of mobile apps and Dotdash, would you consider M&A in those verticals?

Or -- still haven't proven that you want more exposure on that area.

Yes.

This is Brandon.

So we've -- obviously, a big driver here is the capacity growth in the traditional marketplace business.

So obviously, with 36% growth this quarter, that's outpacing where we thought we would be.

And that's going to be a big driver next year.

But we've also seen better-than-expected performance with the traditional advertising business in Angie's List, and that's going to be a bit of a tailwind, too.

I wouldn't say we have completely turned that around going to 2019.

But we're optimistic about what we're seeing from a performance standpoint, and we do think that's a driver of the higher guide here.

On mobile apps and Dotdash from an MA perspective, I think the answer to that is yes.

I'll cover them separately.

Mobile apps, we have been doing M&A.

I think we've done 3 M&A deals in the last year or 2 in that category -- oh, 2, right.

The third one, and this gets the Dotdash also, is what we're now calling internal M&A.

So we moved Daily Burn from the video segment, which was sort of a standalone business into the mobile business, and our internal team acquired that business and really has turned it around and put it into good shape.

And we did the same thing at Dotdash with Investopedia.

And the Dotdash team, I think, so far, has done an exceptional job with Investopedia, and that was a real test.

I mean, they didn't manage that business previously.

Now they took in that business, now they manage that business and they had to do all the things you do in acquiring an external business in the sense of integrating the business, the culture, upgrading things that you want to upgrade, changing things that you want to change.

And that, so far, has gone very well.

And so that does give us confidence in our ability to do more there.

I don't know whether that's a near-term thing or a longer-term thing.

I think there's still some strength in the market or some optimism in the publishing market that will wash itself out and bring us more opportunities in publishing.

But we are, for the first time in a long time, I think, on our toes in that area versus on our heels in the last couple of years.

So we're optimistic on both.

I think on mobile apps, the most recent one we did was this business RoboKiller, which is, even since we bought it, doing -- and we bought it a week ago or 2 weeks ago or something like that, doing exceptionally well.

And the -- so the early signs are strong.

And we can bring these businesses -- they're each individual apps.

We can bring them on to a common platform, which can measure LTVs, which can drive conversion and which could bring it into a marketing funnel which we optimized over many years on the desktop side.

And now we've migrated that to the mobile side where there's real shared learnings and there's real shared best practices there that we're seeing -- we saw that very quickly in an acquisition we did earlier this year called iTranslate and, I think, we'll see very quickly on the RoboKiller side.

So we are excited about acquisitions on that mobile app side.

Our next question comes from Douglas Anmuth with JPMorgan.

First, Chris, just want to say best of luck and good to hear about your political interest and that you won't just be in your pajamas going forward.

Thanks.

But for the IAC team, I was hoping you could just talk a little bit more about the additional disclosures.

I know you just did a little bit, but just how you think about the right time in terms of breaking out the businesses now for Dotdash and Vimeo and how you think about these as potentially being the next big growth engines behind Match and ANGI.

Sure.

One of the things, Doug, that's drives the disclosures is we've talked about the valuation gap and the fact that there's a big group of businesses that are valued not even not optimally, but in theory, negatively.

And we thought we should explain more about what those businesses are and share more about why we're excited about those businesses.

And we're confident they're real businesses with real potential and real value.

And Dotdash and Vimeo are certainly 2 of those.

And I think mobile applications is not far behind.

I think, at some point, you can go too far in disclosure in the sense of just too much information to process and starting to confuse people, but we're -- we favor transparency and we favor sharing more information.

Hopefully, these are ways for people to understand the components of those businesses.

When we think about the growth potential of these businesses and where they are relative to a Match or an ANGI, Dotdash is in a huge category.

And it's got nice momentum in terms of revenue growth.

It's got very healthy margins.

We think it's building a competitive moat in the sense that it's very hard and expensive for somebody else to come in and start publishing the content that Dotdash publishes at the quality they publish it and at the low level of monetization that they monetize it, which is an asset in this area, meaning you -- I think the lasting power of this business is stronger with lower monetization.

So we like that barrier, and we like building into that business.

And I don't know how you want to measure that addressable market for publishing, but it's in the tens of billions.

And we think we have a great team here and a platform to scale.

The same's true on Vimeo.

It is an enormous market and it's got a great secular tailwind.

We've talked a lot about -- we think a lot about the fact that all businesses, entities, events have a need for video today where they didn't previously.

Anything that's primary method of communication or exclusive method of communication to an external audience was text, call it, 10 or 20 years ago and then evolved to text plus images in the last, whatever, 10 years or so.

Now it includes video, and you see that on all the platforms.

You see that on Instagram.

You see that on Facebook.

You see that on Twitter.

And if you are a business for an event, you want to tell your story now with all the tools that are available, and video is going to be one of them.

And whether we capture a huge share of that, I don't know.

I think we're very well positioned to do that, but we like that secular tailwind and we think that is a very large market.

And we think that our products serve that market very well.

And so that's what we're going after.

I think we're still -- I mean, just in terms of revenue and financial, these businesses are a tiny, tiny fraction of both ANGI and Match.

So we're years away from that tail on either one of those businesses, but we do see the potential there in terms of having a real business with a real product and barriers to entry and nice momentum and a very large addressable market.

I think I joked on a previous call that these were gems hiding in plain sight.

And now they're going to be gems no longer hiding.

I mean, you saw Vimeo's accelerating revenue growth of 29% this quarter.

You saw Dotdash growing 35%.

And our mobile business grew organically almost 80%.

So we're excited to share more of that with our investors and analysts.

Our next question comes from Ross Sandler with Barclays.

A follow-up on Dotdash.

Can you talk about the revenue growth that you're seeing in terms of page view growth versus ad load versus CPM?

And as you look out into the future for Dotdash, how big is the opportunity within the existing brands that you have already?

Or do you need to keep adding more verticals or more brands to the portfolio to keep the growth rates up as they are right now?

And then the second question is on Dictionary and Electus.

So do you feel like those asset sales were more one-off?

Or -- I think the plan has always been to run some of the legacy businesses for cash flow.

Do you think other asset sales are a possibility?

How are you thinking about the portfolio on that front?

Sure.

I'll do those in reverse for you, Ross, so Glenn can look up the answer to the first question.

The Dictionary and Electus sales, I think, I guess, by definition, any sale is one-off.

And when we did it, we have talked about, and we continue to talk about cleaning up distractions and really focusing on things that we have a big long-term vision for.

And I think we're largely through that effort with completing those 2 sales, not to say we can't or won't sell anything else, but I think that we are largely through that effort.

On the question of Dotdash growth as it relates to whether we need more verticals, more brands, et cetera, it's certainly a mix of all of those things.

I believe, in our existing verticals and brands, we have plenty of growth ahead.

That's both in terms of audience and page views, but that's also in terms of monetization.

It doesn't mean necessarily increasing the ad load.

We're seeing real demand for our products from advertisers.

I've talked about the stat, and the stat, I think, continued again this quarter, which is our advertisers in a publishing business with display ads are coming back every quarter.

Top 10, I think, all repeated -- 9 of 10 or 10 of 10 repeated...

9 of 10.

9 of 10, okay, repeated this quarter, which is just an amazing stat in this business.

And it tells me that we have the potential to increase monetization here without increasing ad load on this property.

And again, I believe more audience is possible.

I also think that we will get into new verticals, and we will add brands here because I think we have a system that works.

And I think that we can repeat that playbook.

It's something that we've done in a lot of other categories, and I expect it's possible, specifically within Publishing.

So I think we will, either organically or through acquisition, add more verticals and more brands.

And I think that, that will contribute to the growth rate looking at the years forward.

Yes.

And the verticals in which we operate are very large verticals, health care, finance, home, travel, tech.

So there's a lot of room within those and, obviously, some obvious verticals to expand into.

Yes, Joey mostly answered the question, but remember, when we broke this into verticals, we had a stair-step increase in our traffic.

So we are going to continue to grow traffic.

And remember, this is intent-driven traffic.

So we believe the CPMs and our throughput -- our revenue throughput from that increasing traffic will be high.

And we are continuing to benefit from that overindex, if you will, from a revenue perspective.

No from an ad load, we're not going to materially increase the ad load.

One of the things we've effectively done, as we've talked about, is actually reduce the ad load.

And then also, there's other revenue opportunities embedded in the business.

There's an emerging e-commerce opportunity.

And given, again, as I said, the intent-driven nature of our traffic, there's a performance marketing opportunity within that, that we're going after.

So we feel great about the revenue profile going forward for a combination of all those factors.

And I think that a lot of mistakes that other Publishing businesses have made historically is increasing their ad load over time, which, to me, provides room for competition to come in and kind of undercut as it relates to ad and user experience.

And our intention is not to let that happen with our businesses in this category.

I think that answered all of your questions, Ross.

Next question comes from Anthony DiClemente with Evercore ISI.

Best wishes, Chris, on your future endeavors.

Thank you.

Brandon, look forward to meeting you, and welcome to the investor jungle.

Thanks.

Wanted to follow up on ANGI.

Was curious -- just given some pockets of softness we've seen from a macro standpoint in the housing market, how would you characterize ANGI's exposure to that going into next year?

Is that contemplated in the outlook?

And then how does consumer behavior actually work, do you think, if we were to go into a housing slowdown?

Is it maybe more maintenance work for folks versus buying houses?

And then a follow-up also on Vimeo.

There's a lot of commentary in the letter about Vimeo growing its relationships with existing customers, and that sounds like great traction in terms of ARPU growth.

So just interested in hearing more about the tools to drive higher ARPU, maybe a little bit about Vimeo stock and the opportunity there would be great.

So this is Chris.

I'll answer the question on housing.

I sit on the board of Realogy, so I watch the housing market closely.

I'm very close to it.

And I've always sort of tried to watch over the years what happens in housing and how I thought that has sort of impacted us.

And I think, first, we really don't see much -- even as the housing market has felt some pressure over the last 12 months or so and some -- even at the higher end, that's been longer, we really haven't seen any manifestation of pressure on us.

And I think what we've done, over time, specifically, was to build a very robust marketplace, strong brands, so that even as the housing market moves around, we're sort of impervious to sort of any negative impacts.

And I think the rationale for that is, is that if people are staying in their house and we don't have as many sides, as they say in the real estate parlance, going back and forth, that's okay because people can do additions and remodels, nest in place.

And always, the need for maintenance repairs is going to be there.

And if people are moving a lot, then we benefit because you've got a lot of sides going back and forth and people are fixing up homes as they sell one and move into another.

So I think we're in a uniquely positioned place where we do well no matter what happens.

And I don't think we're going to see any sort of strong correlation with what happens in marketing with what happens in our business.

So I feel very confident about how we're positioned for the long term.

And I think, frankly, when you've got the top brands like we have, when you have the service providers that need us just to help smooth out their businesses throughout the year, we're in a really good position no matter what happens.

And as you know, we're in 400 different markets and 500 different categories, so we are exceptionally well diversified.

There's no service request category that is greater than single-digits percentage of the total, so well diversified across everything a homeowner would need, irrespective of the economic cycle.

And on Vimeo ARPU, there's a bunch of factors that drive ARPU.

One of those is, as I'd mentioned earlier, enterprise sales.

So the average enterprise sale, I think, is something like $20,000.

Now that's moved up from the prior quarter, so that can meaningfully impact the overall averages.

But it's also adding incremental services.

You point out Vimeo stock footage, which is a great point.

We look at a product like that to add incremental value to the video creators and provide a new revenue opportunity.

It just adds that convenience inside the platform as against having to go outside the platform to do it.

And we can see that manifest, both in actual purchasing of stock footage, but also driving conversion and driving more users and higher-end users -- or higher-spend users into the funnel for subscriptions.

Stock footage itself is still very early, so we've got a lot to learn there and we've got a lot to prove there.

But we are optimistic.

It's a reasonably sized multibillion-dollar market, and we think we can take a share of it.

And the same will be true of new features we start to offer over time.

We are looking at things earlier in the video-creation funnel that we think can drive incremental users, incremental spend, incremental stickiness of the platform.

And as we add these features and as we have added these features, over time, we've seen users begin to engage with them and drive that either through subscription, conversion or incremental spend.

And we think there's plenty of room still to go there.

Our next question comes from Ygal Arounian from Wedbush Securities.

So on ANGI, so your marketplace, you're paying service professionals growth slowed a little bit.

There was a little deceleration there as there was in the service requests.

But there was real good strength and an uptick in growth in the revenue per service professional.

So can you talk a little bit about those dynamics?

And what -- I guess, especially, what drove some of the step-up in the per service provider revenue?

Yes.

So when you look at these SP counts, these are not commoditized small businesses, right?

They come in all shapes and sizes with vastly different levels of spend and budgets in the marketplace.

And so nominal account is important, but over the course of the year, as we've been trying to solve our capacity problem, we've really been focused on bringing on higher-quality, higher-spend customers that are able to take on more business and serve more consumers, more homeowners.

And we've also been working with our existing customers, particularly those that have seen the most success in the marketplace to expand their budgets where appropriate.

And so what we've seen through this process is we've really increased the average size of our SP, both new and existing, and that's where you're seeing the flow-through in terms of the average spend per SP going from 7% to 14% and -- or the growth rate there going from 7% to 14%.

And overall, as Glenn mentioned earlier, our total capacity has gone up over 30%.

And so our focus is both on growing our sales force and growing our nominal network size but, more than ever, it's also on increasing the quality and size of the providers that we're bringing into the network.

This is Chris.

I'll say something as well.

I mean, on my way out, I'll leave the one refrain, which is capacity, capacity, capacity.

I've said it over and over and over.

We could go out and do something nominal any time, but the real ability for this marketplace to sort of hum is to have lots and lots of capacity.

And we've said we were going to go out and bring in the highest quality capacity.

That meant we didn't go after some of the sort of lower-consideration tasks, and I would argue that's where -- and Brandon was a big champion of the Handy acquisition.

The Handy acquisition fits in very, very nicely.

They're specialists in that lower involvement space.

They focus on handymen maids, et cetera.

So you have a really nice symbiotic relationship with that asset joining the family.

And so I would never be too focused on nominal.

I would look at what happens with capacity and how does that drive revenue.

And I think we have said we're going to focus on that.

You're seeing it flow through.

And now with Handy coming into the fold, you have a chance to potentially go in and add some of these higher nominal but lower involvement SPs to the network.

And we talked about the opt-in product.

That actually is outside of capacity.

And Brandon mentioned the 14% revenue per SP.

We hit a record revenue per SP of $1,034 this quarter.

Now as you know, that drives lifetime value.

So this quarter and this year, the cohort of SPs that we're bringing on are the highest cohort from an LTV, lifetime value, perspective that we've ever had.

Awesome.

Okay, very helpful.

And then if I can, just a quick follow-up, digging in a little bit deeper on Handy.

So you've talked about the fixed pricing or the pre-pricing products there being a driver of the acquisition and part of the platform that you like.

And that's something that's been, I think, absent on your own platform.

You've talked about the difficulty on having something like that for higher-ticket items, where a service provider needs to come to your home and give you an estimate and take a look at the kind of work that you need to do.

As you think about integrating Handy into the broader HomeAdvisor system, is there any correlation where -- of that product where you think you could bring fixed pricing more onto the platform overall for HomeAdvisor?

Yes, absolutely.

That was part of the rationale.

We like the innovation that they have in place there.

And we obviously have over 500 types of home projects that we support.

Not all of them are going to be able to be fixed price, but we absolutely believe there's an opportunity to perhaps apply their model across a range of the services we do offer.

And one of the things we like about that, aside from the fact that homeowners obviously like the ability to see upfront pricing, is the monetization model there gets much closer to the transaction and that you're really taking a share of the transaction revenue.

And we think that is -- where possible, we think that's a better model for all parties involved, so we're excited about that opportunity as well.

It removes friction as we move -- as we remove friction from it, our TAM goes up and our opportunity increases.

Next question comes from Dan Salmon with BMO Capital Markets.

For Joey or Glenn, Glenn, you were kind of digging into this a moment ago, so maybe best for you.

But I want to come back to Dotdash and what you mentioned a moment ago about the intent-driven nature of the traffic there.

It's not a passive audience sitting back for entertainment value.

It's one that's seeking out information and one that often leads to transactions that follow that.

And you mentioned a moment ago the possibility for e-commerce.

I'd love to hear a little bit more about that just because the line between being a good direct response advertising opportunity and an e-commerce one is often a blurry one.

So I just love to have you expand on that.

Are we thinking about e-commerce enablement that you support yourself, building out just a better network to connect brands through to facilitate through other platforms maybe a little bit better?

Would just love to hear more about that.

Sure.

I'll start, Dan.

You're right.

The traffic is intent-driven, and the way I describe it sometimes is the sort of push versus pull publishing.

The typical publishing model is you sit in a room and you think about content and then you push it out and hope people are interested in it.

Ours is different.

It's more pull content in a sense that we know users are looking for information on topic X. And we publish what we think is the best information on topic X. Take for example a recent one, electric scooters.

People are interested in electric scooters.

There's a lot of attention around electric scooters, so we will publish content on what are the best electric scooters available in the market today based on price, based on value, based on battery life or whatever it may be, and we'll publish that content in a purely editorial voice, in a purely unbiased way of evaluating the various options that are available.

But one thing we'll do, and this gets to your e-commerce point, is we'll put links on that page so that, to the extent somebody wants to transact directly from that page, they can click through on a link for an electric scooter and purchase that electric scooter somewhere.

And when that purchase happens, we can get a piece of that transaction.

I don't think we're likely anytime soon, possibly ever, to get actually into the business of being principals in e-commerce.

I think we're going to be an entirely independent editorial voice, looking at things, but then being able to make money to the extent people want to click through and transact.

So that's the basis of most of our e-commerce revenue today and the potential that we see in e-commerce revenue going forward.

But there are other little things.

I mean, we found that certain retailers or retail platforms are interested in some of our brands and licensing some of our brands to help sell their products, which is something that we're experimenting with right now and we're open to.

And so that will maybe open up new channels for us in e-commerce.

But I think the near term one is likely this sort of affiliate e-commerce business.

Our last question comes from Justin Patterson with Raymond James.

And congratulations to Chris.

Best wishes going forward.

Thank you.

I wanted to ask about the new sales office in Chicago and just your philosophy on office expansion, in general.

As you open these new offices, what's typically the time line around seeing the benefit to capacity growth and just overall revenue running higher?

Yes.

So I think, philosophically, we've experimented with a lot of different ways to go add sales offices.

If you look at our sales office in New York, it's a bit different from the sales office in Denver.

If you look at our offices in LoDo, those are different as well.

And what we've been trying to figure out is where can we find the best pool of talent that fits our sales model.

And so we've experimented a lot.

I think what we've found -- and Craig Smith has really driven this.

He is a pioneer in the space.

He knows it really, reallywell and how to find the right mix of talent for sales.

I think we found that some of these sort of near downtown, little hipper, little cooler spaces where we can bring in new graduates and folks who have high energy, fits our model well.

So if you look at what we're doing in Chicago, that's sort of what we're going after, is that sort of vibe and prototype of sales center.

One thing I'll say is we've gotten better and better and faster and faster at opening up sales offices and then getting them up to speed.

That's a testament to our HR team.

It's a testament to the training team.

It's a testament to Craig and his team because this is no easy task.

And so we continue to philosophically think, if we can have a lot of these interesting, smaller-footprint offices in areas where we can get access to great talent, that will be a formula that we'll look at over the coming years.

And I think we still have a long way to go in sort of finding those opportunities, launching those types of centers, and we're getting better and better every day at not only just launching them, getting them up to speed and getting productivity.

I think if you look at the productivity curves of the new sales centers, they're faster and faster and faster.

So I think we feel very bullish about opening new centers and getting really, really good at finding talent that's getting harder and harder to find these days.

I think on Chicago, specifically, you can probably think of it as scaling over the first half of 2019 and starting to meaningfully contribute in the second half of 2019 from a network growth standpoint.

And just to frame that up.

I think in our shareholder letter in 2016, when we did the deep dive on HomeAdvisor, we've talked about 9 months until individual salesperson is breakeven.

We're now down to about 7, 8 months, depending on the location.

So obviously, as Brandon said, that's one of our investment areas for 2019.

All right.

Thanks, everybody.

Thank you, operator.

Have a great day.

Everyone, this concludes today's teleconference.

You may now disconnect.