Match Group Inc (MTCH) 2018 Q4 法說會逐字稿

Good day, and welcome to the ANGI Homeservices Fourth Quarter 2018 Results Call.

I would now like to turn the conference over to Mr. Glenn Schiffman.

Please go ahead, sir.

Thank you, operator.

Good morning, everyone.

Glenn Schiffman here, and welcome to the ANGI Homeservices fourth quarter earnings call.

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

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

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

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

It is currently available on the Investor Relations section of 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 such 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 the ANGI Homeservices' fourth quarter press releases and our reports filed with the SEC.

We will 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, again, to our press releases in the Investor Relations section of our website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures.

Now let's jump right into it.

Joey?

Thanks, Glenn.

We're now up to almost 8,000 employees at IAC, and I just want to thank all of them for another great quarter, which capped, I think, the best year in IAC's history.

And it's fun to be a part of it, and it's fun to have everyone among those 8,000 a part of it.

We have lots to look forward to at IAC right now, and so I want to get to questions quickly, so we can answer on what that looks like.

And with that, I'll turn it over to questions.

(Operator Instructions) We will now take our first question from Dan Salmon from BMO Capital.

Joey, a couple for you.

First, there's a really interesting line in the letter here with regard to ANGI Homeservices where you talk about wanting to become the one-stop hub for managing their home.

I can think of a lot of different businesses from utilities to ISPs to smart home technology that could use that type of phrase.

Obviously, ANGI Homeservices is focused on your physical home traditionally.

You've also added a business here with warranties.

Could you talk a little bit more about that vision that you have for a one-stop hub for managing the home?

And then, just a second one.

I think next year, your ad partnership with Google is coming up for renewal.

Would love to hear maybe just some precision on the timing of that and what you think is important for investors to focus on with that.

Sure.

The first question, Dan, is probably best for Brandon to answer, but I'll give it a second and -- hit the second question and turn it to Brandon.

The -- when you think about the home, it's this massive investment from a -- by a consumer that's usually significantly more than their net worth, and it's something that the vast majority of people have no experience doing, whether it's the financial component, certainly the repair components, maintenance, things like that.

And we think that given our position in the market in terms of being able to help them with repair, help them understand the products that are in their home, the products that comprise their home, that we can add a lot of value to the consumer.

I do think that we'll tie in -- I'm being a little bit vague here, but I do think that will tie in with the acquisition we just made on the warranty side and offering consumers warranties.

But there will be a time, we believe, in our future where a consumer can come to us through our apps and manage the significant components of their home through their relationship with us.

And that's what we're trying to build kind of one piece at a time.

Let me answer the second question then turn to Brandon.

The current Google Search deal expires in March of 2020, so about a year from now.

But as we have typically done, we start that process much earlier, and we are now in a position where I think actually, coincidentally, we just sent a signature page over to Google on an extension today or -- this morning or yesterday or something.

So we are -- we'll make a filing as soon as that becomes official, I would guess within the next week or so, and for a 3-year extension on that deal.

That's been a great partnership for us.

That's been a great partnership for Google.

I think it's probably generated well over $10 billion of revenue between the companies over probably close to 20-year history and that is an important piece of revenue for some of the businesses within our Emerging & Other segment, specifically Ask Media and our Desktop Applications business.

So I think that's a good sign.

Obviously, the extension is important to that side of our relationship with Google and how that works, and that's on substantially the same terms as our previous agreements.

But the thing I'll remind you, which I always remind when we talk about, in particular, the Applications business is policy changes can happen.

Those can happen outside the agreement, and so that's a risk that continues in that business.

Let me turn it to Brandon on home hub who's really the architect here.

Sure.

Joey did a nice job describing it.

I think if you look at our North American properties, in the U.S. in particular, we are reaching almost an unprecedented population of homeowners through Angie's List, HomeAdvisor and Handy.

And fundamentally, we believe that we have the opportunity to productize home services in new and innovative ways that just have never existed before and, through that, really transform how people maintain and care for their home.

The way HomeAdvisor, Angie's List and Handy work today is helping people -- is taking friction out of the process, makes caring for your home easier.

But it's still episodic.

People have something go wrong, they react to that, decide they need to go to find a specialist to come fix that project.

And we think there's an opportunity to really change the way this works in a more complete way and take a lot of the pain and difficulty and friction out of just caring for your home.

And so home warranty is -- we could think of this as maybe our first foray into dealing with unexpected repairs.

That's one segment of the type of work people need to deal with.

There are many others, as you know, and that's how we're thinking about it.

And Dan, just to maybe frame the opportunity a little bit.

The average homeowner in the United States does about 6 to 8 jobs a year.

And between periodic maintenance and episodic repair, the average homeowner probably should do a dozen or so jobs a year.

Right now, we do about 1.8 jobs for each of our customers.

You may recall from a letter about 2 years ago, we said that was 1.6.

So we're making progress there.

But as Brandon said, as we take friction out of the process, we can drive closer to 6 to 8 and then help homeowners drive closer to the dozen jobs that they actually should do.

Getting back to the Google deal.

Versus when we renewed it a couple years back, we're a very different company.

Our partnership with Google now is comprised of less than 20% of our revenue as we have a lot of other engines of growth in the business.

We will now take our next question from John Blackledge from Cowen.

Joey, in the letter, you kind of set the table for investments across the platforms this year, given the respective opportunities.

On ANGI, maybe could you discuss the share gain opportunity in more detail and also provide kind of the key puts and takes to getting to and/or exceeding the 25% revenue growth?

And then just one question on Vimeo.

How should we think about sub growth in particular kind of driving higher enterprise adoption this year?

And who are Vimeo's kind of key competitive threats, if at all?

Sure.

The ANGI share gain and 25% growth, I think the overall home services market in the U.S. grows like low single digits.

So 25% growth, obviously, is by definition going to take share.

I think that will take share from, by and large, our by far biggest competitor, which is word-of-mouth.

We think that's still 90% of the market.

So that's the goal there.

We have -- there's a number of things that are going to drive the growth.

It's the typical things that we've been investing in: sales and marketing being huge ones, sales and more salespeople, add more service professionals onto the platform or help service professionals who are already on the platform understand the opportunity there to spend more money and find more customers through us.

Separate from that, we are doing 2 things that gets to what we are talking about before and what Brandon was talking about before.

The warranty business, that's going to be an investment.

The pre-priced transactions we talked about, I think, a quarter or so ago with the acquisition of Handy, getting into pre-priced transactions, a lot of this through- of all our relationship with the consumer and it will be an investment over the course of this year and it can push revenue growth.

But the biggest one to get to that 25% growth is really pushing more on the sales and marketing.

And you will recall that last year, we pulled back on, and I mentioned in the letter, we pulled back on marketing.

We've now reaccelerated that marketing because we're ready to be able to absorb all that demand.

We're also ready to be able to absorb all that demand because the service professionals on our platform are now different than the service professionals of last year in a sense that they're capable of spending more money and they're capable of using more of our products.

So all those things come together in the revenue growth and the share gains.

Brandon will probably want to add to that, but I'll hit the Vimeo question, too.

On Vimeo sub growth, enterprise is definitely a component of that.

That's a relatively small component of total revenues in 2018.

That continues to grow, and the component still will be a relatively small component, but a noteworthy component of revenue by the end of 2019.

That business, I think, is -- enterprise is probably doubling year-over-year right now, and I think that, that pace is likely to continue.

When we think about the competitive landscape, we don't have a competitor who does the full suite.

We do have competitors who, in any individual thing we're doing, does compete.

So take storage or hosting, I think Dropbox is there in storage, take some of the editing tools or review tools that I think Adobe and Apple have products there.

But really the end-to-end turnkey product for somebody who is not a video professional -- by the way, we have plenty of video professionals on our platform, but that product for -- think about a small business, somebody who's not in the media business, but somebody who's in a different business, that we have, I think, the only product for that customer end-to-end.

Do you want to...

The one thing to note is that the lion share of revenue acceleration next year at ANGI is still coming from the Marketplace business.

The advertising business is still shrinking.

Angie's List is still shrinking when you look at the entire year.

We do expect that to turnaround by the end of the year, but still is a net drag for the entirety of 2019.

Joey said this, but sales and marketing are really the engines that are going to drive the Marketplace business growth.

We start the year with our service provider network in a stronger position than I'd seen in a very long time, and it's monetizing very efficiently.

This led us in late Q4 to really lean back into marketing, which we are seeing returns on as we get into Q1.

And that's really the formula that drove growth prior and up to the point of the merger with Angie's List, and it's what we've been eager to get back to now that the integration there is complete and behind us.

And so that's the main engine.

Yes.

And look, let me just throw some numbers around fourth quarter to highlight it.

This fourth quarter, we really set the stage for the acceleration going into 2019.

Our capacity was up 36%.

We've talked about that all year.

I think last quarter, it was 34%.

We continued to make product progress and roll out our opt-in product.

You heard me on the last call, but the numbers continue around lifetime value for our service professionals.

Our 2018 cohort of service professionals have the highest lifetime value that we've had.

So that obviously, flows through.

And then, in terms of investments, to put a fine point on what Joey said.

Between Handy, home warranty and the investment in home hub, of which Joey and Brandon spoke, we're looking at about $25 million of discrete investments in that.

And but for that $25 million and our increased spend on marketing, of course, our margins would be going up here.

There's real scale in this business, as I've talked about, virtually in every line item.

And there will be real scale from a margin perspective in every line item in 2019.

And you've also heard me talk about how we pulled a lot of margin improvement that we otherwise thought was going to occur in 2019.

We pulled it into '18, particularly on marketing.

And maybe one more little factoid with respect to marketing.

Marketing still will be, as a percentage of revenue, lower in '19 than it was in '17, again, evidencing real scale economics in this marketplace.

We will now take our next question from Brent Thill from Jefferies.

Joey, last night, you had mentioned that ANGI is countercyclical, and I'm just curious if you could walk through if the consumer starts to soften, why you have such confidence.

You did see a little weakness in Q4, and I'm just curious if you could parse out perhaps what you saw in the fourth quarter.

This is Brandon.

We are mindful of -- and obviously aware of the slowdown in the home industry, but we have not seen any impact on our business.

Our performance this year was largely driven by our pullback in marketing early in the year than our reacceleration back in the marketing late in Q4.

That's a far bigger factor for us than any macro impact.

In terms of how subject we are to those types of macro impacts, the reality is that there are offsetting factors, when and if that does occur, that benefit us.

So if consumers soften a little bit, that tends to mean that providers actually have a greater need for our service in terms of finding new customers.

Providers are where we, obviously, make the majority of our revenue.

And so in general, we don't -- we think we're pretty -- I won't go so far to say immune, but we think we're pretty resistant to that effect.

Clearly, if there was some sort of major collapse in consumer demand, that will be a different story.

But I don't think what we're seeing, which is largely probably driven by interest rate effect on home buyers, is really affecting our business

Yes.

And we just looked at what happened in 2008 in the business.

It was a very different business then.

But one thing that, I think, was consistent and we expect would be consistent is activity among service professionals leapt up, meaning they were more engaged on the platform, they were spending more time on the platform during that period.

And I think that is something we'd expect if that's what you saw in the market.

You could also argue our opt-in product is tailor-made potentially for an economic slowdown because you know an SP can react to a job and a potential opportunity based on his up-to-the-minute or her up-to-the-minute schedule as against a month or a year-old budget that they negotiated with a member of our sales force.

So again, as we move more and more and more to an on-demand, opt-in type model, that, of course, helps us in that -- in terms of being more recession resistant.

We will now take our next question from Robert Coolbrith from Wells Fargo Securities.

On ANGI, I just wanted to ask on the 2019 EBITDA guide.

Does that reflect a more aggressive investment stance versus what you've been contemplating around the time of the 3Q call?

Just walk us through any changes in your thinking around the investments that you'll be making over the course of the year.

And then also on Fixd, curious if we could get a little more detail on the business, how they go to market today in terms of mix of customer acquisition channels, direct-to-consumer versus broker.

Anything you might be able to tell us about the retention in the business would be interesting as well.

I'll take the 2019 guide, and then Brandon will take Fixd.

One big thing, obviously, that happened was Fixd.

And that's losing money, of course, and that's part of that $25 million discrete investment that I just mentioned earlier.

And that wasn't in our contemplation when we talked about the potential guide.

But recall, in the letter -- in the third quarter letter and on the call, we said revenue will grow faster than EBITDA and then, therefore, margins will go down.

So Fixd is clearly one.

And then as we finished our year-end planning and we saw some of the real momentum inside the business, some of the unit economics inside of the business, some of the metrics inside of the business in Q4, almost across the board, the investments that Joey mentioned earlier, we wanted to lean in.

Mostly, it's marketing, but again, it's across the board to drive the revenue growth that we expect.

We mentioned the 25% target, and that is absolutely our goal for the year.

With regard to Fixd, what we really like about Fixd is that they're delivering a product that meets customers' expectations and makes them happy with regard to the warranty service.

Obviously, our plan and -- our thought around this is that we have this amazing reach to millions and millions of U.S. homeowners through Angie's List and HomeAdvisor and Handy.

And so our intent is to offer this product to the homeowners we're already in contact with from a direct-to-consumer standpoint.

We have both a unique ability here to offer this at amazing acquisition economics and also some interesting promotional opportunities.

When you think about all the homeowners that are coming, let's say, to HomeAdvisor, telling us very specifically the type of project they need, we might be able to identify a subset of projects that we could promotionally offer being included in a warranty if somebody were to sign up today.

That's really unique to us and is something, I think, that can't be replicated elsewhere.

So that's kind of how we're thinking about it.

It's small.

It's in a few markets in Texas.

There's a long way to go to get this to full scale, but we think we have some natural synergies there in terms of how we can bring it to market.

(Operator Instructions) We will now take our next question from Jason Helfstein from Oppenheimer.

Just a two-parter on ANGI and then an IAC question.

So can you guys talk about how ANGI performed in the quarter, at least in EBITDA relative to your expectations?

I think there was some confusion perhaps relative to Street numbers just given the moving parts.

And then, again, related to ANGI, the logic behind the buyback.

That would be a pretty high percent of the float for a stock that already doesn't have a lot of float.

So maybe talk about the timing and the logic behind that.

And then, Joey, as far as on kind of M&A and allocation of capital, it does look like there will be some movement with Yelp as far as an activist shareholder.

Wouldn't be surprised if they get pushed to have a formal process.

Clear that their legacy business of having local salespeople doesn't work.

You guys have a lot of experience around local.

It looks like that business would have -- at least if you move more to a lead type of business, i.e.

ANGI or a Grubhub, i.e.

24, there would be a lot of synergies with your business.

Maybe just talk broadly about how you think about -- how you're thinking now about local and that platform.

Sure.

So on Q4 performance, I think we've said we -- our most recent number was 260 to 270 for the year.

We came in at 260.

So we're happy with that outcome.

The -- we could go further back.

We said 2 years ago, we're going to do 270.

And so coming in where we came in, I think, we're thrilled with.

The one thing I would have liked to see is some faster revenue acceleration.

I think we were probably off by maybe a month there, meaning we knew we'd pull back on marketing, we pulled back on marketing after Q1 of last year.

We then started to, as Brandon mentioned, accelerate that marketing late in Q4 of also last year.

And I think we're seeing the benefit of that in our numbers now as we've started the year.

I maybe would have liked to see that a month earlier, but we're now debating days.

So overall, I think, we're quite happy with where we are in that business and our outlook for that business.

As it relates to the buyback, that is just something we like to have for good housekeeping.

We have one in place at Match.

We have one in place at IAC.

I think we always want to have all tools available for capital allocation, and a buyback is one that you need to obviously lay out in advance with the board, and so that's what we did in this case.

And it's just something we want to have on the shelf as a tool that's available for us.

There's nothing, I think, more to read into that in a sense that it doesn't mean we're on the verge of something or not on the verge of something.

It just means we like to have access to that tool as a mechanism.

As it relates to Yelp, I think we've said for a long time, I don't know, publicly or privately, we'd love to have a commercial deal with Yelp.

We think we can do a great job for them as a partner on the segment that we're in, in homeservices, and we're totally open to that.

We would -- we'd love to do that.

That would certainly be our first choice in how to do something.

As it relates to M&A, that's -- to the extent something becomes available, we always take a look at everything in every category where we're in, when there's an opportunity to do that.

But we wouldn't comment yet on it.

We will now take our next question from Anthony DiClemente from Evercore.

Just a couple, just on Vimeo trends.

So the subscriber growth for Vimeo has trended closer to around 10% the last, I think, 3 quarters, so there's some deceleration in subgrowth there.

As we think about the forward outlook, just talk a little bit about expectations around revenue growth for Vimeo.

And should we be expecting a re-acceleration in that subscriber growth?

Or will more of the growth come from pricing going forward?

And then more broadly on Vimeo, just the investment strategy to drive growth.

How would you sort of rank your priorities for it between new products, marketing, international?

I do imagine it's all of the above, but any more color on the investments or growth strategy would be great on Vimeo.

I'll start with the second part, and then I'll turn it to Glenn for some of the specifics on the numbers.

But it certainly is, as you said, all of the above when we're thinking about growth.

Maybe taking a step back, the thing that's happening at Vimeo, which is our design, is we are transitioning that business to a higher-value, higher -- type of customer, not necessarily away from the basic customers who use only the most basic features, but certainly emphasizing our energy around leveling up.

So that's video professionals, that's all small- and medium-sized businesses, and that's certainly enterprises.

Each one of those segments is very important to us.

The sort of casual video maker, uploading from their iPhone is not really the emphasis.

We can serve that customer.

That's -- well, it doesn't cost us anything to bring that customer in, but that's not where we're emphasizing our product road map and our vision.

It's really around the pros, the small- and medium-sized businesses and the enterprises.

And all of those segments are growing, and all of those segments will continue to grow.

Now it's just the math of an enterprise customer who's worth $20,000 and a basic customer who's worth $60, so I think that's probably 300 and something to 1 to match 1 to the other.

But that's the path.

And the bigger point is we think that's a roughly $20 billion market.

Just to give you an example, which I found out about, take a customer like Warby Parker who's a phenomenal company.

They're in the eyeglass business, the retail business.

They're not in the video business.

But they're making 5 videos a day, and they're publishing those videos on social media to talk to their customers because that's what they do, they're a very forward-leaning company, and their customers expect that of them.

That's how they communicate.

Go back even 2 years, 3 years, 4 years, somebody making 5 videos a day would be a media company.

But this is an eyeglass company making those videos, and they're using our platform to do that.

I think about all businesses need to be doing that -- whether they need to or not, will be doing that over the next 10 years.

And when we look at that tailwind, that's kind of how we think about it, and that's how we're emphasizing it.

And there is some math in there as it relates to the subs.

When the higher-value subs grow and the lower-value subs don't grow, that's the math that gets to the numbers that we've been seeing.

Yes.

To give you specifics around that math.

Business and premium tiers are the fastest growing from a sub perspective.

That's obviously logical based on what Joey said in terms of our mix shift.

And enterprise is the fastest growing from a revenue perspective, but business and premium are not that far behind.

Joey, earlier on the call, mentioned the enterprise revenue doubled year-over-year.

Translating that into how to model this business on a go-forward basis, we've talked about, from a subscriber perspective, 10% to 15% sub growth.

I think we're going to be at the lower end of that.

We did 9% this quarter.

We could dip down as we accelerate that mix shift.

We could be 8%, 9% for the next couple of quarters, maybe 10% going forward or maybe we never quite get quite to 10% given this mix shift.

But what you will see is continued ARPU strength, and that ARPU strength this quarter was 22%.

And we guided ARPU at kind of 10% to 15%.

And I would think we'd skew to the high end, for sure, of that range on a go-forward basis.

More broadly, the way those factors interplay, as we've talked about, 20% to 30% growth for Vimeo for a while now given the tailwinds in the marketplace and given the strength of our solution.

(Operator Instructions) We will now take our next question from Doug Anmuth from JPMorgan.

Joey, in the letter, you noted that a bit more than 10 years later, you've replaced the profits from the spins in 2008.

So now that you have a big base of EBITDA and free cash flow once again, how are you thinking about your ability to create more shareholder value by potentially shifting the structure?

And how do you think about your positioning now versus 10 years ago?

And then, if I could also ask -- you talked about BlueCrew a little bit in the letter as well, and I think this is probably a business people don't know much about.

Can you just explain more of your thesis around that business?

And how do you view it kind of relative to your other Marketplace businesses?

Sure.

So on profitability and how that relates to capital structure, I wasn't trying to portend some big change on the horizon.

I think it's an interesting stat.

It's something that we're proud of, but it doesn't mean that we sort of hit the trigger where we start to take things apart again.

We'll -- as we always say and always will, those are things that we consider regularly.

Those are things that we -- that a lot of factors go into how we consider whether or when to spin something.

And we continue to evaluate the cost and benefits of transactions like those and always will.

On -- the second one's about BlueCrew.

On BlueCrew, look, I'll start by saying BlueCrew is tiny, less than tiny.

As it relates to IAC, I think, the opportunity there, it's massive but it is tiny.

And we probably won't talk about BlueCrew again for a little while.

I really put that in the letter to illustrate just this sort of interesting dichotomy which we fall victim to, I think others fall victim to as well, which is you size the investment in something like BlueCrew based on the opportunity ahead.

And so we are going to invest in that, and I'll explain why in a minute.

But I think that the right framework for all future investments is not just the small companies that are losing money.

I also think it should be the big companies that are making money and that are, in fact, the strongest with the most certain return.

But going into BlueCrew.

This temp labor market is a multi-hundred billion dollar category, and the amazing thing is it is still basically entirely offline.

People are getting labor onto a factory floor or into a venue or whatever the case may be based on phone trees today and totally inefficient information.

This is the kind of problem that could be solved with software, and it could be meaningfully enhanced by a marketplace.

You have liquidity in jobs on the one side.

You have liquidity in employees on the other side.

And if that whole thing is working, people can choose exactly when and where to work for what pay, and employers can choose exactly when and who to hire, quickly with a click of a button.

I do think that more hiring will happen with a click of a button than it will with the labored process around interviews, et cetera, once software is in there and can help inform hiring decisions meaningfully.

And that's what we're going after there with, I think, both investment capital, M&A capital, whatever we can.

We see a big opportunity, and it's very, very earliest stage in there.

But again, impact on IAC, immaterial for quite some time, I would say.

We will now take our next question from Eric Sheridan from UBS.

Maybe 2. One on the revenue side.

Now that we have the breakout of Vimeo and Dotdash, is there anything we should be aware of that traditionally, from a seasonality standpoint, tends to drive those businesses through the year that we should just be aware of in terms of setting those things up in our model on a going-forward basis?

And then, with respect to Dotdash, wondered if we can get a little bit more color there on what are some of the key investments or how you're thinking about the drivers there going forward that could continue to compound that from a growth standpoint.

So Dotdash is definitely seasonal.

Q4 is going to be by far the biggest quarter in -- I would think, in that business forever just because the ad rates in the fourth quarter with retail are far much higher.

Vimeo, I think, is much less seasonal.

I don't know -- I mean, I know we're spending a lot in Q1 this year, which is not a seasonal thing.

It's just the timing -- a choice of ours in terms of marketing, but I don't think it's naturally seasonal.

That's correct.

Just one thing to watch there.

We broke out the hardware business, so we got the SaaS/platform business we broke out in our press release and hardware.

So you'll see a little more volatility in the hardware.

Given it's a SaaS business, it's very predictable, but hardware is what could undulate a fair amount quarter-to-quarter there.

Yes, Dotdash, obviously, is fourth quarter weighted, as Joey said.

You see in our guide, the first quarter, Dotdash is a little lower.

It's about 10% is our guide.

It's lower than kind of our -- the baseline that we've talked about for that business because we're transitioning the Investopedia business onto the Dotdash platform and program.

And just as when we verticalize all the other businesses, traffic gets hit, revenue gets hit and then we come out stronger the other end.

But other than the fourth quarter and during this first quarter of '19, that's the seasonality you need to kind of think through.

And then this Dotdash growth opportunity, I think, is inside their existing verticals, of course, and then entering new verticals.

So inside their existing verticals, it's creating more valuable content that they know works, where it works, where there's demand for that content.

And they've done a very nice job of growing that, I think, in almost all of their verticals.

And it sticks with those same 3 simple principles: it's the freshest content, it's the lowest ads and it's the fastest site.

And they keep doing that, putting in good, high-quality material.

I think that grows.

Entering new verticals, we just entered a new one a few weeks ago, which is the beauty vertical.

It's one that we had our eye on for a while.

We found a little acquisition, I mean really tiny acquisition, to do there, and we'll see how that one goes.

We did our first experimental acquisition, I will say, by acquiring an internal company, meaning moving Investopedia internally to the Dotdash platform.

Now we've got the external one with a -- in the beauty vertical.

And then the last piece, and we talked about this in the priorities for Dotdash, is building the brands.

We have a lot more traffic to those properties than we do brand, and we've got big ideas and big concepts around how to build up those brands.

And as you build the brand, you build that brand recognition into that through a lot of different means, primarily just delivering a great experience, but we've got some tricks up our sleeves there.

And I think that we start to get more repeat business, and that's how that business grows.

Of course, getting better at advertising and ad sales helps that.

I think I said this on the last call, but these are very large categories here that we're in.

So don't underestimate the amount of blue ocean we have here.

Each of our categories has subcategories within it, and each of our categories compete with much larger players where we're actively taking share.

That's the goal, and that's what everybody at Dotdash knows and understands and is aiming for right now.

In our health vertical, we're going after WebMD, and we think we can.

We'll be disappointed if we don't.

That's a huge, ambitious goal, but that's what we're going after.

In our beauty vertical, we're going after Vogue and Glamour and all these big traditional brands.

In our home vertical, we're going after Martha Stewart or whatever is theElle Decor or things like that.

We don't see a reason why we can't, if we keep doing what we're doing, and we keep doing it well, go after those.

And those are big businesses in big markets, and that's the goal there.

We will now take our next question from Ross Sandler from Barclays.

Two questions.

First, an area that doesn't really get that much air time, your mobile apps business.

So I think you got a bunch of different brands and strategies in there.

We saw recently that Calm raised a bunch of money and is actually profitable.

So any color you can provide on -- is that a subscriber CAC-LTV business?

Is it more advertising arbitrage?

Any brand that you're excited about within the mobile apps business, the portfolio that you have there?

Any color there?

And then, 4Q buybacks were a little bit lower than in the prior quarters.

How do you think about the buyback cadence relative to the value of the core stub?

Can you just talk about that?

Sure.

I'm glad, Ross, you asked about the mobile products, but it is a fun little area that doesn't get a lot of attention.

We are very much a subscriber business, around 90% subscription revenue.

And it is very much driven by subscriber acquisition costs relative to LTV, and we think we've got those systems that back up that spend and that LTV measurement pretty well nailed right now.

And products in there like RoboKiller is a fantastic product that prevents robocalling on your phones.

So not only does it stop the calls from coming in, but also, for the entertainment of our customers, they've allowed the robot to talk to their robot or their, what's it called, speed callers that call in and record that for everybody's entertainment.

That's a fun one.

That one's growing really nicely right now.

Just one fun stat.

So when the government was shut down for a little while, the Do Not Call Registry was also shut down.

And so that was a great moment for RoboKiller in that a lot of things were happening a sort of leap in robo calls, and RoboKiller was able to prevent that for their customers, which is fun.

We got another business called iTranslate, which does real-time translation.

There's a similar one in that vein called Converse, which makes it really easy for 2 people to use their phone -- 2 people speaking 2 different languages to use their phones to speak out loud back and forth.

We have Daily Burn in the fitness category, which we've moved from elsewhere and really totally revamped that business inside our mobile applications around subscriber acquisition cost and LTVs.

We have weather apps.

We have an airplane tracking app.

One thing we did miss, to your point, is the meditation category.

And based on that fund-raising evaluation, I think that was a big mistake.

That's probably something we should look at.

But these businesses, by the way, are also profitable.

They're comfortably profitable.

And they're fun to build.

I think we're going to keep launching products, keep digging in, in the existing verticals that we're in, whether that's translation or call blocking, things like that.

And we're optimistic for the future here, which is the first time in a while inside of Applications where we've said we really see a bright future, a multiyear future beyond just kind of doing what we're doing.

There was another question.

Yes, buybacks, Q4.

Look, it's the same answer we always give.

We're regularly considering buybacks in addition to M&A, in addition to investment through the P&L, and that's something that we'll continue to do.

I don't have a specific view on buybacks in the last 90 days nor in the next 90 days, but it's something that we'll continue to consider.

Yes.

Getting back to the Mobile business.

It may be clouded, given the acquisitions, but that business organically grew 136% in the fourth quarter.

That doubled from the third quarter when it grew organically 77%.

And then the second quarter, it grew organically 44%.

So that has become a gem of a business here.

I hope we can do more M&A there because we seem to have, again, a system that works where we can plug things in.

(Operator Instructions) We will now take our next question from Ben Schachter from Macquarie.

Can you talk a bit more about your appetite for acquisition and how it's evolving into '19?

Our read of the letter, it looks like you're getting a bit more aggressive.

And if that's true, how should we expect that to manifest itself?

Are you going to be doing bigger deals, more tuck-ins, specific platforms, et cetera?

And then separately, we expect platform fees on app stores to come under pressure in some time.

Yesterday, we asked your colleagues at Match about how that would impact their business.

Just wondering your thoughts on it and how it might impact some other businesses you have.

On the second question, I hope you're right.

We would definitely be a beneficiary if you are, and Match is the -- by far and away, the biggest beneficiary inside the family.

But the mobile applications business, which we are just talking about, would also benefit for sure.

I don't -- I can't think of anywhere else that it would matter.

The -- your other question was M&A.

I don't think we're getting more aggressive in M&A.

I think that we are -- perhaps, we have just more opportunity today than we did 12 or 24 months ago.

Again, mobile applications, as we were just talking about, I certainly would not have said M&A is available in the Applications business some time ago.

And now that we've got a system there, that is available.

I don't think -- again, maybe perhaps I'm just picking on the word.

I don't think that's more aggressive.

It's just that now that fits within our acquisition criteria.

I think in the last 12 months, we've been integrating HomeAdvisor and Angie's List, which is a massive project, which I think the team there did phenomenally well.

And so now that we've digested that, I think, again, back to the same criteria, that is now -- M&A is now available again there.

And maybe that applies in more places.

And I guess that answers -- starts to answer the other part of your question.

We certainly do favor tuck-ins and we certainly do favor smaller.

I think that that's just because those have a higher chance of success, and we have a greater embedded competitive advantage when we do acquisitions like that.

I say this a lot, but I'll -- I know I'll repeat myself by saying, when we do acquisitions in our existing categories, we believe we can be the smartest people in the room because we know that category well, because we've seen every business model in that category, because we know what metrics look like in that category.

I think that means we could be smarter than other buyers.

Sometimes that means we can know the business or the potential better than the seller.

And so that's where we'd like to emphasize our capital.

But that doesn't mean we won't -- we always have and always will look at things outside of our businesses, and we'll look for opportunities, big and small, there where we can put capital to work.

We will now take our next question from Youssef Squali from SunTrust.

Two questions, please.

One is a follow-up to the M&A question.

Can you comment on the -- your thoughts on the current public-private valuations relative to where they've been in the last couple of years and relative to where you see opportunities?

And then secondly, at a high level, at the IAC level, can you just, again, help us rank order maybe your investment priorities by categories beyond -- even beyond 2019?

I think the guidance you guys gave for 2019 is very helpful.

But I was just curious as to how you look at that beyond -- how we should look at it beyond 2019.

Just where you see the need for the most investment, least investment, biggest opportunities, least opportunities.

Sure.

The -- I still think private valuations are pretty rich, more so than public valuations.

I'm not sure -- we have a bunch of theories about why that's the case, but I do still think, risk-adjusted, they're generally pretty rich.

Just comparing the businesses that have a lot left to prove, they're in big categories and they've got a little momentum, but they have a lot left to prove relative to businesses that have mostly built, over 20 years, an incredible cash flow.

And the dichotomy in price-to-risk there is, I think, odd.

But that doesn't mean there aren't gems and opportunities in the private market, and those are certainly things that we look at.

What was the second question?

Investment priorities over the next several years.

Yes.

Look, I think -- I hope we're in a position where we'll have investment opportunities in all of the business over the next many years.

I think ANGI Homeservices is in a, I think, special and unique position in that, that market is so big.

It is so our penetration relative to that market is so small, and there are so many adjacencies to that business based on the core of what we've built so far.

I think it's very easy to articulate a range of investments, big and small, over the next decade in that area.

And so I do think that will get -- I do think and hope that we can put a lot of capital there.

But you saw the chart that we put at the end of the letter where, in all of these markets, they're multibillion or tens of billions or, in some cases, hundreds of billions of dollar markets, our share is single digits in all of them.

And if we're executing, then we ought to be able to invest into each of them.

The good news is we're also generating real cash flow along the way, so we've got a lot more that we should be able to invest, and that's something that we think a lot about.

Yes.

Look, taking a step back.

2018 was a real proving ground for a lot of our businesses and for us in total.

EBITDA grew, what, 70-odd percent to about $1 billion across the entire family.

And importantly, that was done whilst the underlying metrics were getting more solid and stronger, which is what underlies and underpins our confidence for the future.

And I just want to harp on the last point Joey made.

Our margin profile allows us to continue to grow profit as we invest, and other companies may not have that luxury, who have to shout out an investment year and that investment year would come at great peril to the P&L.

I think we are fortunate, given the underlying power of our businesses, the diversity of our businesses.

We have 6 growth engines in the portfolio right now.

Every single one of them grew revenue greater than 20% in the fourth quarter.

That's, of course, Match; ANGI; Dotdash; Vimeo; the Mobile business inside of Applications, which we've renamed Mosaic; and our small business, BlueCrew.

And as Joey said, against the TAM, that sets us up for an interesting couple of years.

Well said.

We'll now take our next question from Brad Erickson from Needham & Company.

Just had 2 follow-ups on ANGI.

First, where do you think your SPs are capacity-wise at the moment?

Meaning -- while they may be paying SPs on HomeAdvisor, they obviously can pause their SRs as their backlogs get full.

Where do you think we are in the cycle at the moment?

And sort of what expectation beyond that are you assuming in your guide for 2019?

And then I have a follow-up.

As I mentioned earlier, SP capacity and the ability to monetize a consumer or a homeowner request is the most important factor in driving growth for the business.

And we ended the year in a stronger position than I've seen in a very long time, and there are a couple of factors that went into that.

One of them was the implementation of the opt-in platform last year, which essentially created a significant expansion of capacity from just the existing SP base.

Secondly, we had other optimizations to our algorithms that actually resulted in us seeing our SPs take on more consumer requests than they had been previously.

And this all really came to fruition -- the opt-in platform was earlier in the year.

And then in Q4, late Q3, we made some further advancements.

And so that's put us in a really strong position at the end of the year, led to -- as we talked about at the end of Q3 and I've talked about today, led us to really lean in, starting in December, on the consumer marketing front, and that continues apace now.

Our assumptions for the year are based on what we see currently in terms of what's in the guide here.

Got it.

And then just conceptually on ANGI, you're basically -- sounds like you're spending more to sort of seemingly arrive at kind of the same point you've talked about historically in terms of top line growth.

Am I stating that right?

Or is the message here today more that you're seeing opportunities for maybe bigger growth potentially, and so that's what the spending is really geared towards doing?

Which of that would you -- which of those would you say is kind of more accurate?

Yes, it's the latter, unequivocally so.

When we announced the transaction, we said 20% to 25% go-forward revenue growth.

And as we realized the synergies, it may take us time to get to the top end of that range at 25%.

And last quarter and reiterating this quarter, we're going to be at 25% for 2019.

And look, recall in the first quarter that this combined enterprise grew 15%, and our Marketplace business grew 28%.

And we closed the year at 37% and 21%, respectively, on our scale.

So we are definitely investing to beat our previous expectations or previous cases.

Our next question comes from Kunal Madhukar from Deutsche Bank.

Two -- a couple, if I could, one on ANGI and the other one on the app side.

On ANGI, given that you've been growing capacity, and Brandon, you just talked about how opt-ins have helped grow capacity significantly, why -- the capacity growth isn't -- we are not seeing that translating to like revenue growth overall on the Marketplace side.

So what's happening?

Is it not the right time, right place, right person kind of a thing?

Or what's the issue there?

And then on the app side, one of the things that you mentioned was -- in your letter, was e-commerce as a potential opportunity.

Wanted to get a sense of what you're thinking there.

Yes, this is Brandon.

I'll take the first question.

In Q1, we saw -- as we ingested the big jump in demand from Angie's List, we saw that we didn't have enough capacity, and we pulled back on some of our marketing channels and optimized margins and did that, both optimized margins and served our customers better.

We made tons of progress throughout the year on building up capacity.

At the end of Q3, we said -- we saw strength in revenue growth and we said, you know what, we've made a huge amount of headway on the capacity front in terms of expanding our network.

We're going to lean back into revenue, into consumer marketing, which obviously drives revenue.

We did that in Q4.

We got to it, as Joey said, a little later than we probably would have liked and really kind of hit it running in December, and that's kind of the story.

As we get into Q1, we're obviously seeing that accelerate and flow through.

But from the time we started marketing, particularly TV, there's some time necessary to build momentum and to see that flow through to consumer demand.

That's really the entire story.

And Glenn, you probably have a comment on revenue growth.

Yes.

Revenue growth accelerated.

Per my answer to the last question, revenue growth accelerated all year.

As I said, we started out the Marketplace growth at 28%, and it was 37% this last quarter.

And just like it takes time for marketing to kick in to lock -- to unlock that capacity, that capacity stays with us, and that capacity will be with our SPs for 2019, if we continue to do a great job, and beyond for sure.

On the -- on your second question, the e-commerce business, that's inside of Dotdash, and we've talked about that on previous calls.

That's our affiliate e-commerce business.

Given the strength of our traffic and the intent-driven nature of our traffic, we think we can monetize that traffic through an affiliate e-commerce business.

I think Joey gave the example of when you're searching for scooters or the best scooter, on the last call, you can serve up a way to purchase said scooter.

And maybe I'm missing something, but the capacity growth is translating to revenue growth.

I mean, you see this directly in the acceleration of Marketplace revenue.

Yes, 100%.

We will now take our last question from Ygal Arounian from Wedbush.

So just a couple on ANGI, maybe one more follow-up on the marketing and on the service request side.

So I think there's a couple of things going on over last year.

So on service requests, you had the ANGI integration and volume coming in from placing the HomeAdvisor funnel there.

I think that lifted the year-over-year growth for a little bit.

You scaled back on marketing.

Now you're scaling it back up.

Is -- any way you could help us kind of understand what the appropriate trajectory for growth is?

Should we start to see it reaccelerate again from this 24% now that you're going and spending more on marketing?

And with your marketing spend, you talked about the investment next year, both to go after service providers and to go after consumers.

Any way to help think about the split between the 2?

Is it kind of equal between both?

Is it more of a focus on one over the other?

Yes.

On the marketing point, yes, it's more going after consumers.

We have a large sales force, and we're growing the sales force.

Now there's collateral benefits when you go after consumers, service professionals see that, but it's much more weighted towards consumers to drive service request.

And it's a good question on the cadence of service requests.

The growth is 24%.

I think we're going to be in and around those levels.

Joey mentioned this in the letter, and Brandon talked about it.

We got a lot more efficient with our spend and our ability, importantly, to monetize every one of those service requests.

So the service requests are becoming more valuable to us.

You saw that in one metric, revenue per service request.

And that was actually the highest it's been since 2014, and that speaks to the efficiency of our system in terms of taking advantage of the demand we have on the platform.

So no, I don't think service requests are going to grow dramatically from here.

They could -- as we even get more efficient, the growth could go down, especially because, you remember, in the first quarter of last year, we hadn't dialed back the marketing.

So the first quarter service requests grow -- grew 38% last year, so in the first quarter, we have a difficult comp.

So I think this mid- to low to maybe high 20% service request growth for the next couple of quarters, that feels about right.

Okay, that's really helpful.

And if I could squeeze in one more, just on how you think about building versus buying.

You have 2 of your -- kind of things you're focusing on next year.

You write in the letter building for repeat usage and then entering adjacent categories through M&A.

It feels like sometimes those things could overlap.

Like the warranties business is and adjacent business but also helps with repeat usage.

Just if you could help us think about how you think about building versus buying.

And I'll leave it there.

Look, I think what you said is exactly right.

There definitely is overlap, and that definitely is -- the vision for where we think this category can go is very informative to how we prioritize M&A and putting those things together.

And in -- at any moment, we're evaluating doing a build versus buy.

In fact, any time we're buying something, we are usually simultaneously building that.

And then we figure out, boy, it's really hard to build and whether we want to continue building or we prefer to buy.

And we do that math and make a transaction.

But that is -- that's how we prioritize those decisions.

All right.

I think we are out of time.

Appreciate all the questions and everyone's support.

And we will talk to you in next quarter.

Thank you.

Ladies and gentlemen, this now concludes today's conference call.

Thank you for participating.

You may now disconnect.