Match Group Inc (MTCH) 2019 Q1 法說會逐字稿

Good day, and welcome to the ANGI Homeservices reports Q1 2019 results.

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

Please go ahead, sir.

Thank you, operator.

Good morning, everyone.

Glenn Schiffman here, and welcome to ANGI Homeservices First 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 address any questions you may have on IAC's first quarter results.

Similar to last quarter, supplemental to our 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 these risks have been set forth in both IAC and ANGI Homeservices' first quarter press release 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 to our press releases, the IAC shareholder letter and, again, to 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?

We're grateful that things are going very well.

And I know everyone has lots of things they want to talk about, so let's just get right into the questions.

Operator?

(Operator Instructions) Our first question comes from Anthony DiClemente from Evercore.

Maybe starting with Brandon on ANGI.

Service requests in 1Q came in a bit light versus our model.

We can certainly see that, that was balanced off by greater revenue per SR, but it looks like -- sounds like you turned away some profitable service requests in the name of quality initiatives.

So is that a transitory trend?

Or is this an ongoing MO for ANGI?

Is it an ongoing trend that we should expect to continue to see in the metrics?

And then maybe one on Vimeo, perhaps for Joey.

Good quarter, revenue a bit stronger.

Maybe just speak to the ongoing trends at Vimeo.

And then, in the letter, you guys wrote a lot about Magisto and that acquisition.

How could that benefit Vimeo's financials or impact financials either in the near term or then longer term?

Yes, Anthony.

Thanks for the question.

The -- in the last 12 months, we've had more than 24 million service requests submitted by homeowners.

And one of the things that isn't well understood is that a large minority of those requests are still completely unmonetized, and a significant majority go either unmonetized or under monetized.

And so for us, there's a tremendous opportunity to simply get better at matching supply and demand in the marketplace of the demand we already have.

And that means bringing on the right capacity, bringing on more capacity and also targeting our marketing towards consumer demand that better matches the capacity we do have.

We've talked about that on the provider side, and we've talked about moving away from some of the lower value categories and focusing on higher value categories.

Well, a natural partner to that action is to also do that on the consumer marketing side and drive demand where it best fits.

Separately, we did make some optimizations focused on ensuring that we're bringing the highest value consumers to our providers.

We have said this in the past.

We are sort of maniacally focused on bringing value to our customers.

And as part of doing that, we are constantly looking at win rates and ROI for our service providers.

And in Q1, we made some changes that moved us away from certain marketing sources that were a little bit below where we want to be at from a threshold standpoint and toward those sources that produce better returns for service providers in our network.

We had the benefit of some new proprietary techniques that really came about as part of the opt-in platform we developed last year.

They're giving us better insights in real time to quality of -- intrinsic quality and value in the consumer request we're getting, and that afforded us the ability to make some decisions that we know are in the best interest of our customers.

In terms of whether it's transitory or strategic, I think it's strategic.

I don't think this is something you're likely to see on an ongoing basis.

Really, it was reflective of the insights that these new techniques granted us, which are pretty exceptional.

And you saw in the letter that we're continuing to migrate towards more and more on-demand transactions.

So that path towards quality, as Brandon said, will continue.

In terms of Vimeo, Vimeo had a great quarter.

Revenue is growing nicely.

We've talked a lot about how that's both subscribers and ARPU and not so much price increases.

I don't think we're comping to a price increase at all.

Actually, it's really just mix shift to higher priced products, one of those being enterprise products, which continues to do very well, small in total Vimeo but doing very well.

So we're happy with the trajectory that Vimeo is on right now, and Magisto really adds to that.

So Magisto is a -- what Magisto opens up for Vimeo is a creation product.

We actually went out, probably about a year ago, to look at what our options would be there.

We knew we wanted to offer creators -- the ability to create video on our platform.

We said we could build or buy.

We looked at every single product in the category from an acquisition perspective.

We did a full analysis of what it would take to build something there, and unequivocally, Magisto stood out above the competition, both in terms of the team, in terms of the product, subscribers, growth rate and then the underlying technology itself, really compelling slick product.

And so we bought Magisto to further that opportunity, and what it really does is it allows us to find customers earlier in their path.

So today -- or pre-Magisto, we look for a video customer after they've created the video and we say, "You can host it here.

You can broadcast it from here.

You can publish it from here.

You can get your stats here." But now we can say, "Hey, when you're thinking about video -- in particular to a small business but really any entity or event or individual, "When you're thinking about video, we can help you make that video, and we can make that video compelling." And that opens up, I think, a lot of new marketing opportunities for us and category.

In terms of financials, we think about it -- Magisto -- it's bigger than our hardware business, but it sort of replaces what our hardware business would have been.

We just sold the hardware business.

That's a little bit bigger than hardware was in 2018, but it's obviously growing much faster.

And so as we layer that on into our 2019 numbers, that will accelerate the business growth from here.

And in terms of profit, it's roughly, I think, an offset to losses that we were experiencing in hardware.

So you can think of it neutral in that regard to our financials, but the long-term opportunity, we think, is real.

As we highlighted, it won't close until probably the end of the second quarter.

So any impact in the second quarter will be muted and then there will be a tiny deferred revenue component impacting the third quarter.

And look, more broadly, we do M&A to accelerate our business and in particular, in this case, to accelerate the penetration of the very large addressable market that Vimeo competes in.

If you look back to 2016, we bought VHX.

That got us into the OTT business.

In 2017, we bought Livestream.

It got us into the live business.

And now Magisto.

And we continue through product development and through M&A to add features and functionality for our users and more so than ever, our small- and medium-sized businesses.

Your next question comes from Jason Helfstein with Oppenheimer.

So kind of a two-part question on ANGI and then an IAC question.

So what was the catalyst to the comment in the letter about VCs and start-up capital around the home services?

Are you seeing any impact of competition impacting consumer traffic or other areas?

And then just, Brandon, with regards to the first question, with the focus on quality, would that suggest that you should be able to increase SP pricing in the medium term?

And then Joey, I want to ask you a theoretical question.

How do you create the most value for IAC shareholders by spinning off Match, at a 52-week high or a 52-week low?

And then any other comments you want to offer about Match.

Sure.

I'll start probably with 2 of those, Jason.

On -- I'll start with the last one, spin-off, 52-week high versus 52-week low.

That's, I think, totally irrelevant to the consideration, meaning the shareholders in a spin are the IAC shareholders.

So giving those shareholders a thing at a high or a thing at a low, you're giving the same thing to the same people.

And the thought is that they are holders of that security.

I will be a holder of that security.

The management team will be holders of that security.

It's not a thing of how do you optimize that for the price of the security at a moment in time.

If you really think about spin and other transactions, it's how does the transaction itself actually create value or enable something that was perhaps not previously available or not as easily available.

Sometimes it's solving management issues, sometimes it's solving or creating an M&A opportunity or sometimes it's cleaning up a story in one way or another.

Those are things that we look for, and those things could be a catalyst.

But it's not about optimizing the price and kind of ending the chart -- the price chart at one point or another.

On the question of the VC line, it wasn't anything in particular.

But we have seen -- I've always marveled in this category at how competitors or start-ups have been able to raise money and be able to raise money at reasonably high valuations very quickly with a tiny bit of scale.

And that -- the amount of money that folks have raised is not enough, I think, to mess up the market in one way of creating spending or things like that.

But it just -- it does surprise me that certain things that we have tried in our 20-year history in this category, I think that we've evolved to or evolved from, that those things are able to raise money quickly.

And that is not something that's going to impact our lives every day, but it's more just a line in the letter.

And then on -- the question on pricing is a good one.

It's one we've been thinking about.

We are exploring new ways of leveraging the information that we now have, which I referenced earlier, the ability to understand very, very quickly the intrinsic value of a consumer request and what it means for our provider.

We're looking at new ways of pricing those requests in a way that takes into account and consideration the improvements in quality, the improvements in win rate and the improvements in ROI.

We think there is something there.

I think we're in the early stages of looking at that, but we believe there is an opportunity to better index pricing toward targeted take rates that anchors off of what we know about the value of a request that comes in.

And so I think we're in the early stages there, but there should be more to come.

Our next question comes from John Blackledge with Cowen.

On ANGI, just curious how the branding initiatives are going.

And how do you feel about further top line acceleration as we ramp through the year?

And kind of what are the key drivers to potentially hit that 25% year-over-year pro forma revenue growth?

And then just one follow-up on ANGI.

Just how's the Handy deal tracking?

Sure.

So in terms of the branding initiatives, as you know, we began to really ramp our marketing spend as we entered this year.

The nature of that is that it sort of builds and snowballs over time, particularly television advertising.

And so we believe that in Q1, we're seeing it perform consistent with what we would expect.

But we also expect to see that grow and accumulate as the year progresses.

We also are continuing to lean in heavily to mobile app as an acquisition channel.

That continues to be our fastest-growing marketing channel, generating our best customers with the sort of the longest life cycle and best loyalty to us.

So that's something we're still excited about.

In terms of the balance of the year and how we're going to see growth accelerate, there are a few factors that we expect to play into that.

One is what I just referenced, which this early marketing spend is going to continue to grow and not necessarily in terms of spend, but in terms of effect.

That accumulates over time as we consistently lean into it.

Two, we are extremely optimistic about product innovation and the impact it can have on this year and in the future in general.

In particular, the opt-in platform is still really just a V1 of that platform.

This is an entirely new ecosystem.

We spent last year building V1 and then launching it across all of our different service request sources.

And so because we were so focused on this expansion, we didn't spend any time at all on just iterating on the core designs and efficacy.

And so there's a lot that we have in the pipeline that we expect to see come out shortly and will have a good chance to affect the balance of the year.

Three, as you all know, Angie's List has been a drag on our growth rates since the acquisition, mostly for good reason, but, nevertheless, true.

And we're seeing that significantly moderate and don't expect that -- to see that be the tailwind -- sorry, to be the headwind that it has been as we get into the back half of the year.

And so -- what was the third question?

Oh, Handy.

Handy.

In terms of Handy, we're excited.

I think it's going very well relative to what we expected before the acquisition.

We are seeing a good performance in that business.

We're seeing great momentum in terms of some of the retail partnerships they've been able to get.

And so it's still early.

We're not that far past the close.

But so far, so good on that front for sure.

And look, the other tailwinds we have going into 2019 here in addition to everything that Brandon said is SP capacity.

We've been driving strong capacity out of our SPs.

This quarter was the fourth quarter in a row of greater than 30% capacity.

So that will roll through.

Opt-in that Brandon spoke about, as you know, that's outside of capacity.

And then last year, the Angie's List synergies, the SR path on the Angie's List site, we enjoyed a lot of SRs from there.

But they -- since we didn't have the capacity, they showed up as obviously expenses -- reduced marketing expenses.

And this year, we think we can monetize them.

And you saw our pacing last year where we didn't have these tailwinds and you saw revenue growth of 15% in the first quarter, 17% in the second quarter and 21% in the third quarter.

So within year, in 2 quarters, we accelerated 600 basis points.

Our next question comes from Douglas Anmuth with JPMorgan.

It's Cory Carpenter on for Doug.

Two questions on ANGI.

You highlighted that on-demand grew to 15% of service requests this quarter.

Just hoping you could expand more on some of the drivers within that category.

And stepping back, do you have a target or goal on how big of the mix on-demand could represent longer term?

And then one quick follow-up on the marketing channel comments in the shareholder letter.

I would just be curious what the channels were that you cut spend on.

Sure.

Thanks for the question.

So in terms of the driver in on-demand growth this year, a large part of that is driven by the new opt-in platform.

And I think where our focus is, is on driving real-time connections on a one-to-one basis.

We found that, that produces the highest satisfaction and the highest quality and value for both consumers and for service providers.

And so each of our products that we've put in this on-demand category really fit that description and set of characteristics.

In terms of where the ceiling is, I think we've debated this a lot, and certainly, we believe 25% to 50% is possible.

But I think what you're likely to see is us develop and deliver a lot of new products that fit that same description that may look different than what we've already introduced.

I think this notion that you connect people quickly in real time and at their discretion is one that has legs and that can be expanded to a lot of project types that we may have previously thought were sort of difficult to fit into the on-demand mold.

So certainly, we think we can get to 25% to 50%, but perhaps, there's room beyond that as well.

In terms of the spend reductions, we essentially moved away from a few sources that were producing win rates and ROI for our providers that were, call it, lower than some of our better performing sources.

And so we made a decision to essentially reduce spend.

And these were not branded channels, so we weren't getting a ton of brand benefit from them for the HomeAdvisor brands as well.

And so we essentially reduced spend in this area and reallocated it to other marketing sources that generate requests that have the higher intrinsic value, that produce higher win rates and that generate exceptionally good ROI for our professionals and that have the additional side benefit of really creating sort of a halo effect for the HomeAdvisor brand by helping to build awareness of the brands overall.

Our next question comes from Brent Thill with Jefferies.

Just on ANGI, over 90% of business is in the U.S. And just curious to hear your aspirations in Europe and the rest of the world and how you think that progresses.

And I had a quick follow-up for Joey.

I can do that one, Brent.

So right now, we're really just in -- outside of the U.S., we're really just in Europe and Canada.

And that's, today, effectively 5 different businesses.

Obviously, the liquidity in each country only affects that country in terms of service professional network.

But what we're trying to do is figure out ways where we can get cross-country efficiencies, so in product and technology.

Each one of the 5 countries was built effectively through acquisition, which we think came with their own technology, came with their own platform, and we're trying to fill that efficiency.

And we're starting to see the cross learnings between the countries and from the U.S. spread through and see results of that.

So it's -- Europe is starting to work nicely, but we have not reached the proverbial flywheel there.

And that's going to be realistically 5 separate flywheels because, again, you have to build the liquidity on the supply and demand side in each country.

You do get efficiencies on that by what you learned throughout and technology you used throughout.

So we're optimistic on Europe.

We think that that's a big market.

We've said that's a $300 billion market relative to the U.S.'s $400 billion.

But again, it's broken up into a lot of smaller pieces.

We're nowhere today in Asia or South America.

I think that's probably likely to continue to be the case for a while.

We've got a lot of opportunities ahead of us in the U.S. We've got a lot of opportunity in Europe, and I think that kind of higher ROI opportunities for us exist in those markets than in entering new markets.

But that could change if we see something really exciting worth buying, we see a team really ambitious worth backing, we could do something like that.

But right now, our focus is significantly U.S. and then Europe secondarily.

Great.

And Joey, just a quick follow-up on the buyback.

It's the second straight quarter of no buyback.

You mentioned in the letter cash is accumulating.

You have an $8 million share authorization.

Maybe perhaps, Glenn, you can just address the buyback.

Look, buyback is not something that we predict.

We -- it's something that we consider.

It's something that we consider regularly and will continue to consider.

It has been a big use of our cash historically, Glenn's probably got the stat on how much we've bought over the last few years, and it remains in that consideration set.

Yes.

I mean we -- since Joey was in his seat, we bought back 9% of our company, spent about a little under $500 million.

And then you see Match is buying back stock.

They bought back about 5% of their company and used roughly the same $450-odd million.

Across the family and across the complex, we net settled SBC.

So you saw that, and you see that in our statement of cash flows.

Gary talked about that yesterday.

We do spend our capital to reduce the dilution in that way as well.

Our next question comes from Ross Sandler with Barclays.

Just thought I'd mix it up and ask one on Dotdash.

So thanks for the new color there.

So if you look at the tables, you guys are breaking out the uniques revenue scale since you launched the new verticals.

And it looks like Investopedia is generating way more revenue with far fewer uniques relative to your health verticals.

So maybe, I guess, just can you talk about is that a function of how long you've been selling Investopedia or the monetization potential of finance versus health?

And then how do we think about same-store sales growth for each of these verticals in terms of either unique visitors or revenue and maybe for the overall business?

Can you talk a little bit about kind of the apples-to-apples growth between these verticals?

Sure.

So I'm not familiar, Ross, with the numbers that you're referring to by vertical, but I can give you some general color.

Health and finance are definitely 2 of the best monetizing verticals, period, and I suspect will be forever for a bunch of reasons.

But that's where a lot of money gets spent, and therefore -- that's where a lot of GDP gets spent, a lot of consumer money gets spent and therefore, a lot of advertising dollars gets spent.

And there could be big transactions in those categories.

Getting a credit card, for example, is a very valuable transaction.

Finding a broker is a very valuable transaction.

Finding a new medicine is a very valuable transaction or a health care provider.

And so you can imagine that those users could be more valuable in a marketing context.

The biggest vertical for us today is actually health, not finance.

But I think that's because, number one, we started in Verywell first, and so we applied most of the learnings to -- or we really pioneered a lot of the learnings on Verywell and that has the benefit of everything that we've been doing.

And we just moved Investopedia over onto the Dotdash platform.

And so Investopedia is now still early in applying those learnings.

And we're very optimistic, confident in what we can do in the finance side of the Dotdash verticals and Investopedia, in particular, I think, both in terms of the things we can do on traffic through the Dotdash platform and making the pages better, faster, lighter and making the content tighter and then, of course, on monetization as well.

You talked about -- I think your other question was same-store sales or the equivalent of same-store sales, and we're very optimistic to be accelerating that over the course of this year.

And I think that there's a bunch of things underlying that, product innovations we've done, investments in content.

Investments in content means we have more stuff on our site for users to come visit.

And if we can get that content to work and resonate, we can bring in more users, and then we can get them to stick around longer.

So we're optimistic on all of those things.

I think that answered both your questions.

Yes.

Historically, we talked about organic growth of in and around 20%.

That's what we guided for the quarter.

And as you know, revenue growth comes from traffic, which creates impressions and then impression times the yield on those impressions.

And you saw in the letter that we've done -- or really the management teams have done a really effective job of driving that yield and our throughput on that impression.

You also saw in the press release we grew traffic 18%.

That accelerated from last year.

So if you look at the traffic growth, multiply it by the monetization of that traffic, especially, as Joey said, as we move into the e-commerce businesses and the performance-based marketing business, which yield a better throughput than our display and programmatic, we think we're set up for a nice couple of years of strong organic growth.

Our next question is coming from Michael Ng with Goldman Sachs.

I just have one for Brandon.

I was hoping you could expand a little bit more on your answer regarding on-demand.

You mentioned the improved customer satisfaction from on-demand product.

But what are some of the other nuances of on-demand related to monetization, whether that's the take rate, a willingness to bear cost related to service professionals or marketplace liquidity, when you compare it to the traditional lead-gen business?

Yes.

That's a great question.

So what we've found is that all of our on-demand products have substantially better win rates for our providers.

And because of that, they tend to under index on our take rate, meaning the ROI for providers is outsized on those transactions.

There are a couple of key benefits to that.

One is that win rate, which is the percentage of the time a provider wins when presented with an opportunity, has an important psychological effect on advertisers.

ROI is the most important thing, but if I win 1 out of 3 times, that's a lot better than 1 out of 10 times just psychologically and, also, in terms of the time and effort and cost of trying to close business.

So the more activity we can move to these real-time one-to-one connections, it is dramatically better for our providers.

And obviously, over time, that gives us the opportunity to have a more significant take rate and, obviously, as well, satisfying and retaining those customers better.

And so that's why we're so attracted to it.

It is a critical input to how service providers view the efficacy and value of the service.

Great.

And if I could just have a follow-up.

You guys have obviously made a lot of investments on on-demand, including Handy and the warranty service with Fixd.

You said that one may work well enough that you may decide to go all in at one point.

What is -- what are those characteristics of something that may conclude that you would go all in?

Well, I think Handy is -- it's already a national scale service.

We're very happy about the performance since the close of the deal.

We have a clear plan there in executing against it.

I think Fixd is a little bit of a different -- Fixd home warranty is a bit of different animal in that it's a very small business, it's in 3 markets, there's a lot of work to be done to scale that to all the largest American markets.

And I think we obviously want to see how it performs as we scale into the first few markets.

If I had to distill it down to a metric, it would be frequency.

And we can drive frequency on -- if we find that one particular service or another, whether it's -- at ANGI, whether it's things around on-demand and we find that one of those drives frequency in a meaningful way, then we will be very heavily into that product.

And one of the things that -- I think Brandon did a great job explaining on the service provider side the value of these products.

The other piece is on the consumer side.

Consumers don't actually want to get 3 bids or 5 bids or whatever it is.

They want a better price and a higher quality, but they don't want to go through that process.

Very few actually want to go through the process of having to do that.

And so we can do that on behalf of the consumer and make that, actually, less friction on the consumer side, too.

Actually, both sides of the marketplace are happier, and that's a real win-win.

And that's what we're looking for in these products, that reliability, that trust, that you can rely on -- that you can be certain on the quality, you can be certain on the price.

And we think that, that can both drive frequency on an individual user basis, but then also open up more of the market to more jobs, and that's what we're looking for.

I may have said this on one of the recent calls.

The average household in the U.S. does 6 to 8 jobs a year.

The average household should do 12 jobs a year.

We do less than 2 currently through ANGI Homeservices.

So as we drive frequency, we want to climb that curve from the less than 2 to the closer to 12.

Our next question comes from Ygal Arounian with Wedbush Securities.

So I just -- I want to dig into the -- back on ANGI, on cutting the marketing spend on those specific channels that you weren't getting enough return on.

So you note that, that was generating $50 million of annualized revenue, but then you also noted you're reallocating that to other channels.

So could you just help us make sure we understand correctly?

Is that $50 million of revenue that you're foregoing?

Or is it just moving over to other channels?

And how does this shift change the drive in the SR growth rate?

Last quarter, you kind of noted you're expecting it to remain in the mid-20% range at least in this year.

They're coming in at 15% in the first quarter.

So how should we think about how that changes as well?

Well, I'll take the first part of that, and Glenn can address the growth rate question.

The way we think about marketing is largely driven by the capacity on the provider side and our utilization of that capacity.

And so we're largely always targeting sort of a utilization metric in terms of feeding our provider network the right amount of work, the amount of work that it can handle and without overtaxing it.

And you guys recall, last year, in Q1 where we sort of got out of balance.

So as we talk about shifting dollars away from these sort of lower performing marketing sources and shifting them to different marketing sources, in the end, we're roughly targeting the same sort of capacity utilization for our entire network.

And so our intention would be that you wouldn't see a loss in revenue related to this shift, but we'd hopefully end up fairly neutral.

Yes.

In terms of the SRs, I think we guided last quarter that actually the SR growth rate was going to come down.

Recall, in the first quarter of last year, we had a very strong quarter for SRs.

It was the first quarter when we were applying a lot of marketing, before we cut back on marketing, and it was the first quarter when we started driving the traffic synergies from the Angie's List site.

So we had obviously a difficult comp in the first quarter.

In terms of going forward, we will continue, as Brandon said, to focus on quality.

And notwithstanding the quality, we think SRs will grow -- will go up from here, slightly up.

But no, I don't think we're going to be at the levels that we enjoyed previously.

And we're seeing that in the overall health of the ecosystem, the overall strength of what we bring to our SPs.

I think Anthony alluded to it earlier, marketplace revenue per SR was up 15% year-over-year to a record high of $38, it's a great illustration of the value that we're deriving from each of these SRs as we climb that quality curve.

Okay.

That's helpful.

And then maybe one more on EBITDA and incremental investments in second quarter.

The guidance came in below where we were looking for the quarter.

So it seems like more back-half weighted with maintaining the full year guidance.

Any insight into the focus on the incremental investments?

Is it just kind of more what you've been doing with on-demand, Handy, Fixd?

And then what's driving the back-half weighting?

Is investment kind of leveling off and going away in the second half?

Is it a step down in marketing, just (inaudible) around that.

We're -- let me start, then I'll hand it off to Glenn.

But we have investments we're making that pay off really quickly.

We have some that will pay off in the medium term, and then others are a little bit longer term.

We are currently investing really heavily across, I think, 4 key areas.

At HomeAdvisor, we really, really ramped marketing strongly.

That's an investment that pays off relatively quickly.

Obviously, you've seen the immediate impact, but it will sort of grow and accumulate throughout the year.

At Angie's List, we're both ramping marketing as well as substantially investing in the sales force growth there.

Sales force growth takes a while to play out.

And so that's going to be an investment that continues for the majority of this year but is really going to flow through next year.

And then we continue to invest in Handy, which we're happy with the returns we're seeing there.

And then ultimately, Fixd as well, which we've talked about, and that's a little bit more of a long-term play.

That's going to take some time to play out.

Yes.

It's consistent with what we laid out in the letter -- -- sorry, the letter last quarter and on the call.

It's $25 million of discrete investments across Fixd, across Handy and across the hub that we're working on to manage one's home and then the incremental marketing.

And if you look at our business, as you know, we've always been back half of the year weighted in terms of EBITDA split.

And if you look at what our guidance implies, it's about equal to the split that we've achieved over the last several years.

And the incremental margin needed to get to those numbers actually is even less than what we enjoyed last year, so pretty consistent.

Our next question comes from Kunal Madhukar with Deutsche Bank.

I had a question on ANGI -- I had a couple of questions on ANGI.

One was, as you look across the supply side, there is a lot of unused capacity that has -- that you've been having on the network or the platform for a long time.

On the demand side, there are so many service requests that are either unmonetized or under monetized.

Can you talk to your marketing strategy that is getting so many service requests for either services or in geographies where there is no demand from the service professionals?

Well, it's a great point, and what you're really pointing out is part of the complexity of this type of business.

We say we have 200,000 micro markets that we have to manage supply and demand.

And then it's incredibly challenging.

Even in our scale, with 24 million service requests in the last 12 months, you still find the significant imbalance, and it's something we're constantly working on.

We've made great strides.

As Glenn pointed out, revenue per SR is up 15%.

Revenue per SP, I think, was up the same.

16%, yes.

16%.

And so you're seeing us get better and better each quarter at matching supply and demand.

But there's a lot of -- there's still a lot of opportunity before us, and it's both a challenge for us, an opportunity for us, but it's also a defensive moat for any new entrants that are coming into the space because when you're small, it's almost impossible to solve.

And so it's something we're working on.

I think we're making great progress, but I expect to see more of it in the future.

Great.

And a follow-up on the traffic versus service request.

So I think traffic grew faster than the service requests.

So any change in consumer behavior that is leading to the traffic but has not resulted in service requests?

It depends on what source you're looking at.

I don't recall off the top of my head.

We certainly haven't seen any, like, fundamental decline in conversion rate for visitors that are submitting SRs.

We do have different sources of traffic, some of which is higher converting, some of which is lower converting.

For example, certain types of content and articles don't necessarily convert as well as people that are coming in on a higher intent, what's called an SEM ad.

But largely speaking, I don't think I've seen the same phenomenon using our actual data.

And it's possible if you're using Similar Web or some other source, that they're just not completely accurate.

We also don't look that closely at just traffic when we're tracking the business, the measure we're looking at is service requests, and that's where -- how we're organized...

Yes.

I mean just as an illustration of that branded traffic or traffic that's coming in response to TV might convert 25x higher than a do-it-yourself content article.

So there's just all kinds of different ways and reasons people come to the site with very different complexions in terms of how they ultimately convert.

And overall, that's continuing to look healthy and consistent.

Our next question comes from Youssef Squali with SunTrust.

I guess given the increased emphasis on Dotdash in the letter, I was just wondering how do you get that business to potentially scale faster?

20% is obviously a very respectable number, but considering that you seem to be running it for both the growth and profitability, I was wondering if -- maybe if you were to invest more aggressively and, say, run it at breakeven, can it grow much faster?

What are the gating factors to faster growth?

And then I have a quick follow-up.

Sure.

Youssef, I love the question.

I ask the same question all the time of our management team there, and we think about it.

I think look, one area for sure that you will see from us there is M&A.

We can -- I think we can acquire a thing.

And when you put more capital to work, it takes a little time to turn around, so that requires both balance sheet and P&L capital.

And we are looking at one in particular right now.

We will announce in the next day or two.

It's very tiny stuff.

But we're looking at small acquisitions there, and I think that will help us scale.

We look at the content creation lever.

The thing -- the hard one there is you have to maintain the highest possible level of quality, and that's just something that inevitably takes time.

You can't just dump resources on that and produce at the same quality.

And so that's going to be a meaningful meter to how much we can invest there.

But we are -- we're experimenting with things around product.

So probably, the most obvious lever we've got there is M&A, and we'll definitely use that.

I think it will be small deals, very small deals, but we will use that.

Okay.

And then just staying on Dotdash for a second.

You also seem to be migrating the way or changing the way you're pricing to more of a transaction -- based on transaction value rather than just CPMs.

Can you just speak -- and maybe it's too early, but maybe the delta in revenue, either per user or by piece of traffic or whatever between a CPM and, call it, a cost to purchase and whether that could possibly be the -- one of the key drivers to maybe revenue reacceleration there?

I do think that will be a lever for revenue growth, revenue acceleration.

It is a -- there is a dramatic difference in value on a CPM or a -- which is cost per impression, or CPA, which is a cost per some kind of activity.

And in our -- and just to give you an example, in Investopedia, we have a broker product where we've independently reviewed every -- or not every broker, but lots of brokers where we've reviewed about all kinds of metrics and a really beautiful, compelling user experience for how to find a broker and how to choose a broker.

I think the right product for monetizing that is a performance marketing product, meaning bringing customers to advertiser screens -- bringing specific customers and the specific actions to advertisers as against just impression-based brand advertising.

And the difference in value between one and the other is dramatic.

So we are doing that.

We will continue to do that.

And with scale, we get better at that.

So we have better data.

We know what the users are -- we work more, we know more what the users want, and we can deliver them, therefore, a more compelling product and that makes our products also more compelling for the advertisers.

Also, when you start to get more scale, you just get better deals with folks who are interested in introductions to those customers.

And so the splits start to look different, and we're trying to build that scale.

And I think that can also be an accelerant to the business.

Our next question comes from Brad Erickson with Needham & Company.

Just two.

One, related to the on-demand products, are you able to dynamically increase price there as you see sort of greater conversion and, hopefully, SP satisfaction rise?

Or are you starting those leads off at a higher price point and then the expectation is to hold it steady?

So that's the first one.

And then second, I just want to understand the timing of this marketing allocation change you're talking about and the whole -- the $50 million of revenue in the quarter.

Was that a decision that was made sort of dynamically and maybe not communicated explicitly earlier in the year?

Or was it something you decided when you reported back in early February?

Two very good questions.

So on the on-demand pricing question, currently, we do charge, what I'll call, sort of a quality premium for those requests.

However, even with that premium, they significantly over index from an ROI standpoint, meaning our take rate is quite a bit lower.

We -- and I alluded to this earlier, but we think there is a very interesting opportunity to perhaps shift to a dynamic-pricing system that instantly and in real time prices an opportunity, a lead or a request consistent with the value we know it's going to have.

We don't think this is something we could have done historically, but some of the proprietary techniques we've recently developed enable us to deeply understand the quality and value of a lead in ways that we have never previously and that we don't think anybody else can do.

So that's something we're exploring.

I think it's a pretty significant opportunity, and I think our professionals, our providers are very happy to pay as long as it's consistent with the value they're deriving.

So aligning those things makes a lot of sense.

In terms of the marketing change, we were making -- first of all, the reason this came about is that we actually did develop these new proprietary techniques that give us essentially real-time insights into the value and quality of a consumer request.

We have always been able -- we've always looked at this sort of thing in the past, but it was an extremely delayed and fairly inaccurate set of techniques that we had previously.

And now we've got something that will tell us essentially in real time and with a very high level of accuracy how likely a request is to turn into a job and what that value is likely to be.

That was something we developed in Q1.

And looking at that data and comparing it to our other sources, ultimately, we made the decision to shift away from those sources into other sources.

From a timing perspective, I think it was -- we were like going through this process around the time we reported last time.

We didn't have our hands around it fully.

So it was sort of in Q1 where we made the decision and made the switch.

And you saw on the letter, that was $50 million of annualized impact.

Our final question comes from Victor Anthony with Aegis Capital.

So maybe I'll just go back to the initial stages of the acquisition or the combination of the 2 companies.

You guys laid out, one, I think what you referred to as bucket 3 synergies, which is a sales force integration.

Maybe you could just talk about the timing of where you are with that piece of the synergy.

And second, you laid out the 35% margin target over time.

So maybe given where you are today, maybe you could just tell us now how you plan to get there?

Let me take the synergies, and then Glenn can address the margin target.

The way I view the merger of the Angie's List and the synergies we laid out is that it's complete.

We talked about cost restructuring, which was completed, and we talked about the SR synergies and we ultimately talked about the sales force, sort of bucket 3.

And the first 2 played out exactly as we thought they would.

I think on the third one, that was a little bit of a longer-term synergy, and I think what's -- that's proceeded a little bit differently.

And what happened was we got into operating the company and we actually found, from a sort of a core strength standpoint, that there was more value there than perhaps we thought at the time of the close.

What we're doing now is leaning into investing and regrowing the Angie's List sales force.

And that's a little bit different than what we originally thought, where we thought we would combine the sales forces and get some efficiencies there.

Rather now, we think Angie's List as a stand-alone business can grow.

We're growing the sales force as we alluded to in the letter.

They actually had, recently, their very best sales month in the history of that business.

These businesses, just by their nature, take a long time to turn around in terms of showing their financial performance and improvements, but that type of leading indicator is exceptional.

And I think you can take from that a pretty good indication of where this can possibly go.

So while that third bucket has played out differently, I think it's actually played out better because being able to just simply grow that sales force and ultimately see that flow through to revenue growth in the, hopefully, not too distant future is the best case scenario.

Yes.

Regarding the long-term margin target, Victor, yes, we still continue to firmly believe we're going to get to 35% over the long term.

Every time we've said it though, you've heard me say that depends on the investments we make, the investments in international, the investments in category expansion and the investments in additional services.

I'll walk you through a little history here, if you'll indulge me, to suggest this is not going to be linear.

From 2013 to 2015, while we were in the midst of the model change and the rebranding, margins were in and around 5%.

As we began to scale, as the model changed and the rebranding took hold, we doubled that to 10%.

And then in 2018 and this year, we're doubling that again to about 20% as we continue to scale, as we continue to innovate on product and as we continue to enjoy the network effects that this marketplace gives us.

So I think we'll see the margin improvement continue.

It will not be linear, but importantly, the levers are clear, and the levers are within our control.

And near-term margin is not our near-term priority.

We see a big market here, and we see a big opportunity.

We've got a nice lead, and we're going to continue to try to expand that with the things that we've said we're doing this year.

Thank you, and thank you all for joining the call.

Thanks for your support.

Thanks for the questions, and we will talk to you next quarter.

Thank you, everyone.

This concludes today's teleconference.

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