Angi Inc.'s (ANGI) CEO Oisin Hanrahan on Q2 2022 Results - Earnings Call Transcript

Aug. 10, 2022 2:37 PM ETAngi Inc. (ANGI)
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Angi Inc. (NASDAQ:ANGI) Q2 2022 Earnings Conference Call August 10, 2022 8:30 AM ET

Company Participants

Mark Schneider - Head, Investor Relations

Christopher Halpin - Chief Financial Officer, IAC

Joey Levin - Chief Executive Officer of IAC and Chairman of Angi

Oisin Hanrahan - Chief Executive Officer

Neil Vogel - Chief Executive Officer, Dotdash Meredith

Conference Call Participants

Cory Carpenter - JPMorgan

Ross Sandler - Barclays

Eric Sheridan - Goldman Sachs

Jason Helfstein - Oppenheimer

John Blackledge - Cowen

Youssef Squali - Truist Securities

Daniel Kurnos - Benchmark

Brent Thill - Jefferies

Tom Champion - Piper Sandler

Mark Schneider

During this presentation, we may discuss our outlook and future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar statements. These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in IAC and Angi Inc’s second quarter press releases and our respective filings with the SEC.

We'll also discuss certain non-GAAP measures, which as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. Please also refer you to our press releases, the IAC shareholder letter and to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures.

Christopher Halpin

Good morning. Thank you for joining the IAC Q2 Earnings Call. I'm joined here today by Joey Levin, CEO of IAC; Oisin Hanrahan, CEO of Angi; and Neil Vogel, CEO of Dotdash Meredith.

We are going go into statement by Joey and some early comments and then we will go directly into Q&A. With that I’ll turn it over to Joey Levin.

Joey Levin

Good morning, everybody. Thanks for being here. I am grateful to be here in the office with my colleagues, building businesses. Grateful to all of you on the phone and video for joining us. And I am very upbeat on our businesses right now. We have, our biggest business Dotdash Meredith, we are on a path we said when we look at this -- we are taking the steps we plan to take and generally seeing the intended outcome. We are not moving as fast as we like and I hope that we have the support from the ad market that we expected. But we are getting things done that we expected to get done which is most significantly migrating towards the Dotdash platform that we’ve done in 90 days. And that puts all of our weapons in place where we could really start and executing from there.

The biggest thing we will need from here is driving traffic and this is something we’ve done many times before in this business and something that we expect will happen since we get the migrations done and that business should be growing from here and taking share. We know we have the best product in the category. We know we are delivering for consumers in the category and we should continue the growth there. At Angi, the focus on profitability I think has been very healthy. We've been seeing losses come down and services every month while the business is still growing. And even as we've tempered growth meaningfully, we're still far outpacing the market growth and we expect continue to do that.

And I like where we're headed both at Dotdash Meredith and at Angi. And of course, we have lots to prove, but we're heading in the right direction. And when I look at the rest of the businesses that we're good too, Care and MGM and Turo are all growing and it was big clear opportunities ahead of them.

And as far as the macro environment, we shared the data that we've been seeing, but we don't really have a prediction, I think signs we see suggests that the other businesses are bracing for impact. But there's a lot of things that can happen over the next few months that can impact what consumer does and how the economy reacts.

And for us, we can control our businesses and we can control how we execute. And we intend to execute well internally and grow our businesses regardless of the environment. And we're in a position where we think our businesses can thrive through that. So I know everyone's got a lot of questions. So let's take to those questions.

Question-and-Answer Session


Great. Our first question is from Cory Carpenter at JPMorgan.

Cory Carpenter

Thanks for the questions. I had two on Angi. Oisin, maybe bigger picture, could you talk about the trends you saw through the quarter…

Oisin Hanrahan

Go ahead, Cory.

Cory Carpenter

Can you hear me now?

Oisin Hanrahan


Cory Carpenter

Okay. Two questions on Angi. Oisin, maybe just bigger picture, if you could talk about the trends through the quarter and the ads leads and in all sorts of services business. And on services specifically hoping to hear more about the optimizations you're making around unit economics and how that impacts growth?

And then second, I think probably for Chris, just pulling it all together, how should we think about the right level of overall growth and profit for Angi in the second half of the year? Thank you.

Oisin Hanrahan

Thanks, Cory, good to see you. So let me start at the top overall, we're incredibly happy with the performance we saw in Q2. I think if you rewind a year ago when we started the rebrand, and you said we'd get the ads and leads business back to growth. At this rate, I think that would have been great outcome. So we're very happy to be here, very happy that we've got the ads and leads business in a strong place of growth and we want to continue to see that improve. The drivers of that growth, primarily were around pro engagement, pros’ willingness to pay, pros becoming more active in the market, which has been incredibly helpful.

In terms of services, we have had an incredibly strong run on services. Again, Q2, with the focus is, as Joey said, on profitability coming to the forefront, we made some tradeoffs within that business, that for the most part have been very, very positive, where the profitability in that business has -- sorry, the profitability in that businesses led to overall increases in profitability for Angi overall. When you put down and you look at some of the underlying things, we've definitely had some challenges, particularly in Roofing.

So as we've wrapped the Roofing acquisition, I think it's important just to unpack a couple of things. So we put the overall growth rate together. If we remove Roofing from the services number, we get to a 34% growth rate for the underlying organic growth rate of services, that would obviously tell you that Roofing shrank in July, taking this down in growth rate. Just to put some more numbers around that, we did $15 million, or $14 million, sorry, average in Q2 revenue for Roofing, that's down to about $9 million in July. And you comp that to last year was about $11 million in July.

So you can see that we've had some pretty significant operational challenges in Roofing. Those have been primarily around pricing, where in our other categories, we turn the pricing dial and we dialed in and we got to the right number on Book Now, on retail, on managed projects. We've had much more success.

–On Roofing, we stumbled a little bit and that's caused us to hit the brakes a little bit in terms of growth. We expect it'll take us a couple of quarters to get growth back on track on Roofing. So overall, you put all those pieces back together, again, you've got our largest business ads and leads growing mid to high single digits. You've got our net of service, or net of Roofing services business growing in the 34% range in July.

So assume that stays around there and we get our Roofing business back to growth. Over some period, we do expect to get back into the 15% to 20% range. And again, this is with increasing profitability. So you look at the underlying profitability across all these business units, we're incredibly happy with the trend, incredibly happy with how it adds up. And you can see that's why we overachieved in profitability in Q2 and we expect to go forward and have increasing profitability from here.

Christopher Halpin

Thank you, Cory. With respect to overall profitability, we were very happy with where Q2 came out $9.7 million of adjusted EBITDA for Angi, that is inclusive of a $2 million lease impairment. So run rate profitability of the business is higher.

One of the things that we were cheered by was 10% overall gross profit growth across the Angi portfolio, some of that is due to growth at the higher-margin ads and leads business, but it's also a function of the take rate and margin improvements that Oisin and team are driving across services.

When we looked for the rest of the year, high single digits, ads and leads revenue growth will again drive revenue to the bottom line and continued margin improvement by - at services. We said last quarter that we are past peak investment in services. And we said in the Q, we expect to have continued sequential improvements and services investment throughout this year as we go. So our view on overall adjusted EBITDA within Angi is for higher aggregate EBITDA in the second, in the third and fourth quarter than what we produced in the second quarter. And we feel very good about the profitability picture and momentum in the business.


Great. Our next question will be from Ross Sandler at Barclays.

Ross Sandler

Hey, guy. I guess question for Neil. We can obviously see what's going on with the broader digital ad space and the deceleration. But if we look at MDD Digital, the 7% decline, how much of that is just the macro environment versus self-inflicted? Or said differently, what would that down 7% have been if you had not demonetized and re-platform some of the sites in 2Q? So that's the first question.

And the second question is just looking at the monthly trajectory, it seems to trend that MDD Digital could be down low double digits to 15% or so in the back half. And that combined with the over $300 million in EBITDA common points to about a 30% EBITDA margin for that digital business. So how much do you see the margin expanding in 2023 once all the re-platforming is done? What kind of incremental margin might we see at MDD Digital given the new run rate? Thanks a lot.

Neil Vogel

I think I remember all that out on packet. Thanks, Ross. So the first thing is about the ad market. And the ad market is definitely challenged. I think self-inflicted is actually a good word, because a lot of it is self-inflicted. I think if you had to guess I'd say it's probably 50:50. It's really hard to unpack. There's this secondary thing going on, and Joey talked about it, it's - we've been a little slower on the migrations than we would have liked, it's all for good reason because we want to make sure we get them, right and the internet's complex, it's hard hiring people and all that stuff. But we feel very, very good about where we are now.

So if you look at the ad market, it's hard to look at it as a whole, right? You got to unpack it a bit. I think we've some pretty good diversity and we saw that through the pandemic, I think, health is decent. Finance is decent, travel is actually excellent, just not that big of a category. Beauty is good. I think you'll see a lot of the concentrated problems for advertisers around retail whose problems have been well talked about by you guys, food and CPG, which links together the assets that we bought, the Meredith assets over indexing those categories based on the brands that they are.

So there's a little bit of a knock-on effect of us being a little later than we wanted to be on some of these migrations means we're going into a tougher period without our full arsenal of tools. So one of the things we had in the pandemic with Dotdash is when things got tricky, we still did, okay, because our stuff really performed. Because we haven't quite moved over the Meredith assets as quickly as we could, we didn't have the performance sites fast enough. So it's a little bit of a knock-on effect. I'm probably over explaining it.

But I would say it's safe to say 50:50. I mean, we're 75% of our traffic has migrated now, we feel very good about where we are and the rest of it should be done by the end of the next quarter. We're very optimistic. What I would say is the pool of assets and the offering that we have put together, this combination of scale and incredible brands and intent-driven performance traffic is something we're still learning how to use and we're having now that we're migrated, we can show some results to advertisers.

We're having a lot of very interesting initial discussions. We've had large advertisers tell us we're talking to Google, we're talking to Meta, and we’re talking to you, because we can deliver at scale. And we can deliver at performance, we deliver at brand safe environment, and we deliver against the publisher and against content with a different kind of offering. So what we are saying the market is bad. It's probably 50:50. But we like our chances from here.

The second question is has to do with margins and growth. I'll start, I'll let Chris finish. I think you'll see for the rest of the year from us, you should see monthly improvement. Now it may not be sequential, it's going to be lumpy. If you remember we said the last few times we spoke and this is still a transition year and it's turning into be all of that, given the challenges in the market that we couldn't have foreseen in January. But I think what you'll see is the improvement and as we get into the fourth quarter on a monthly basis, you will see us sort of turn the corner and get to profitability.

In terms of margin, I'll let Chris take that to answer that one for you.

Christopher Halpin

Certainly. The margin we are most focused on obviously is digital profitability and EBITDA margins. You've seen -- you'll see steady improvement over the year. Fourth quarter is always the biggest revenue year seasonally for the business and also highest margins, just given the scale on a fairly fixed cost base in the digital business. We feel good, very good as Joey articulated in the shareholder letter about the level of cost savings that we've identified and driven in Meredith through the integration.

Parts of those, though, however, are obscure just by the lower digital revenues than we had hoped for, at this point, given some of the headwinds that Neil just spoke about within the advertising market. As we get back to growth and continue to scale digital revenues, we look forward to increasing EBITDA margins. Dotdash historically, was in the low to mid-30s. There's every reason to believe this business on a stabilized basis can get back to that level. And when we think about getting to $450 million of EBITDA, well, as we said, in the shareholder letter that is not in the cards for next year on digital.

The key there is getting to about $1.3 billion of revenue and then mid-30s EBITDA margins, and we will be at that $450 million. So, it's really now in our mind as we get back to growth, and get through this period, when we get to that $1.3 billion of digital revenue and achieve the $450 million of EBITDA. Probably we're six to 12 months delayed on that, given the ad market and a few of the migration slowdowns. But as Neil said, we are confident we'll be there by the end of Q3.


Our next question is from Eric Sheridan at Goldman Sachs.

Eric Sheridan

Thanks for taking the questions. Maybe a few, if I can. In terms of looking at the shareholder letter, I think the thing that stuck out was first, on the macro side, your bifurcation of the market between enterprise and consumer trends, maybe flesh that out a little bit in terms of what you're seeing and how you're preparing some of your consumer businesses for what your assumption is about how the consumer spending habits might change in the back part of this year and into ‘23.

Second off the letter bought back stock for the first time in four years. But there was also sort of an implication that the M&A market might move back more in your favor when you see compression and sort of public versus private valuations, we'd love to get an update on the broader capital allocation strategy versus what you're seeing in your own stock, versus the broader M&A. Maybe if I could just sneak in one last one on Care. I thought it was interesting to call out elements of how demand might pick up in September, when you get back to work back to school, and the elements of how you're planning for an improvement in demand and investing behind Care broadly as a platform. Thanks so much, guys.

Joey Levin

Sure. I think I'll take all those. As far as the macro environment, this has been a very clear disparity we've seen so far. And the presumption is that corporations are ahead of the consumer on this, meaning they're expecting the consumer to get worse and therefore preparing for that. We don't know if that ends up being the case or not. But being prepared just means that we're being much tighter on expenses, and being much more focused on margin so that we have that flexibility if consumers start spending less. And that's entirely possible. It also means thinking about our products in the context of what that means if consumer spending less. We've talked about Angi and that's not a terrible situation for Angi because as service requests come down the service professionals are more interested in our platform and more interested in what our platform can deliver.

And therefore we have to make sure the ads and leads product is servicing that part of the market and is well prepared for it. And as you go through business by business, but the main theme is tight on expenses, tight on margin, leave ourselves room for consumers to spend less so that we can operate in that environment.

As it relates to M&A or share repurchases. Always both are on the table, today both are on the table. The M&A is evaluated against the share repurchase. And as is often the case these things happen to be highly correlated, meaning as the M&A market gets cheaper so does our share price. And we'll look at both of those things at the same time and make decisions, so the benefit in share repurchases is of course we know those businesses very well and how they're doing and what their prospects are and what their issues are. And so we can do that well. But we are interested in finding a new business pricey and we're going to continue to look there and we have the capital to do it. So looking there is very much something that we're looking at M&A is very much something that will be active in. And I still think that the public markets as far as opportunities are much more attractive than the private markets, it takes time for the private markets to catch up. And they haven't really yet, so companies raised enough money where they don't have to worry about it for a little while. And so I think the opportunities are certainly much more in the public markets today.

As far as Care, we, the back to school has always been a big moment for the Care business. Also important actually, for Dotdash historically, and Meredith but is a big moment because that's when seasonally a lot of people are looking for Care. And it's very hard to see trends right now, given the impact of the pandemic. And so it may be that there's some of that was pushed out a little bit where we saw the demand come down and/ or not accelerate as much as we expected in July that seems to have started to actually come back in later in July, and early August. So it's very hard to read the trend. But the things that will matter in thrive in that business is product. How quickly a user can, family can find a caregiver, and how easy that match happens. And the work we've been doing over the last two years is to improve the efficiency of that. And we've seen that getting better every day. Instant book is a great example of that product, which is now live, where people can find a caregiver instantly for a specific time on a specific date. And we think things like that can drive frequency onto the platform, which is good for both sides of the marketplace. When you can find a books about it instantly. And more importantly, when you know that you can find a book somebody instantly go to the platform more often. And so that product is now live. And we'll see how that goes.

And the other product that's new right now and contributing in the second half for new edition computing in the second half is managing families with daycare centers and starting to see momentum to start to contribute. And then the enterprise business has also picked up momentum recently. Seasonally the back half of the years where we'll really see that but we now see employees in enterprises increasing utilization, in some cases, increasing utilization meaningfully. And we think that'll be a nice driver of revenue for the business [Inaudible].


Next question will be from Jason Helfstein at Oppenheimer.

Jason Helfstein

Hey, guys, thanks. Just want to dig a bit more. We're getting questions from client just on Angi. And the monthly trend if you can unpack it. And so was the slowdown that you saw on July just maybe you've kind of reconcile that versus June, do we think about the business being kind of a high single digits in ads and leads in the back half kind of be low teens? And then just maybe help us understand some of the marketing decisions you're thinking through Oisin as you're kind of thinking about growth versus margin for the back half. Thanks.

Oisin Hanrahan

Sure. Thanks, Jason. So in terms of the ads and leads business, were obviously a bunch of stuff going on in terms of lapping the rebrand, we've got the Angi brand continuing to be -- continuing to grow pretty aggressively, outperforming I think the expectations that we had, so the consumer demand coming in that brand continues to be strong. The home advisor brand continues to be a drag in terms of consumer demand. Net-net, you put that together with the pretty stable revenue that we get from the ads business. And I think we expect things to improve from here. So I think overall on ads and leads, we're more positive than we were a year ago when we started the rebrand and certainly more positive than we were a quarter ago. And overall that's flowing as Chris has said down into profitability because our businesses, they are continues to be incredibly profitable. You put that together with the services piece as I unpacked in the beginning, the services business had a serious headwind on Roofing that took us down from the 34% into the 18% range.

As that fixes itself and we fix the Roofing business it will take us couple of quarters to do it probably. We expect to get back into ultimately get back into the 15% to 20% range at some point in the next year. So overall, we feel like the tradeoffs we're making on growth versus profitability are the right ones. We've certainly dialed the levers more toward profitability, particularly in the underlying businesses for services. So those are our book now business, our retail business, our managed projects and our roofing business. So each of those individual business units, we've definitely dialed more toward profitability. And that's had an impact on the growth rate. But we think it's the right thing to do.

In terms of marketing, we haven't yet deployed any meaningful marketing dollars against services, all the marketing dollars we deploy continue to be against the ads and leads business and the services business simply still draft off the excess demand created by the ads and leads business. So those three products together ads, leads and services, you put them together, they still represent the best product in class, in terms of how to serve pros and how to drive business. There's nobody else with those three products. We absolutely believe that the combination ultimately drives more revenue, more market share, and eventually more profitability. And overall, I think we're making the right tradeoffs between growth, revenue, growth and revenue profitability and how we're deploying those marketing dollars. I think the question that typically comes is when will you deploy marketing dollars against services, and that still remains to be seen, it's still isn't something we need to do. If we get to a place where consumer demand is much more imbalanced with our pro supply across the three businesses than we will lean into that. We haven't had the need to do that just yet. But it is something we continue to evaluate all the time.

Christopher Halpin

The only thing I'd add with respect to services, monthly trends is it's -- it was a stark hit in to growth in July from Roofing. As Oisin said before, Roofing did about $9 million of revenue in July, it had been averaging $14 million a month across Q2. And that is not in our mind macro. That's not due to any decline in demand. We just got ahead of ourselves in aggressiveness on price and some other operational challenges that Oisin and team are focused on and really that the focus on price started in early June. So a bit of an own goal there. But we feel very good about the overall growth rate of the rest of the services portfolio. We feel great about the long-term growth rate of services. We just got to get Roofing chugging, as evidenced by the $14 million revenue earlier in Q2, which was up substantially on a pro forma basis. So that's the point of focus right now, along with continued growth and profitability in ads and leads.

Oisin Hanrahan

Score fewer own goals.

Christopher Halpin

Correct. It’s always a good strategy.

Oisin Hanrahan

Yes, we'll work on that.


Our next question will be from John Blackledge at Cowen.

John Blackledge

Great. Thanks, maybe two on Dotdash Meredith, for Neil. Could you provide some further color on the digital optimizations of the Meredith brands? Which brands have been converted? And then kind of what results are you seeing? And then secondly, any color on the brand versus performance mix at Dotdash Meredith? How was brand versus performance relative to the performance digital down 7% in 2Q and down 12% in July? Thank you.

Neil Vogel

Sure. So let's do the migration, first question first. And the so take a step back. Remember, the migrations are to unlock two things for us. One, it unlocks all the audience growth, our full weaponry to make these great sites. The second thing is it unlocks performance, meaning, we get the ability to have extremely fast sites and fewer ads that perform better, which means better ROI for advertisers, whether they come in programmatic or premium and it unlocks all our ability to do commerce.

We've migrated now and I have the list here seven sites, Health first, People most recently, Parents InStyle, Travel and Leisure, Shape, Better Homes & Gardens, and they skewed towards most recently, I mean People we did last week. So we can look at the curves that we've seen in the past with what we've done. And if you take a basket, Byrdie, Investopedia, Brides and, which is a good cross section of different types of sites that we have will migrate here. If you look at traffic growth or audience growth, it will just keep it a simple traffic growth to keep the math easy. In four months, we typically see on average and they're all bumpy so you blend it up 10% to 15% growth. A year you blend these out, growing about 30, 18 months, you're close to 50. And that is from on the more performance site, you just build a much better experience and do all the things that we've done, and it's worked, the site that we launched first health is very comfortably on this curve. The others because we've been a little late are a little harder to read. They've just been too recent, I would say parents is probably on this curve as well. We did that one in late May. But most everything else was done in June, July. So early reads are positive. I think the one thing that we can say with confidence is these brands have exceeded our expectations in terms of when you make changes how consumers will respond, how algorithms will respond, how advertisers will respond.

Like these brands have a superpower, People, Better Homes and Gardens has its 100th anniversary, it is a significantly more substantial brand than Spruce which we made the largest home site on the internet. So the big 10 opportunity there is really compelling. So that's sort of on the scale side. On the monetization side to answer other questions, there's three ways that we make that we create yield. One, we sell premium ads, two, we do a lot of programmatic ads. And three, we do performance marketing, which is commerce and various transactions, helping people source goods and services. Programmatically, July 1, we essentially put the two stacks together. So we are brand new, and we are learning. What I mean by we are learning as we now have this incredible scale of this really valuable intent driven content. And every time you migrate a site, it gets more powerful because the audience gets better and the ads getting more performance. As we go through that. It's almost like starting from scratch, we have to learn what ad units to use, and the ad setup on all the old Meredith sites is totally different. So what units are we using? What ad types are we accepting? How are we doing floors? How are quoting with demand sources? So we are really learning and we were very optimistic of our ability to take up yields programmatically. Premium, I mentioned in the first answer, we have this incredible opportunity, we have something other people can't replicate, and nobody can do our performance at scale on these brands. It is our job to tell the story. And we are out now telling the story. Ad integrations are hard, we knew it was going to be hard, and it is definitely hard. But it's also really fun. And it's working. And it's fun to be received by clients. And it's fun to be received by the big agencies and the reception we're getting is outstanding. Now there's obviously the headwinds of the market. But frankly, in the longer term, it's not going to be in the next month or the next quarter. But in the longer term, I believe we should outperform the market because we have an offering that is significantly better than the rest of the market. We can address branding, we can address performance. Our sales guys are learning how to sell this.

We have to bring the hustle across the portfolio, but we're doing that and we feel very good about it. And the third thing we're going to do for yield while we feel very good about this is the commerce piece of our business and the transactional piece for business. And remember, we talked about this when we did the deal, the primary way that we've done transactions in commerce historically has been sort of like very detailed guides, ratings, reviews, and best stuff sort of things. Meredith, despite all of the brands they've had had never really engaged in this sort of commerce, the only thing that they really leaned into was sort of like the news and deals commerce. How do I buy what Jennifer Aniston wore last night on People Magazine? But the real opportunities on these incredible sites, the real symbols and the people's and the Better Homes and Gardens, the food and wines, how do we do our type of commerce there. And as soon as we hit that migration is done, we'll unlock our capabilities and we get going. So that is a long answer of saying we feel very good about the supply side, we feel very good about the demand side. The market is obviously bumpy and a drag on that, but we just got to execute. It's fun. It's fun to put it all together.

The second question was how do we view ads and performance marketing? What I would say generally, what Joey wrote in the letter seems to be true. It's not totally predictive. What?

Joey Levin

I hope so.

Neil Vogel

Yes. No. It seems to be true for us. It actually is true for us where the transactional business in in categories has held on fairly well year-over-year. The ad stuff has been more challenged. I would say we have some specific things baked into our results. Like we had a huge business helping people open crypto accounts last year, that's obviously not going to happen. So we had a couple of outliers that have maybe nicked us to the downside. But overall the commerce business is a transaction, this is the primary business has been has been fairly strong.

Joey Levin

And just a few points that we'd add to the overall arc of Neil's summary, the business. One as we go month to month and obviously, we produce monthly metrics. So you have great insight into our trends, I think across these, you're going to have noise month to month, so days of holidays, et cetera. But as we move throughout the year, our comps at Dotdash Meredith do get easier in the fourth quarter, especially at the Meredith properties, which were quite slow, at the end of last year, probably due to distraction due to the acquisition, which put us behind where we want it to be entering this year.

But we are, for all the reasons that Neil highlighted, we are seeing where we feel good about revenue improvements, as we go along. Key will be overall environment in the fourth quarter and where people are on holiday advertising, holiday spend. But we feel momentum against the comps in that period. The other is on a profitability basis, the cost savings that we've driven phase in as they are annualized each quarter. And so we do expect to see continued margin improvement in the fourth quarter.


Our next question will be from Youssef Squali at Truist.

Youssef Squali

Great, thank you very much. So a couple of questions for me maybe staying with Neil there. Can you maybe just talk about the base case for growth for that Dotdash Digital as you exit the year? I think before we have talked about 15% to 20%, as you exit and then maintain that through 2023. So how are you thinking about that now? And then on the print ad business up 3% into the quarter. That was nice to see. But can you speak to the puts and takes there? And how do you think -- how sustainable is that positive growth there? Thank you.

Neil Vogel

I mean, I'm just happy we got a great question. You did very well.

Youssef Squali

I had to ask.

Neil Vogel

Thank. I appreciate that. So, print, I think we said when we bought this thing that we're going to approach print differently. And I think we have. What print can be for us, it is not going to be an economic driver of the business. But it is a very important brand driver for everything we're doing. And we've seen that in food and wine with its continued success. We've seen that Better Homes and Gardens, we had Harry Styles on the cover, it really helped rebrand Better Homes and Gardens, and it carries over to everywhere else. It is a brand leader. Now, it can be a nice, profitable business. And Chris could talk about a look at it. And what we think that the EBITDA can do. But what we did was we made the hard decisions very quickly, we shot a series of properties. As you know, we got down to seven titles, we have outstanding publishers, we have outstanding editors, we've improved each of the products, like you'll see the new better, we've improved paper quality, it's a little bit more of a luxury good. I mean, again, I don't want to talk too much about print. But more paper books were sold in electronic books last year, I was just told people still buy vinyl records. People love these things and they're doing really well. And they're good brand leadership, the fewer properties has definitely helped the ad business but also a higher quality.

And it's working. And frankly, when you go from 15 to 7, you get to keep an all-star people, other people we have are essentially the all-star team. So that's been really positive. And frankly, it's been a really positive morale thing for our company. Because what we've said and we keep saying is we have brands. We have the best brands in the world, whether it's Tick Tock, whether it's Print, whether it's Instagram, whether it's the Web, that's what we have, and that's what we're doing. And if we're going to do something, we're going to be the best at it. And I think that's really internally been a big win for us. Talk about a base case for growth for the year. I think we mentioned it a little bit, I think we're going to see, hopefully monthly improvement. And not hopefully, we will see monthly improvement for the rest of the year. Again, as Chris said, it's going to be bumpy, it's probably not going to be linear, given decisions we're making, given frankly, IAC’s patience with us and encouraging us to do the right thing, do the right thing. Don't take the shortcut, which has been very freeing for us, you guys understanding the transition year, it has been very helpful. But I think by the end of the year, we should be back to growth and 15% to 20% it's in play for next year. And I'll let Chris give you more color on that.

Christopher Halpin

Yes, I think with respect to Print, we have always positioned it as we'd like the EBITDA, adjusted EBITDA from Print cover our corporate expense, give or take in any quarter and year with the profitability trends that we're seeing and the strong performance in Print on an adjusted EBITDA basis. There's a lot of noise in Print given the restructuring that occurred in February and ongoing, non-recurring costs associated with that. But on a recurring adjusted EBITDA basis, we feel good about that coverage of corporate and are cheered by the momentum we see in advertising in Print for the core titles in the portfolio. More broadly on the cost structure, we're just -- we just look to see continued scale in digital. One of the key things we look at is the marginal profitability of $1 of digital revenue.

Our targets are to get to maintain 50% to 60% in north of that drop to the adjusted EBITDA line. And we feel good about what we're seeing. The key there as then is as Neil said previously, is to drive the consumption, the engagement and the premium sales. So that is the business plan, keep bringing digital revenue in, maintain that incremental profitability on $1 of digital revenue, and have it dropped to the bottom line. And we are very much in that path.


Next question we have from Daniel Kurnos at Benchmark.

Daniel Kurnos

Great, thanks. I guess we'll stick with that, boy, you might get two Print questions here. The just maybe even for Chris too, we know that Meredith national portfolio tends to reprice kind of going into year ends, it's a sort of a big setup here. You guys have clearly taken an aggressive stance on cost reduction there. So if things get a little bit worse, I guess, I just like to hear your answer on, do you believe you have -- you're not going to be impaired by anything that happens in Print and your ability to invest in underlying DDM. And attached to that I think when you guys made the acquisition, I may have referenced that you might find a few more dollars in the seat cushions in the sort of underlying synergies. And you've already started to acknowledge that. So you gave some good color, Chris, just around to get to the $450 million. But I mean, if those do we think of that incremental synergy as additive to that or that's just broader DDM? And not necessarily digital related on the synergy? And then I have a follow up sort of more operationally for Neil.

Neil Vogel

Sure. So let's talk about the print question first, the answer's no. What we are doing for Print is we are making products and properties and assets that help our brands. And I think we have significantly de-risked the print business from where we started, and then we'll print in 2023, we'll print probably a little bit fewer than half the number of magazines printed in 2021. So we are, I think we are very realistic of what we think print can be. We think print can be a very nice business. And we're being extremely judicious with expenses. We're making smart investments, if you're going to do something, you have to be good at it.

But I think we're approaching it with the type of rigor you would expect. If you follow us, or if you followed IAC for a while. We feel pretty good about it. The second seat cushions question, I think you're someone who's probably followed the company for a while, because before we bought it, because that is correct. And I think we said we there'd be about 50 and synergies we're I think we're plus or minus 100 now. Is there more, is there less? I don't know. But we are approaching this with a lot of rigor. And look, it's, you get fresh eyes on something that hasn't fresh eyes on it for a long time you find things. And that's where we are. So I don't know. Chris takes it, probably the rest of it.

Christopher Halpin

Yes, I'd say we wouldn't make any decision with respect to investment in digital, that we'd having medium and long term value for that core business and not do it because of headwinds in print. That's just not how I see things. It's not how Dotdash Meredith thinks and our belief in the long- term value that's being generated there. With respect to cost savings and long-term profitability of the business. I think I understand your question. Certainly, those were a key element of the $450 million EBITDA target and they are just because as you drive efficiencies and you drive margin scale that is a key boon to profitability. But we knew 2022 is going to be a noisy year with restructuring, pulling some of the Dotdash title or the Meredith titles back when we migrate them, to allow them to run even faster, as Neil has articulated post migration. Layered on is the ad slowdown that we've all experienced really in May, June into July as a number of companies, especially in retail and CPG, put on the brakes. But we have significant confidence that while all those cost savings are not appearing right now in the P&L because of the digital compression, or the digital slowdown in revenues. They will as those dollars come back because we have real cost scale in the business. And we have a tight machine at Dotdash Meredith Digital. So I think we're answering that question. And I'll go back to you for the follow up.

Daniel Kurnos

Yes, thanks. That's helpful. Neil's kind of part fair part unfair, just he gave some good color on sort of ecom, which we knew was under penetrated at Meredith and I really want to get a sense from you. The unfair part is you're not even done with the migration yet and asking you a question about whether or not you're finding a way to leverage Meredith’s licensing capabilities. But clearly you have more to go there. And then secondarily a little bit more on the fair, we've seen a lot of guys aggregate sort of the reviews angle, I think of the market, you guys clearly have a differentiated scale, taken market leadership in a number of different verticals. So I'm just wondering what you guys are doing to sort of to differentiate and how you look at this marketplace and go to people and say, hey, look, we can provide incremental traffic and/ or purchase or sales to you in a downtick, so just maybe some incremental thoughts on growing ecom now.

Neil Vogel

I’ll take the second question first, which is my favorite question, and we can actually sort of combined them. A big driver of why we were so excited about this transaction is Meredith has not historically done the type of commerce transaction sourcing that we've done. And remember, our, the way we got into commerce was not we decided we need to get into commerce, it was because our brands at Dotdash were very trusted. And the next step of making the blueberry pie is figuring out what blender you need to make it and then we thought we should start to recommend blenders. From that, sort of like humble start three or four years ago, which happened very organically, we now have 50, or 60, test kitchens. I am going to get this number slightly wrong, like 10 or 15 video and photography studios, fully blown out product testing labs, and a north of 200 person crew of people that rigorously measure, test and try every single thing we recommend. So our advantage is we're good at the Internet. And we are very rigorous at all of the things somebody wants to trust to make a purchase. Now, for whatever reason, people don't trust retailers, they don't trust the reviews on retailers, they don't trust being straight with them. So this middle layer that we are now is becoming increasingly important. And what we have set up to do and we actually took Joey and Barry to go see it, which we do in Birmingham, Alabama and Des Moines, Iowa, it is incredibly rigorous, it is our advantage, the advantage of scale and our ability to do these things at scale. And to test every single thing that we put on the internet with pictures and with videos is a real, real advantage. Now we've done that at Dotdash. And it's worked, we've barely scratched the surface of Meredith. We have not started to roll this actually just started to roll these things out on a few of the properties as they've migrated like Better Homes & Gardens, we think has a massive opportunity. I mean, part of the reason the spruce has been so successful is some of the other guys that space have not paid attention to it. This space is big enough for two or three or four or five of these guys. There's so many categories. So we feel really, really good about this opportunity. It was a big driver of what we're interested in. It works when you look across the portfolio, it works at Travel and Leisure and it works at food and wine and it works at simple and it works at people, it works everywhere. So we feel really, really good about it. And I think that probably got both your questions in that one answer.


Our next question would be from Brad Erickson at RBC.

Unidentified Analyst

Hey, thanks for taking the question. This is Logan on for Brad. Just a couple quick questions on the July growth metrics. You guys did the 10% total consolidated. Do you guys have that number ex- Roofing. I am just kind of curious on that one. And then any sort of one off items in July? Aside from what you've already mentioned, that you would extrapolate or could we kind of consider the July growth rate as a proxy for the rest of the quarter. And then just on margins. How are you guys thinking about second half EBITDA? I know you guys said it'd be slightly above ‘21,

I'm just kind of curious if you have any more color on that margin expansion. Thanks.

Christopher Halpin

So, ex- Roofing, overall Angi growth would be just over 12%. And that is driven by we've talked about the decline. Do you want to take that, Oisin?

Oisin Hanrahan

Yes. So just to unpack that a little more ex-Roofing, the overall Angi growth, as Chris said, would have been 12% ex-Roofing, the services growth would have been 34%. We expect the services business to continue to grow in around that rate, perhaps a little faster, perhaps a little slower. Obviously, the monthly metrics are volatile. And as we recover in Roofing, we will get the overall growth rate back up. In terms of the sorry, the other part of the question was around.


Can you repeat the other part of the question?

Unidentified Analyst

Yes, so I was just saying, is it fair to extrapolate kind of July trends through the rest of the quarter? And then the last question was just on to 2H EBITDA. Is that still kind of in line with your original guide of slightly above ‘21?

Oisin Hanrahan

Yes, so the trend that we're seeing right now is for increased profitability from where we are, we've said that ‘22 profitability will be better than ‘21. We've obviously over achieved in Q2 in terms of profitability, we expected. And we continue to see positive trends as we've discussed in services where we are past peak profitably -- our past peak investment, we expect profitability to improve in the ads and leads business as we get it, as we get back towards high single digit for mid-single digit growth, as we talked about before, that pretty much drops, that drops rapidly to the bottom line. So we're very happy with the profitability we expect for the balance of the year. And we expect things to improve from here.


Our next question will be from Brent Thill at Jefferies.

Brent Thill

Thanks, Joey on Care, with it only growing 10% in Q2, can you provide your view and aspirations for longer term growth over time?

Joey Levin

Yes, I looked at it as very large market that we're still under penetrated. And so I think for the second half of the year we look for 10% to 20%. And I think we've tried to accelerate from there, a lot of that'll depend on getting enterprise going with new sales and the impact of the instant book business. And again, it's not so much that we drive dollars in instant bookings, but it is we drive frequency, and we drive subscription product from people having the ability to find simple games on there, and how that impacts your behavior. But that's what we look for, because we think we're in a very big market with a lot of room and the leading product.

Oisin Hanrahan

And the only thing I'd add, as we disclosed in the letter, first four months of the year, you really had consumer growing at plus minus 30%, and enterprise flat. To Joey's point, we will last -- we will lap the challenging COVID comps of early ’21 in Care, we'll get it back to growth, and it'll be less of a drag on the business. So first half was tough, but we feel good about the long-term opportunity in the enterprise space.

Brent Thill

And just a quick follow up on the capital allocation. I mean it was good to see the buyback come back in but many would ask you have 7 million authorized shares, why not be more aggressive? Is that you're implying you want to do a larger transaction? Is it implying that you're still worried about the core business? Still I think there are some questions why not lean a little harder here?

Joey Levin

I think you can always ask that question. There's always room for more and we asked ourselves, what we should look at it. I certainly would not read into it that we're worried about the businesses. I mean, you heard from Neil and Oisin today. The businesses are in a good spot, it is a tough macro environment but the businesses are in a good spot. We know exactly what we need to do it, got that experience. And we have, I think the best product in most of the categories where we've dealt with. We know exactly what we need to do in Angi and we have the leading product in that category and the full suite of products in that category. And we're starting to drive profitability in that business. So we like where the businesses are right now. Overall market, I'm probably a negative on just from the underlying things that we see going on in the world. But and so that's why we're sort of patient on spending money. But we have confidence in our business is great right now and share repurchases is something we always have evaluated. And we'll continue to evaluate. And again, at any point, when you talk about how much we bought, we always could have bought more or less, and it's hard to read anything into to that specifically.


And we go to Tom Champion at Piper Sandler.

Tom Champion

Okay, thanks guys. I’ll be quick. Oisin, maybe you could just talk about demand specific to home services. How do you think the consumer is holding up? And maybe you could reconcile that with maybe de-prioritizing spend on the home? Just curious if inflation is having an impact? And that just last one quickly, any update on Angi Key subs in the quarter where that ended up? Thank you.

Oisin Hanrahan

So I'll hit them in reverse order. Thanks for the question. Angi Key, over 300,000 Angi Key members right now continue to be very engaged continue to have out, I guess, retention and engagement characteristics above where we are above where we would have expected them to be versus normal consumers. So very happy with that. We are continuing to build out that product and expect to add more features to it. We're testing a couple of new things on it. But it's still pay to save membership program that we're very happy with. In terms of overall demand. I think the point that Joey made, which is we have this suite of products is really important. So we got this ads and leads product where we make money when pros need more work. And we've got a services product where we make money on the back of consumers driving towards convenience of purchase. You put those two things together in a slower environment, our ads and leads product actually does better. So as pros need more work, every incremental SR that we have, is worth more money to them. And that's a really important topic that perhaps gets lost sometimes. But as the macro environment slows down, whether it's because home ownership or home transactions slow down a little bit, and Home Services slow down a little bit, it's really important that we maintain our share of the overall home service requests. But a moderate slowdown in Home Services is actually really good for the demand for our pros using our product. And we've seen that. So we've already seen that in the last couple of months, where our pros are more engaged, they're active for match more. So that means they're turning their leads on more, their willingness to pay per lead has gone up. And overall, we think that moderation in demand is a very positive thing for the largest part of our business.

Christopher Halpin

The only thing I'd add also being newer to the business. We knew April and May would be substantial comps in terms of the demand across the US for home improvement and overall services. We said in the letter, sort of 5% to 10% top of funnel a little bit lower conversion, it feels that's just reduced activity around home, macro pressures those would be probably less of a factor in that magnitude given how elevated last year was. But the other part of this is the health of a two sided marketplace as Oisin has commented and more of a match between supply and demand accrues to the benefit of the Angi marketplace. And now we just got to keep improving product and experience and capturing pro demand.

With that, I think we will wrap up the call. We thank all of you for your time. And wish you a good day. Thank you all.

Oisin Hanrahan


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