Angi Inc. (NASDAQ:ANGI) Q1 2024 Earnings Call Transcript

Angi Inc. (NASDAQ:ANGI) Q1 2024 Earnings Call Transcript May 8, 2024

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Operator: Good day and welcome to the IAC, Angi First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Christopher Halpin, CFO and COO of IAC. Please go ahead.

Christopher Halpin: Thank you. Good morning, everyone, Christopher Halpin here and welcome to the IAC and Angi Inc. First Quarter Earnings Call. Joining me today is Joey Levin, CEO of IAC and Chairman of Angi Inc., and Jeff Kip, CEO of Angi Inc. Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter, which is currently available on the Investor Relations section of IAC’s website. We will not be reading the shareholder letter on this call.

I will shortly turn the call over to Joey to make a few brief introductory remarks and then we will open it up for Q&A. Before we get to that, I’d like to remind you that 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’s and Angi Inc.’s first quarter earnings releases in 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 as EBITDA for simplicity during the call. I will also refer you to our earnings releases, the IAC shareholder letter, our public filings with the SEC and again, to the Investor Relations section of our respective websites for all comparable GAAP measures and the full reconciliations for all material non-GAAP measures.

Now I will turn it over to Joey.

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Q&A Session

Joseph Levin: Thank you. Good morning, everybody. Thank you for spending some time with us this morning. I won’t repeat the numbers you’ve seen posted. I think we had a great quarter with real progress on growing profit and free cash flow. And that puts us in a solid position for deploying capital from here.

Biggest news in the quarter was we’ve — we’re starting to participate now in the new AI ecosystem in a tangible, financial way. We announced the deal yesterday with OpenAI, where we’ll be compensated for enhancing ChatGPT experience. We’ll start to hopefully get some incremental users to our properties from ChatGPT and we are going to collaborate on D/Cipher, which is a product inside of Dotdash Meredith that we think is the future of advertising on the OpenWeb and where we’ve been growing nicely and we think generally taking share on the OpenWeb. And hopefully, that agreement is just the beginning of other opportunities for us in that AI ecosystem.

And we’re incredibly grateful to OpenAI who, from the very beginning here, has been a leader in the category, including with their first product which really opened the dam for everybody competing in this area. And hopefully, they’ll still similarly act as a leader as they have done in the agreement with us in starting the — opening the floodgates towards new opportunities for us in that area.

I also want to welcome back Mr. Kip. He actually used to be on this call 8 years ago and is back in new capacity as CEO of Angi. I’m not just thrilled about that because it lightens my load at Angi. I’m thrilled about that because I think Jeff has been — already know, Jeff has been involved in this business in a meaningful way for a very long time, going all the way back to his role as CFO of IAC many years ago where he spent an enormous amount of time getting deep with what was the predecessor to Angi Inc., HomeAdvisor and then spent 8 years very much in the details of the business, in running the international business for Angi.

And you’ve seen, as we’ve reported tremendous progress in that business. And I’m really excited now that Jeff has the entire Angi business and he’s very focused on the key to succeeding in that business, which is delivering jobs done well and I expect the job done well out of Mr. Kip. So welcome, Jeff.

Let’s get to questions. Operator, first question please.

Operator: [Operator Instructions] Our first question comes from John Blackledge with Cowen.

John Blackledge: Two questions. First, for DDM, overall revenue growth beat our forecast. Could you just unpack the growth within DDM digital revenue across advertising performance and licensing? And maybe how should that trend going forward? And then I have a follow-up on the OpenAI deal.

Christopher Halpin: Sure. So we felt great about the performance of Dotdash Meredith digital in Q1. Overall, Digital revenue grew 13%, led by 19% growth in Digital advertising. And that’s due to the combination we’ve talked about before, 8% core session growth and then improved monetization across both premium and programmatic.

Advertiser spending is firming up. It’s not a hot market or on fire but it’s better and it’s strengthening and that drives our premium sales. And then on programmatic, we believe we’re outperforming and improving market and that we’re doing better because of our superior tech stack and performance.

Performance marketing only grew 3% in the quarter and that was really pulled down by a 30% decline in services such as — which is overwhelmingly financial products such as brokerage accounts and insurance. Performance marketing for e-commerce or goods, as we highlighted, grew 18%. So we recognize we’ve got to continue to invest and innovate in performance marketing, particularly on the services side but we’re confident that we’ll get back to strong growth there.

And then a real bright spot was licensing, which returned to growth at 9%, led by a strong performance at Apple News and syndication partners. That area has been a — had been a headwind really since we closed the Meredith acquisition but we now feel it will be a tailwind and OpenAI will be a further element there.

Looking forward, we continue to see 10% plus revenue growth in Digital each quarter and for the year, with solid execution across all 3 line items. Advertising will clearly lead the way as we see session growth and improve monetization. And what’s your second question, John?

John Blackledge: Yes. Second question, could you talk about the DDM, OpenAI deal at a high level, including key terms of the deal? And can we expect similar deals with other LLMs, like Google, Anthropic, Meta, et cetera? And if you don’t strike a deal with those companies, are they precluded from training their models on DDM content?

Joseph Levin: Yes. So the deal, we obviously can’t get into the very specific terms but at a high level, there are 3 elements to the OpenAI deal. There’s displaying content and links attributed to DDM in the relevant ChatGPT responses. There’s using the historical and ongoing DDM content to enhance their model’s performance. And then there’s partnering with DDM and OpenAI on building out the D/Cipher cookie-less, intent-based targeting ad solution. That’s a first of its kind partnership and we think that really enhances the future — has the potential to enhance the future of privacy-protected advertising and we’re excited to collaborate with them on that.

It’s a multiyear deal and it involves both — all the elements we said and that includes financial compensation. And we’re really excited about that deal.

In terms of others, I think — look, as I said in my opening remarks, OpenAI led the way in showing the world the possibilities of GenAI and — a sort of chat interface. And I think that they — I’m hoping that they will again demonstrate to have led the way in dealing with publishers and journalism and content. And I do expect that others will follow. That may take time and some may sort of go through various stages of resisting that but I do expect that others will follow over time.

And the deal is not exclusive, which means that we certainly have the opportunity to do a lot more there and we really are grateful to OpenAI for figuring out how to get this done. And I think really from the beginning, them — and under Sam Altman’s leadership, have had the right tone in thinking about a healthy Internet ecosystem and making sure that OpenAI but AI generally is a force of good for the world and they’ve continued to demonstrate that so far.