Angi Inc. (ANGI) Earnings Call Transcript & Summary

All right. Great. So we'll get started. I'm Cory Carpenter, an Internet analyst at JPMorgan. And joining me this afternoon is Oisin Hanrahan, CEO of Angi Inc. Angi is the leading home services platform in the U.S., operating brands including HomeAdvisor, Angi and Handy. Oisin has been CEO since February of this year and prior to that, co-founded Handy, which Angi acquired in 2019. Oisin, thank you for joining us today.

Thanks, Cory. Great to be here.

So I'll kick off with questions. [Operator Instructions] But starting off, Oisin, so you've been CEO for a few months now. Well, you've been involved in the home services industry for at least a decade. So maybe to start, can you talk a bit about your background and what really excites you about the home services industry and the opportunity that you guys are going after at Angi?

Yes. Sure. So I'm originally from Ireland, from Dublin. I studied economics and the first business I started was a real estate development and construction business. I ran that for about 6 years. And one of the things I noticed was how hard it is to get things done in construction. And you think to start with that it's just hard on the buy side, but it's actually hard on the sell side, too. So whether you're a contractor, a plumber, a painter or you're a person, a homeowner who's trying to get something done, it is a clunky, messy process. And I started Handy in 2012 to try solve some of that for small tasks. So we started Handy with the idea that you should be able to book everyday home services at the touch of a button. And I think the thing that excites me about the category is, we're so close to unlocking home services delivered in a digital way at scale. I think never before have we had a marketplace that has so much potential or a category that has so much potential and yet is so, so clunky and messy and broken still in terms of how far it is from the ideal customer experience. And I think, you think about where we are in that journey, I think we're really close to making it a really seamless experience. And I think that's what gets me really excited about it. There's so many people affected by this category. Pretty much every homeowner in the United States is affected by how difficult it is to take care of your home. And when we get this right and we get to a world where you can press a button and pretty much take care of whatever you need done inside your home, we'll have unlocked a really great experience for consumers and hopefully, something that really helps pros build great businesses.

So zooming in on Angi, it's certainly been a volatile year for everyone at Angi and globally. How would you characterize kind of the state of the business today? And what are your top 2 or 3 priorities as CEO?

So you zoom all the way out on where we are. Home is a $500 billion category, $500 billion a year, $0.5 trillion spent on home improvement in the United States. Historically, Angi's played in that sliver of it that was marketing for small businesses. So the lead spend, the marketing spend, the ad spend for small business. The big shift we've made is we've put a stake in the ground and we've said, actually, that's not how we're going to solve this category. That's a part of it, but it's not how we're going to solve this category. We're going to solve this category by going after the whole thing. And that means saying, hey, we're going to measure ourselves against the $500 billion of TAM. We're going to measure ourselves against share of wallet of the whole thing. we're going to measure ourselves by what percentage of the time a customer who needs something done is coming to Angi and ultimately getting the job done. And that's on the consumer side. And that's a shift from where we've been in the past. And on the pro side, we're going to measure ourselves by whether or not pros are driving ROI from the platform. So again, historically, we've had one business, which was the leads and ads business. Now we've added Angi Services, which is this pre-priced model. You can go to Angi. You can pick a service and then get the job done and we'll actually go and contract with the pro on your behalf and make sure that we deliver the experience. So we're in this really interesting inflection point at Angi where we've got Angi Services up and running. It's at reasonable scale and it's growing quickly. And we're figuring out how to make these 2 models work really well together. If you think about the difference between them, one of them gives us really great breadth. So Angi Services gives us 250,000-plus pros on the platform serving 20 million homeowners. Not a lot of depth. So we don't have a lot of depth in any one vertical or any one category. Angi Services gives us that depth. And it allows us to go really deep and say, hey, whenever somebody comes in and wants to get a plumbing job done in Denver, we're going to make sure we deliver on that, and we actually own the full transaction. And I think that's where we are in terms of the business. In terms of priorities, look, we started by saying, let's make sure we've got a really clear mission. Let's put the homeowner and the pro at the center of everything we do. Let's make sure we're not making short-term financial decisions. Let's make sure we're putting the homeowner and the pro at the center of every single decision that we make, which is a shift for us as an organization. We're going through a cultural shift to make sure we orient everyone at the whole organization around that. So that's like a really important priority. We're obviously building out the leadership team in terms of making sure that we bring in folks who put the customer and the pro first and have a long-term vision that this is about the $500 billion of TAM, not a lead or an ad business. And then the last thing is making sure that we actually measure ourselves against the right metrics. So what percentage of customers are getting the job done, what percentage of pros say, yes, this is the best darn place I can go to drive my business. If we get to that, then the rest of it will take care of itself.

So definitely want to dig more into Angi Services, your fixed price offering. So you initially launched fixed price or Angi initially launched fixed price in August 2019. Clearly, an area that you personally have a ton of experience in. So a couple of questions, but maybe for those who are less familiar with the story, could you just give us an update where are you in terms of the Angi Services build-out, whether it's size or percent of jobs being done just to get everybody up to speed?

So the way the Angi Services model works, so that everyone knows, you go to Angi. You put in a ZIP Code. You pick a category that you're looking to get work done in. And right there in the service request path, where instead of matching you with a pro, we say, hey, would you actually like to buy this service directly from us? And that delivers a really seamless, easy experience for those customers that want to take out their credit card, put in the credit card and actually make the booking today. That model kind of breaks down into 3 parts, small, medium and large tasks. The small tasks are where Handy has a ton of expertise. We've done this millions and millions of times at this point over the last 9 years. And we're just going now vertical by vertical within that and knocking out category after category. So we're trying to light up another dozen categories where we go really deep, deliver a great experience and make sure everyone is really happy with that experience. In the medium-sized task, this is the kind of $5,000 to $10,000, $15,000 category, we're learning. So that part of the business is growing quickly, but it's very much in learning mode for us where it's not very automated. A great example is in our roofing category. There's a ton of opportunity to do some really interesting things around using LiDAR data and high-res aerial photography to do great upfront quoting. We're really learning how to do that and again, figuring out how to apply the technology rather than just applying it. If you think about it in the first part, the small task, we know how to do it. It's just a matter of going vertical by vertical and knocking it out. The medium stuff, we know that technology can be applied to solve the problem. We're learning the category and we're learning how to apply the technology. And then in the large stuff, we're dipping our toe in the water. These are the $50,000 to $250,000 jobs where we act as a digitally enabled general contractor on a full remodel. We're learning how that works. It's a very obvious experience that can be better for the customer, but it's one that we're still very much learning how to take on.

I mean, one of our takeaways from at least your first earnings call was, and certainly, it seems like we got the message you're going all-in on Angi Services, and that's just a better solution. What have you seen and what you've done so far that just giving you the confidence that this is the right direction for us to go in?

Yes. So one of the things, I think, was the data we put out in the last earnings letter, which really broke down by experience type how the consumer repeats with us, how often they repeat with us when they have different types of experiences. And I think that's a really valuable data point to help us understand whether or not the consumer is having a great experience. It's one thing for them to rate us highly, it's another thing for them to actually come back more frequently. So that's a really important data point. You think about the money we spend every year on consumer marketing, it changes the game pretty drastically if instead of having less than 2 service requests from the average consumer in a year, if we get that up towards 6 or 7, it really meaningfully changes the relationship that we have with our consumers and the way in which we can invest. The second is around pro retention. We're really excited about the early data we're seeing in terms of how pros are engaging with the product. And then the last is, we've got a playbook for how to enroll pros in the small categories in an online way. And so it's self-enroll, digital enroll. What we've been doing is rolling it across more and more small categories. And the success we're seeing there has given us confidence in kind of what we're doing and has made us feel better about how we can really blend together the different methods for bringing on pros, from our high-touch sales for leads and ads, to this lower touch for these small categories. The economics are obviously challenging if you bring on pros and you pay full-fledged sales commissions and full-fledged sales cost to bring on pros that only do small tasks. And that's a real challenge in terms of pricing, in terms of the cost model. It's very different if you can bring those folks on with far lower cost in a scalable way and then they self-serve and they take care of the jobs themselves. So I think those things together give us confidence in terms of the individual data points. You zoom all the way out. Obviously, the business is growing really quickly. We're investing in it. I think we said we did $55 million of revenue in Q1 without spending on marketing, really just driven off the excess service requests in the marketplace business, growing 66% plus or 66% Q1-on-Q1. And I think that's, again, just a macro data point as we invest in that business gives us confidence that we're excited about what we're doing.

On that point, I mean, I think one of the things that have stood out to me is that you've done this without marketing, basically to your point, just through organic traffic. I mean, when is the right time? So you're investing $60 million this year. So maybe I'll kind of pull 2 questions together. I think one would be, what's that money going towards specifically? And then two, when is the right time to put marketing dollars behind it to drive traffic to fixed price?

Yes. So look, it's obviously an important investment for us. We're excited about making that investment. It's really about category by category, going deeper, making sure that we're building a great experience. I mentioned the roofing business. I mentioned the kind of dozen-plus categories that we're going deep in each year in the small task business. That requires a team, requires us to build individual product experiences. And it's obviously not cheap to go do that, and we're excited to make sure that we're pushing on that investment. We feel good about it. I think on the earnings call, the last call, I said this will probably grow faster than you think, but it will cost more than we think. And I think that's probably true. I think Q2 will be an expensive quarter for us in terms of investment. And I think we expect right now, we're seeing the Angi Services business accelerating growth, which is great. We're excited about the rates of growth we're seeing. And we're seeing some softness. The other side of that is we're seeing softness on the marketplace business. I think we said we'd be around 10% growth in May for the overall. I think the blend of that has shifted. We see services growing a little faster. The marketplace business growing a little slower in terms of where we would like it to be. We'll probably be a little under on that. I think in terms of where we are for the year, the number we put out there is getting to over 20% by Q4 for the overall. Again, I think we feel very confident about that. We feel very good about the growth we're seeing in Angi Services. I think, again, marketplace, there are headwinds, tailwinds on this. It all depends on how those things play out. But there's definitely a very clear focus here, which is making sure that we make these 2 things work really well together. And I think overall, we're really excited about where the consumer experience is going, where the pro ROI is going. And I think you fast forward 12, 18, 24 months, we want to get to a place where we feel really good about consistently growing this to take more and more of that TAM. And I think we'll measure our long-term success here based on the volume of that TAM that we have going through our platform, assuming we can keep the customer experience at a really, really high rate -- sorry, really, really high level of satisfaction, keep those retention rates where we want them to be and hopefully drive more ROI to the pro as well.

So let's talk about the Angi rebrand for a bit. So I guess just could you talk a bit more about the rebrand you're doing? And why now was the right time, especially given you have a lot going on in terms of fixed price and you have some of the supply challenges?

Yes. So the rebrand, obviously is, look, there's never a good time. I think we said the best time to do a rebrand is 20-plus years ago, but the same as the best time to plant a tree. And we are now in a world where we've got 3 distinct business models that the pro can engage with, right? You've got leads, ads and pre-priced services. It doesn't make sense for us to be in market confusing pros and selling those under 3 different brands, having them engage with 3 different products, having 3 different sales teams, like that just doesn't make any sense. So what we're trying to drive towards on the pro side is a single brand, where we can have pros that drift across the experiences, we can guide them to the ones that make most sense for them. On the consumer side, what we've got is, again, 3 different brands. We've come down to one primary brand, which is the Angi brand. We're definitely seeing great consumer engagement across the different products when we bring you in under a single brand. Again, in the last letter, we showed, hey, when you come in and make a Angi Services booking first, you actually submit more service requests than if you made a service request first, which is great. So it's again speaking to the value of having the multiple experiences under a single brand. There's obviously costs associated with the rebrand. I think the same way that we're investing in Angi Services, we're also investing in that rebrand. There's SEO headwinds against that, and we'll continue to make sure that we think we're doing the right thing over the long term for the customer. We're going to see some headwinds on SEO as we think about what Q2 numbers are going to look like. But you flash to Q3 and Q4, we feel really good about the trajectory that the rebrand is on. We feel really good about the data that we're seeing in terms of consumers repeating on that brand. And overall, we feel good about the investment in Angi Services and the investment in the rebrand.

I mean, you kind of talked about unifying under one brand. I think that the shareholder letter was saying, the goal is to unify under one single brand. So I guess, is this kind of the first step in a longer process? Like does Handy still exist? Do the different brands exist over time or do you see them all kind of meshing into one?

I think they all mesh. We've got to be careful here in terms of making sure that we are deliberate and thoughtful about how to use the brands that we have and transition to a single brand. Obviously, you don't want to cut off a brand and say, do a hard cutover on any one day. But we're being very thoughtful about making sure that we put the Angi brand first, making sure that we are investing our mainstream marketing dollars in that Angi brand. The Handy brand, as an example, has collateral in 10,000-plus retail stores across the country. We got to be thoughtful about like how we think about the long-term transition of that as we think about what the Handy brand stands for and how we move it towards Angi in a gradual way. But you can see us already doing that with the HomeAdvisor brand. HomeAdvisor is now HomeAdvisor powered by Angi. I think you can expect to see us continue to push that Angi brand more and more front and center. And you dream out 2, 3 years, I think we're very clearly aligned around the Angi brand on both the consumer side and the pro side.

And you talked about this a bit just in terms of the SEO headwind, but maybe just to dig in a little more. So I think, you called out $40 million impact this year. Kind of where do you feel that the most? And I mean, is this something that when you talk about SEO headwind, like is that impacting revenue or is it more of an expense to build the brand? Kind of where do those dollars go into?

Yes. I mean, look, it impacts both, right? It impacts revenue. I think it's one of the reasons we're seeing the softness in the marketplace business in May in terms of the headline numbers. We're investing in the brand. We're investing in the technical aspect of SEO. We're investing in consumer marketing spend to make sure that we're driving people toward the new brand, we're educating consumers on the new brand. And I think you think about what it means, I think we said that the Q1 EBITDA number was representative of where we would expect the average for the year to be. We still believe that to be true. It won't be even throughout the year. It will be down. It will be up. But we've factored that in when we gave that indication that Q1 was where we expect it to be. Q2 will be more expensive, bounce back. And we still believe that for the full year, that number, that $40 million you referenced is, encompass $40 million for the brand, $60 million for services is encompassed when we gave that indication that Q1 was indicative of where we would expect the year to land on a run rate. And I think the more we get into it, the more positive feedback we get from customers, the more data we get from pros. I spoke to a pro last week, who runs a fourth-generation masonry company. So it's a 102-year-old masonry company. And he was buying ads from Angi. He's buying leads from HomeAdvisor. And he'd been called a number of times about selling pre-priced services through Handy. And his question to me, there was a few of them, but one of them was, why do you need these 3 different teams, these 3 different folks? Would it not be far better to have a single team focused on each pro or each category? And that's so much more logical, right? So you get so much more leverage if you had a team focused on masonry who could help that pro out and help them have the right ad spend, lead spend and take pre-priced services. That team would know more about masonry. They'd know more about his business as opposed to where we are today, which is super spread across brand and not category or vertical focused. And I think the more you get into it, the more you realize how much opportunity there is for going really deep in each vertical. We've got $1.5 billion plus of revenue that we talk about in a homogeneous way or we talk about it in terms of leads and ads and services. The reality on the ground is, the customer is not thinking about that. The customer is thinking about, I'm buying X amount of masonry work or I'm buying Y amount of plumbing work. And the person selling it is also thinking about their category or their vertical. And the more we can align our business, the more we can align our teams, the more we can align the organization to be focused on the vertical that the customer and the pro care about, which isn't leads or ads, it's what they're actually buying. And that model has been tried and true in so many different e-comm categories and so many different e-comm leaders have come out and built that vertically specific teams and organizations and it's really paid dividends for them. And I think that's a big shift. When you go back to the first question you asked me like, hey, what are we doing differently putting the customer and the pro first. It actually means organizing the team in a way that puts the customer and the pro and what their needs are at the center of everything that we're going to do. And that means verticalization in this case.

One topic I want to make sure we hit on, not the most exciting of them all, but gotten a handful of questions just around Handy and what's going on in California. I guess it would be helpful to hear your thoughts to the extent you're able to comment in how big of a risk, if any, this is potentially spreading to being a broader issue?

Look, we've been at this for a long time, and we've been very transparent and very forward leaning saying that we don't think that the current set of structures is perfect for everybody. We've been very clear in terms of our public statements, and we've leaned in and said, hey, what we want to do is make sure that everyone working on the platform has the ability to combine both flexibility, the flexibility and autonomy. They have to choose their own hours, set their own rates with the ability to have access to benefits and access to training. And I think the existing model forces a hard line and choice between those 2 things, which is frankly not -- I understand why it's there. I don't think it's a rational choice, and we've erred on the side of giving people access to flexibility, access to set their own rates, access to autonomy and access to the choice of when and how and where to work. I think we'll be working to announce a number of pilots in the coming weeks where we've historically said, hey, what we want to do is give people access to more benefits and access to more things. I think those pilots were many years in the working. This is not a problem that has erupted overnight. This has been going on for a really long time. We absolutely believe that categorization, classification of our contractors is correct. We will continue to work at every level to make sure that, every level to make sure that, that's internalized by the relevant legislators and judiciary and relevant authorities. And hopefully, we can get to a place where, hopefully, we can get to a place where not only are we right, but we are actually right and we can help pros have access to things that they didn't have access to before. Like this is not a new model, right? The average plumber out there is a person working by themselves or working with one other person on their team. Like this model has existed for 100-plus years. And some people are working at small companies, some people are working at big companies. And we want to make sure that we have a platform that gives these contractors, give these individuals, give these small businesses the ability to work in a way that works for them. So I hope we can get to a better place. I think right now, for the last 9-plus years, the only people who've made money out of this are the lawyers. So hopefully, we can, at some point, flip that around.

That's helpful. I want to talk a bit about, I think, with fixed price, one of the things that we view as quite exciting is kind of the suite of products, if you will, that you're building around it, payments, consumer financing, memberships. There's a bunch. I know they're all very early. I want to start with payments. You mentioned, I think, $100 million volume run rate. I think the most interesting thing there, too, is not necessarily payments but it being facilitated on your platform, so helping bring new customers. Can you just talk more about kind of the payments, the opportunity that you see in your offering today?

So I don't know if there is a single large successful two-sided marketplace that is not involved in payments. Like I don't know if there's any like $50 billion marketplace that is not, a consumer marketplace that is not playing in payments. So for us to get into payments 20-odd years in is pretty late in the game. I think we're 9 months or maybe a little more than that into payments now. I think it is critical to the long-term success of Angi. Like you think about the services business, every single transaction in the services business, we obviously process the payment for. So we're out there doing business. We're making sure the pro gets paid. So we are deeply involved in payments in the services business. In the marketplace business, which is the number you referenced that's doing $2 million a week in payment volume or $100 million run, we are, I think, early to that, and we think it's a huge opportunity. We think it's a huge opportunity because it's a better customer experience. Just obvious, right, if the consumer can pay in the same place that they're engaging with the pro, it's just better. The second reason is, it gives us a different relationship with the pro. So instead of them thinking, hey, Angi is going to hit my credit card or my debit card every single week to charge me for leads and ads, they're thinking Angi is going to do that, but also I'm getting this ACH payment in once every other day or whatever cadence they're getting paid from the consumer, from the agent. So it changes the dynamic of the relationship. The third, and this is probably one of the biggest areas of broad opportunity for Angi is data. So by having the loop closed, by knowing what the pro actually received from the customer, we can have a really early insight and a really powerful amount of data on how that pro is really doing on the platform. Yes, we can collect surveys. Yes, we can get like data or early survey reads and whether a pro won a job or a consumer says they connected with a pro, we could see all that, but the dollar is moving. The money moving from the consumer to the pro is like the most powerful signal that, that pro is making money on the platform because it is first-party data. The other data aspect is, it gives us real pricing information. So it tells us, hey, you know what? This pro bought 4 leads from you, paid $30-something a lead. And then they got a job, and that 1 of those 4 customers paid them $4,500. Like that's real, live, closed, actionable data. And it's like this like level of insight we've never had before on what's going on in our marketplace. So I think payments is absolutely critical to our long-term success. It is something we can't just be good at, we have to be great at. We won't build a $50 billion company unless we become great handling our payments between our customers and our pros.

I just got a 3-minute warning. So I'll maybe put 2 together and let you pick where to go. Other initiatives would be memberships, probably a little earlier than payment, I would presume, and then consumer financing with Affirm. Just curious to hear about your ambitions there and what you're most excited about.

Yes. I mean, look, financing, I'd put in the same category as payments. Long term, we've got to be great at it. We've got to make sure that -- we're not in a category where the average ticket is $500. The average ticket is thousands of dollars. People are financing these jobs. Financing is a critical component of large home improvement projects. We've got to be great at it. And whether that's doing it ourselves or doing it with a partner as we're doing today, we need to be long-term great at offering financing in the purchase flow and in the decision flow. In terms of memberships, this is an early bet for us. But I'd venture to say that it's really positive. We've got about 100,000 members paying us on a pay to save program right now, which is similar to a Costco membership. You pay X dollars a year and you save a certain amount off home services. It's a very obvious way for us to develop a deeper relationship with our consumers and help them think of Angi as the go-to place. It doesn't have a name yet. We'll likely brand it in the near future. It's just Angi membership right now. And we will likely build it out past pay to save. Like maybe it includes X percent financing, may include zero-point financing for a certain amount of categories of tasks. But you can see very obviously that people want a way to take care of their home. And by becoming an Angi member, like we should be doing more to help you take care of your home and help you love where you live. And I think that's a really exciting way for us to think about developing that relationship between the consumer and offering them something more if they've made a small commitment to us to spend a certain amount per year to be a part of Angi. So I think memberships, again, early. We made a small acquisition to really double down on a team that had some expertise in membership. And I think they're doing a great job. The retention rates, as you saw in the letter, are strong and the rate at which we're adding members continues to accelerate. So I think we feel good about it.

Last one, service pro supply, fixed or Angi Services should do a lot to address this. But it's been a constraint, I think, for at least the past year or so. Where are you in terms of kind of rightsizing that? I mean, is that still one of the things that's impacting the marketplace side of the business?

Look, service pro supply has been a topic of debate in this business for a long time. I think there's a few different things we're doing that are different that should give us an edge in terms of how we think about supply in the future. The first is verticalization. So empowering individual teams and people within a particular vertical to sell multiple products. So long term, we want to think about the team that's focused on plumbing, thinking about whether to set their plumbers up with leads, ads or Angi Services, so Angi pre-priced. And that's a shift, excuse me, from where we are now, and I think that's important. The second is focused on pricing. And again, it comes back to the data on payments, the data we're getting from our Angi Services business should help us be much better at pricing those leads and pricing ads in a way that drives ROI for the pro. And then the third is what you hit on in Angi Services, but I might put an even finer point on it. By changing what we're selling to pros, we're unlocking a new base of potential supply. So if you bought leads and ads from us, you actually have to be pretty good at selling. So you actually had to be pretty good at going out, following up, texting the customer, arranging the finance, doing whatever. By doing Angi Services, we're not saying you have to transition from A to B. We're not saying, hey, like, hey, you have to move your lead people and your ad folks over to my Angi Services. What we're saying is, this unlocks new supply, pros who might necessarily be great at selling. They might be great at doing the job, but they might not necessarily be great at calculating marketing ROI and internalizing, hey, if I buy 10 leads for $35 a lead, it doesn't matter if I only win one of them if the job is worth $35,000, perhaps that's like, okay, that's not the world I'm in. I didn't want to risk the $350 to make $35,000 or $3,500 or whatever. So this unlocks a different category of pro who might not necessarily be great at selling or great at thinking in terms of marketing ROI. And I think that's really very powerful because it allows us to bring in a new category of pro we've never been able to work in the existing model because they have to put money down and buy leads and follow up and do all that stuff. And I think that's like another shift that we're making. So I'd put those 3 together, and I think we should be able to grow supply over the medium term. You take a long-term view, look, I think there's an opportunity for us to become more active in terms of changing the perception of trades, changing the perception in terms of what it means to take on a career in trades. You look at where we stand versus the Scandinavian countries or France and Germany, we're underpenetrated in terms of the percentage of population working in trades. So if we took a 5- to 10-year view here and said, hey, we're going to put a certain amount of capital behind growing the percentage of people in trades. If you doubled the percentage of tradespeople in the United States, we've got a far better business. So we'd be in a far stronger place, both in terms of helping our customers and in terms of having more pro capacity. So I think there's a real long-term opportunity for us to think about that.

Awesome. We're out of time. Thank you. Hopefully, we'll get you back here in future years, but appreciate you coming on today.

Thanks so much, Cory. You're welcome.

All right. Bye.