Angi Inc. (ANGI) Earnings Call Transcript & Summary

Welcome to the IAC and Angi Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Christopher Halpin, Executive Vice President, CFO and COO of IAC. Please go ahead.

Thank you. Good morning, everyone. Christopher Halpin here, and welcome to the IAC and Angi Inc. Fourth Quarter Earnings Call. Joining me today are Barry Diller, Senior Executive and Chairman of IAC; Joey Levin, CEO of IAC and Chairman of Angi Inc.; and Jeff Kip, CEO of Angi Inc. Supplemental to our quarterly earnings releases, IAC and Angi have each published shareholder letters which are currently available on the Investor Relations sections of their respective websites. We will not be reading the shareholder letters on this call. I will shortly turn the call over to Barry and then Joey to make a few introductory remarks followed by Q&A. Before we get to that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities laws. These forward-looking statements may include statements related to our outlook, strategy and future performance and are based on our current expectations and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q, our most recent annual report on Form 10-K and in the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. We'll also discuss certain non-GAAP measures which, as a reminder, include adjusted EBITDA, which we will refer to today as EBITDA for simplicity during the call. I'll refer you to our earnings releases, the IAC and Angi shareholder letters, our public filings with the SEC and again, to the Investor Relations section of our respective websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. And now I will turn it over to our Senior Executive and Chairman, Barry Diller.

Thank you, Chris. Yes, I am definitely the very senior executive, but it's nice to talk with you this morning. I haven't been on one of these calls, and I think a little more than 10 years. And hopefully, you will not want me to wait another 10 years before I do it again. But what I wanted to do really is to review what's really happened in this company over the last couple of years. About 2 years ago, we, of course, realized that our -- 2 of our principal businesses, Angi and Dotdash were troubled. Here's what the troubles were. We had taken Angi, which the prior year at about $260 million of EBITDA down to $35 million. Our CapEx shot up to $115 million. On Dotdash Meredith, the initial plot after the acquisition was we thought we would do $450 million in EBITDA, actually, the plot for that particular year, 2.5 years ago, 3 years ago, went from $335 million down to $230 million. So I felt, as did Joey Levin and our colleagues that we were really in a crisis. And we had to fix these 2 principal businesses. So we essentially stopped everything. We did not want to do things that either extended the amount of work we had to do into other areas that weren't as important. We knew that we had to hit the ground and really spend and we thought at the time it would take certainly 1 year maybe 2, to get these businesses back to performing. And so we froze everything basically other than attending those 2 businesses and getting them back on a track where they need it to be. At Angi -- some of this, of course, you all know, but I really want to put this in context because I do think it is, at least, from my point of view, it clarifies what the company has been doing in these last couple of years and where we are now and where I think we will be in the future. First thing we did is we replaced the CEO of Angi with Joey Levin, who was kind of also, obviously, at that time, he was the CEO of IAC. But we said, okay, we'll take all the other areas of IAC, you concentrate on fixing Angi. We immediately got rid of the low quality and a low margin revenue, which reduced our revenue but -- and we stopped the capital expenditures at anything near that level. I think we went from $115 million, if I recall correctly -- or I said correctly earlier, to about $50 million. And what happened is that, of course, the profit and the cash flow went back on to a positive track. We also appointed Jeff Kip, to be the CEO. He had been running the international businesses really well. And at the essence, Angi, like all these entities, they are product companies, and we had to fix the product. All of that work has been in train for these last couple of years. And Angi now is back, as you can see from the figures, it is back from where it was A lot of the things that happened to Angi were -- some of them were self-inflicted, some of them were grandiose plans to get into the services business ourselves, et cetera, which, while good ideas were not executed well at all. And so Joey and now Jeff went in and took the thing down to, I think, kind of its studs and have built it back up where it can now perform. And then hopefully, next year, you'll see real revenue growth. So that's the arc of Angi. On Dotdash Meredith, we reversed the traffic declines. They're up -- I think traffic is up about 8%. With the integration, as you all know, when people talk about integration and synergies and all of that, they can talk a good game. But when you get right down to it, it's a tough slog. And it was a very difficult 1.5 years as Dotdash [Audio Gap] invested in digital [Audio Gap] great makes us get this whole thing in train [Audio Gap] Dotdash have done so well, which is the thing that got us to buy, which is we thought we had a game plan for properties, service properties, be able to gain advertising at a greater value than anyone else. And Angi, I'll just give you just one -- I don't do stats very well. So this is my one thing on stats, which is the digital revenue growth, and I found this very stark. This is Q2 of '22. I'm just going to read you a consecutive 6, 7 quarters, down 7%, down 13%, down 15%, down [Technical Difficulty].

Barry, I think we...

This is the operator. It looks like Mr. Diller, we have lost your audio, sir.

Barry, can you hear us? Well, hopefully, we will get the audio back there. And the good news on that is previous remarks, we're very consistent with some of the things that I was going to say, so hopefully, I can pick up where he left off. First of all, thank you, Barry. Thank you to Chris. Thank you to Jeff and everybody for being on this call. I looked in my first one of these calls was in Q4 of 2013. So I've been doing these calls for 12 years, and this is, I think, nearly my 50th one of these calls, but only actually one of those was ever with BD. So this is a treat for all of us if we can get them back on the line in fixing that connection. Obviously, we have plenty of ups and downs as Barry took us through and businesses come and go since then, but it's nice to have the operations really on the upswing right now. We finished the year 2024 very strong. We had a nearly $250 million increase in cash flow year-on-year to almost $300 million of cash flow for IAC's businesses. And the -- there's just real momentum right now behind the businesses, especially Dotdash and Angi. Dotdash is outgrowing the market. And Angi is almost there. We're looking at growth next year as we've discussed. And the good news is we've had enough progress in the business in terms of just delivering the customer experience, nailing the unit economics, addressing the costs and OpEx and CapEx, such that we've had enough to with at Angi that we were really able to rip off this last quarter or this current quarter, sorry Q1, we're really able to rip off that last band-aid and get the product experience fully to where we want it to be. And that means we can start building again. And that's what Jeff and I are -- and the entire team at Angi are incredibly excited to do. And as I said for a quarter or 2 now, we're back on offense. And I think that's true for both IAC and Angi. And I think Barry and Chris and everybody at IAC are incredibly excited about that. And Jeff and I at Angi as well are soon to be at Angi as well, incredibly excited to be back on offense. And that's a great place to be. So unless we connect to Barry in the next second or so, let's go to questions.

Yes, sir. sorry, I do not have Mr. Diller back on yet.

Okay. Let's go to the question queue, operator, and take the first question.

[Operator Instructions] Our first question today comes from Cory Carpenter with JPMorgan.

I had one for each of you, I think, on Angi. Joey, I'll start with you. Could you talk about your motivations from moving to Angi with the spin? Maybe for Jeff, what's giving you confidence in trends improving through the year despite the 1Q guide coming in below your prior expectations? And for Chris, could you just talk through the next steps in the spin process and if I see is planning to take any cash from Angi.

Sure. I'll start. Thanks, Cory. I think to answer your question, there's both a -- of course, a personal and a professional element and a lot of overlap with those things. But on the personal side, I think there comes a point in life where you start to optimize for freedom and that time for me, I decided it now, and I'm incredibly excited about it. And on the professional side, Angi just still has asymmetrical upside, I believe. And I know how hard it's been. I know it is in this business, but as I started to say before, the news is, I think we've done most of the hard stuff. We've pulled out most of the challenging things. And we know it's -- believe me, no fun to sit in front of all of you and own some big mistakes and rip out some sizable chunks of revenue. But that really, especially with the changes Jeff talked about in the letter on January 13 is now behind us. And that means we -- the -- I think the pains in the rearview mirror and now we finally get to focus on building again. And that building process with a product that makes us proud is a fun thing to do, and I'm really excited to do it.

Thanks, Cory. I'll just take the spin process questions. We filed the registration statement on January 27. Once it's declared effective, we'll continue to finalize separation agreements between the companies. We'll also make additional filings with the SEC as necessary. We are very focused on closing right now on March 31, but we continue to work through customary legal and tax considerations along with certain operational details. At the end of the day, the goal is a seamless and successful transition to -- for Angi to be in a stand-alone public company. And as we said, we're on process for 3/31. Regarding Angi's balance sheet, the current plan is not to make any dividends. So we would spin Angi with its current cash balance of $416 million and $500 million of attractively priced bonds. With that, I'll pass to Jeff.

Thanks, Chris. So Cory, I'll take your question on Q1 and the 2025 outlook, and I'll probably throw in 2026 a little as well. Our Q1 outlook is a little below what we estimated about 3 months ago. At the time, we assumed that the first quarter would be a world framed by the FCC order, and we got ready. We fully implemented consumer choice consistent with the FCC order on January13. That's a couple of weeks ahead of the orders effective would take. Not just because of the order but also because we know and we've known it's clearly the best thing for our customers and the business long term. We've been steadily moving towards this implementation and the FCC order really only accelerated our path. As we noted in the letter, the experience -- the improved experience has been an evidence for a while. Homeowner NPS is double digits better when they choose the pro than when they're auto matched, and Pros win the lead 60% more often when they're chosen than when they're auto matched. So we looked at that data, we said this is clearly the right thing. Since we've made the change, we've gotten very positive feedback from our customers, and we've observed the dynamics in the marketplace and the improvement in the market experience and has only confirmed all of this prior analysis and our conviction to change. On January 24, at the last minute, the courts vacated the FCC rule change. And we, however, are still going ahead. We're sticking with the change we're making. Our competition is not -- this is creating some short-term disruption in the market and an impact on our first quarter. But long term, we consider ourselves very well competitively positioned in the marketplace with a significantly better customer experience. So going forward, we're obviously real time adjusting to the changes in the marketplace given the regulatory shift, but there's a number of factors that give us high confidence or build through 2025 and back to growth in 2026. First, the first quarter is our toughest comp for the year. We're sunsetting a few hundred basis points of non-choice revenue in our proprietary channels that we got rid of at the end of the first quarter last year and we don't have to compare to that for the rest of 2025. Secondly, we have a number of product builds impacting marketing efficiency, matching and monetization that we have clear data behind that will add revenue and profit as we build through the year. Thirdly, our single Pro product initiative referenced in the letter on the last call is going to lead to growth in revenue per monetized transaction by the second half of the year as we sunset our legacy ads pricing structures. Fourthly, we expect to steadily return to growth in our proprietary SR channels this year and be fully growing in 2026. Our SEM unbranded SRs are growing today. Angi.com SEO is only down single digits today and is 90% of our unbranded organic traffic. And so we expect to continue building through the year and reach growth in 2026. On the flip side, our third-party SRs are going to take a significant step down in 2025. But because we're doing it at the beginning of the year, we expect it to be flat in 2026, and the 2 together give you growth. Finally, we expect increased homeowner repeat and Pro retention because of the impact of a homeowner choice on the experience on both sides of the marketplace. So net Q1 is going to be down a little versus what we said a few months ago and down in the low 20s percent year-over-year. But we've got even more confidence in revenue improvement across the year and a return to growth in 2026. And very much have confidence in competitive position we're able to take and the quality of the customer experience we're going to be able to deliver over the long term. So we think that this is to deliver value to our customers, value to our shareholders and a strong next couple of years.

Our next question comes from John Blackledge with TD Cowen.

And Joey, good luck with the move. Two questions for Chris. First, could you talk about the drivers of DDM 4Q revenue and EBITDA? And maybe walk through the 1Q '25 and fiscal '25 puts and takes for DDM revenue and EBITDA guide? And then second question would be kind of given IAC's strong balance sheet and the ramping free cash flow. How should we think about capital allocation? And then with the upcoming Angi spin and Joey moving over to Angi as Executive Chairman, how should we think about kind of the management transition at IAC?

Yes. Thank you, John. So starting with DDM on our last earnings call, we talked about how sluggish both consumer traffic and advertiser spend we're headed up to and through the U.S. election. We were cautiously optimistic at the time both would ramp back up after the political landscape was sorted. And we saw that. November traffic was excellent for us, most notably on our food sites. As Neil Vogel likes to say, "Thanksgiving is the Super Bowl for all recipes." Traffic in December was slower, mainly due to a lack of celebrity and entertainment news at people and some less robust holiday momentum in the home category. . On the advertising front, we saw many advertisers come back into the premium and programmatic markets in mid-November. Net result of all that for the third quarter, we posted 3% core sessions growth and 3% digital advertising growth. A real bright spot in the quarter was performance marketing, which grew 22%, led by exceptional e-commerce performance. It was great to see this area grow strongly after a couple of sluggish quarters and it highlights DDM's industry-leading ability to convert consumer interest into sales for our retail partners. And then finally, licensing continued its strong growth led by our OpenAI and Apple News partnerships. Together, these 3 revenue lines blended a 10% digital revenue growth above the range we were forecasting. Looking to 2025, we view all 3 digital revenue growth areas as healthy and strongly positioned. In aggregate, we're expecting 10% plus digital revenue growth for the year with high single-digit growth in Q1. A few factors contribute to a slightly lower first quarter growth in those high single digits. It's more challenging in January and February comps. Easter, which is a key holiday for shifts this year into Q2 from Q1 last year and there's one less day due to the leap year. The second quarter conversely sets up stronger with easier comps in the Easter benefit. On the digital advertising front, we're expecting mid-single-digit traffic growth for the year and mid-single-digit monetization growth. We'll also generate incremental revenue from the launch of D/Cipher Plus where we will be seeing third -- we'd be selling third-party inventory using our proprietary targeting technology. We're testing this with select advertisers this quarter, and we'll scale it up throughout the year. And then performance marketing and licensing should both grow solidly for the year. DDM continues to manage its cost structure thoughtfully as shown by the severance in the fourth quarter due to headcount reductions to reallocate resources. For the year, we're forecasting 40% plus digital incremental EBITDA margins, which combined with 10% digital revenue growth and then 10% revenue declines in our Print segment, lead to our guide of $330 million to $350 million of total EBITDA, $300 million of total EBITDA. One accounting note, as noted in the release, we will have a significant gain -- Barry, I hand it over to you one second. We have a significant gain in the first quarter of 2025 of approximately $36 million associated with a highly favorable lease buyout. Our adjusted EBITDA guidance excludes this gain. Barry, I'll turn it over to you. We just got the question about capital allocation and how that changes in the context of our strong balance sheet.

All right. This is all very odd for me because you'll have to -- I've been -- did you hear my opening remarks?

We got your opening remarks up through Angi in the very beginning of DDM and then we sort of lost you when you were going through the quarterly growth rates of DDM starting with '22. That's where we lost you.

Nice. Yes. Well, Technology über alles, so about how many minutes in? Because I went on for about 20 minutes and then [indiscernible] and heard nothing.

I think the key would be to pivot to the capital allocation section and talk through thoughts on M&A and buyback because we didn't get to that, and that's...

This is all because we're not in the same room. So this ain't the easiest. But did I cover the turnaround of Angi and Dotdash?

Yes, yes, we got through Angi and most of Dotdash, not entirely.

And did I talk about Angi spin?

But we didn't get Angi spin.

All right. Let me pick up there then. I'm sorry, everybody, but technology fails at just the moment you kind of depend upon it. So whether you heard it or not, we spent those 2 years turning around businesses, which is why I froze everything. We didn't want to be distracted during this period. And as you certainly know about our how decades of spinning off companies or conglomerate -- that's an anticonglomerate. It's kind of like that concept, which I believe that businesses when they get to be a sufficient size, they ought to be spun off and be independent. There's nothing more further than IAC could do really for Angi, Joey and Jeff running the business with complete confidence in them. They've done a very good job in getting it to the state where it can begin to grow. And also, Joey come to me and said, "I really like a business of my own. I like my own store." And I totally respect that and encourage that. And we had the vehicle to do so. It made no sense for us to keep Angi partially to have its own majority, but still be a public company, either we're in or we're out I think that it is a perfect time to do the spin. And I'm glad that I think it will happen on somebody correct me, but I think it's March 31 is the date that it will happen. And so as I said before, I did freeze everything. We were burning cash in '22. We've gone from burning cash now having $352 million of cash flow this year. We purified the company. We've sold assets. We bought MGM before this period. I believe that MGM is -- I mean MGM it is run like a Patek Philippe watch. It has superb management. No one will ever duplicate Las Vegas anywhere else in the world. We have 40-plus percent of the market. It cannot be disintermediated by any technology. There's nothing between it and its customer and serving its customers. As you know, these hotels run at 90-plus percent capacity. And the future for MGM, building a $10-plus billion resort in Japan, the only gaming resort in the entire country in Osaka, which will open -- let's take some years to build it, but is a great flag for MGM. It's going to plant other flags around the world. It's going to simplify itself over the next period. I think it's been complex to a little overly complex for people to understand. It's wildly undervalued. And I think that it's just a how lucky do you get to be able to have found a company at a time when it was -- since it was all shut down in Las Vegas, when we came upon it. It wasn't open. We were able to buy in advantageously. It's bought back a lot of its stock. It will continue to do so. And I just couldn't -- I think the idea of having DDM in the position that DDM is in outperforming its competitors. I did -- I'm going to ask you one more question. Did I get to the thing of giving you the stats of the traffic, digital traffic of DDM or not?

I think you were halfway through that when -- which is exactly when we lost you.

All right. Well, good, halfway is really the worst of it. So let me go from the halfway bad to the next halfway good. For 6 quarters, we went down 7%, 13%, 14%, 15%, 10%. Beginning in the fourth quarter of '23 plus 9%, fourth quarter -- first quarter, 13%, then 12%, then 16% in the fourth quarter, just announced 10%. I mean, that's an incredible reversal. And DDM is just -- it is -- it had to go through this difficult integration and transition, also hit by the ad market itself having a decline. But it is an excellent asset, the bedrock right now of IAC, DDM and MGM, plus we have, obviously, you all know, our balance sheet is very strong. As I said earlier, we -- I froze everything. It's me that we're not buying stock back during this period because I didn't think we deserve to until we've gotten our businesses in shape and gotten confidence about our business. I'm not going to talk about what we will do, but I will talk about one thing, which is the fact that I did stop it, that stopping has ended. And I'm not going to foresee things because what I've just said, I hope is fairly obvious. But I hope you understand the reason I did stop it and wanted us to freeze and only pay attention to our businesses and getting them straightened out and getting the whole corporate structure straightened out. We're now in a situation where that phase has finished. I think we are freshened by these recently announced events as far as what are we going to do with our capital. There are areas, I think, of DDM to invest in. There are also all sorts of opportunities, whether it's buy, build, history of this company has been God knows, endless starts of buys of businesses. And that landscape, well, I think the Internet field is fairly covered, but we're going to look at anything that talks walks or whatever. And we're not anxious. We'll do this as we've done it before, tell us a good idea. And if we think it makes sense, we'll go forward with it. And we've -- at least our history has shown that in doing that, we've built assets in value. And that's what me and Chris and Russell Farscht, our Head of M&A, are dedicating themselves to do in addition to the work that we'll continue to do with our principal asset of DDM and our involvement with MGM. So okay, I hope still I'm with you after having now almost done this twice.

That was perfect. And you answered John's question well there, Barry.

Our next question comes from Eric Sheridan with Goldman Sachs.

Maybe 2, if I could. First, for the Angi team, understood on the 3-pillar dynamic with respect to '25 going into '26. I wanted to if we get a little bit more color on what investors should expect in terms of some of the headwinds turning it to potential tailwinds for the business that we should be monitoring from the outside in, in terms of that transformation or call across those 3 pillars. And specifically, with the transition to a single product and platform, how to think about some of the integration dynamics of moving towards that what it might mean for sort of improving the quality overall in the platform. That would be number one. And then Barry, maybe following up on your answer, great to have the opportunity to speak. IAC has changed over the years in terms of taking stakes in companies and continue having operating business. When you think about the framework you just laid out investing for the long term in IAC. How should we be thinking about what our priorities are with respect to operating business as opposed to maybe investing in businesses like we saw examples like MGM and Turo.

So with your first question, Eric, I'm going to try and sum up a little bit what I said before, which is we have been progressively improving the product and building our proprietary traffic back to growth. Our SEM, proprietary SEM has returned to growth. We expect our proprietary growth to move and improve through the year and get to growth in 2026. Consent and Choice has taken a big chunk out of our third-party business, but that business is now going to be stable going forward. So the 2 together get us to growth going forward. On the Pro side, our retention has improved materially. We're literally bringing 700 basis points more of the Pros active in -- we brought 700 basis points more of the Pros active in 2023 into 2024 compared to what we brought from '22 into '23. While our acquisition is coming down and thus, we're not netting network growth yet, those forces will cross going forward, particularly with the incremental changes in customer experience. So we expect the Pro network to inflect the growth again as well. So the 2 of those things will combine, and that will take our trajectory back to growth in 2026. In terms of single Pro product, there's a couple of pieces to it. One is moving all of our Pros to a single platform with a single product and pricing structure is going to allow us to run our operations far more efficiently, reduce time to market, reduce overhead and make our acquisition and marketing more efficient. Secondly, it's going to, as I said before, sunset some pricing structures that's going to pave the way to grow our revenue per monetized transaction in the second half of the year, which will be another lift in our incremental progress back to growth. In terms of integration risk, we've now done 5 migrations of a comparable size in Europe. We're pretty seasoned at this. We'll likely take a little disruption, but we'll also get back Pros from the old product. We do it every time we do it in Europe. We've just -- this is basic operations for us. And so we expect, of course, there to be a little noise in the system, but we actually expect to come out better and move forward well there. I think I covered all the pieces of your question.

I think that's very well said. Let's go to Barry.

As far as operating businesses, I mean, we'll take it any way it comes. I believe, as I've said forever that once the business gets up to sufficient scale, it ought to be spun out and be independent and on its own. I think companies that have multiple operating businesses and try to operate each of them, I think they do so less advantageously than they would if those companies were standing on their own. And as we look into the future of possibilities, I'm sure that there'll be operating businesses that we will operate for a period of time. But actually, we operate them for too long, I think probably they will have failed and we will dispose of them. If they succeed, we will spin them out.

Our next question comes from Jason Helfstein with Oppenheimer.

Two questions. Maybe just first for Barry and then the second is a follow-up for Joey and Chris. Maybe I'll ask them in that order. So just Barry, I think one of the questions we keep getting from investors was would be how would you characterize IAC kind of post now the Angi spin? Are you poised to lean more into multiyear bets? Or are you more focused on realizing the current bets and returning kind of the maximum amount of kind of cash and value to shareholders. So just let's start with that question. Then just a follow-up on Meredith Dotdigital.

Well, you'll see what we do in the next period. As I say, I stopped us from using our capital to return it to shareholders for the reasons I've said before, that period has ended. And so it's always going to be a balance. You take the first opportunity of investing in your current businesses. I think there's a real opportunity inside DDM in all sorts of areas. And I think that may take some capital. I think also, again, we have a clean slate. We don't have any drag on us. We don't have any problem, so to speak. All of that stuff has been solved. So all of our attention can go to seeking new opportunities, and they always come if you're -- I'm not inpatient and I'm not patient. So we will see. It will be clearly a mix between returning capital to shareholders and seeking opportunity.

And then, Joey, Chris, now that digital revenue is growing double digit at Meredith Dotdigital. What are your plans to transition to focus on top of funnel and find ways to further leverage content and drive more engagement and impressions. And how do you -- and do you think that can accelerate revenue over the next 2 years at MD?

Yes. Thanks, Jason. We always look at the business as advancing 2 key drivers in parallel. Traffic as you're talking about and monetization, quantity and price. For traffic, there's definitely top of funnel elements a few key strategic priorities. One, as we talked about in the letter, and we talked about previously is direct consumer relationships, where we engender traffic through new products, e-mail and marketing. Another is continuing to offer premium content behind our industry-leading brands that we optimize for different platforms. So think Apple News, Google, Discover, social media, things like that. And then the last one, which we mentioned a little bit earlier, is D/Cipher Plus. In our partnership with OpenAI and also on our own, we've mapped comparable third-party sites that have the same signal of intent that the cipher utilizes from the signals developed on our own properties to target and deliver ads. With the launch of D/Cipher Plus, we will now be offering our advertisers the ability to increase their buy by using our target platform. We believe this will provide additional value and utility to advertisers while also opening up new budgets for DDM. We're ramping this up steadily and believe it can be a large and attractive business. On the monetization side of the equation, there are 3 core elements continue to be best-in-class in premium direct sales, and that's all about performance, service, et cetera, for our advertisers. The second is improve and continue to broaden our programmatic efforts to take advantage of the auction market and then continue to innovate and lead the market on performance marketing. We felt great about the last quarter with 22% growth, keep it chugging. Thus, drive as much traffic and grow revenue per session. In terms of higher growth rates that you asked about, our guide is 10% plus digital revenue growth this year and going forward. But we believe in the power of our platform and the incremental growth opportunities it provides. So we will keep pushing.

Our next question today comes from James Heaney with Jefferies.

Can you break down the results at Care.com? Is there any additional detail you can give the divergent results between enterprise and consumer and what to expect going forward? And then I just had a follow-up question.

Yes. So we broke out care as its own segment this quarter. This is a business we bought in 2020 and have spent a lot of time and energy rebuilding the platform and advancing it, and we will talk about further efforts there. It has 2 main business lines. It's consumer business where individuals and families directly subscribe to Care.com to be matched with caregivers and find home care. And then it's enterprise business where companies pay care to provide benefits to their employees. The companies can purchase backup care days that employees can use to get emergency care for their child or senior if needed. They can access specialists to help support different needs at home and with their family. And they can also pay for their employees to have full access to the care.com marketplace. The last few years at Care have seen ups and downs driven by COVID then followed by post-pandemic adjustment. The enterprise business experienced a major boost during the pandemic as companies sought to help employees manage care needs with differing work arrangements and get them back in the office. That leveled out post pandemic. Right now, the enterprise business has a nice tailwind behind it as employer provided support for care needs is increasingly becoming a standard benefit, sort of table stakes in some ways similar to health insurance. The enterprise line grew last year and should continue to be a solid performer going forward, and we're one of the real leaders in that category. On the consumer side, we saw a greater macro tailwind in the '22 period than we realized, and it frankly masked some deficiencies in the core product experience. Consumer declined last year as we lapped challenging comps, struggled on marketing and the product lagged on conversion and renewals. New CEO, Brad Wilson and his team have been actively working to improve the product, focused on areas like messaging and matching, and we believe the impacts will be seen throughout this year. It will be a slow return to growth given the subscription product and the nature of ramping back up and reversing trends. But we love care.com's positioning as the industry leader with the most care seekers and caregivers in the market. We also know the consumer demand is there. The company recently released its annual state of the industry report and the challenges of finding good child and senior care are only growing as are the costs. So with an improved experience and better marketing, we think the team can seize on that opportunity and return to growth. And then James, next question?

Yes, great. Just one quickly on the corporate costs. Just curious what's driving that elevated level in 2025. And then how should we think about that on a normalized run rate going forward?

Yes. We guided obviously to a much higher number this year. There's a number of nonrecurring things going on in corporate this year. The first are associated with Joey's separation from IAC and movement to Angi. His 6-year consulting agreement will be recognized at the time of the Angi spin all at once. Next are costs associated with the Angi spin, tax, legal, filing, et cetera. Additionally, we have legacy matters that are hitting the P&L this year, such as ongoing litigation relating to the Match Group separation that will drive expenses this year. And then finally, as talked about in the prior quarter, we have taken actions to streamline costs at corporate, and that's created onetime expenses this year. I'd also flag when you look at '24, the run rate costs were artificially masked and the reported number was lower due to a $10 million out-of-period insurance payment that we received in '24. So in sum, we are incurring roughly $50 million of nonrecurring costs this year that will not be in the cost structure in '26 and beyond, and we'll provide more clarity on that as we move forward. Thanks, James.

Our next question today comes from Ross Sandler of Barclays.

Great. Barry. I guess a question for you is how involved do you want to be in the day-to-day at IAC and how do you feel about the management structure at the top with Joey moving over to Angi? And then, Chris, a follow-up on the opportunity for D/Cipher Plus and non-owned and operated inventory. Could that be material in '25? And what kind of impact could that have on profitability at DDM?

All right. I'll start quickly. I have great confidence in my colleagues in terms of the day-to-day. Chris Halpin and Russell are both going to help me with that. But we really have we have one prime operating business, which has superb management does not need us day-to-day. And I think that again, I think this is a group that just by the nature of the change and all of these things, I think, is fresh and eager. And I'm going to do what I've always done, hopefully stimulate the process, drive people a little crazy and pay attention to the things that I think are important, which obviously -- obviously too much today. I don't know why, but whatever anyway, obviously, it involves capital allocation and seeking out new opportunities.

Yes. And then, Ross, D/Cipher Plus we're excited about. We think it can be a powerful growth driver. It really increases the company's access to 2 types of inventory that advertisers want. The first is look like premium inventory in our core categories, food, health, home, others where we see consumer intent at scale. So DDM is often limited by inventory and our own premium pricing on highly performing inventory in these categories. And we can use D/Cipher Plus to identify similar performing inventory on those third-party sites and buy it efficiently. This inventory today is being monetized on programmatic platforms at lower rates, where current buyers lack the powerful intent-driven signal that D/Cipher provides to DDM. The second set of inventory is undervalued, yet performing impressions in our categories. So we have core advertisers who are being priced out of DDM inventory because the performance in CPIs are so high. And they're looking for some lower price volume to be included in their buys. We can do that and still have the D/Cipher performance guarantee. So think about it as adding both elements of the price curve. Because of these factors, we believe we can substantially increase our supply of impressions and do it at attractive margins while providing our advertisers with exceptional performance. We're ramping this offering up across '25, selling it into accounts and believe it can grow rapidly on a revenue basis. . On the incremental margin point, we said we're targeting 40-plus digital incremental EBITDA or adjusted EBITDA margins. We believe that strikes the right balance between investment and products and content on the one hand and profit growth on the other. And D/Cipher Plus, we believe will be supportive of those types of incremental margins.

Our next question today comes from Justin Patterson at KeyBanc.

Great. I wanted to hit on Jason's Dotdash question in a different way. What do you see as the key steps to grow traffic more and eliminate the middleman. And then as you execute on these initiatives, how might the financial profile of the business differ versus what we see today?

Thanks, Jason -- Justin. So the direct-to-consumer effort is one that Neil and team have been driving for aisle, and it's an offensive plan. We know our brands are exceptional. We know they're trusted and we know they're sought after by consumers. We've also talked for a few quarters about our efforts to expand our content to as many platforms as possible to engage our customers and to grow our touch points with consumers to be able to interact with it directly. Some of that has been through e-mail, marketing, video, social media and also live events, which have worked very well from both an engagement and a monetization perspective. This year, we're looking to continue to invest in these areas and also roll out new products initially centered on people and our industry-leading food brands to engage consumers directly and then further enhance loyalty, which drives even deeper engagement and repeat engagement. These products, which will be providing more information as we go, take advantage of video, personalization, utility and our breadth of content and storytelling. And we think we're going to offer experiences in these categories that no one else is today. With respect to financial impact, the monetization models are similar. And so we don't view them -- we view them as advancing and not dilutive to our overall financial efforts to DDM.

Absolutely. Our next question comes from Youssef Squali with Truist Securities.

One question for Chris and one for Barry, please. So Chris, back to D/Cipher now that you've integrated OpenAI tech in there. Can you maybe talk about the impact on KPIs that you've seen like conversion, at pricing, et cetera? And how much of that is left in your view? I'm not talking about D/Cipher Plus, just D/Cipher on the owned and operated. And then, Barry, I guess now that I see -- or now that Angi is going to be spun off, how do you see IAC engagement with MGM post that? Does that compel you to want to do more in that category. And if so, how there have been a bunch of news coming out, BetMGMs, I think other JV partner Entain seems to have had some changes at the top. So just how do you think about that opportunity now that you seem to have gotten some flexibility in your corporate structure?

BD, do you want to go first?

Yes, sure. I see it as what I've said before, which is I think MGM is in excellent shape, excellent operating results and superb management team. MGM is going to continue to opportunistically. Certainly, it's been buying back its stock, will continue to do so, knowing how undervalued it is, which will increase our ownership. We may increase our ownership. As I said before, I consider it to be a forever asset. Conditions, of course, possibly could change, but I can't fathom that. And I think it's in -- I also said earlier, I think we'll see it be something that is somewhat less complex going forward. But I just think it's ours. It's never going away.

And then Youssef, with respect to D/Cipher, -- we've talked before about the case studies that we've executed with our advertisers, and we have over 30 case studies that prove it out. What's interesting is we target or optimize different metrics based on what the advertisers' goals are in the given campaign. And as you know, D/Cipher today is all premium direct campaigns. So for some advertisers, that's click-through. For others, it's efficiency. For others, it's actually sales conversion and then some, it's in-store visits. We have -- we are quite confident we've outperformed in all these case studies, cookies and then blow away non-cookie-based solutions. We've seen the -- we talked about this last quarter that campaigns that or orders that include D/Cipher are over -- provide over half of the direct digital revenue in DDM. That trend has continued as has -- we said last quarter that orders with D/Cipher are over 50% larger than orders without D/Cipher. And that trend will continue. It is an important feature in an overall direct advertising campaign. We also are thrilled that being able to integrate OpenAI's technology, we can utilize video and images in our targeting, in our scoring for even better contextual performance, and we expect to continue and advance that.

And Youssef, on your question on BetMGM, this is Joey now. The -- you saw the announcements from BetMGM a week or 2 ago, nice -- really nice momentum in the business. The things we were talking about on the product side for a while, they talked about how that's materialized into the business. And MGM and BetMGM both have had a great relationship with Entain, both at the CEO and the Chairperson level with Stella David. And so we wouldn't expect anything to change there.

Our next question comes from Nick Jones at Citizens JMP.

I guess just a couple on learnings from AI, Angi's focused on improving the questioning and matching. And in 2025, there's an increased focus on kind of Agentic AI. As you think about the kind of energy playbook going forward, is that going to play a role in kind of improving matching, I guess the same question for Care.com.

Yes, I'll start. Our view is yes, on improving matching. Jeff talked about that a little bit in his letter. I think I've said for a while, and we're not sure whether this happens or not, but I said for a while that one of the best things that could happen to Angi and Angi's user interface would be if consumers adopt conversational UI. Obviously, they're doing that to some or a significant extent with ChatGPT and similar. But that's the ideal UI for us to get the right information from consumers about a job. And of course, the better information we get about a job, the better matching we can do. And then on top of that AI is better technology for sorting data to allow for better matching. But if we can get that conversational UI adopted broadly and consumers are comfortable with that, I think that, that is net very positive for Angi and the user experience there.

Yes, I would just say, effectively, that becomes Agentic AI, right, where we're effectively serving as the agent we're matching with the Pro. And so that's where we see this going as we leverage those tools and technology.

Yes. And Nick, I'd just say broadly across the portfolio, we said this for a while, where you have proprietary data sets, the application of AI optimization and analysis, you will have -- it will enhance things like matching on our marketplaces, be it Angi, Care, Vivian, elsewhere. And we are seeing those applications. And then secondly, onboarding, sign-ups, service request generation, nurse information at Vivian, all of these open information entry activities as well as classic customer service functions, you can see where the puck is going due to the AI opportunities. And do you have another question? Okay. Operator last question.

And our last question today comes from Tom Champion with Piper Sandler.

Thanks. I guess, Chris, I'd love to hear a little bit more about the verticals within DDM and just maybe the trends that unfolded in 4Q and what you're seeing thus far. You made an interesting comment on digital ad revenue taking place via spend commitments and maybe that portion overlaps with D/Cipher. And so with D/Cipher seemingly growing well, I'm kind of curious if you have more revenue visibility. Hopefully, that makes sense. Maybe just a final question for Joey, if I can. Joey, I think you ran the search business way back when. And I'd just be curious, as you have observed OpenAI and search evolve. What do you think about the future of search broadly?

That's a big one.

Just wanted to slip in there, Tom, right?

Why don't you go first, Chris. Why don't you answer that question?

Yes, that's fine. I'll be pointy-headed, and then we can go to the big concepts. So Tom, a few things. We describe the ad market as fine right now. The -- we definitely saw the momentum pick back up after the political freeze. People broadly -- or sorry, advertisers, agencies broadly, I think we'd say are more short term in their commitments, move quickly, but they've got things to sell and brands to build, and we're seeing that. Across categories, no major trends that we would note from the past. We've got clearly health, home, food and beverage, finance, others. We'd love to see some momentum return in finance over time. Health is fine, and we'll continue to monitor how the economy grows. D/Cipher plays in the direct premium advanced sell area. Our goal is to roll it into more through product enhancements into more on-demand ad buying, and that's something that the team is working on and be able to serve advertisers in both places. So we are constructive on the current ad market, but cautious as always, given the geopolitical volatility and everything that has been a hallmark of the last few years.

Yes. So I'll answer a little bit anecdotally and then maybe broader. But as I start searches now. And as many people I know start searches now and increasing share is certainly going to the AI platforms. And that's because it's a good, efficient experience, and I expect that experience to continue to gain share. It's a meaningful evolution from the ten blue links, and we've been looking for that meaningful evolution to the ten blue links for a long time. And I think that is a profound advancement. I think that one of the keys in that is those user interfaces, whether they're voice or the sort of AI conversational thing that we're used to have space for fewer answers. And that means that what's going to be important there, and we think about that in the context of IAC and DDM and in the context of Care and in the context of Angi is you got to be the best in the category with the best content. And for those, I think you're in a very good position. And if you're further into the tail, I think that's a much harder position. And so I think that these models or the LLMs and those user interfaces continue to take share for a while and then sort of concentrate audience around the very best in a more meaningful way.

Thank you. Thank you, Tom. Thank you, operator, and everyone.

Thank you all for a decade or more of these, and good luck from here.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.