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Q & A Highlights

Q: Can you discuss the macro environment and how it affects consumer spending in the services landscape, and how this impacts Angi's margins and investments? A: Andrew Russakoff, CFO, explained that in recessionary environments, consumers focus more on necessary maintenance rather than large discretionary purchases. This shift impacts Angi's business, with a noted 3-5% impact on run rates. Despite macro challenges, Angi benefits from being a small fraction of the industry, with word of mouth as its biggest competitor. Pros rely more on Angi when their order books shrink, leading to easier customer acquisition and increased share of wallet. Angi has reduced overhead by $100 million since 2022 and plans to maintain stable investment levels while focusing on revenue growth and improved unit economics.

Q: What gives you confidence in the revenue trends improving through the year, and what are your capital allocation priorities now that Angi is a standalone company? A: Jeffrey Kip, CEO, stated that improvements in proprietary service requests and leads, along with anticipated growth in revenue per lead, support confidence in revenue trends. The company expects network channels to remain flat, while proprietary channels grow, leading to overall growth. Regarding capital allocation, Angi plans to buy back shares to manage dilution and focus on core operations. While not aggressively pursuing acquisitions, Angi remains open to strategic opportunities that are accretive to shareholders.

Q: What are the next product initiatives to reduce friction in the ecosystem and improve job outcomes, and how does AI play a role in this? A: Jeffrey Kip highlighted ongoing initiatives to improve job matching by refining homeowner questions and implementing an AI helper to enhance match quality. The move to a single Pro product will allow Pros to select specific tasks and geographies, improving engagement and match accuracy. AI is seen as a facilitator across various aspects of the business, from customer interactions to operational efficiencies, enhancing the overall experience and conversion rates.

Q: Can you provide insights into the factors affecting international revenue growth and the status of monthly active Pros? A: Jeffrey Kip noted that international revenue is impacted by transitioning the Canadian business to a higher-margin model and regulatory changes in Europe affecting Pro acquisition. Despite these challenges, the core international business remains healthy with strong homeowner NPS and margins. On monthly active Pros, Angi is focusing on acquiring higher-capacity Pros, leading to capacity growth despite a decline in raw numbers. The company expects Pro network growth to resume by 2027, aided by online Pro acquisition initiatives.

Q: How does Angi plan to approach Pro acquisition and marketing channels, especially given the reset in strategy? A: Jeffrey Kip explained that Angi is concentrating on acquiring higher-value, higher-capacity Pros at lower costs, resulting in increased lifetime value. The company is leveraging its rich database for reactivations and focusing on paid channels like SEM, display networks, and Meta's ecosystem to drive proprietary lead growth. Angi's marketing team has successfully increased acquisition in proprietary channels, contributing to the company's growth strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.