Joey Levin - Chairman of ANGI Homeservices, Chief Executive Officer of IAC Brandon Ridenour - Chief Executive Officer of ANGI Homeservices Glenn Schiffman - Chief Financial Officer of IAC.

Good day, and welcome to the ANGI Homeservices, Q4 2019 Results Conference Call. At this time I would like to turn the conference over to CFO, Glenn Schiffman of IAC. Please go ahead..

Thank you, operator. Good morning, everyone. Glenn Schiffman here, and welcome to ANGI Homeservices Fourth Quarter Earnings Call. Joining me today is Joey Levin, Chairman of ANGI Homeservices and CEO of IAC; and Brandon Ridenour, CEO of ANGI Homeservices. Joey and I will also address any questions you may have on IAC's fourth quarter results.

Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relations section of our website.

I will shortly turn the call over to Joey to make a few brief introductory remarks, and then we'll open it up to Q&A. Before we get to that, I'd like to remind you that during this call, we may discuss our outlook and future performance.

These forward-looking statements typically maybe proceeded by words such as we expect, we believe, we anticipate; or similar such statements. These forward-looking views are subject to risks and uncertainties, and our actual results could differ materially from those views expressed today.

Some of the risks have been set forth in both IAC and ANGI Homeservices fourth quarter press releases and our reports filed with the SEC. We'll also discuss certain non-GAAP measures, which as a reminder include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call.

I'll also refer you to our press releases, the IAC Shareholder letter and again to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now, let's jump right into it. Joey..

Thanks Glenn. Thanks everybody for joining us on what we know to be a very busy morning. This is the first call in IACs 25th year under current management and a really great place to start 2020. This is yet another big reset for IAC.

I think since I’ve been here we’ve probably had about fourth of these and right now we're on the verge of separating from Match Group which is the bulk of our current enterprise value and cash flow, which is a little bit daunting, but exciting because we are going to become a much smaller company again, which means we're going to focus on building, we're going to focus on building new businesses and new categories and we love this stage of the business.

It wouldn’t be possible without the support of the 8,600 employees now across all of IAC. I want to thank everybody for a great year in 2019 and an exciting outlook going forward in 2020.

In particular, just one employee I want to thank which is Mandy Ginsberg for her leadership over these last few years at Match Group, and an unbelievable run and a seamless transition to Shar Dubey, who has been an incredible leader at Match throughout her tenure at the company and is I think going to do a fabulous job at the top.

So, that’s the exciting news and let’s switch to the questions now. Operator, we’ll take the first question. .

Thank you. [Operator Instructions] We'll take our first question from Eric Sheridan with UBS. .

Thanks for taking the question. Joey, the section in the letter on public versus private market valuations. I wanted to sort of see if we can get a little bit more granularity about you're thinking there, of what you're seeing on the landscape for capital allocation, for new IAC and for the new entity going forward.

And maybe taking the time to bring it in terms of care. Why that was a deal you guys wanted to do, what you see is an opportunity there and maybe if or if not that should be a blueprint, people should think about the way the company might allocate capital going forward? Thanks so much. .

Yes, thanks Eric. I think that you're exactly right. I think Care is a great blueprint for a bunch of reasons. It is a public company, it’s probably a public company that maybe went public a little bit too early in its life, but built an unbelievable brand, build great liquidity on both sides of the marketplace.

Is a real market place business and is in a category that had tremendous relevance for consumers at a pretty regular frequency and those are the kind of things we look for. It’s also a good size. I mean about a $500 million deal.

I think if we look through IACs history, our best results have been in that and a multi hundred million dollar range, ensure the value creation. So we like that size of check, we like that size of business, we like that size of market.

It did happen to be a public company and we think it’s ironically or maybe apart from the fact that it’s easier to get to transactions with public companies and with private companies and I do think that the private market remains sort of mysteriously priced from our perspective.

So Care is a great example and just to get into Care a little bit, we looked at that with a great analogy to ServiceMagic actually, and ServiceMagic, some of you might recall as the predecessor to HomeAdvisor and now ANGI Homeservices. And when Brandon and team came in to ServiceMagic that was in many ways similar to what Care.com is right now.

ServiceMagic was trying to, as quickly as possible get a consumer in and get a consumer out, and make the margin in between there ideally. And they did a wonderful job of that, but couldn’t really scale the product, because there wasn't the necessary product innovation happening in there.

And the folks on both sides of the market place who were using the platform didn't really appreciate the value that the platform could provide.

What happened is as Brandon and Chris and others really evolved it from what was sort of derisively legion to true magic and I think that adds a lot of value to the – in the case of Care to the Care Giver, adds a lot of value to the Care Seekers and makes that process much more efficient.

That’s what we’re going to try and do in the product here with Care.com and it’s a $300 billion market just in the U.S. It's got great tailwinds we think, both in terms of an aging population and eldercare being very important to more families’ overtime.

A lot of families with two working parents, which means that they are going to need help with childcare, Enterprise is very focused on making sure that their employees have help in this area, so that they can show up for work and still a very small penetration among enterprises since its providing solutions for Care for their employees.

And if we look at all that and say that we can get the product right and Care has done a wonderful job today building a product and we think there's room to improve their, we can get that product right and we get a really, really big opportunity, with a lot of relevance and a lot of frequency. .

Interestingly, the financial profile of ServiceMagic when Brandon and team came on and rebranded it is very similar to what you see at Care. LTM revenue, a Care about $200 million and LTM EBITDA, little in excess of $20 million. So we're excited to actually get the playbook. .

Thank so much for the color. .

Thanks Eric.

Next question?.

We'll take our next question from Brad Erickson with Needham & Company..

Thanks. Just had a couple on ANGI. First, just on topline. I guess you know lately you’ve talked about kind of a 20% to 25% growth rate. Are you able to stick to that in 2020 and just help us what if anything is contemplated there for fixed price.

And then second, with the sequential decline you showed under the old definition of what accounted as a service provider, can you talk about what’s kind of going on there and then, you know sort of why that's happening and then also why the new disclosure I guess maybe more instructive for how to think about the business going forward? Thanks. .

Yeah sure, this is Brandon. You know we are still committed to the long term goal of 20% to 25% growth. I think as we sit here today, we are more confident than we have been in a while. The drivers are really a few different areas. One is that Angie's List is accelerating from a growth standpoint. We expect that to continue throughout 2020.

ANGI, the acquisition there has proven out even better than sort of what we had modeled in advance. And then with HomeAdvisor, I look at it from a few different ways.

I think our position is much stronger on a relative basis to where we were same time last year and our traditional business there on the consumer side, we have made pretty dramatic progress in paid search and that's gone from a huge headwind last year this time to a real area of strength and should be a good tailwind.

We are as of the end of January, past the affiliate cuts from last year, which has been a big 12 month headwind for us. And then SCO, while we haven't seen any significant improvement has remained relatively stable and we are optimistic that that environment which has been pretty volatile over the last few years is more stable going forward.

And as we get through the spring and sort of the event we saw last May, that will also be favorable from a comp perspective. So we feel really good about the consumer acquisition side of our business at HomeAdvisor. On the provider side, we end the year with the largest sales force in the history of the company.

A lot of the investment in expanding the sales force was back weighted in the second half of the year as we’d expect to see that investment drive SP capacity growth as the year progresses. As always we’ve got a lot of work to do to bring on more providers, but we are excited with where we’re in the year and what that potential is for future growth.

And then lastly, taking all that into consideration, we're now able to marry on top of it fixed price. With this new fixed price line of business, which obviously we've been pleased with the progress there and back half of the year and particularly Q4, being ahead of where we thought we would be.

And you know as we exit the year, we have a really good understanding of the run rate of fixed price transactions and have from that confidence in the contribution to the growth rate that we expect in 2020. I think that beyond that is lots of opportunity for upside. That is a little bit uncertain at this point.

Obviously we've launched on 150 different project types, most of those are what we call low consideration projects, such as lower ticket value projects. There is a whole other category of projects that are sort of medium priced projects that covers about $150 billion in TAM that we’re in the early stages of experimenting with.

So the projects we've already unlocked cover about $50 billion in TAM and the projects we’re sort of in the early stages of experimenting with cover another $150 billion.

And for the patient timing of how quickly we are able to roll out those medium sized project is uncertain, but I think we understand the baseline and expect fixed price to be a material contributor to grow for the next year.

In terms of the SP metric, the way we have classically defined paying SPs includes the distribution of the 12 month membership that service providers sign up for when they join and so as we look at paying SPs, its whoevers paid us in the last 30 days and if you have a membership, you may only have a membership which is what you are paying for in the prior month.

One of the things we began doing in the last quarter is experimenting and actually going out relatively significantly new package and promotion configurations during the sales process that include a free membership for providers.

And while we’ve seen really strong results from that promotion in terms of our ability to have much more productive sales people and see actually improved retention, it has caused a huge distortion in this paying SP metric, because effectively you don't have the revenue recognition of that membership fee over a 12 month period.

In order to get ourselves maximum flexibility to offer, you know the pricing and promotions and package configurations that are best suited to our customers and that drive the best sales performance, and to better reflect where our business is going with fixed price transactions, we've introduced this new metric, which is transacting SPs and I firmly believe that this gives much more transparency to the exact performance and inputs to our business.

Effectively with the new metric you will know exactly how many SPs transacted within the last quarter, and ultimately you'll be able to calculate things like number of transactions for SP, the total value for SP.

This is much more suitable to the hybrid model that we're going forward with and will better reflect on an absolute basis for grow not only in providers, but in the activity of those providers which has been a little more opaque in the past. So that's the reason for that.

The traditional number unfortunately is just heavily distorted by the introduction of this promotion, but the promotion that was effective and appropriate for us to roll out. .

And then we’ll see similar such numbers throughout the year as we continue to affect that sales strategy, and our membership is a year, which means every quarter obviously 25% of the membership is up for renewal and on a year-over-year basis given the new membership strategy, membership only SPs were down.

And then to marry the two questions together, to give you some back-up if you will for the 20% to 25%.

You can look at our transacting SPs, you can look at our monetized transactions and we look at the double digit growth rate for both of those metrics and then you look at revenue per transacting SPs and you look at revenue per monetized transaction and we look at double digit revenue growth for those two metrics as well.

We’ll probably be more efficient at monetizing than necessarily the nominal metrics over the next couple of quarters given all the product innovation and the scaling of fixed price, but those two metrics and their corresponding revenue co-efficiency gets squarely and firmly to that 20% to 25% going forward. .

Great! Thanks. .

Next question?.

We'll take our next question from Brent Thill with Jefferies. .

Just a quick follow-up on fixed price. I think historically you said it’s less than 10%. Can you give us a sense of where you think that can go over time? And real quick, Joey just on Vimeo guidance, calling for another $300 million EBITDA loss in 2020.

I realize you're investing in the platform, but can you help us walk through the top rate of profitability for that business and where you think ultimately the margins for that business could go over time? Thanks. .

Sure, I’ll go first just because the track. When you say $300 million EBITDA loss of Vimeo, you meant a $30 million EBITDA loss of Vimeo, otherwise we’ve made some big mistake there.

The – right now Vimeo, so just in terms of how we are thinking about profitability and when we are thinking about profitability, our internal discussion is around 2021 or 2022 and I think there are some choices in there for us to make and the main choices evolve around scaling enterprise sales and the sales force for that, and scaling marketing.

Of course we can see some investment product and we’ve added product engineering and we’ll continue to add product and engineering there, but those are the kinds of levers that we are thinking about as it relates to 2021 or 2022.

And really that investment is on the enterprise business, which is growing incredibility fast right now and new business which we’ve talked about launching, that we are in the process of launching right now, which is around Video Creation.

And I think we’ll learn a lot over the few quarters in Video Creation, in particular in our ability to invest in there and accelerate there to drive revenue growth and topline.

The other thing, so there is some choices in there, but if you sort of go away from those two businesses, which are new or newish, the rest of the business we could make profitable if we wanted to be or really is profitable right now. The other thing that comes towards profitability for Vimeo are gross margins.

We've made real progress on gross margin over the course of 2019. I think we picked up somewhere in the neighborhood of 500 basis points of gross margin over 2019 and we are on best. We think very clearly to that 70% growth margin target that we talked about there.

And we’re also starting to see so far this year, more leverage on our marketing, marketing decreasing as a percent of sales and that’s something that you see based on a very sticky customer base, if you build on that customer base every year. So you can get real efficiency there in the core business.

So those are the levers that are in our hand and that I think we’ll play with over the course of this year and decide then from there whether it’s a 2021 or 2022. But I don't think - I don't see a scenario where we expand losses from here, the question of sort of where we target profitability. .

And then on the question where we can get fixed price to sort of a percentage of our business. I think there is a couple of ways to think about it. First, we’ve already launched 150 project types. Those as I mentioned earlier, those projects types covered out a $50 billion addressable market.

As we experiment our way into the next tranche of projects, the medium-priced projects, that is from a GMB standpoint about – GMB and TAM standpoint about triple to $150 billion, but they're both somewhat equivalent in terms of frequency of requests.

So we're already covering you know in terms of the opportunity for customers to engage, we are already covering about a third of the service request we get, but we can expand to the next third request. We you know essentially quadruple the addressable market that we're covering. We believe we can get there.

The medium sized projects are more complex, because the scoping and pricing is simply a more complicated effort, one that will take a little bit more time to work through, but we are as I said earlier actively experimenting there and the early signs we see are very, very encouraging.

And then lastly, once we have made this offering available, you know let's call it two-thirds of requests and perhaps $200 billion of addressable market, it all comes down to consumer preference, and our philosophy here is that we are going to give people a choice, the choice to connect to local providers as our traditional business has always done, versus the choice to transact digitally and buy it now directly from us.

Our expectation is that there is that demographic trend and consumer preferences will meaningfully drive adoption of the sort of buy it now option up over time, but I think we'll have to see how that trend ultimately plays out. .

Did that answer your question Brent?.

Yeah, I’ll have more coffee in my numbers next. Thank you. .

We'll take our next question from Kunal Madhukar with Deutsche Bank. .

Alright, thanks for taking the questions. Two if I may, one on the ANGI side. I want to understand leverage that had been under pressure all of 2019. I want to understand you know how you are going to see margin improvement and leverage across different line items in 2020. And then on Match a couple of quick questions there.

One is, what is the next step that we are going to see in terms of you know maybe it’s an S4 that gets filed or when do we see that, and how soon after that should we start seeing things coming out of both Match, as well as IAC in terms of next steps. And then second is with regard to exchange ratio.

I know you talked a bit about exchange ratio earlier in December, when you were talking about the deal. How should we kind of look at the exchange ratio for the convertible notes that will travel over to Match. Thank you. .

Sure, I’ll ask Brandon to go first and then I’ll tackle the next one. .

Yeah, on the margin leverage we’ve talked before that ANGI creates operating margin in every line item; sales, ops, G&A with the exception of marketing.

And importantly this year we are going to create real operating leverage in every line item, including marketing and that's going to create some nice investment dollars, and those investment dollars are primarily going into fixed price in our international business.

And we are framing those investment dollars at about $30 million to $50 million of expenses that we're investing in international and we're investing in our fixed price and not withstanding that investment of $30 million to $50 million given the incremental margin we are creating at HomeAdvisor, at Angie's List.

That will still enable us to drive incremental EBITDA this year and incremental profits. In terms of Match’s next steps, we should file the S4 at some point next week and then that can navigate through the FCC. We have to wait – we have to get comments and react to the comments post that.

When it gets cleared we have to mail it to our shareholders and the Match shareholders. Then there will be a shareholder vote and then there’ll be an averaging period for all the calculations embedded in of course the exchange and the merger.

So we still continue to believe the end of the second quarter, probably the end of June is the best estimate for when all this will be done by. And then in the exchange ratio, I think there's a couple things embedded in that. I think your question related to two – of two mechanics as it relates to the merger.

One, how many shares we, IAC give up to Match in exchange for the net liabilities that Match assumes. And we announced in December, in the deck and I'll refer you to that deck.

I think when you went through all the calculations and all the puts and takes that we laid out in the appendix, I think IAC was distributing 2.35 shares, of Match shares to the IAC shareholders. Given the movement in the stock prices, I think we're now at 2.36.

The numerator in that calculation tends to move with the denominator, so we don't see that moving a lot. As it relates to the exchangeable, specifically in the appendix we laid out how the exchangeables move to Match and these instruments will be converted from IAC to Match based on the relative market values of new IAC and new Match at closing.

So for example, our exchangeable that's due in 2030, once you include obviously all the adjustments that I talked about, as well as the adjustments associated with the call spread, that instrument currently converts into IAC shares of $457 per share and again, this is a representative calculation that will be done at the time of spin, but right now we estimate that instrument will convert into Match shares of $140 per share.

.

Thank you. .

We'll take our next question from Brian Fitzgerald with Wells Fargo. .

Thanks guys. I wanted to ask a little bit about the thought process around HomeServices. To what extent you can leverage backed processes or best practices or maybe even infrastructure across kind of all the dozens of brands you have in there fixed CraftJack, MyHammer.

And then do Care.dom and NurseFly and BlueCrew, do they finish discussion as well? Maybe one way to ask the question might be is Care.com more like a NurseFly BlueCrew or more like ANGI? Thanks. .

I’ll take the last one first and then Brandon can go to the brand inside of ANGI. We think of Care separately and NurseFly and BlueCrew separately.

Is there an opportunity maybe in the long distant future where you start to see some synergies upon them and sort of the consumer or the worker perhaps, but really today and for the foreseeable future, they will all be organized separately, whichever leadership building their business is on their own.

We for a long time at IAC, we believe in sharing information, sharing best practices, sharing learnings, but we don't believe in synergies between these business unless they have natural synergies and we don’t believe in four synergies because of the common ownership.

So there is a lot of work to do on the product, there is a lot of work to in building out that market play, building out the tools, bespoke for Care Giver and Care Seekers and that's going to be the priority there. They will learn.

I mean Tim Allen is going to [inaudible] right now to pick is brain on a number of things and throughout the organization in terms of what you learnt in conversion, what you’ve learnt in retention, what’s possible in areas like this I think is really helpful to be able to talk to somebody who's been through it.

To be able to get access all their performance data. Those are excellent tools for building a business and we view that through – see, I am not talking about using consumer data and consumer information, but I’m taking about what is possible in terms of running the business and things like version or other packages used to drive the business.

So that would be helpful, I think invaluable to the people who run these businesses, but each individual business is going to run on its own.

They do have common themes, common thread, which is what we're doing in each of the four businesses you talked about; ANGI, Care, NurseFly, BlueCrew is we’re helping people get jobs, helping people find work and really making that process much easier and taking out a lot of bureaucracy in that process to just get people working, and that's something that we feel good about as a mission and [inaudible] loss of this country, but operating them in businesses, they are going to operate separately as businesses..

Now in ANGI Homeservices, we are creating commonality and leveraging technology platforms where it makes more sense. I think in our international businesses we’re in five countries. We're seeing them converge on a common model, including you know replatforming in some cases where it makes more sense. In the U.S.

we have the Handy platform which is really the engine of our fixed price offering across all of our brands, so Handy, HomeAdvisor and Angie's List, and while Handy is a brand it's more importantly a platform that is powering this innovation across the street in a very large branch at this point.

Actually you know we've made some changes to fold in and helpdesk which is our field service tech offering into Angie's List, that combination makes a ton of sense, because Angie's List tends to deal with larger service providers and this is a software you know SaaS offering that you know delivers the most value to larger providers.

So we are taking advantage of the opportunities to sort of get synergies from a capability standpoint, but at the same time we're not forcing a combined replatforming across all 10 of these brands. It doesn't make a ton of sense to you know create that level of distraction in a space that’s moving so quickly from an innovation standpoint. .

Thanks Joey, thanks Brandon. .

We'll take our next question from Ross Sandler with Barclays. .

Hey guys. A couple of questions about the core stub business. I guess starting with apps, so this this business will generate aside from ANGI’s the most EBITDA in the core business post spin, so congrats on getting to the $200 million milestone with Mosaic.

Can you just talk about how that $200 million is concentrated among the big ones like Robokiller or iTranslate versus some smaller ones and then on the desktop side of the app's business, you know there's obviously lots of changes happening in the browser world.

So any comment on the sustainability of that $60 million to $70 million of EBITDA that apps is going to generate this year on a go forward basis. And then lastly, post spin, what's likely to happen with the corporate expense line, the negative 125.

What would that look like after you spin out Match and potentially you know bring that down a little bit? Thank you. .

Sure, thanks Ross. It’s been a while since we got an applications question, which is good. So it is – on Mosaic, the way to think about the concentration, definitely the two that you mentioned are big ones.

Translation for sure are one of our best categories and really a phenomenal product or phenomenal series of products, iTranslate being the biggest and its worth trying if you’re traveling abroad or need to communicate with somebody in another language. Robokiller is another big one for sure.

The other areas, weather is a big area for us, productivity is a big area, fleet, airplane trackers, things like that are all apps that are important and I think we've got something like 40 apps right now and probably a dozen greater than -- $2 million?.

2-ish, yeah. .

So Mosaic, we think a big opportunity in a category with about – when we added it up, 20 billion downloads I think or over 20 billion downloads last year in the areas where we have problems and we're continuing to build products both in areas we’re in and adjacent areas and in new areas with 20 billion downloads across iOS and Google in areas where we currently have product and that growth and monetization is growing there too.

People are more accustomed to subscription there now and so we – both our products is 90% something subscription. We’re moving toward longer term descriptions, annual subscriptions which is doing well too.

So we're pretty excited about Mosaic and continue to add they are both through organic build and through acquisition where we've done reasonably well in those acquisitions. On the desktop site, we had a – you know we've been – and this is a very long time. We've been through a lot of volatility in this business, both up and down.

We had a nice calm period for several years of great cash flow and more importantly 2019 took another step down. I think that was a series of things. There were definitely some changes in the browsers.

It was definitely some changes on the Google side and I think that we’re now at another new baseline and to step down for the desktop business, I think the way we look at it now and probably bottoming out in Q1 and then setting a new baseline from there and then we do think sustainable cash flow at that new level.

And remember we just signed a new Google deal last year extending that deal for another three years. On the corporate expense side, remember one big thing in there which is important to call out is we are endowing the IAC foundation out of our 25th year to support the IAC Fellows Program with $25 million, so that entirely is in the year 2020.

That is not a recurring expense and so you can adjust that out and then I'll let – or you can adjust that however you want, but I’ll let Glenn take you through it. [Cross Talk].

Yeah, and all through this year we have $20 million of expenses in respect of the mass spin off. So we think steady state probably 2021.

We get back to where we were in 2018, call it $75 million of corporate, you know plus or minus, depending on you know the transactional activity or what we look like then, because as we talked about in the letter, the goal obviously is to grow again and we want to make sure we have all the resources to deuce that action.

You know Joey talked about, he’s been on earnings calls for now what, six, seven years.

I will bet one of the first calls – one of the first questions he got when he was running the desktop applications business years ago was the longevity and the future of that business, and since he answered that question probably in 2013, ’14, we’ve generated $1 billion of EBITDA out of the desktop applications business.

So we think obviously the rumors of its demise are not going to be true and we think we have some nice cash flow on a go forward basis for a period of time as Joey said with the Google deal renewed. .

We'll take our next question from Cory Carpenter with J.P. Morgan. .

Great! Thanks for the questions. Two on ANGI. First Brandon, maybe following up on marketing, you touched on this a bit earlier. Could you expand some on the trends you saw across paid organic search, maybe where you are today versus six months or a year ago.

And then on the international business, could you talk about what impacted revenue growth this quarter and how we should think about that going forward? Thanks. .

Yeah, so in terms of marketing if you look at where we were this time last year, we had seen – on the paid side of things we had seen a rapid increase and it’s a cost per click within the search environments. Unprecedented I think at the time we said it was north of 30% on a year-over-year basis, which is just like something we've never seen before.

And on the organic side this time last year, you know we were seeing a dramatic amount of change you know on the search results pages and culminating with a pretty big impact that we saw in May specifically.

Since that time on the paid side we have built out a new approach to how we bid and operate within paid search environments and we’ve seen that yield really dramatic improvement such that the paid search is one of the great areas of strength right now for our business in terms of driving consumer acquisition, and we expect that to be a pretty major tailwind throughout 2020.

On the organic side, you know that, when you look at the pages, the environment there has gone through dramatic change over probably the last two plus years and it's been incredibly volatile, but we believe or at least are optimistic that most of that change is behind us, simply just given the nature of the way the pages look today and our hope is that we see reasonable stability.

We have seen that be the case since sort of the drop last May and you know we’re hopeful of that. That continues throughout the year.

Obviously we don't control that and the future is always a little uncertain there, but I think there are some reasons to be optimistic that you know that level of volatility that's been present there is not what it has been in the past. International, if you want to take that Joey..

What was the question on international?.

The question was on the Q4 growth rate and prospects there. .

Yeah, exactly. .

Yeah, we're going through an exciting transition actually in international, where our biggest market, we’re replatforming back, not dissimilar to what Brandon and his team did with ServiceMagic years ago. So you saw the growth rate was 1% and constant currency is a little higher, it was about 4%.

But with our biggest business going through that platforming and when you go through the platform you take a half step back to hopefully take three or four steps forward.

So if you break that out, we still have you know three or four thriving businesses, all of whom have grown you know greater than 30% throughout the course of the year, and then I think we have some pretty – a couple of digamous items in the fourth quarter in Europe obviously with the brexit situation and the strikes in France.

But it’s largely by design given the replatforming interest. .

I think we’ll have a good sense of that replatforming in France that’s going in the first half of this year and both sides are like how to approach it from there, but the actual technological transition I think is what’s completed this week and now there's some transition with customers in getting people to adopt a new system, a new platform.

And if we can get these businesses operating on common infrastructure, then we start to get as Brandon alluded to earlier, real leverage in the international business. .

We'll take our next question from Jason Helfstein with Oppenheimer. .

Thanks. I’ll ask two questions, one on video and then another on Care of Vimeo. So obviously this is going to get a lot more focus post spin. Any updated thoughts about the advertising opportunity? We obviously understand the subscription opportunity, but just anymore thoughts there.

And then secondly on care.com, just maybe elaborate a bit more and maybe go through number one, you know the issues that they faced with kind of verification. Was that kind of solved do you think internally before you buying them.

Number two, how impaired do you think that brand is you know out there? And then I guess the third question, do you have any thoughts on how you solve some of the challenges with you know consumers going around kind of the paid function and any thoughts you might have about you know improving the monetization of it.

And I do know it's early, but just any thoughts there? Thank you. .

Those are all good questions on Care and what we’ve – each individual spent a lot of time on those questions, so I'll go through it. On Vimeo quickly, advertising, no, we're not planning to change anything with respect to advertise.

The thing that we do a little bit and will do more of is we will offer the creator, the subscribers on Vimeo tools to incorporate advertising to the extent they want to in their videos, but we at Vimeo aren't going to be monetizing those Vimeo user base with advertising.

That’s – the best way to think about it, that tool our subscribers can use if they want to. And that's been fundamental to Vimeo for a very long time. The creators, the subscribers control the experience.

They control the relationship with their audience and they'll do what makes sense there and if they want to add, so we'll try to give them tools to help them with that, but we don't plan to near term be fundamentally in the advertising business.

On the Care side, so staring with background check verification, identify verification and things like that, and one of your questions was is it solved, and answer to that is it’s never solved and it’s an ongoing process.

You have to continue to innovate here, you have to continue to get better, and you have to continue to make sure that you are a step ahead of everybody else in terms of the cutting edge product to drive safety for both sides of your market place.

And we know that from Match, we know that from ANGI and we’ll certainly apply that at Care, which is we have to continue to innovate there.

One of the things that we continue to consider is in that area of background checks and identity verification, Care Household to have some products there that verify identity and when people enroll in those products at both sides of the market place, see more engagement and better engagement.

It’s factored in other markets where SEC belong in those platforms, pay for those services.

We haven’t decided what exactly we're doing or who we might charge or whether we pay for those charges in the platform itself, but that is – there is a wide range of options there that we think are viable, and that can actually enhance the experience for everybody on the platform, add real value and we are one side or another of the platform would pay for that incremental value, may be willing to pay for that incremental value.

In terms of the brand, the brand has been I think in excellent shape. Obviously there was some bad reps in 2019 which I think was not good for the ecosystem.

But I don't think we should confuse sort of the investor reaction, the stock price and things like that with consumer reactions around the brand and we're looking at traffic and audience and all those things are in I think really healthy places and meaningfully recovered.

In terms of providers or Care Seekers circumventing the platform, this is another issue that we're very familiar with. People ask this question, ask about ANGI all the time, which is if you find a plumber and that plumber works, you get off the platform. And our answer in that case and in this case remain the same.

That's a totally fine outcome; in fact that’s an excellent outcome. It’s a bunch of people that are coming onto the platform and filling up a book of business by virtue of having been on the platform, then we have succeeded and they have succeeded.

And the nature of this category is people come into and out of this category very frequently and if Care Givers are saying ‘well, I built my entire book of business on Care and now I work directly,’ Great! And if Care seekers are saying, ‘I found an entire fleet of Care Givers here and now I work directly,’ Great and they'll inform the next generation of people interested in those categories to come on to the platform.

But also, and this is really important in terms of how we are planning to innovate in the product.

It’s – we have to make it easier and the easier you make it, the more people want to keep that on the platform, the more it makes sense, that this convenience of the platform actually adds real value, such that you rather do things on the platform than off the platform.

If we get to that level I think we get to that thinking it’s – that’s totally possible and that the economic trade off that will make a lot of sense for both sides of the platform. Again [inaudible] ANGI, and if we don't do that then people will move off the platform.

I think that’s really a product innovation issue that I think we are totally capable of handling and really excited to get our hands into. .

Coming back to Vimeo, one of the reasons why advertising isn’t a priority, is we’re really seeing a big opportunity in the SMB and the enterprise ecosystem. You saw us in the letter talk about enterprise revenue grew 45%. Last quarter we talked about record bookings. This quarter was another quarter of record bookings and as bookings are accelerating.

So we are really seeing a rick and deep vein in our SMB and our enterprise opportunity there, and the management team is executing well against it. .

We’ll take our next question from John Blackledge with Cowen. .

Great! Thanks. On ANGI, on fixed price, could you discus Brandon maybe the conversion uplift you see when you move a task to fixed price. On Dotdash we saw the recent acquisitions.

Joey maybe can you level set how Dotdash is set up for 2020 and how we should think about potential for adding further verticals? And then maybe Glenn or Joey just continuing the quarterly guide, kind of what went into the decision process there? Thank you. .

Yes, sure, this is Brandon. Just talking about the conversion uplift. You know as I mentioned earlier, our philosophy here is to give people the option, the choices as to whether they want to connect directly with high quality local business or purchase the service through us directly and that is being presented roughly as an either/or choice.

I mentioned earlier that you know we should exit the year understanding a baseline run rate and through that can be confident in the contribution to our growth rate this year, but let me share a little bit of data that made us so excited and drove us to go even faster than we originally anticipated.

We're seeing user satisfaction proposed to the buyer. A fixed price transaction is more than 35 points higher than it is in our traditional model. We are seeing those customers come back and reuse our service at greater than a 50% increase rate. And we are seeing that same audience engage with our mobile app at a greater than 30% increased rate.

And sort of these – these sort of side effects if you will, that’s really led by our customers drove us to understand that there is a dramatic interest in this, that there’s been engagement with it, and that’s it’s going to drive some of the behavioral changes that we think are really important for the long term health of the business.

I think what we have the opportunity to do going forward is to drive more and more engagement with fixed price offering you know as a percentage of our transactions. And obviously the first page of this is simply just making it available, which is what we've been focused on for the last six to eight months.

But over the coming year we’ll be optimizing that offering, we’ll be optimized pricing.

Right now our pricing for the task is generate at national level and the power of getting that pricing in a more sophisticated place where its localized is going to drive a much higher engagement, and then in the very long term we can start to look at pricings and promotions and other ways to driving engagements with these services and as long as we're seeing – as long as we're seeing these improvements to the characteristics of our customers in terms of satisfaction, in terms of repeat use and in terms of engagement with our mobile app, which is a strategic priority for us, you know we are going to continue to lean and to drive people, more and more to engage on the fixed price side of things.

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in terms of M&A, we are not counting on any M&A for 2020 as it relates to our growth objectives. We are certainly going to keep looking and hope to find things to add there. I don’t think we need any more verticals. I think we have a lot of opportunity in our existing verticals.

Beauty which is one we added in 2019, we then have significant room now and maybe we can add some things within beauty, but we think there's significant room there.

We think there is significant room in health, we think there is a significant room in finance, we just added this sustainability vertical which actually standalone is a really interesting category, but also has knock on effects to all the other categories where people in beauty very much care about sustainability and people in health very much care about sustainability, in home care about sustainability there.

So I don't think we need more verticals, but we’ll keep our eyes open there and acquisitions overall, I mean 2019 weren’t a huge factor in driving the growth in that business. All of our acquisitions that we’ve done in that business are very small.

They get a lot of attention, because media likes to cover media, but they are very, very tiny deals for IAC and even for really for Dotdash. In terms of 2020, there is a lot of good things that push us into 2020.

One is you start with a bigger audience base line in some of the key areas, in particular the monetizable areas and that’s from the content investment we've made over the last few years and continue to make towards just winning with the best content.

The other area that’s been growing fast is our performance marketing, where we're not just selling impressions and we’ve done a very nice job selling impressions, but also selling transactions, so quite a click to go through to ultimately do transactions.

And because our audience – and we keep saying this and we've been saying this to the display advertisements for a long time – because our audience is so intent based, that audience performs well for advertisers and we’ve, in essence we’re putting our money where our mouth is and saying we’ll allocate a lot of our inventory to say we only get paid on performance, because we know this audience is so intense base.

The other benefit of that right now in particular, in media is there is a big movement right now.

I’m sure you’ve all seen to end cookies and most of the big platform blocking cookies in one way or another or eliminating the reach of cookies in one way or another, and what cookies do is they just put a mark on users computer to identify that user in one way or another or identify some traits of that user, and so that’s been historically an important tool to a lot of advertisers.

That tool is not nearly as important to Dotdash and Dotdash’s properties, because we don’t need it. The reason we don't need it is because our content shows what the user wants. We don’t have to guess this is a 40 year old female who is interested in shoes.

They are looking at an article that’s about shoes for women and they are trying to figure out which is the right shoe to buy.

In that context, that you can imagine is very effective, is very effective media for somebody who wants to buy that kind of advertising and that is especially enhanced by the fact that people were out trying to target these users with cookies, have less options to do that. Now we're looking at okay, where can we find that with intent.

It’s similar although I think it’s ambitious of us, but Google has always been the ultimate intent based media. We over our history bought billions of dollars’ worth of media from Google and hundreds of millions of dollars a year from Google on that intent information.

And as we think we have similar dynamics here with Dotdash in a sense that we are providing the answers. People are going to Google to questions, and very often Dotdash is the answer to that, which means we're are at the right place to reach those users.

And the other thing that you see with our advertisements which I talk about a lot, which is that we're using probably the repeat rate on advertising. So we entered 2020 with a good base of advertisers, those advertisers are significantly repeating and now we are adding new advertisers to grow on top of that.

But we have a lot of reasons to be optimistic about Dotdash. I can go on for a while, but we are really excited about the team that we have there and the assets that we’ve built. I think your last question was quarterly guidance.

And the philosophy there in terms of pulling it back is we don’t manage the business for quarters, we don’t want to manage the business for quarters and we are trying to put sort of our money where our mouth is by saying lets go – weigh this quarterly guidance, so that it doesn’t become a track for the business.

I think we have always tried to avoid organized by quarters, but when you put out the quarterly guidance that lends a little more weight to it and we really want to focus on longer term and so we are going to continue to talk about the year and I think that our shareholders should know how we think about the year, and how we think about the future and what our ambitions are future, but breaking that down into individual quarters, we think is too narrow or too short sighted and so we don’t want to continue to do that.

In new IAC we don’t want to do a sort of pull back in that, so did it this quarter, but really looking forward for new IAC. We don’t think quarters are as important in thinking about how to build the business and how to build long term value. .

Thank you. .

We’ll take our next question from Dan Salmon with BMO Capital Markets..

Hey, good morning everyone. Brandon maybe just a quick update on some of your partnerships with Nextdoor and Realogy and others as you make efforts to tap into different quarters of demand and the virtualized traffic demand.

Just one for Joey, obviously Match has gotten most of the attention, but you also made some other small divestments from the portfolio over the past year. So can you just give us an update on those efforts and whether we should expect more of that as well? Thanks. .

Yes, sure, this is Brandon. So on the partnership front, I think 2019 was I think an exciting year. Nextdoor partnership is something obviously we're excited about in terms of the audience that we are reaching.

That’s a large and growing audience of neighbors who often times are looking for local services so that the synergies there in terms of intense are significant.

The Nextdoor partnership is already a meaningful contributor to our business, but we think it's just in the early stages and really has far greater potential, and we're working actively with the team there and looking for to what additional value we can unlock in 2020.

In terms of Realogy, it’s a very different animal in the sense that it gives us sort of entree into real-estate transactions that are off line, and so the ability to serve a home seller while they are in the process of selling their and to be able to reach them through the agent is a powerful new avenue for us to reach people at the right moment for when they are looking for home services.

The other thing that makes it very different is that it's very much a market-by-market sort of ground game. And so in 2019 you know we started with testing in just four markets, but we very, very, very quickly expanded that to dozens and dozens of markets and looking forward very much to seeing that scale meaningfully in 2020.

The other things that’s interesting about, about the Realogy partnership is it really gives us a fundamentally new capability that we’ll be able to take to market and offer to other similar provides or situations where we can reach people offline at a time when they have you significant home service needs.

So I think on both of those partnerships we are obviously very excited about the potential for growth in 2020 and then we have – you know we are very focused in on sort of the partnership pipeline. Hope to have more to talk about..

Dan, in terms of divestment, I’ll try to be really quick so we can squeeze in one more question. I think we've largely done the clean-ups that we were set out to do over the last couple of years and we are nice place. It doesn’t mean that we won’t benefit or more gain or this change obviously will continue to clean up.

But right now we are in a place where I think we cleaned up all this, the vast majority of the things we intended to clean up. So let’s go to one more quick question. .

We’ll take our next question from Youssef Squali with SunTrust Robinson. .

Great! Thank you for squeezing me in. So Joey, going back to your letter and given what you said about valuations in the private market, are your return expectations changing? Trying to understand how you guys balance the return threshold expectations, which is how fast you want to deploy your new found capital.

And on ANG, can you maybe speak to the pace of buyback. I know you bought some stock back, it wasn’t a lot. You still have a fair amount of dry powder and considering the performance of the stock over the last several quarters, I was wondering if there any plans to accelerate that? Thank you. .

Yeah, speaking to deploy the capital of return thresholds, I don’t think anything has changed there. We are not in the rest of deploying capital, we have never been in the rest to deploy the capital. It’s really opportunities specific.

We’ve generally been over capitalized and I think our plan generally is to remain over capitalized, to be flexible for the right opportunities and that’s a good segment. Your second question which is share repurchases, we certainly want to get some powderfor share repurchases to make that available; it made sense.

We did some share repurchases of ANGI in the last question and it’s definitely something we’ll continue to look at over the future as we always do. .

Alright, thanks. .

I think that said, we are out of time. We are grateful as always for everybody for joining us for this call and look forward to talking to you next quarter. Thank you. .

This concludes today's call. Thank you for your participation. You may now disconnect..