Glenn Schiffman - CFO Joey Levin - Chairman, ANGI Homeservices & CEO, IAC Chris Terrill - CEO, ANGI Homeservices Brandon Ridenour - Chief Product Officer, ANGI Homeservices.

Eric Sheridan - UBS John Blackledge - Cowen Brent Thill - Jefferies Jason Helfstein - Oppenheimer Douglas Anmuth - J.P. Morgan Ross Sandler - Barclays Anthony DiClemente - Evercore ISI Ygal Arounian - Wedbush Securities Dan Salmon - BMO Capital Markets Justin Patterson - Raymond James.

Good day, and welcome to the IAC and ANGI Homeservices Reports Q3 2018 Results Conference Call. At this time, I'd like to turn the conference over to Mr. Glenn Schiffman, CFO. Please go ahead, sir..

Thank you, Operator. Good morning, everyone. Glenn Schiffman here, and welcome to the ANGI Homeservices third quarter earnings call.

Joining me today is Joey Levin, Chairman of ANGI Homeservices and CEO of IAC; Chris Terrill, CEO of ANGI Homeservices; and Brandon Ridenour, Chief Product Officer of ANGI Homeservices and soon to be CEO of ANGI Homeservices, welcome Brandon. Joey and I will also address any questions you may have on IAC's third quarter results.

Similar to last quarter, supplemental to our quarterly earnings releases, IAC has also published its quarterly shareholder letter. 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 may be preceded by words, such as we expect, we believe, we anticipate, or similar statements.

These forward-looking views are subject to risks and uncertainties and our actual results could differ materially from the views expressed today. Some of the risks have been set forth in both ANGI and IAC, IAC's third quarter press releases and our reports filed with the SEC.

I'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, 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. First, I just want to welcome Mr. Ridenour to our favorite quarterly rituals, first of many I hope, and wish farewell to Mr. Terrill, who I know will miss these mornings terribly when he is waking up and spending the days in his pyjamas. I also want to thank Chris.

And we said this in the letter, and I said this in the press release, but Chris's run at ANGI Homeservices, is really pretty rare, not just in terms of his impact on value of these businesses, but on consumers and I say this one seriously because I think it's rare on the country in terms of putting people to work, having put people to work and especially near and dear to us is the team that he builds and the team that he galvanize in doing this and that of course starts with Brandon who is now here today.

Chris is really successfully rendered himself lined up or actually going to complete that transition from Chris to Brandon this week. And I think we all have all the confidence in the world on how well that's going to go. But let me turn to Chris who I think wants to say a few words..

Yes, thank you very much, appreciate it Joey. I've been very, very lucky to be a part of two huge marketplaces. It's rare to get one like a Match or Home Advisor to have both is pretty unique and I feel really, really lucky that I had that opportunity.

I appreciate that IAC gave me that opportunity again, amazing to think that you can have such two huge marketplaces in one company, I think that's the testament to IAC in the way they think about businesses and the patience they gave both me and Brandon to develop this, to really invest in it, and to lay out our plan long-term for why we thought this could be a really huge opportunity in a market that's just taking off.

So I appreciate it and thanks Joey, thank IAC, and everyone who gave me that opportunity. Second, I've had a lot of personal questions and people asked me why now, why step out? I think it's a two-part answer.

One, when I stepped in early 2011 and convinced Brandon to join me, part of my pitch was eventually one day I would step out, and hand over the baton to him, and let him sort of take it and continue to grow the business.

And so we set out together to map out a plan that was very ambitious with a lot of growth and the hope was that I would get to that point where I could walk away and leave him in a great position and I'm super excited, he is a good friend of mine, I think there is nobody better qualified to step in, he knows the business very well.

So that makes me excited to have that opportunity.

The second for me is I have always been interested in politics and have political ambitions not in the traditional sense, but would like to work in that realm and I've thought about it for a long time, I just don't think you can do that these days least successfully without headache and without all sorts of issues as a public company CEO.

So for me, I have some interesting things that I plan to work on and that is one of the reasons that I'm leaving now.

But I think the company is in great shape to use the Match analogy I think about the early days when we were excited about hitting 100,000 subs, and we were just super excited if we could just hit 200,000 subs we blown away and it would be unprecedented and looking how far that business has come.

I think we're in the early days of this business very, very similar and I'm excited to hand it over to Brandon and I'm here for a moral support today and if you guys have any specific questions for me, I'm happy to answer them. Thank you..

Great. Let's do questions. We are ready for the first one.

Operator?.

Our first question comes from Eric Sheridan with UBS..

Thanks for taking the question. I guess two, if I can.

Joey on capital, lot of talk in weather around how you think about the capitalization of the company now maybe some of the opportunities that sits in front of you and the second part of that would be the Handy acquisition, why that asset was intriguing ANGI, what you think it does on the product side and the platform side looking out and what sort of investments are needed behind that asset to see it fulfill its potential? Thanks guys..

Sure, thanks Eric. Capital allocation is something that we spend huge amount of time on at corporate level at IAC and it's something where we look at all the tools and capital allocation regularly.

This come up this quarter, I think significantly on account of the dividend that Match and that's something that we absolutely put a lot of thought into with the management with the Match forward and our view in general this has been true for 20 something years is that returning capital to shareholders is a good thing and there's a lot of ways of doing that.

You can do that through share repurchases, you can do that through dividend, both of those are tools we've used in the past, I think a significant degree, and I think that will use in the future if we do significant increase.

And so this particular dividend with management, this particular test specifically we looked at it as at the Euro matches free cash flow give or take a little bit and in aggregate even if we raise more debt in this context leverage ratio will be down for that business overall and we'll be going into 2019 with probably more financial flexibility than we went into 2018 as to match them.

So we thought that that this is something that the business would be healthy in terms of optimizing its capital structure. The business is doing fantastically well and it's an attractive asset from a leverage standpoint and it's an overall attractive market from raising that standpoint.

So we looked at all of that and said now this is a good time to think about some capital repatriation. Of course the options in that context are really dividend or share repurchase. At the scale, we thought this was the business could do from a very healthy perspective; share repurchase was difficult to pull off.

And so that led to dividend and that's a little bit of sort of thinking in terms of how to get there is we're also many years into a bull market not crazy to be distributing some cash in that context.

And from an IAC perspective to be holding out for some cash for a rainy day and thinking about how the markets evolve and being in a position where we can take action in a changing market.

And what we think about in terms of the IAC's balance sheet and the cash that we accumulate on the IAC's balance sheet is all the things we've historically thought about. Obviously we want to invest in the businesses through the P&L as much as we can. We want to look at M&A aggressively and we have and will continue to do that.

We look at share repurchases, we look at dividends, and all those things have been on the table and remain on the table. And I think we will have moments where any of those things may look attractive to us and we'll take some actions. We don't have a huge acquisition by and right now.

And but we think it will be in a nice position to have a healthy cash balance at IAC. Lot to think that Match has tons of flexibility, Match will not be remotely constrained in their ability to do M&A.

There are many tools available for Match able to do M&A and that that company is very active in the market and thinking about what specific opportunities could be done in terms of M&A. And same is true for Match in terms of share repurchases or anything else.

Of course business is growing well and will continue to grow well and we feel good about profit with that business. So a bit of a mouthful but that a little bit how we're thinking about things in aggregate right now.

Glenn, you want to add to that?.

Yes, the only thing I would add to that is we've been talking for a while about the free cash flow characteristics of all of our businesses.

And I think it's a real differentiator that we have -- our free cash flow conversion, we talked about, Joey talked about in the letter that this year we're looking at greater than $750 million of free cash flow and I think that was last letter or the letter before and will probably beat that in terms of the free cash flow or aggregate enterprise will generate.

And hopefully this puts a fine point on the free cash flow characteristics and the power of all of our businesses to generate that free cash flow in particular at Match. Brandon, you want to start on the Handy..

Sure. So Handy represents a really straightforward growth opportunity for us and there are really three areas of synergy. The first is that Handy offers a number of complementary service types that we don't offer in our traditional business.

And so there the opportunity is to simply be able to promote those new services to our very large audience of American Homeowners across Home Advisors and ANGI's list and through that drive bookings mostly drive more frequency engagement from our users and ultimately obviously revenue growth.

Second category is that there is some overlap where we do share categories in common and just so happens that some of those in particular cleaning services and Handyman services are very highest demand categories. And we have such high demand that it's very difficult for us to keep up with it.

So we're excited to be able to bring on their provider network which we're going to be able to leverage to fulfill on more that demand, create more satisfied customers and obviously through that drive revenue as well.

And then the third area perhaps is the most exciting which is Handy really has a tremendously innovative service and platform, it's a great point of sale solution retail because we're able to price upfront services like shower head inflation or furniture assembly at the point where you're purchasing those items and so they've got some great initial retail partnerships.

We think that channel is likely to grow significantly over the next couple of years, and for us that represents potential stream of new customers that gets experience our service and hopefully through that we form a long-term relationship..

Yes, in terms of financial impact, Eric, we're looking at a few million dollars of EBITDA losses in the fourth quarter and will probably be on that trajectory a few million per quarter throughout 2019.

It's one of the reasons for the updated EBITDA guide for the year and one of the elements that we will be investing in, in 2019 to continue to drive growth in the marketplace..

Thanks..

Next question?.

Our next question comes from John Blackledge with Cowen..

Great, thanks. Two questions.

On ANGI, you discussed your decision in 2019 to drive the best towards kind of that high-end of the 20% to 25% top-line growth bogey while holding margins in check and just how you expect to build more liquidity in the marketplace? And then on Vimeo, what's the margin profile now and is it a business where you can invest significantly to grow subs within a positive ROI framework or in other words can you accelerate the scaling of the business particularly given the interesting and indifferent economics for subs now versus years ago as you laid out in the letter? Thank you..

Sure, this is Brandon. The history of this company has always been about making smart but aggressive investments to drive growth. As we consummated the merger with Angie's List, we had a period where we had to ingest a tremendous amount of demands at the beginning of that period earlier this year.

And for a while we were restrained on the provider capacity side.

Throughout this year we've made tremendous progress and inroads in expanding that capacity through both our sales efforts, our efforts to expand our budgets and capacity of some of our existing customers, and then as you may remember with the Austin platform which we've seen a lot of success with.

These three have resulted in a substantial expansion of provider capacity and you're seeing that already translate into revenue growth which is outpacing where we thought we would be this quarter. And so our intent here is to lean into that capacity that capacity is really is the ability for us to serve more homeowners.

And so we're going to be making investments that levers that capacity and lean into growth as we exit this year and as we get into next year. And that's where we believe we're going to be at 25% which is again ahead of where we thought we would be next year from a revenue growth standpoint..

Brad is going to go into Vimeo in just a moment..

Just look on the capacity, just put some numbers around what Brandon said, you know the efforts that we've gone throughout the year in terms of increasing cap at the point of sale, increasing cap with SPs in months. Last quarter I think we said we increased cap 31%, this quarter we increased cap 34%, you've seen our --.

Yes, cap is capacity for service professional to spend with us..

Yes. And you've seen our marketplace revenue growth 28% in the first quarter, 31% in the second quarter, and 33% sorry 36% in the third quarter, and we feel great about how that capacity works through the system.

Brandon also talked about the Austin product which is been rolled out about 85% of our SRs and 50% of our SPs who have opted into the Austin product. So we feel good about that trajectory, that trajectory is continuing.

We also talked and I will little use the word synergies that they're kind of no longer synergies because really running the business on a combined basis. But remember the traffic that we're getting from the Angie's List side, that SR path we put on the Angie's List side which helps margin throughout a lot of this year.

As we lifted the supply capacity, we think that will begin to help us on the revenue side next year and we're going to invest marketing in that could now obviously be rewarded with revenue growth.

And then of course with Handy, there will be slight increase in our revenue growth as a result of adding the Handy business into the fold, a very small compared to the overall ANGI Homeservices, ANGI Homeservices business that will be slightly accretive to growth..

And just from a broader perspective, what we’re really trying to do in this business is change consumer behavior.

Our biggest competitor here we think is offline word of mouth in 90% of the market and we think we have the product in a place now it gets better every day but we have the product in a place now where our user experiences a -- user experience that is compelling.

And the more people we can expose experience the more we think we can shift that offline to online migration and I think is really our priority right now. On Vimeo, John, it's a good question and we have been accelerating revenue growth there. It is something that we think we're in a very good position in that business today.

We are able to acquire customers very profitably through marketing. We are -- we've been talking about this and we're still very early in this beginning of international marketing and making that those pass optimize to local audiences in each market where we have customers where we think can have customers.

And the same is true on the small business or enterprise sales side where we've just now started with an enterprise sale force I think we'll have 40 people in there by the end of this year with still just responding to inbound call. So we have a lot of interest in this business.

The product we think is very compelling and we now are in the period of getting the word out as broadly and aggressively as we can and our map today shows that you can do more of that profitably.

We in terms of specifically subscriber growth and one of the things we've been talking about for a little while, and thinking of this quarter, we grew subscriber 10% this most recent quarter, but there is a shift that's happening inside of there, where we're moving towards higher priced customers more small businesses and enterprise is still very much serving the consumer and the enthusiastic but also bringing that new customer into the fold.

So if you look at our figures now I think our first time subscribers at Vimeo in this most recent quarter have a 50% higher average ARPU than our first time subscribers in the same period a year ago.

That's really emblematic of the fact that we're moving to this -- this -- we're bringing in I should say this different type of subscriber at a higher price point with a bigger level of service.

So we're really optimistic about the future in that business and of course we'll be able to see it more closely as we now starting next quarter disclose that as its own segment. And Anjali, the CEO of Vimeo, will be in -- I think doing an Investor Conference in December.

So I mean you will get a chance to meet her there and ask her some questions and congratulate her on just becoming a mother last week..

And just in terms of that mix shift that's going to continue, we see subscriber growth in and around at 10% maybe one quarter will be higher, maybe one quarter will be lower but we will have continued strong ARPU growth, ARPU you saw this quarter grew 18%..

Thank you..

Next question, please?.

Our next question comes from Brent Thill with Jefferies..

Good morning. Just as a follow-up on NGE, you mentioned in the letter a focus on revenue growth at the possible expense of margins.

Can you just touch a little bit about, what you mean in terms of the expense of margins near-term and how you think the dynamics play out there?.

Look we'll go through full guidance in the February earnings call on our February letter. I think we said in the letter that revenue will grow faster than EBITDA obviously than therefore margins going down next year. What we did this year as you saw in all year is we pulled a lot of margin improvement from 2019 into 2018.

You've heard me talk about that the biggest driver of that was marketing as a percentage of revenue that went down somewhat significantly.

So as Brandon said earlier, as we continue to chip away and solve our supply constraint which we are solving, given what we earlier talked about, we're going to lean into marketing some more, again to take a shot at accelerating the business by accelerating our penetration of the market and driving that offline to online conversion that is one of the many talents we have behind us.

On a go-forward basis, there's still some real terrific margin improvement in this business. We of course standby our 35% long-term margin target that we articulated when we announced the transaction.

That will of course as always depend on the investments we make, investments international, investments in category expansion, investments in other services.

And in terms of the components of that margin increase look we will continue to enjoy scale as we grow the business we saw that in Angie's List transaction G&A of course has a lot of scale, marketing of course has a lot of scale, not as I said in 2019 but beyond.

And then you look at the other component the sales force component, the ask component and we think there are things over time that the Handy specie look those are all self-served SPs.

So there are ways of us thinking about the SP universe and going after different segments of the SP in a more cost -- SP universe in a more cost effective and cost efficient way, yes, we do.

And then, on the operation side, we think there's some real scale there, over time as you've heard me say we still call back 50% of all as far as a human being dials a phone number, there are ways to automate that and make more of a close look using technology we do things so.

And then if you recall back to the transaction we have two independent sales force at Angie's List and at HomeAdvisor and we think over time there could be scale and margin improvement there..

Thanks..

So I do think we plan to have healthy profit growth in this business next year. I just think that we should have revenue growing faster given the investments that we see available to us..

Thank you..

Next question..

Our next question comes from Jason Helfstein with Oppenheimer..

Thank you. Two questions.

So just first back to the ANGI 25% guide for next year obviously that's higher than the prior comments about exiting at 25%, how much of the higher guide is due to a rebound in the advertising of the legacy ANGI listings business or that success from the marketplace business? And then given the success in mobile apps and Dotdash would you consider M&A in those verticals or still haven't proven that you want more exposure in that area.

Thanks..

Yes, this is Brandon. So we obviously a big driver here is the capacity growth in the traditional marketplace business. So obviously 36% growth this quarter that's outpacing where we thought we would be and that's going to be a big driver next year.

But we've also seen better than expected performance with the traditional advertising business in Angie's List and that's going to be a bit of a tailwind too I wouldn't say we've completely turned that around going to 2019 but we're optimistic about what we're seeing from a performance standpoint and we do think that's a driver of the higher guide here..

On mobile apps and Dotdash from an M&A perspective I think the answer to that is yes I'll cover them separately. Mobile apps we have been doing M&A. I think we've done three M&A deals in the last year or two in that category -- two. Right the third one and this gets the Dotdash also is what we're has on internal M&A.

So we moved DailyBurn from the video segment which was sort of a standalone business into the mobile business and that that our internal teams acquired that business and really has turned it around and put it into good shape. And we did the same thing at Dotdash with Investopedia.

And the Dotdash team I think so far has done an exceptional job with Investopedia and that was a real test I mean they didn't manage that business previously.

Now they took in that business, now they manage that business, and they had to do all the things you do in acquiring an external business in the sense of integrating the business, the culture, upgrading things that you want to upgrade, changing things do I change, and that so far has gone very well and so that does give us confidence in our ability to do more there.

I don't know whether that near-term thing or a longer-term thing I think there's still some strength in the market or some optimism in the publishing market that will watch itself and bring us more opportunities in publishing.

But we are for the first time in a long time I think on our toes in that area versus on our heels in the last couple of years. So we're optimistic on both.

I think on mobile apps, the most recent one we did was this business RoboKiller which as even since we bought it doing and we bought it a week ago or two weeks ago or something like that is doing exceptionally well.

And so the early signs are strong and we can bring these businesses or each individual apps we can bring them onto a common platform which can measure LTVs, which can drive conversion, which can bring it into a marketing funnel with the optimized over many years on the desktop side, and now we migrated that to the mobile side where there's real shared learning and the real shared best practices there that we're seeing.

We saw very quickly in an acquisition we did earlier this year called iTranslate and I think we will see very quickly on the RoboKiller side. So we are excited about acquisitions on that mobile apps side.

Next question please?.

Our next question comes from Douglas Anmuth with J.P. Morgan..

Thanks. Two questions. First just want to say best of luck and good to hear about your political interests and that you won't just be pyjamas going forward.

But for the IAC team I was hoping you could just talk a little bit more about the additional disclosures, I know you just did a little bit but just how you think about the right time in terms of breaking out the businesses now with Dotdash and Vimeo and how you think about these as potentially being the next big growth engines behind Match and ANGI? Thanks..

Sure.

One of the things Doug to drive the disclosures is we talked about the valuation gap and the fact that there's a big group of businesses that are valued, not even not optimally but in theory negatively and we thought we should explain more about what those businesses are and share more about why we're excited about those businesses and we’re confident the real business with real potential and real value and Dotdash and Vimeo are certainly two of those and I think mobile applications not far behind.

I think at some point you can go too far in disclosure in the sense of just too much information to process and starting to confuse people but we favor transparency and we favor sharing more information. Hopefully these are ways for people to understand the components of those businesses.

When we think about the growth potential of these businesses and where they are relative to a Match or an ANGI, Dotdash is in a huge category and it’s got nice momentum in terms of revenue growth, it’s got very healthy margins, we think it’s building a competitive mode in a sense that is very hard and expensive for somebody else to come in and start publishing the content that Dotdash publishes at the quality they publish it and at the low level of monetization that they monetize it which is an asset in this area meaning, I think the lasting power of this business is stronger with lower monetization.

So we like that very, we like building into that business and I don't know how you want to measure that addressable market for publishing but it's in the tens of billions and we think we have a great team here and a platform to scale. Same true on Vimeo, it is an enormous market and it's got a great secular tailwind.

We talk a lot about, we think a lot about the fact that all businesses, entities, events, have a need for Video today where they didn't previously, anything that’s primary method of communication or exclusive method of communication to get to an external audience was text call it 10 or 20 years ago and then involved text plus images in the last whatever over 10 years or so, now includes video and you see that on all the platforms, you see that on Instagram, you see that on Facebook, you see that on Twitter.

And if you are a business sport event you want to tell your story now with all the tools that are available and video is going to be one of them.

Whether we capture a huge share of that, I don't know, I think we're very well-positioned to do that but we like that secular tailwind and we think that is a very large market and we think that our products serve that market very well and so that's what we're going after.

I think we're still -- I mean just in terms of revenue and financials these businesses are a tiny, tiny fraction of both ANGI and Match.

So we're years away from that scale in either one of those businesses but we do see the potential there in terms of having a real business with a real product a barrier to entry and nice momentum in a very large addressable market..

I think I joked on our previous call that these were gems hiding in plain sight and now they're going to be gems no longer hiding. I mean you saw Vimeo's accelerating revenue growth to 29%, this quarter, you saw Dotdash growing 35%, and our mobile business grow organically almost 80%.

So we're excited to share more of that with our investors and analysts..

Great. Thank you guys..

Thanks, Doug.

Next question please?.

Our next question comes from Ross Sandler with Barclays..

Hey guys, a follow-up on Dotdash.

Can you talk about the revenue growth that you're seeing in terms of pageview growth versus ad growth versus CPM? And as you look out into the future for Dotdash, how big is the opportunity within the existing brands that you have already or do you need to keep adding more, more protocols or more brands to the portfolio to keep the growth rates up as they are right now? And then the second question on dictionary and electives, so do you feel like those asset sales were more one-off or I think the plan is always going to run some of the legacy businesses for cash flow, you think other asset sales are positive how you're thinking about the portfolio on that front?.

Sure. I will do those in reverse order Ross. So Glenn can look out the answer to the first question. The dictionary and elective sales I think I guess by definition any sale is one-off. I mean we did -- we have talked about and we continue to talk about cleaning up distractions and really focusing on things that we have a big long-term vision forward.

I think we're largely through that effort with completing those two sales. But not to say we can't or won't sell anything else but I think that we are largely through that effort. On the question of that escrow that it relates to whether we need more verticals, more brand et cetera; it’s certainly a mix of all of those things.

I believe in our existing verticals and brands, we have plenty of growth ahead that both in terms of audience and pageviews but that’s also in terms of monetization, it doesn’t mean necessarily increasing the ad load. We're seeing real demand for our products from advertisers.

I talked about this in the past, I think continued again this quarter which is our advertisers in a publishing business that display ads are coming back every quarter. Top 10 I think all repeated 9 of 10 or 10 of 10..

9 of 10..

9 of 10, okay repeated this quarter which is just an amazing stat in this business. And it tells me that we have the potential to increase monetization here without increasing ad loads on these properties. And again I believe more audience is possible.

I also think that we will get into new verticals and we will add brands here because I think we have a system that works and I think that we can repeat that playbook something we've done on lot of other categories and I expect is possible specifically within publishing.

So I think we will either organically or through acquisitions, add more verticals and more brands and I think that that will contribute to the growth rate for looking at the years forward..

Yes and the verticals in which we operate are very large verticals healthcare, finance, home, travel, text. So there is a lot of room within those and obviously some obvious verticals to expand into. Yes, Joey, mostly answered the question but remember when we broke this into verticals, we have sheer step increase in our traffic.

So we are going to continue to grow traffic and remember this is intense driven traffic. So we believe the CPMs and our throughput or revenue throughput from increasing traffic will be high and we're continuing to benefit from that over index if you will from a revenue perspective.

Now from an ad load, we're not going to materially increase the ad load. One of the things we've effectively done as we've talked about is actually reduce the ad load.

And then also there is other revenue opportunities embedded in the business, there is an emerging e-commerce opportunity and given, again as I said, the intense driven nature of our traffic, there's a performance marketing opportunity within that that we're going after.

So we feel great about the revenue profile going forward for a combination of all those factors..

And I think there are lot of states that other publishing business that made historically is increasing their ad load over time which to me provides room for competition to come in and under passage related to that and user experience. And our intention is not to let that happen with our businesses in this category.

I think that answers all your questions, Ross?.

Yes, that's terrific. Thanks guys..

Thanks. Next question please..

Next question comes from Anthony DiClemente with Evercore ISI..

Best wishes Chris on your future endeavors..

Thank you..

Look forward to meeting you and welcome to the investor jungle..

Thank you..

One follow-up on ANGI.

I was curious just given some pockets of softness we've seen from a macro standpoint in the housing market, how would you characterize ANGIs exposure to that going to next year is that contemplated in the Outlook and then how does consumer behavior actually work, do you think if we were to go into a housing slowdown may be more maintenance work for folks versus buying houses? And then a follow-up also on Vimeo with a lot of commentary in the letter about Vimeo growing its relationships with existing customers and that this sounds like great traction in terms of ARPU growth.

So just interested in hearing more about the tools to drive higher ARPU, maybe a little bit about Vimeo stock and the opportunity there would be great. Thank you, guys..

So this is Chris. I'll answer the question on housing. I sit on the board of reality, so I watched out the housing market closely and very close to it and as always sort of tried to watch over the years what happens in housing and I thought that sort of impacted us.

And I think first we really don't see much even as the housing market felt some pressure over the last 12 months or so and some even at the higher end it's been longer we really haven't seen any manifestation of pressure on us.

And I think what we've done over time specifically was to build a very robust marketplace, strong brands so that even if the housing market moves around we're sort of impervious to sort of any negative impact.

And I think the rationale for that is, is that if people are staying in their house and we don't have the many sides as they say in the real estate problems going back and forth that's okay because people can do additions and remodels nest in place and always the need for maintenance repairs is going to be there.

And if people are moving a lot then we benefit because you've got a lot of side going back and forth, and people are fixing up homes as they sell one and move into another. So I think we're in a uniquely positioned place where we do well no matter what happens.

And I don't think we're going to see any sort of strong correlation with what happens in marketing with what happens in our business.

So I feel very confident about how our position for the long-term but I think frankly when you've got the top brands like we have, when you have the service providers that need us to help smooth out their businesses throughout the year we're in a really good position no matter what happens..

And you know we're in 400 different markets and 500 different categories. So we're exceptionally well diversified there's no service request category that is greater than single-digits percentage of the total. So well diversified across everything a homeowner would need irrespective of the economic cycle..

Understood. Okay..

And on Vimeo ARPU, there's a bunch of factors that drives ARPU. One of those is as I mentioned earlier enterprise sales, so the average enterprise sale I think is something like $20,000 now that moved up from the prior quarter so that can meaningfully impact the overall averages.

But it's also adding incremental services; you point out Vimeo stock quoted which is a great point. We look at a product like that to add incremental value to the video creators and provide a new revenue opportunity just adds that convenience inside the platform as against having to go outside the platform to do it.

And we can see that manifest both in actual purchasing of stock footage but also driving conversion and driving more users and higher-end users or higher spend users into the funnel for subscriptions.

Stock put it itself is still very early so we've got a lot to learn there and we've got a lot to prove there but we are optimistic it's a reasonably sized multi-billion dollar market. And we think we can take share of it. And same will be true of new features.

We start offer over time where we are looking at things earlier in the video creation funnel that we think can drive incremental users, incremental spend, incremental stickiness of the platform, and as we add these features and as we have added these features over time we see users to begin to engage with them and drive that either through subscription, conversion, or incremental spend and think there's plenty of room still to go there..

Okay. Thanks very much guys.

Thanks, Anthony.

Next question please?.

Our next question comes from Ygal Arounian from Wedbush Securities..

Hey good morning guys. Thanks for taking my question. So on ANGI, so your marketplace, your paying service professionals growth slowed a little bit, there's a little deceleration there as there was in the service request. But there was real good strength and an uptick in growth in the revenue per service professional.

So can you talk a little bit about those dynamics and what I guess especially what drove some of the step-up in per service provider revenue?.

So when you look at these SP counts, these are not commoditized small businesses right they come in all shapes and sizes with vastly different levels of spending budgets in the marketplace.

And so, normal account is important but over the course of the year as we've been trying to solve our capacity problem, we've really been focused on bringing on higher quality, higher spend customers who are able to take on more business and serve more, more consumers, more homeowners.

And we've also been working with our existing customers particularly those that have seen the most success in the marketplace to expand their budgets where appropriate.

And so what we've seen through this process is we've really increased the average size of our -- of our SP both new and existing and that's where you're seeing the flow through in terms of the average spend for SP going from 7% to 14% and -- or the growth rate there going from 7% to 14% and overall as Glenn mentioned earlier, our total capacity has gone up over 30%.

And so our focus is both on growing our sales force and growing our nominal network size but more than ever it's also on increasing the quality and size of the providers that we're bringing into the network..

Hey this is Chris; I will say something as well. I mean, I'm on my way out, I will leave one refrain which is capacity, capacity, capacity. I've said it over and over and over we could go out and do some nominal any time but the real ability for this marketplace to sort of harm is to have lots and lots of capacity.

And we said we were going to go out and bring in the highest quality of capacity, that meant we didn't go after some of the sort of lower consideration tasks and I would argue that's where and Brandon was a big champion of the Handy acquisition. The Handy acquisition fits in very, very nicely; there are specialists in that lower involvement space.

They focus on Handyman made success, so you have a really nice symbiotic relationship with that asset joined in the family. And so I would never be too focused on nominal, I would look at what happens with capacity and how does that drive revenue. And I think we've said we're going to focus on that, you're seeing it flow through.

And now with Handy coming into the fold, you have the chance to potentially go in and add some of these higher nominal but lower involvement SPs to the network..

And we talked about the Austin product, that actually is outside of capacity and Brandon mentioned the 14% revenue per SP. We had a record revenue per SP of $1,034 this quarter. Now as you know that's life time value.

So this quarter and this year the cohort of SPs that we're bringing on are the highest cohort from an LTV, lifetime value perspective that we've ever had..

Very helpful. And then if I could just a quick follow-up digging in a little bit deeper on Handy. You talked about the fixed pricing, the new pricing products there being a driver of acquisition and part of the platform that you like.

And that's something that's been I think absent on your own platform you've talked about the difficulty on having something like that for higher ticket item where a service provider needs to come to your home and give you an estimate, take a look at the kind of work that you need to do.

If you think about integrating Handy into the broader Home Advisor system, is there any correlation where that products where you think you could bring fixed prices more onto the platform overall for Home Advisor?.

Yes, absolutely, that's part of the rationale. We like the innovation that they have in place there. And we obviously have over 500 types of home projects that we support not all of them are going to be able to be fixed price but we absolutely believe there is an opportunity to perhaps apply their model across a range of the services we do offer.

One of the things we like about that aside from the fact that homeowners obviously like the ability to see upfront pricing is the monetization model there gets much closer to the transaction and that you're really taking a share of the transaction revenue and we think that is where possible we think that’s a better model for all parties involved, so excited about that opportunity as well..

It removes friction as we remove friction from it, our TAM goes up and our opportunity increases..

Okay. Thanks guys..

Next question?.

Next question comes from Dan Salmon with BMO Capital Markets..

Good morning everyone.

For Joey or Glenn, Glenn you're kind of digging into this a moment ago, so maybe best for you but I want to come back to Dotdash and what you mentioned a moment ago about the intent driven nature of the traffic there, it's not a passive audience sitting back for entertainment value, it's one that's seeking out information and one that often leads to transactions and all of that.

And you mentioned a moment ago, the possibility for e-commerce; I’d love to hear a little bit more about that because the line between being a good direct response advertising opportunity and a e-commerce one is often a blurry one.

So I just love to have you expand on that are we thinking about e-commerce enablement that you support yourself building out a better network to connect brand through to facilitate through other platforms maybe a little bit better would just love to hear more about that? Thanks..

Sure. I'll start Dan. The -- you’re right, the traffic is intent driven and the way I describe it sometimes is the sort of push versus pull publishing. The typical publishing model is you sit in a room and you think about content and you push it out and hope people are interested in it.

Ours is different, it's more pull content in the sense that we know users are looking for information on topic X and we publish what we think is the best information on topic X.

Take for example a recent one, electric scooters, people are interested in electric scooters, there's a lot of attention around electric scooters, so we will publish content on what are the best electric scooters available in the market today, based on price, based on value, based on battery life or whatever it may be and we'll publish that content in a purely editorial voice in a fairly unbiased way of evaluating the various options that are available.

But one thing we'll do in this to get to your e-commerce point is we'll put link on that page, so to the extent somebody wants to transact directly from that page, they can clink through a link from electric scooter and purchase that electric scooters somewhere and when that purchase happens we can get piece of that transaction.

I don't think we're likely anytime soon with the effort to get actually into the business of being principals in e-commerce. I think we're going to be an entirely independent editorial voice looking at things but then being able to make money to the extent people want to put through and transact.

That’s the basis of most of our e-commerce revenue today and the potential -- the potential that we see in e-commerce revenue going forward.

But there are other little things we found that certain retailers or retail platforms are interested in some of our brands and licensing some of our brands to help sell their product which is something that we're experimenting with right now and we’re open to and that will maybe open up new channels for us in e-commerce.

But I think the near-term one is likely that sort of affiliate's e-commerce business..

Thanks, Joey..

Thank you. And operator, I think we will do one more and we will let everyone get on with their day..

Thank you. Our last question comes from Justin Patterson with Raymond James..

Great, thanks for fitting me in and congratulations to Chris, best wishes going forward..

Thank you..

I wanted to ask about the new sales office in Chicago and just your philosophy on office expansion in general. As you open these new offices, what's typically the timeline around seeing the benefit to capacity growth and just overall revenue ramp higher? Thanks..

Yes, so I think philosophically we've experimented with a lot of different way to go to our sales office. If you look at our sales office in New York, the big difference in the sales office to Denver, if you look at the office in LoDo, those are different as well.

What we've been trying to figure out is where can we find the best pool of talent that fits our sales model and so we have experimented a lot, I think what we've found and Craig Smith has really driven this, he is a pioneer in the space, he knows it really, really well how to find the right mix of talent for sales.

I think we have found that some of these sort of near Downtown little deferral little tour spaces where we can bring in new graduates and folks who have high energy fits our model well. So if you look at what we're doing in Chicago that sort of what we're going after is that that sort of vibe in prototype of sales centers.

The one thing I'll say is we've gotten better and better and faster and faster at opening up sales offices and then getting them up to speed, that's a testament to our HR team, it’s a testament to the training team, it’s a testament to Craig and his team because this is no easy task.

And so we continue to philosophically think, if we can have a lots of these interesting smaller footprint offices at areas where we can get access to great talent that will be a formula that we'll look at over the coming years.

And I think we still have a long way to go in sort of finding those opportunities, launching those types of centers and we're getting better and better every day at not only just launching them, getting up to speed, and getting productivity up.

I think if you look at the productivity curves of the new sales centers they’re faster and faster and faster. So I think we feel very bullish about opening new centers and getting really, really good at finding talent, it's getting harder and harder to find these days..

I think on Chicago specifically, you can probably think of it as scaling over the first half of 2019 and starting to meaningfully contribute in the second half of 2019 from a network growth standpoint..

Yes, and just to frame that up, I think in our shareholder letter in 2016, when we did the deep dive on Home Advisor, we talked about nine months until individual sales person is breakeven. We're now down to about seven, eight months depending on the location. So, obviously as Brandon said that that's one of our investment areas for 2019..

Right, very helpful, thanks..

Thanks everybody. Thank you, operator..

Thank you everyone. This concludes today's teleconference. You may now disconnect..