Good day and welcome to the ANGI Homeservices Report Q1 2019 Results. At this time, I would like to turn the conference over to Mr. Glenn Schiffman, CFO of IAC. Please go ahead, sir..

Thank you, Operator. Good morning, everyone. Glenn Schiffman here and welcome to ANGI Homeservices first 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 address any questions you may have on IAC's first quarter results.

Similar to last quarter, supplemental to our earnings releases, IAC 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 may be preceded 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 the views expressed today.

Some of these risks have been set forth in both IAC and ANGI Homeservices first quarter press release and our reports filed with the SEC. We will 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 website for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now let's jump right into.

Joey?.

We are great and the things are going very well, and I know everyone has lots of things they want to talk about. Let's just get right into the questions.

Operator?.

[Operator Instructions] Our first question comes from Anthony DiClemente from Evercore..

Thanks very much and good morning everyone. Maybe starting with Brandon on ANGI. Service requests in the 1Q came in a bit light versus our model, we can certainly see that that was balanced off by greater revenue per SR. But it looks like, it sounds like you turned away some profitable service requests in the name of quality initiatives.

So is that a transitory trend or is this an ongoing MO for ANGI and this is an ongoing trend that we should expect to continue to see in the metrics.

And then maybe one on Vimeo perhaps for Joey, good quarter, revenue a bit stronger, maybe just speak to the ongoing trends of Vimeo and then in the letter, you guys wrote a lot about Magisto and that acquisition and how could that benefit Vimeo's financials or impacts financials, either in the near term or the longer term?.

In the last 12 months, we've had more than 24 million service requests submitted by homeowners and one of the things that is not well understood is that a large minority of those requests go completely un-monetized and a significant majority go either un-monetized or under monetized and so for us, there is a tremendous opportunity to simply get better at matching supply and demand in the marketplace of the demand we already have and that means bringing on the right capacity, bringing on more capacity and also targeting our marketing towards consumer demand that better matches the capacity we do have.

We've talked about that on the provider side, we talked about moving away from some of the lower value categories and focusing on higher value categories while natural partner to that action is to also do that on the consumer marketing side and drive demand where it best fits.

Separately, we did make some optimizations focused on ensuring that we're bringing in the highest value consumers to our providers. We have said this in the past, we are sort of maniacally focused on bringing value to our customers and as part of doing that, we are constantly looking at win rates and ROI for service providers.

In Q1, we made some changes that moved us away from certain marketing sources that were a little bit below, where we want to be at from the threshold standpoint and toward the sources that produce better returns for service providers in our network.

We had the benefit of new proprietary techniques that really came about as part of the opt-in platform, we developed last year.

They're giving us better insights in real-time to quality of - intrinsic quality and value in the consumer request for getting, and that afforded us the ability to make some decisions that we know are in the best interest of our customers.

In terms of whether it's transitory or strategic, I think it's strategic, I don't think this is something you're likely to see on an ongoing basis, really was reflective of the insights that these new techniques granted us, which are pretty exceptional..

And you saw in the letter that we are migrating our on-demand trends - we're continuing to migrate towards more and more on-demand transactions, so that path towards quality, as Brandon said will continue..

In terms of Vimeo, Vimeo had a great quarter, revenues growing nicely. We've talked a lot about how at both subscribers and ARPU and that's so much price increases I don't think we're comping to a price increase at all.

Actually, it's really just makeshift to higher priority products, one of those being enterprise products, which continues to do very well, small and total Vimeo but doing very well. So we're happy with the trajectory that Vimeo is on right now and Magisto really adds to that. So Magisto is a - what Magisto opens up for Vimeo is a creation product.

We actually went out probably about a year ago to look at what our options would be there. We knew we wanted to offer creator the ability to create video on our platform, we said we can build their buy, we looked at every single product in the category from an acquisition perspective.

We did full analysis of what it would take to build something there and unequivocally Magisto stood out above the competition, both in terms of the team, in terms of the progress, subscribers, growth rate, and in the underlying technology itself, really compelling slick product and so we bought Magisto to further that opportunity and what it really does is it allows us to buying customers earlier in their pack.

So today, our pre-Magisto, we look for video after they've created the video and we say you can host it here, you can broadcast it from here, you publish it from here, you can digitize here, but now we can say, when you're thinking about video and in particular to a small business, but really any entity or event or individual, when you're thinking about video, we can have you make that video and we make that video compelling and that opens up finding a lot of new marketing opportunities for us and carry forward.

In terms of financials, the - we think about it - Magisto, - it's bigger than our hardware business but it sort of replaces what our hardware business would have been, we just sold the hardware business as it won't be bigger than hardware was in 2018, but it's obviously growing much faster.

And so as we layer that on into our 2019 numbers, that will accelerate the business growth from here. And in terms of profit, it's roughly, I think it offsets the losses that we are experiencing in hardware. So you can think of it neutral in that regard to our financials, but the long-term opportunity we think is real..

As we highlighted, it won't close till probably the end of the second quarter.

So, any impact in the second quarter will be muted and then will be a tiny deferred revenue component impacting the third quarter and look more broadly, we do M&A to accelerating our business and in particular, in this case to accelerate the penetration of this very large addressable market that Vimeo competes in.

If you look back to 2016, we bought VHX that got us into the OTT business; in 2017, we bought Live Stream, got us into the live business and now - and now Magisto and we continue to through product development and through M&A to add features and functionality for our users and more so than ever our small and medium-sized businesses..

Next question comes from Jason Helfstein with Oppenheimer..

So, kind of a two-part question on ANGI and then an IAC question. So, what was the catalyst for the comment in the letter about VCs and start-up capital around the home services, are you seeing any impact of competition, impacting consumer traffic or other areas.

And then just Brandon, with regards to the first question, with the focus on quality would that suggest that you should be able to increase SP pricing in the medium-term and then Joey, I want to ask you a theoretical question, how do you create the most value for IAC shareholders by spinning-off Match at a 52-week high or a 52-week low and then any other comments you want to offer about Match? Thanks..

Sure. I'll start probably two of those Jason.

Starting with the last one, spin-off 52-week high versus 52-week low, that's I think probably a relevant to the consideration, meaning remember the shareholders and it's been are the IAC shareholders, so giving those shareholders a thing at a high or a thing at a low, you're giving the thing to the same people and the thought is that they are holders of that security.

I will be holder of that security, the management team will be holder of that security. It's not a thing of how do you optimize that for the price of the security at a moment in time.

We really think about spend and other transactions is how the transaction itself actually create value or enable something that was perhaps, not previously available or not as easily available sometimes, it's solving management issues, sometimes it's solving a return, creating an M&A opportunity, or sometimes it's cleaning up the story in one way or another.

Those are the things that we look for and those things could be a catalyst, but it's not about optimizing the price and kind of ending the chart, the price chart at one point or another..

On the question of the VC line, it wasn't anything in particular, but we have seen, I've always bottle rolled in this category at how competitors or startups have been able to raise money and been raising money at reasonably high valuations, very quickly with a tiny bit of scale and the amount of money the folks have raised is not enough I think to mess up the market and in one way of crazy spending or things like that, but it does surprise me that things we've tried in our 20-year history in this category and things that we've evolved to or evolved from that those things are able to raise money quickly and that is not something that's going to impact our buys every day, but it's more just line in the letter..

And then on - the question on pricing is a good one, it's one we've been thinking about. We are exploring new ways of leveraging the information that we now have, which I referenced earlier. The ability to understand very, very quickly the intrinsic value of the consumer requests and what it means for a provider.

We are looking at new ways of pricing those requests in a way that takes into account in consideration the improvements in quality, the improvements in win rate, and the improvements in ROI. We think there is something there.

I think we're in the early stages of looking at that, but we believe there is an opportunity to better index pricing towards targeted take rates that anchor off of what we know about the value of our request that comes in. And so, I think we're in the early stages there, but should be more to come..

Our next question comes from John Blackledge with Cowen..

On ANGI, just curious how the branding initiatives are going and how do you feel further top line acceleration as we romp through the year and kind of what are the key drivers to potentially hit that 25% year-over-year pro forma revenue growth? And then just one follow-up on ANGI, how is the Handy deal tracking? Thank you..

So in terms of the branding initiatives, as you know, we began to really ramp our marketing spend as we entered this year. The nature of that is that it sort of builds and snowballs overtime, particularly television advertising.

And so, we've learned it in Q1, we are seeing it perform consistent with what we would expect, but we also expect to see that grow and accumulate as the year progresses.

We also are continuing to lean in heavily to mobile app as an acquisition channel that continues to be our fastest growing marketing channel, generating our best customers with the sort of the longest life cycle and best loyalty to us. So that's something we're still excited about in.

In terms of the balance of the year and how we're going to see growth accelerate, there are few factors that we expect to play into that.

One is what I just referenced, which is early marketing spend is going to continue to grow and not necessary in terms of spend, but in terms of the effect that accumulates over time, as we consistently lean into it. Two, we are extremely optimistic about product innovation and the impact it can have on this year and in the future in general.

In particular the opt-in platform is still really just a V1 of that platform. This is an entirely new ecosystem. We spent last year building V1 and then launching it across all of our different service requests sources and so because we're so focused on this expansion, we didn't spend any time at all just iterating on the core designs and efficacy.

And so, there's a lot that we have in the pipeline that we expect to see come out shortly, and we'll have a good chance to affect the balance of the year.

Three, as you all know, ANGI's list has been a drag on our growth rate since the acquisition, mostly for good reason, but nevertheless true and we're seeing that significantly moderate and don't expect that to see that be the tailwind - sorry - to be the headwind that it has been, as we get into the back half of the year.

And sir, what was the third question?.

Handy?.

Handy. In terms of Handy, we're excited. I think it's going - going very well relative to what we expected before the acquisition. We are seeing good performance in that business. We're seeing great momentum in terms of some of the retail partnerships they've been able to get. And so, you know, it's still early.

We're not that far past the close, but so far so good on that front for sure..

And look, the other tailwinds we have going into 2019 here in addition to everything that Brandon said is that the capacity. We've been driving strong capacity out of our SPs. This quarter was the fourth quarter in a row of greater than 30% - greater than 30% capacity. So that will roll through.

Opt-in that Brandon spoke about, as you know that's outside of capacity. And then last year, the Angie's List synergies, the SR path on the Angie's List site, we enjoyed a lot of SRs from there, but they didn't - we didn't have the capacity they showed up as obviously expenses - reduced marketing expenses.

And this year, we think we can monetize them and you saw our pacing last year, where we didn't have these tailwinds and you saw a revenue growth of 15% in the first quarter, 17% in the second quarter, and 21% in the third quarter. So within year, in two quarters, we accelerate 600 basis points..

Our next question comes from Doug Anmuth with JPMorgan..

It's Cory Carpenter on for Doug.

Two questions on ANGI, you highlighted that on-demand grew to 15% of service request this quarter, just hoping you could expand more on some of the drivers within that category and stepping back, do you have a target or goal and how big, the mix on demand could represent longer term? And then one quick follow-up on the marketing channel comments in the shareholder letter, would just be curious what the channels were that cut spend on?.

So in terms of the driver on on-demand growth this year, a large part of that is driven by the new Opt-In platform. And I think what our focus is on driving real time connections on a one-to-one basis.

We found that that produces the highest satisfaction and the highest quality and value for both consumers and for service providers and so each of our products that we put in this on-demand category really fit that description and set of characteristics.

In terms of where the ceiling is, I think we've debated this a lot and certainly we believe 25% to 50% is possible, but I think what you're likely to see is us develop and deliver a lot of new products that fit that same description that may look different than what we've already introduced.

I think this notion that you connect people quickly in real time and at their discretion is one that has legs, and that can be expanded to a lot of project types that we may have previously thought were sort of difficult to fit into the on-demand mode. So certainly we think we can get to 25% to 50%, but perhaps there's room beyond that as well.

In terms of the spend reductions, we essentially moved away from a few sources that were producing win rates in ROI for our providers that were - call it lower than some of our better performing sources and so, we made a decision to essentially reduce spend and these were not branded channel.

So, we weren't getting a ton of brand benefit from them for the on the major brand as well.

And so we essentially reduced spend in this area and reallocated it to other marketing sources that generate requests that have higher intrinsic value that produce higher win rates and that generate exceptionally good ROI for our professionals and they have this additional side benefit of really creating some halo effect for the home advisor brand by helping to build awareness of the brands overall..

Next question come from Brent Thill with Jefferies..

Just on ANGI, over 90% of businesses in the U.S., and just curious to hear your aspirations in Europe and the rest of the world and how you think that progresses and had a quick follow-up for Joey..

I think you do that one, Brandon..

Right now, we are really just outside of the U.S. we're really just in Europe and Canada. And that's today effectively five different businesses. Obviously the liquidity in each country only affects that country in terms of service professional network. But what we're trying to do is figure out whenever we can get across countries efficiencies.

So in product and technology, we beat one of the five countries was built with effectively through acquisition, which means they came with their own technology, they came with their own platform and we're trying to fill that efficiency. And we are starting to see this cross learning between the countries and from the U.S.

spread through and see results of that. So it's - Europe is starting to work nicely, but we have not reached the flywheel there and that's going to be, realistically by separate flywheel to get again yet to build the liquidity on the supply and demand side in each country.

We did get efficiencies on that by what you learnt throughout and technology you used throughout. So we're optimistic and we think that that's a big market. We said that's a $300 billion market relative to the U.S. is $400 billion. But again, it's broken up into a lot of small pieces. We are nowhere today in Asia or South America.

I think that's probably likely to continue to be the case for a while. We've got a lot of opportunity ahead of us in the U.S.

and we got a lot of opportunity in Europe and I think there is higher ROI opportunities for us in those markets than in entering new markets, but that can change if we see something really exciting, worth buying we see as a team really ambitious worth backing, we could do something like that, but right now our focus is significantly U.S.

and then Europe..

And just a quick follow-up on the buyback, it's the second straight quarter of no buyback, you mentioned in the letter, cash is accumulating you have an $8 million share authorization and maybe perhaps - Glenn, you can just address the buyback..

So buyback is not something that we predict. It's something that we considered, something that we consider regularly and we'll continue to consider. It has been a big use of our cash historically, that is probably got to say how much we've bought over the last few years, and it remains in the consideration set..

Yes. I mean since Joey was in his seat, we bought back 9% of our company spent about little under $500 million and then you see Match is buying back stock, they bought back about 5% of their company and used roughly the same $450 odd million.

Across the family and across the complex, we net settle SBC, saw back and you that in our statement of cash flows, Gary talked about that yesterday, we do spend our capital to reduce the dilution in that way as well..

Our next question comes from Ross Sandler with Barclays..

Just thought I'd mix it up and ask one on Dotdash. So, thanks for the new color there. So, if you look at the table, you got there breaking out the unique revenue scale since you launched the new vertical and it looks like Investopedia is generating way more revenue with far fewer unique relative to your health verticals.

So, maybe I guess, just can you talk about, is that a function of how long you've been selling Investopedia, for the monetization, potential of financial vertical and then how do we think about same-store sales growth for each of these verticals, in terms of either unique visitors or revenue and maybe for the overall business, can you talk a little bit about kind of the apples to apples growth in these verticals?.

So, I'm not familiar Ross with the numbers exactly you're referring to by vertical, but I can give you some general color.

Health and finance are definitely two of the best monetizing verticals period and I suspect, we'll be for the - forever, for a bunch of reasons, but that's where a lot of money gets spent and therefore that's where a lot of [DEP] gets spent, lot of tour money get spent, and therefore a lot of advertising dollars gets spend and there could be big transactions in those categories.

Getting a credit card, for example is a very valuable transaction, finding a broker is a very valuable transaction, finding a new medicine is very valuable transaction or healthcare provider. And so you can imagine that those users could be more valuable in a marketing contract.

The biggest vertical for us today is actually health not finance, but I think that's because number one, we started in very well first and so, we applied most of the learnings to - we pioneered a lot of the learnings and very well and that has the benefit of everything that we've been doing and we just moved the recipe over onto the Dotdash platform and so Investopedia is now still early in applying those learnings.

And we're very optimistic confident in what we can do in the finance side of the Dotdash verticals and Investopedia in particular, I think both in terms of things we can do on traffic through the Dotdash platform and making the pages better, faster, lighter and making the content tighter and then, of course, monetization as well.

In terms of - I think you asked a question with same-store sales or the equivalent of same-store sales and we're very optimistic to be accelerating that over the course of this year and I think there's about things underlying that product innovations we've done, investments in content - investments in content means we have more stuff on our side for users to come visit and if we can get that content to work and resonate, we can bring in more users and then we can, we can get them to stick around longer.

So, we're more optimistic on all those, I think that answered both of your questions..

Yes. Pretty much..

Historically, we talked about organic growth of - in and around 20%, that's what we guided for the quarter and as you know, revenue growth is traffic creates impressions and impression times the yield on those impressions and you saw in the letter that we've done a really - the management team has done a really effective job of driving that yield and our throughput on the crushing.

You also saw in the press release, we grew - we grew traffic 18% that accelerated from last year.

So, if you look at the traffic growth multiplied by the monetization of that traffic, especially as Joey said, as we move into the e-commerce businesses and a performance-based marketing business which yield a better throughput, than our display and programmatic, we think we're set up for a nice couple years of strong organic growth..

Our next question comes from Michael Ng with Goldman Sachs..

I just have one for, Brandon. I was hoping you could expand a little bit more on your answer regarding on-demand.

You mentioned the improved customer satisfaction from on-demand product, but what are some of the other nuances of on-demand related to monetization whether that's the take rate or willingness to bear costs related to service professionals or marketplace liquidity when you compare it to the traditional lead gen business? Thanks..

Yes. That's a great question. So what we found is that all of our on-demand products have substantially better win rates for our providers and because of that, they tend into under indexed on our take rate, meaning the ROI for providers is outsized on those transactions.

There are a couple of key benefits of that, one is that win rate, which is the percentage of the time provider wins when presented with an opportunity, as an important psychological effect on advertisers, ROI is the most important thing, but if I win one out of three times, that's a lot better than one out of 10 times just psychologically and also in terms of the time and effort and cost of trying to close business.

So the more activity, we can move to these real time one-to-one connections, it is dramatically better of our providers and obviously over time that gives us the opportunity to have a more significant take rate.

And obviously, as well satisfying retain those customers better and so that's why we're so attracted to it, it is a critical input to how service providers view the efficacy and value of the service..

And if I could just have a follow-up, you guys have obviously made a lot of investments on on-demand, including Handy and the warranty service with Fixd, you said that one may work well enough that you may decide to go all in at one point, what is - what are those characteristics of something that may conclude that you would go all in? Thanks..

I think Handy is - it's already a national scaled service. We're very happy about performance since the close of the deal. We have a clear plan there are executing against that I think Fixd is a little bit of a different - Fixd on warrant is a bit of a different animal and that it's a very small business, it's in three markets.

There's a lot of work to be done to scale that, all the largest American markets and I think, we obviously want to see how it performs as we scale into the first few markets..

If I did it down to a metric, it would be frequency and we can drive frequency and if we find that one particular service or another, whether it's Handy, whether it's things around on-demand, if we find that one of those drive frequency in any meaningful way, then we will lean very heavily into that product.

And one of the things that I think Brandon did great job explaining on the service provider side, the value of these products. The other piece is on the consumer side, consumers don't actually want to get three bids are five bids or whatever it is. They want a better price and a higher quality.

But they don't want to go through that process, very few actually wanted to go through the process of having to do that and so we can do that on behalf of the consumer and make that actually less friction on the consumer side too, actually both sides in the marketplace are happier and that's a real win-win.

And that's what we're looking for in these products that reliability and trust that you can rely on, you can be certain on the quality, you can be certain the price and we think that can both drive frequency on an individual user basis and also open up the market to more jobs, and that's what we're looking for..

I may have said this on one of the recent calls. The average household in the U.S. does 16 jobs a year, the average household should do 12 jobs a year. We do less than two currently through ANGI Homeservices. So as we drive frequency, we want to climb that curve from the into the closer to 12..

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

So I want to dig into the back on ANGI on the cutting the marketing spend on those specific channels that you weren't getting enough return on, you know you see note that was generating $50 million of annualized revenue. But then you also noted you are reallocating that other channels.

So can you just help us to make sure we understand correctly, is that $50 million of revenue that you're foregoing or is it just moving over to other channels, and how does this shifts change the drive in at the SR growth rate.

Last quarter you kind of noted, expecting it to remain in the mid 20% range at least in this year and then coming into 15% in the first quarter.

So how should we think about how that changes as well?.

I'll take the first part of that and Glenn can address the growth rate question. The way we think about marketing is largely driven by the capacity on the provider side and our utilization of that capacity.

And so we're largely always targeting sort of a utilization metric in terms of feeding our provider network, the right amount of work, the amount of work that it can handle and without over taxing it. And you guys recall last year in Q1 where you sort of got out of balance.

So as we talked about shifting dollars away from this sort of lower performing marketing sources and shifting to different marketing sources. In the end we are roughly targeting the same sort of capacity utilization for our entire network.

And our intention would be that you wouldn't see a loss in revenue related to the shift, but would hopefully end up fairly neutral..

Yes, in terms of the - I think we guided on the last quarter and actually the SR growth rate was going to come down. Recall in the first quarter of last year we have a very strong quarter for SRs.

It was the first quarter when we were applying a lot of marketing before we cut back marketing and it was the first quarter, when we started driving the traffic synergies from the ANGIs list side. So we had obviously a difficult comp in the first quarter.

In terms of going forward, we will continue as Brendon said to focus on quality and notwithstanding the quality we think SRs will go up from here slightly up, but no, I don't think we're going to be at the levels that we enjoyed previously and we're seeing that to the overall health of the ecosystem, the overall strength what we bring to our SPs.

Well, I think, as Anthony alluded to it earlier but marketplace revenue per SR was up 15% year-over-year to a record high of $38. It's a great illustration of the value that we're deriving from each of these SRs as we climb that quality curve..

And then maybe one more on EBITDA and incremental investments in second quarter. The guidance came in below where we were looking for the quarter. So it seems like more back half-weighted with maintaining the full-year guidance.

Any insight into the focus on the incremental investment, is it just kind of more and more you've been doing with on demand Handy fixed? And then what's driving the back half weighting? Is it investment kind of level off and going away as it stepped down marketing just that?.

So, let me start and then I’ll hand it off to Glenn. We have investments we're making that pay-off really quickly. We have some that will pay-off in the medium term and others are a little bit longer term. We are currently investing really heavily across I think four key areas, Home Advisor, we really, really ramped marketing strongly.

That's an investment that pays off relatively quickly, obviously you see the immediate impact, but it will sort of grow and accumulate throughout the year. In ANGI's list, we're both ramping marketing as well as a substantially investigating the sales force growth there. Sales force growth takes a while to play out.

And so that's going to be an investment that continues for the majority of this year, but it's really going to outflow through next year and then we continue to invest in Handy, which we're happy with the returns we're seeing there and ultimately fixed as well, which we've talked about, and that's a little bit more of a long-term play that's going to take some time to play out..

Yes, it's consistent with what we laid out in the letter, - sorry the letter last quarter and on the call. It's 25 million of discrete investments across fixed, across Handy and across the hubs that we're working on to manage, to manage one's home and then at the incremental marketing.

And if you look at our business as you know, we've always been back half of the year weighted in terms of EBITDA split. And if you look at what our guidance implies, it's about equal to the split that that we've achieved over the last several years and the incremental margin needed to get to those numbers.

Actually it's even less than what we enjoyed last year, so pretty consistent..

Our next question comes from Kunal Madhukar with Deutsche Bank..

I had a question on ANGI or a couple of questions on ANGI. One was, as you look across the supply side there is a lot of unused capacity that has been - that you've been having on that network or the platform for the long time.

On the demand side, there's so many service requests that are either un-monetized or under monetized, can you talk to your marketing strategy that is getting so many service requests for either services or in geographies where there is no demand, where there is no demand from the service professionals..

Well, it's a great point and what you're really pointing out is part of the complexity of this type of business. So we said we have 200,000 micro markets that we have to manage supply and demand and it's incredibly challenging even at our scale with 24 million service requests in the last 12 months.

You still find the significant imbalances something we're constantly working on. We've made great strategies, as Glenn pointed out revenue per SR is up 15% revenue per SP I think was up the same 16%.

And so you're seeing us get better and better each quarter at matching supply and demand, but there's a lot of - there's still a lot of opportunity before us, and it's both a challenge for us, an opportunity for us, but it's also a defensive mode for any new entrants that are coming into this space, because when you're small, it's almost impossible to solve.

And so it's something we're working on. I think we're making great progress, but expect to see more about of it by the future..

And a follow-up on the traffic versus service requests.

So I think as traffic grew faster than the service requests so any change in consumer behavior that is leading to the traffic, but does not result in service request?.

You know, it depends on what source, you're looking at. I don't recall on top of my head, we certainly haven't seen any like fundamental decline in conversion rate for visitors that are submitting SRs.

We do have different sources of traffic, some of which is higher converting, some of which is lower converting, so for example, certain types of content and articles don't necessarily convert as well as people, that are coming in on a higher intent was calling that CMED] but largely speaking, I don't think I've seen the same phenomenon using our actual data that’s possible if you're using SimilarWeb or some other source that they're just not completely accurate..

We also don’t look [indiscernible] really we won’t tracking the business and those resources and service request and that’s how we are organized..

Yes, I mean if you just as a illustration of that branded traffic the traffic that's coming in response to TV might converts 25 times higher than a do-it-yourself content article and so this is all kinds of different ways and reasons people come to the site with very different complexions in terms of how they ultimately convert them.

Overall, that continue to look healthy and consistent..

Our next question comes from Youssef Squali with SunTrust..

I guess given the increased emphasis on Dotdash in the letter. I was just wondering how do you get that business to potentially scale faster 20% is obviously a very respectable number.

But considering that you seem to be running for both the growth and profitability I was wondering if maybe if you were to invest more aggressively and say running at breakeven can you grow much faster. What are the gating factors to faster growth and then I have a quick follow-up? Thanks..

Sure Youssef I love the question, I asked that same question all the time of our management team there and we think about it. I think the one area for sure that you will see from us there is M&A. I think we can acquire thing when you put more capital to work it takes a little time to turnaround so that requires both balance sheet and P&L capital.

And we are looking at one in particular right now, we will announce in that day to very tiny stuff. But we're looking at small acquisitions there and I think that will help us scale.

We look at the content creation lever, As I think - the hard one there, is you have to maintain the highest possible level of quality and that's just something that inevitably takes time you can, just Dot resources on that and produce at the same quality. And so that's going to be a meaningful meter to, how much we can invest there.

But we’re experimenting things or experimenting with things around product and probably, the most obvious lever we've got there is M&A and we’ll definitely use that as there will be small deals, very small deals, but we will use that..

And then just staying on Dotdash for a second, you also seem to be migrating the way or changing the way your pricing to more of a transaction, based on transaction value rather than just CPMs. Can you just speak and maybe it's too early maybe the delta in revenue either per user or by piece of traffic whatever between a CPM and cost to purchase.

And whether that could possibly be the one of the key drivers to may be revenue acceleration there?.

I do think that, I'll be a lever for revenue growth, revenue acceleration. It is a - as there is a dramatic difference in value on our CPM, which is comp compression or CPA which is comp for some kind of activity.

Just to give you an example in Investopedia, we have a broker price where we independently reviewed every not every broker but lots of brokers, where we reviewed about all kind of metrics, but really beautiful compelling user experience for how to find a broker and how to choose a broker.

I think, the right product for monetizing that is a performance marketing product meaning bringing customers to advertise bring specific customers and specific after the advertisers as against impression based brand advertising. And the difference in value between one and the other is dramatic.

So we are doing that, we will continue to do that and we still, we get better at that. So we have better data. We know what the users are worth more. We know more what the users want and we can deliver then therefore on more compelling products and that made that product also more compelling for the advertisers.

Also, when you start to get more scale, you just get better deals with folks are interested in introductors to those customers. And so the split start to different and we're trying to build that scale and back it [indiscernible] to the business..

Our next question comes from Brad Erickson with Needham & Company..

Just to one, related to the on-demand products. Are you able to dynamically increased price there as you see sort of greater conversion and hopefully, FP satisfaction arise or you starting those leads offset the higher price point and then the expectation is to hold it steady, so that’s the first one.

And then second, just want to understand the timing of this marketing allocation change you're talking about in the whole.

The $50 million of revenue in the quarter, was that a decision that was made sort of dynamically and may be not communicated explicitly earlier in the year was that something you decided when you reported back in early February? Thanks..

Two very good questions so, on the on-demand, pricing question. Currently, we do charge, what I'll call sort of the high quality premium for those requests. However, even with that premium they significantly over index from an ROI standpoint meaning our take rate is quite a bit lower.

I alluded to this earlier, but we think there is a very interesting opportunity to perhaps, shift to a dynamic pricing system that instantly and real-time prices an opportunity to lead a request consistent with the value, we know it's going to have.

We don't think this is something we could have done historically, but some of the proprietary techniques, we've recently developed enable us to deeply understand the quality and value of the lead in ways that we have never previously and that we don't think anybody else can do. So, that's something we're exploring.

I think it's a pretty significant opportunity and I think our professionals are providers, are very happy to pay as long as it’s consistent with the value they’re deriving. So aligning those things makes a lot of sense.

In terms of the marketing change we were making, first of all, the reason this came about is that we actually did develop these new proprietary techniques that give us essentially real time insights into the value, quality of a consumer request.

We have always been able - we've always looked at the sort of things, in the past, but it was an extremely delayed and fairly inaccurate set of techniques that we had previously.

And now we've got something that will tell us essentially in real time and with a very high level of accuracy, how likely a request is to turn into a job and what that value is likely to be.

That was something we developed in Q1 and looking at that data and comparing to other sources ultimately made a decision to shift away from those sources into other sources. From a timing perspective I think it was we were like going through this process around the time we reported last time, didn't have our hands around that fully.

So it wasn't sort of in Q1 where we made the decision or made the switch..

And you saw in the letter that was $50 million of annualized impact..

Thanks. Operator, I think we have time for one more and let us get on today..

Yes, sir. Final question comes from Victor Anthony with Aegis Capital..

So maybe I’ll just go back to the initial stages of the acquisition or the combination of the two companies, you guys laid out. One, I think you refer to as a bucket three synergies, which is a sales force integration. Maybe you could just talk about the timing of where you are with that piece of the synergies.

And second you laid out a 35% margin target over time.

So maybe given where you are today, may be you could just tell us how you plan to get there?.

Let me take the synergies and Glenn can address the margin target. The way, I view the merger of the Angie's List and the synergies we laid out is that it’s complete. We talked about, cost restructuring, which was completed, we talked about the SR synergies then we openly talked about the sales force, sort of bucket three.

And the first we put out is that as we thought they would. I think on the third one that was a little longer-term synergies, and I think that's - preceded a little bit differently.

And what happened was, we got in to operating the company and we actually found from a sort of a core strength standpoint that there was more value there, then perhaps, we thought at the time of the close.

What we're doing now is leaning into investing in re-growing the Angie's List sales force and that's a little bit different than what we originally thought where we thought we would combine the sales forces and get some efficiencies there. Rather now, we think Angie's List as a standalone business can grow.

We're growing the sales force as we alluded to in the letter they actually had recently their very best sales month in the history of that business. These businesses just by their nature, take a long time to turn around in terms of showing their financial performance and improvements, but that type of leading indicator is exceptional.

And I think you can take from that a pretty good indication of where this could possibly go. So well that third bucket is played out differently, I think it's actually played out better because being able to just simply grow that sales force.

No point to see that flow through to revenue growth and hopefully, not too distant future is a best-case scenario..

Yes regarding the long-term margin target, Victor, yeah we still continue to firmly believe we are going to get to 35% over the long-term. Every time, we've said it though, you've heard me say that depends on the investments we make, the investments in international, the investments in category expansion and the investments in additional services.

I'll walk you through a little history here if you indulge me to suggest this is not going to be linear from 2013 to 2015, while we are in the midst of the model change and the rebranding margins were in around 5%. As we began to scale as the model changed and the rebranding took hold, we doubled that to 10%.

And then in 2018 and this year, we doubling that again to about 20%. So as we continue to scale, as we continue to innovate on product, and as we continue to enjoy the network OpEx that this marketplace gives us. So, I think we'll see the margin improvement continue.

It will not be linear, but importantly the levers are clear and the levers are within our control..

And near term margin is not our near-term priority. We see a big market here, we see a big opportunity, we have got a nice lead and we're going to continue to try to expand that with the things that we've said, we're doing this year..

Thank you and thank you all for joining the call. Thanks for your support, thanks for the questions. We'll talk to you next quarter..

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