Angi Inc. Class A Common Stock 2026 Q2 Earnings Call

Please go ahead. Good morning, everyone.

I'm Julie Hoarau, the CFO of Angi Inc. Welcome to the Angi Inc. second quarter earnings call. Joining me today is Jeff Kip, CEO of Angi. Angi has published a shareholder letter, which is currently available on Angi's website in the investor relations section. We will not be reading the shareholder letter on this call. We will go through a few introductory remarks and then opening up to Q&A. Before we get to that, I'd like to remind you that during this presentation, we may make certain statements that are considered forward-looking under the federal securities law. These forward-looking statements may include statements related to our outlook, strategy, and future performance, and are based on our current expectations and on information currently available to us.

Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recently quarterly reports on Form 10-Q, our most recent annual reports on Form 10-K, and in the subsequent reports that we have filed with the SEC. The information provided on this conference call should be considered in light of such risks. We'll also discuss certain non-GAAP measures, which, as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I'll also refer you to our earnings release, shareholder letter, our public filing to the SEC, and again, to the investor relations section of our website for all comparable GAAP measures and full reconciliation for all material non-GAAP measures. Now, I'll pass it off to Jeff.

Morning, everyone. Thanks for coming to the call. We're very happy with what we've been able to accomplish on our strategy over the last three months, and we believe we're well on track. Julie's going to give some commentary on the numbers, and then I'm going to come back and discuss our strategy somewhat comprehensively.

Julie? Thank you, Jeff. Starting with our revenue.

Our revenue for the second quarter was down 11% year-over-year. Three things drove it. First, we continued shifting away from our network channels. Network revenue was down 34% year-over-year. Second, we stepped back from lower quality-based marketing channels. We had ramps in Q2 last year, which makes this a harder compare. Third, our revenue in Q2 was materially impacted by a shift in mix and traffic starting about 10 days into March as oil and gas prices rose sharply following global events. We noticed that homeowner behavior changed, and demand moved away from larger jobs category, like roofing and HVAC, and that's where we have the most available pro capacity, towards smaller jobs, where we have less capacity, and that less capacity in those categories are unmonetized. We surveyed our homeowners consistently over the last few months.

In April, we saw more jobs being canceled or postponed. More recently, overall spend is back at expectations, but each job is more expensive, so homeowners are doing fewer jobs, which ties right back to the lower demand we are seeing. We can see all of this in our metrics for the quarter. U.S. service requests are down -6%, while leads are down -13%. Our revenue per lead, however, is up +1% year-over-year. That's due to the mix-out of the old heavily discounted legacy ad product we had. As a result, compared to historical seasonality, the second quarter revenue is in the range of double-digit percent lower than on pre-March 11 run rates. We have seen things trending positively, but we remain below our pre-March 10 run rates, and we do expect modest improvements as the future quarters progress.

On the profitability side, sequentially from Q1 to Q2 2026, revenue grew and adjusted EBITDA grew faster with about 50% flow-through. We have improved our marketing ROI, and we have reallocated about $6 million of inefficient TV spend in the second quarter towards higher ROI channels. TV has been less effective this year than in prior years, so we will be back. We do expect to take out a comparable amount moving into Q3. We remain on target with our overall adjusted EBITDA minus CapEx range for the year. Jeff said on the last earnings call that we would be happy with about $50 million a year of EBITDA minus CapEx, and we are right on track for that. July EBITDA margin is already several hundred basis points above Q2, and further reduction in ineffective TV spend should support a stronger Q3.

I also want to discuss the impairment that we registered for goodwill and trade names. We recorded a non-cash charge of $235 million this quarter on our U.S. reporting unit. The trigger was the sustained declines in our market capitalization since year-end. That requires an interim test, which the test compares the estimated fair value of each reporting unit to its carrying value. We tested both reporting units, and the charge is entirely on the U.S. reporting unit. International came through with substantial headroom. This is not a reflection of our business on a consolidated basis. There is no effect on cash liquidity of our commitments. Looking ahead, our annual test for goodwill impairment is in October, and earlier if there's another triggering event. Further charge is possible if the market conditions, the valuation assumptions or the operating performance deteriorates. That's a function of the accounting rules.

We've disclosed the sensitivities in the 10-Q. In closing, we're not reinstating guidance at this time. Our focus remains on building out the strategy Jeff Kip described in the shareholder letter. We have laid out the reasons to believe, and we expect that to show up as acceleration in 2027, as Jeff Kip explained on the last call. I will now pass it back to Jeff Kip, who will go into more insights on our strategy.

Thanks, Julie Hoarau. Let's get up in the helicopter and look at our market opportunity and our strategy to win it comprehensively. I think as many people know, we estimate the overall market for completed home services work in the U.S. at about $700 billion. That is the total revenue available to our Pro customers. We estimate that less than 1.5% of that flows through our platform. We have a material opportunity to continue to penetrate that significant market. Our core lead business targets the $70 billion to $80 billion of total customer acquisition spend that all Pros make across the United States. About 65% of that spend comes from Pros with more than 20 employees. We have less than 0.5% of that market, and probably in the range of 4%-ish of the 35% of the market that is small to mid-size businesses.

We under-index significantly against the large Pro segment. If we achieve comparable share in the large Pro segment to what we have in the small to mid-size segment, we'll reach something like $2.5 billion in revenue, and we think that's a very reasonable target for our existing core business. That, of course, ignores any improvements in Pro lifetime value and engagement. Reducing churn, which is a focus of our strategy, for example, by 25%, all else equal, would add 10 points to our annual growth rates versus what we can do otherwise. Executing on both opportunities, i.e. penetrating the large Pro market and reducing our churn, will put us within striking distance of the $5 billion in revenue we talked about in our last letter.

Before we penetrate the Pro software and services market at all, that market for Pro software and services to run their businesses and close down their leads is, we estimate, about the same size as the market for total spend on marketing and lead acquisition. We have a material opportunity in front of us. Our strategy is to be the trusted revenue partner for Pros and go after both markets. Effectively, the entire marketing and lead acquisition market for Pros and also the services and software business. What gives us the right to win in this $150 billion revenue market? Well, first, our core leads business. This is our competitive wedge in the Pro revenue cycle.