Angi Inc.

Welcome to the Angie Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After introductory remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Andrew Rusikoff, Chief Financial Officer. Please go ahead.

Good morning, everyone. Rusty here, CFO of Angie Inc., and welcome to the Angie Inc. Fourth Quarter Earnings Call. Joining me today is Jeff Kipp, CEO of Angie. Angie has also published a shareholder letter, which is currently available on the Investor Relations section of Angie's website. You will not be reading the shareholder letter on this call. I'll soon pass it over to Jeff for a few introductory remarks and then open it 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 laws. 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 recent quarterly report on Form 10Q, our most recent annual report on Form 10K, and in the subsequent reports that we file 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 filings with the SEC, 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 I'll pass it off to Jeff. Thanks, Rusty.

Thanks, everyone, for joining. I just like to start. We are fairly happy with where we've gotten to right now. Over the last three years, we've given up about half a billion of lower quality revenue. But at the same time, we've doubled our EBITDA and cut our capital expenditures in half, meaning we've swung from real negative free cash flow to real positive free cash flow. At the same time, we've moved our homeowner NPS more than 30 points. We've cut our churn by more than 30%. We've improved our customer success rates more than 20%. And actually, in the fourth quarter, we've turned our customer repeat rate positive about 10%. So we're pretty happy with the progress we've made. We're making a material stair-step improvement in our year-over-year revenue changes, probably 700 to 900 basis points. Actually, in January, we grew very modestly, although year on year, we don't fully expect growth in the first quarter. But we're pretty happy with where we are. We're very optimistic. On top of that, we've reset our margins. We've cleared the capital to invest in long-term profitable growth. And we're very excited about our prospects in the AI landscape. I'm going to talk a little bit about that. I think there's a few things to talk about. I think we should talk about LLMs, marketplaces, software, and agentic coding, different layers of emphasis there. First of all, when we look at LLMs, we see it as great opportunity. We're very happy to see LLMs enter and be places where homeowners and consumers generally who have lower knowledge and maybe less frequent interaction go to discover and explore. We've been very successful building an acquisition on Google, which is effectively the predecessor of the LLMs. Google obviously has its own LLM. where homeowners and customers go to explore, research, and discover. We've been very effective because we have built a network, a deep, broad, and skilled network, which Google still finds very useful as a partner to serve its customers, and we believe the LLMs will as well. We have started working actively, working with every LLM. We have had conversations that are an effective dialogue. We've announced the deal with Amazon's Alexa. We have an app submitted to another major LLM. We're talking live about two technical integrations based on the same technology we built for the app we submitted. And we feel very good about the opportunity there. We think that it's harder for LLMs to go out and build the deep and engaged customer base that we have. Again, we were able to do it and maintain it and sustain it all the time while Google tried to do the same. So we feel pretty good about our competitive position. We think we can serve as excellent partners to LLMs. In fact, we've deployed LLM technology in our SR path, in the core customer experience, which we are training with our own proprietary data and experience. to make sure that we can land the homeowner at a better match. About 35% of our homeowners touch that part of our technology and experience. They convert about 3.3 times as well to a pro selection as the customers that don't. And so as we've trained that technology, we think that's positioned us better to interact with the LLMs. Our approach with the LLMs is that We can pick up the context and the conversation that the homeowner is having with the LLM at the beginning when Rusty says, I have water on my floor, what do I do? Or the LLM can have the full discovery with Rusty and get to the point where we say, okay, we think there's a leak at the base of your toilet. We need a plumber and we can take that information and bring the right plumbers. So we think we can do that effectively. Obviously pros have separate marketing channels than we do. They go direct to Google. They do a number of things. We actually think longer term we can help them there because we think we're probably at scale the best there is at finding homeowners who need help from pros. But we think that we will still exist and be able to grow in this environment. And we're just very excited to have competition at the top of the funnel and be able to diversify our channels. Let's just talk briefly about then our role as a marketplace, some of the things that are being said about software out there and agentic coding. Fundamentally, let's focus on Angie as a marketplace. We are an agent. We have customers on one side. We have data and systems of record on the other side. We are effectively the execution later in the UI layer in between, and we get the homeowner's job done, which is finding a pro who can do their home job well. And we get the pros job done, which is finding a homeowner whose job they can do well. And we act as an agent. We believe that using agents will allow us to be even more effective at what we do. And again, use our proprietary data and systems of record and experience be stronger and faster at development here, in addition to the existing network and customers and the resulting network effects that we already have. A competitor may be able to build an alternate marketplace technology metaphorically overnight in their garage now, but they cannot build our network nor our homeowner reach or our brand. So we think we're very well positioned. We think further that when you think about software, we think now we have the ability to extend our agents and actually integrate with all the software out there that our customers use better. For example, we believe that we can act as the post-lead communication between the pro and the homeowner to clarify things for the pro, to book the appointment into the pro calendar, and perhaps even book the appointment into the homeowner calendar, send follow-ups, etc., We believe we can ultimately integrate also with ERPs and HR systems and anything else that helps the pro move through the chain to get the job done. And so we believe we're well positioned to actually extend our mission. Today, if five homeowners come to us with a job, three of them hire a pro, which is not that different than what we study when homeowners call a pro. We get to something more like seven out of 10 hire a pro once they've made a phone call. But so that's pretty good. Of those three, Only one hires our pro. We believe that by using agents, we can drive that up to two and then towards three, which will dramatically improve the value created, the retention, the repeat, and our ability to extend the marketplace. So we're actually very excited about this. And then the final piece, I'll just briefly state, obviously, there's a lot changed even in the last week or so with agentic coding and what's being written there and the possibilities. We're extremely excited here. Again, We can build something in our metaphorical garage over the weekend. We think this gives us great opportunities to extend our software by using agents and invest and regrow our whole network and business. So overall, we're very excited about the entire landscape. Let's talk a little bit about now. I'll talk a little bit about our business and revenue trajectory, and then I'm going to let Rusty talk a little bit about margins, and then we'll take questions. First, I'd say we're roughly in the same place we were before, maybe modestly lower. Previously, we were talking about getting to a little bit of growth in the first quarter and getting to mid single digits for the year. I think now we're looking at very modest negative growth, but still a material sequential acceleration in the first quarter and maybe low single digits for the year. What's the difference? The difference is obviously we had pressure. We discussed it on our last call from both Google SEO and our network channel. in the third and fourth quarters. Between our November call and now, we think that that pressure's extended, and so we have gotten more conservative on those channels in the year. What we've historically been able to do is take actions, do work on our product, et cetera, and actually changed the trajectory of these channels. If you look at just Google SEO, we were down 35 to 40% year over year in mid-24. We brought that into the double digits, mid-double digits by the end of the year, and we expected to continue that trend. We were metaphorically punched in the mouth again in the spring and fell to the range of 35 to 40 again, but then we sequentially improved into the low to mid-20s by mid-year. Then we got hit again in the late summer, and thus we were where we were going into the year. What we've done is we've essentially said we don't think we're going to make that progress back again, and we're going to assume Google SEO stays down at that lower level for the year. We're doing something similar with our network channel where we basically have assumed we're not going to improve it. in the rest of the year, and we're just going to kind of get to the second half of the year and stay at that lower level we were in the second half of last year. So we've effectively gotten conservative. We think it's more prudent to look at our full year revenue that way. And really, our focus is on our proprietary business, which, again, we grew 17% in 2025. We're expecting high single, low double digits in the first quarter there. We believe that that business can be a solid mid-single digit plus, ideally double digit grower long term. We've put a great deal of investment there. We've executed very well. And frankly, we've seen our repeat growth turn in the fourth quarter. So we actually think that the high quality branded traffic is coming back. And with all of our improvements in the customer experience and what we see in customer behavior, we think it's time to lean back in to branded advertising where we're running TV and streaming and social. We've done this effectively for years. We're basically going to return from the lower level we were at in 2025 to the level we were at in 2024, which is an effective level for us to spend at, and we think we can do it well. Just talking about the quarters briefly, and then I'll hand over to Rusty. In the first quarter, compares get more difficult. February, March, in our proprietary channels, we ramped two areas of Google last year, first in February, March, and then April, May, which was Google Display and then Google Search Partners. We got some effective revenue growth, but as we watch that traffic season, we actually saw lower win rates than the rest of our channels. And we effectively scaled them both down. That makes the second quarter in particular difficult to compare and a little bit more difficult to compare in February, March. So we expect the first quarter with the kind of 60-ish percent network decline baked in to come in at minus one to minus three. We expect the second quarter to come in at flat, maybe a little bit down. And then we expect to get the mid single digit in the second half of the year as the network channel stabilizes, flattens out, and we're able to grow our proprietary at an effective long-term rate. And we're optimistic we can do better, but that is prudently where we want to guide right now. Again, looking out over the course of the year, we basically think low single digits, let's call it one to three, that's impacted by a few hundred basis points, worse of Google SEO and network outlook. It's impacted to the positive side by our brand spend, And then in the first quarter, again, there's a little bit of delay in the product roadmap that came with a rift. Sometimes you have to make a short-term sacrifice for the long-term good of the business, and the first quarter is going to be a bit negative at minus one to minus three. So, again, I think we're overall very pleased. It's not quite as high as we want it to be, but, again, 7 to 900 basis points of acceleration from Q4 to Q1, focused on growth in this year and very strong performance overall in our proprietary channels. And with that, I will let Rusty just talk about our margins and our EBITDA progressions.