Angi Inc.

Welcome to the ANGI first quarter 2026 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. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Julie Orojo, Chief Financial Officer. Please go ahead.

Good morning, everyone. I'm Julie Orojo, the CFO of Engie Inc., and welcome to Engie Inc. First Quarter Earnings School. Joining me today is Jeff Kipp, CEO of Engie. Engie has published a shareholder letter, which is currently available on Engie's website in the Investor Relations section. We will not be reading the shareholder letter on this call. I will 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 10-Q, our most recent annual report 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 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 will also refer you to our earnings release, shareholder letter, and public filings with the SEC and again to our investor relations section of our website for all comparable gap measures and full reconciliations for all material non-gap measures. Now I will pass it off to Jeff.

Good morning. Thank you all for taking the time to read our letter and join us today. We know everybody's busy. Just to repeat a little bit of what I wrote in the letter, we believe we're in the middle of the most transformational time in technology in a generation. We think AI agents and agentic coding present energy opportunities that we did not have in the same way or fashion 12 or even a few months ago. We believe it's incumbent upon us as good stewards of the company and its capital to move aggressively to take advantage of these opportunities. Moving from our legacy platform to a new AI native technology platform for our core business and flywheel much faster as the first Building agents to multiply the effectiveness of our core customer experience and offer new capabilities to our pro customers, what we are now calling the ngPro Chief Revenue Officer, is the second. And finally, leveraging Agents at Coding to build these agents and the platform twice as fast as we could before is the third. We have great assets. We're confident that our existing flywheel is one of the best in the industry, if not the best. We have 30 years of brand equity. We have nearly 200,000 active pros across North America and Europe. We have the most powerful customer acquisition engine there is in the industry. Our flywheel is going to spin even faster as we deploy agents to improve our customer success rates and serve as a phenomenal distribution base for our new product that anyone building AI software would love to have. Thus, we think we have a tremendous head start and great leverage against the opportunity. For the last three years, we've been working hard quarter by quarter to incrementally improve our customer experience and business on an old, brittle legacy stack. And the resources we've been using to do this are really critical to moving forward as quickly as possible against the much greater opportunities I just described. We have made real progress on the customer experience. I won't list everything I've listed in the past, but moving NPS 30 points and improving ProChurn by 30% are key markers during that period. We've also made good incremental progress moving AI into our key revenue flows, with 50% of our homeowners now touching our AI helper in their path. However, we've also not been 100% consistent at delivering incrementally with our legacy technology. The time and costs are extremely high. The incremental approach we've taken and we are taking is not enough, and it's not, frankly, worth the opportunity cost versus what else is in front of us. We just can't afford to keep our product development teams battling with the core technology to improve quarterly revenue and deliver against specific targets. So we're going to release our resources against the opportunities I just described. Getting the new AI-native platform is critical because it's going to allow our core product to function more effectively and drive AI-first innovation, improve the customer experience and the efficiency of the business far better than we can on the decades-old code our current technology is made up of. Our core flywheel is going to spin faster, and our core experience on both sides of the marketplace is going to be better. Shifting and focusing on building the new Angie Pro Chief Revenue Officer is an incredible opportunity because, first, we're going to generate materially more value for our core pro customers by making sure they win more of our leads, driving retention, engagement, multiplying lifetime value, which in turn will spike acquisition opportunity of new pros. It's the strongest bet we can make in this business. And then, secondly, we effectively will have a new business because our pros will be able to use the Angie Pro CRO for non-Angie leads, the rest of their business, grow and enjoy more success, which is, of course, our core mission. Get more jobs done well for our homeowners and more jobs won well by our pros. So we have a two-fold market opportunity and a huge, as yet, undisrupted market where we have the leading assets and leading market positions. So multiple things can be true at the same time. Our mission has not changed. We're focused on jobs done well, as I just said, and jobs won well for our pros. Our goal is to deliver profitable and accelerating growth over time. And we are also making a clear pivot on how we execute our strategy, given, again, what we think is a remarkable opportunity in front of us in our space, and we think we are well-positioned to win. So with that intro... We will move to questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Dan Kernan with Stonex. Please go ahead.

Thanks. Good morning. Jeff, I guess the first obvious question, just to follow up on this, you know, we're calling it a pivot, but it's really more of an enhancement to the way I think you guys are trying to win business. And so, you know, with the reduction of guidance here or the pull of guidance, I guess, for the short term, maybe you can just frame for us. how much this is going to impact in your mind, revenue and EBITDA and over what timeframe. And then I want to kind of follow up on sort of how you perceive the market opportunity.

Okay. Thanks, Dan. Good to hear from you. So first, It is, again, two things can be true. We have been going down the path we've been going on. I think it's a material pivot in the way we deploy our resources and execute, and I think it is a whole new opportunity that we are going to build as well. In terms of your question on revenue, EBITDA, cash flow, you know, we made a clear decision not to give guidance We think that setting guidance and the pursuant distraction it is from executing its larger opportunity is not where we should be focused. But what I would say is our existing business and flywheel generate and will continue to generate solid operating cash flow, which we think of as adjusted EBITDA minus our capex. And we plan to continue to generate solid operating cash flow. We're not looking to destroy our EBITDA margins or take our cash flow anywhere near zero. We're effectively going to fund our platform and product strategy internally, meaning we're only going to add to our cost base where we see more opportunity. For example, our AI software and token costs will be several million dollars more than we anticipated even a few months ago. By taking resources off the legacy technology and acknowledging that we're no longer going to focus on quarterly revenue, there will be an opportunity cost measured in some amount of lower revenue implicit by not working on the core technology to deliver incremental revenue wins. To be clear, we don't plan to use the cash on our balance sheet to fund the transformation. Rather, we actually anticipate continuing to build the cash on our balance sheet by continuing to produce cash flow.

Does that – just to be clear on that before I ask the kind of TAM question, Jeff, you know, it's obviously not a distraction. You're aiming for a bigger target here. Some revenue opportunity loss, but you're – I mean, we're still focused on the core business and we don't anticipate, I mean, I don't, is there any way to kind of frame how big a disruption you think this might be to the core business in general?

Look, I think we plan to operate with a, with a cash cushion. Um, Without this being a commitment or guidance, I think we'd be happy with a cash flow cushion in, give or take, the range of $50 million a year. That's adjusted EBITDA minus capex. That's not a goal, a budget, a commitment, or a plan or guidance, but that's directionally how we think about a floor. And we think that that's a good number that allows us to internally fund the transformation and continue to deliver cash flow to the business. And... We think that our core business will continue to generate solid profitability. We think that once it gets onto the new platform, we will have the opportunity to accelerate with innovation and efficiency there. And then I think we'll have the opportunity as we put our agents in place and get penetration over the next several quarters, we think we'll have the opportunity to accelerate materially following getting the new Angie Pro CRO infrastructure into place.

So with that, Jeff, I think in the letter you basically said that the $700 billion TAM that you're referencing is just job value, and for you guys to get to your $5 billion revenue opportunity, which you lay out there, it just seems like doubling your win rate. I mean, what you're suggesting here is that by building the CRO for PROS, I mean, you have an opportunity for them to utilize this both on and off platform. So there seems like there's a software element to this. So maybe you could unpack for us how you think about getting to that $5 billion and separately, is there a separate TAM that we aren't discussing yet today or in the shareholder letter that could be achieved or attacked from a software perspective, given that most pro Marketing budgets are viewed as percentage of job value, but software is typically a separate expenditure line and kind of viewed as sort of a separate TAM when they think about cost of service.

A great multi-part, but very smart question from you, Dan. I should expect nothing less. So, yes, $700 billion TAM is – residential construction, specialty construction, home services, total job value that we think is our target market for our platform and customer base. Today, we capture below 1.5%. The market is split 75% larger pro, 10 employees or more, 25% smaller pro. We think we have 3% to 4% share in the smaller pro market. and we're under half a percent in the large pro. We have a strong view, AI, no AI. We can replicate the share of the small pro market in the large pro market. We think we've underinvested and not executed well there over time. Doing just that and getting to that share would give us $2.5 billion of revenue at a 10% take rate, which is about our current take rate, which is Pros pay $50 a lead. They win one in seven, one in eight. The average job is about $4,000. And so we think about it that way. I'll come back to that. On our platform, 10 homeowners submit jobs. Seven of the jobs get completed, but only two of those are won by our pros. If you look at our four longstanding strongest brands and businesses in Europe, which would be the U.K., Germany, and the Netherlands, they win more like three and a half So we believe that doubling that, too, is well within reach. And so if pros are winning twice as many, you know, four out of the seven instead of two out of the seven, that takes your share of the total job value in the market from three to four to six to eight or seven as a proxy. If you come back to the take rate, pros are looking at their overall P&L and their share they're paying to support their revenue. We think 10 is a pretty good marker where you're driving good value. By improving the win rate, we would lower the take rate unless we took lead pricing. Taking lead pricing is one way to keep the take rate a fair take rate. Another way is charging some for the software. So, you're correct. There's two markets there. There's the lead market, where maybe we'd like to be a little less than 10 to drive real value there. but there's also the software market. And based on our research and looking at, if you take 10% of that $700 billion job value market, it's $70 billion that's the potential revenue. We think that there is a comparably sized market you know, $50 to $70 billion maybe in services and software to sell to pros that is likely growing as software transforms with AI. So on some level, you know, there's $140 billion of revenue out there. I think our focus is on delivering against the 70, delivering for our pros, but it is a product that while we're first focused on Angie leads, our pros should be able to use for other leads, and, frankly, running their overall business. So you're not wrong. And when we think about our $5 billion revenue target, one way to do it is to get 7% of the market at a 10% take rate. Another way to do it is to get a lower percent of the market and effectively have software and services revenue. And then the third leg we have is actually accelerating growth even faster in Europe, which can be a material contributor because there's another $500 billion or $600 billion of TAM in Europe, which we've been less successful at penetrating. We think that's tied a bit to market structure, and that's a different conversation. But we think we have multiple ways to get to the $5 billion, and I think you've hit well on a couple of them.

Got it. Well, very ambitious, Jeff. Thanks for all the color. Appreciate it.

Thank you. The next question comes from Yousef Scully with Truist. Please go ahead.

Hi, this is Robert on for Yousef. Thanks for taking our questions. On the Q1 performance, can you just explain the levers relative to 90 days ago, which areas of the business are outperformed and how sustainable is that outperformance? And then what are you guys doing in new LLM traffic channels? Thanks.

I'll take the first question. So in terms of revenue, we had a strong January and February, but then March pulled us to the lower end of our revenue range, driven primarily, we believe, by macro factors. Service request mix shifted away from larger jobs in category where we have the most extra capacity, such as roofing and HVAC and towards smaller jobs, We surveyed thousands of pros and homeowners, and it's clear that homeowners backed away from projects, like, more in March than in previous months. And as a result, like, pros reduced lead budget because they believed they would lean less, like, less jobs, meaning overall we had lower capacity. On EBITDA, our EBITDA came in at about $23 million. That's above our $10 to $15 million, like, guidance range. There were two contributing factors. First, we capitalized about $2 million more of engineering labor than we thought in our initial guidance. We followed our accounting policy here, and we went by the book, so it went a little bit higher. And second, we had a couple of one-time benefits and expense and some timing, and so we came out above our guidance for Q1.

Yeah, I would again say editorially, we look at all in adjusted EBITDA minus CapEx. So when we have these swings, you can blame Julie for following our accounting policy. But if given our druthers, we wouldn't capitalize it. And I don't mean to speak accounting heresy, just we think it makes things more complicated and the cash ends up in the same place. So we're just calling out that benefit. Let's talk a little bit about LLM traffic. We have been investing a fair amount in making sure that we are there for the LLM traffic. We've been buying OpenAI ads successfully. We're near break-even on that buy. There's been a bunch of noise out there on it, but we're happy with it. We're in their beta test, and we know they are working on optimizing, and we're confident that we're going to be able to grow value and expand there. We've launched our app successfully on ChatGPT. We'd like to see them move their app ecosystem into deeper integrations, and we're working with them on that. We're going to launch on Amazon soon, and we are live working on multiple other integrations with major players, which we expect to announce in the next couple of months. The overall share of traffic from these sources is pretty low right now, but I think we are all seeing consumer usage shift and will increase, and we think the platforms are going to figure out how to leverage this traffic and will be very interested in working with us. If you think about, I wrote this in the letter, but if you think about our approach, Our approach and our pivot is about making sure our pros get better results. When our pros get better results, our homeowners get better results. And when customers get better results, the LLM wants their customers to go there. And so we think that in the same way that our results on SEO once kind of won SEO when we were home advisor in Angie's List, And we have most recently taken really leading positions in SEM and buying on social for the same reason. We think we're going to do the same here. So we're pretty excited about it. Our approach has been we've developed technology where we can pick up the conversation in any part of the chat with the context in the chat. So if you were to say, hey, ChatGPT, or, hey, Claude, or whichever you're talking to, I have water on the floor in my bathroom. We could effectively let the LLM know, and we will have let the LLM know, that we can pick up the conversation there and ask questions which are LLM-driven, but with our proprietary domain knowledge fine-tuning the LLM chat. We also can pick it up somewhere in the middle or at the end when Claude or Chachi or Perplexity or whomever has diagnosed that, oh, you have a crack in the base of your toilet and you need a new toilet, we can say, here are some pros, Mrs. or Mr. Consumer, and get the job done there. And we're already taking the same approach with our core homeowner experience. We have in test an LLM first chat that effectively mirrors this experience. It's right now a conversion deprecation, which we want to narrow before we move it broadly. We do plan to lead with this experience when we're working with partners and new traffic channels because we do believe that ultimately where we want to be is having a full chat with a homeowner getting whatever information they're capable of, and homeowners aren't always very good at giving the information or assessing the information, and being able to provide price estimates, advice, information, and, of course, our pros through the experience. And that is where we see things going, and that being beneficial to the pros on the other side as well. So that's how we're looking at it all holistically. So I hope that kind of answers your question.

Yep, thank you for the color.

The next question comes from Sergio Segura with KeyBank. Please go ahead.

Hey, good morning. Thanks for taking the questions. First, I was hoping you could just provide a little bit more detail on what the Angie CRO is going to look like at the product level, any kind of required investment for that product. You know, just maybe a little color on why this is the right jobs to be done to focus on right now. And then secondly, relatedly, maybe how did your go-to-market strategy change with this new AI approach? And then if you could discuss any challenges or opportunities of targeting those smaller pros that you mentioned in the letter for this product. Thank you.

Right. So the reason this is the right job to be done right now is on a simple basis, This is, we believe, the best way to achieve our mission and deliver the best customer experience to both sides of the market, A. What we're trying to do is make sure that when a homeowner comes to our platform, they hire a pro from our platform, and the job gets done well, and the pro feels like they've won a job well. Everybody's happy when that happens. Customer NPS is plus 50. Pro retention and satisfaction jumps, and the pros pay us, and we make more money, and everybody's happy. Our biggest gap, as I walked through earlier when I was responding to Dan, is the number of jobs that are actually completed versus the number our pros win. So to drive that North Star experience, our pros need to win more. There's been just a dramatic change in the possibilities available to us with AI agents and agenda coding in just the last few months. And we have been assessing and digging in and looking at what we're doing. And we believe that agents offer us the opportunity to close the loop and take that metaphorically two out of seven to four or five out of seven that I referenced earlier and double the win rate, double the effectiveness for the homeowner, double the effectiveness for the pro, and really grow value in the business and the ecosystem. In terms of how we're approaching this, how it's going to look, Effectively, what we're doing is starting with the core lead-to-close cycle. So lead received, first agent would be what you might call an AI call center and booking agent. Outbound call can be made to the homeowner. Homeowner doesn't pick up outbound text, can call back in. Booking agent gets more information, confirms the needs, books into the pros calendar, sends reminders to the homeowner and the pro, makes sure there's a rescheduling, makes sure the pro shows up, and getting the booking is really the first key anchor in getting the job won. A lot of our large pros look at booking rate as their key metric. But you can go from there and imagine that you can coach the pro on the sale going in, You can record the visit. I don't know if anybody uses Granola for their meetings and transcribes their meetings. You can do something very comparable. You can send notifications with coaching advice to close the sale during the visit. And you can also take the transcription of the call and the agent can put together a draft quote by the time the pro gets out to or is truck or van and is able to then dispatch a quote right away. One of the gaps in the winning process is delivery of quote in a timely fashion and accurately. And once you have the quote, you have follow-up, you have checks on changes, you have closing the deal, you have asking the pro to intervene with a visit or a call to close the deal. And you can go from there. And your imagination can take you to different places. And what we're going to do is carefully assess the needs and the opportunities to make sure when the homeowner submits a service request and creates a lead for our pro, one of our pros is consistently winning it. And so you can imagine the ecosystem will look like that. And, you know, in our mindset, we should have our first agent in its first test in the next several weeks. We will then, as that gets going and we complete our agentic software development lifecycle, which is the platform on which you do your agent development, we will work on getting our second one out, and we're working on prototypes, and we get to our investor day in the fall. We hope to demo this for everybody who wants to come. And, look, we're pretty excited. We think that the opportunities opened up here to really deliver value for our customers and ultimately really accelerate the business to deliver value for more and more customers that are shareholders are incredible right now.

The next question comes from Steven Jha with UBS. Please go ahead.

Hi, this is Vanessa on for Steven. I just wanted to ask a question on the guidance. So can you add some color on what forecast item is getting more difficult for you to rescind guidance on? And is it more on the cost side as you build out the product? Thank you.

So I wouldn't say that we're having difficulty forecasting. We have high visibility in our business. We pay careful attention to what we're doing. It's just very simply we're not going to give guidance because there isn't a reward for managing quarterly or annual guidance. There's not any reward for hitting the range on our quarters. There's not any reward for dedicating resources to getting the next million dollars in the quarter versus the next billion of value that's in front of us. And to be honest, the market's telling us that. So we're going to stop trying to invest and improve our revenue on our old platform, which is really just fighting the last war. We believe the upside of our AI-native strategy is on some level uncapped. So we believe that anything that distracts from the tremendous prize management, engineering resources, anything that distracts from the tremendous prize we have in front of us is effectively kind of a waste of time. We still plan to run our commercial machine and drive the business back to pro growth and ultimately revenue growth. We're just not putting a timetable on that. Our milestones that we're thinking about is we're targeting getting onto the new platform in the next 12 months or so. That's a key marker in terms of getting into a place where we can innovate and work on the core business. And secondly, what I was just talking about in response to Sergio's question, we're going to sequentially build, test, and roll out our ngPro Chief Revenue Officer agents. And as we get that into place and the new platform rolls out, we anticipate being able to accelerate our revenue in 2027, and we think it should be material. Otherwise, it's not really worth playing for. So I think without giving guidance, that's how we're thinking about it, and it's not a problem on visibility or difficulty. It's simply a matter of where we're prioritizing resources, and then, frankly, the feedback we're getting from the market on the value of doing that.

The next question comes from Corey Carpenter with JP Morgan. Please go ahead.

Hey, this is Danny Pfeiffer. I'm for Corey. Thanks for the questions. For the first, Jeff, can you talk about what this pivot business strategy means for the consumer and homeowner experience and how it may change? And then for the second, can you talk about the rationale for the debt repurchase in 1Q and 2Q quarter to date and maybe provide an updated capital allocation strategy?

Thanks. So, Let me talk about the homeowner experience. I'm going to let Julie talk about our bonds, and then I'll add any color there. So I talked a little bit earlier about the development of the LLM's services as traffic sources and our strategy there. And that was sort of very practical. How are we approaching this now? How are we working with the LLMs, and how does that opportunity work? If you go a step further, What many people see right now, and you can just go back to the development of OpenClaw as really the key marker here, consumers are going to have personal agents more and more. And those personal agents are going to be able to go out and perform tasks for them without them necessarily interfacing with, in their minds, a website. So what we strive to do is to be the best place for a homeowner to come to get their job done well. We think that the strategy we've laid out continues to be the best thing. And as I said, we think that the strategy we've laid out is the best approach to delivering signals to the LLMs to make the LLMs choose us. Effectively, get the job done, get the traffic. Demonstrate that you're going to get the job done, get more traffic. When we think about personal agents, personal agents are effectively trained LLMs, trained on personal preferences. And so if we can train the LLMs by delivering results to be a choice place to send homeowners, we will also train the personal agents. So what we want to do is we want to position ourselves not only to be a place where a homeowner can come and use us as their agent to get their questions answered and find their bros, but the homeowner's personal agent will come and do that. And we think we do that by delivering jobs, one, well for our bros, which means jobs done well for our homeowners. I described a little bit earlier thinking about the homeowner experience, and when you think about what I was saying with the ability to deliver estimates based on the information the homeowner gives us, again, homeowner information is not always perfect, so they'll have to be caveated estimates, take in photos, take in info, have an iterative conversation, make requests of the homeowner for certain measurements, et cetera. You can imagine the way the interactive experience can develop And ultimately, that means the pro has better information. We get better matching. The pro can match the technician and the equipment that they send, and we can have a much stronger ecosystem. And this can happen either by a homeowner coming through an LLM, coming to Angie, coming through a partner. We have several partners who deliver us traffic or, frankly, a homeowner's trained personal agent. And we see the world evolving this way, and so we think the homeowner experience will evolve this way, and we need to deliver against it.

In terms of, like, capital allocation, as Jeff said earlier, we're confident in our ability to produce consistent cash flows. In terms of M&A strategy, we're conservative, and then we cap our share repurchase ability until next year. We have repurchased about 20% of our share outstanding at this time of the spinoff, at the limit of the safe harbor for a tax-free spin, and that's for a period of two years following the spinoff, so until April 2027. So as a result, we thought that buying bonds was a good use of capital. We bought about $100 million worth of bonds, so that's about 20%. of the debt outstanding at an almost like 9% discount.

So just to follow on, we are clearly not against buying our shares at favorable prices, but we can't do that until next year. We're clearly not against buying our bonds at favorable prices. As Julie said, we just bought a bunch. We do have to be mindful of creeping tender rules and how that works. So we're not averse to doing it, but we have to, in the same way we have to pay attention to the structures around share of purchase, we have to pay attention to the structures around bond repurchases. And as Julie said, you know, we are not in an aggressive mindset. We're in a disciplined mindset about M&A. We would take a great value and a great opportunity that augments our strategy, but we are not trying to go and take the cash off our balance sheet and buy brand-new things that are outside of what we've told you our core strategy is. And I think that's our thinking on capital.

This concludes our question and answer session. I would like to pass the floor to Jeff.

Well, thanks very much. Thanks for all the questions. I think we've laid out what our thesis is here, which is there are really tremendous new opportunities in front of us that are provided to us by AI agents and agentic coding. We think we're remiss to continue to work on the old technology, which is not easy to work with, nor is it productive to keep chasing quarters in revenue guidance, et cetera. We are incredibly excited about what's in front of us, because we think we have a clear line of sight on executing against our agentic strategy, and we clearly believe that we have the strongest distribution base between our brand, our pro network, and our acquisition machine in the industry, and we think we can spin the flywheel standalone, we think we can add to it by building our agents. And then I think effectively, Dan pointed out, there's another market opportunity here for us as well. So we're extremely excited. It's going to take us the next several quarters to put it all in place with the new platform and the rollout of agents. But we will be talking to you over time about our progress and how we're looking at the metrics. And we just think that this is a unique opportunity, and we haven't seen something like this in the last few years for Angie. So thanks again for joining us, and we will talk to you soon.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.