Good day everyone and welcome to the Angi second quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal to 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 and then one on your telephone keypads. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Andrew Russakoff, Chief Financial Officer. Please go ahead. Thank you very much and good morning everyone. Rusty here, CFO of Angi Inc., and welcome to the Angi Inc. second quarter earnings call. Joining me today is Jeff Kip, CEO of Angi. Angi has also published a shareholder letter which is currently available on the Investor Relations section of Angi's website. We 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 opportunities, 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 file 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'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. Good morning everybody. The first thing I'd like to do is thank everyone for joining us this morning. We appreciate it. Our internal research indicates that this is the busiest earnings morning of the quarter, and we know everybody's working really hard, so thank you. This is our second earnings call since Angi spun off from IAC as an independent public company. I think it's worth taking a minute and reminding everyone again of the multi-year journey we've been on. Last night we reported our first quarter of proprietary volume growth since the beginning of 2021. It's a big milestone for us and our journey. To state the obvious, that everybody knows, we have over the last few years shed over $400 million in revenue. That is on the face of the P&L. To the untrained eye, many people have thought this looks like a bad thing, and under normal circumstances maybe it would be. We would actually argue it is all a very good thing and quite the opposite for the long-term success of both our customers and the company. What we've really done is, first, we have shed lower quality revenue which was in fact deprecating our customer lifetime value and thus the long-term value of the enterprise. Poor quality transactions mean that customers leave or they don't come back. Secondly, we've removed a material amount of unprofitable marketing and sales expense. In other words, we were spending money to acquire customers at negative profit. Now that we've adjusted that, you can see our profitability has improved greatly. Both our adjusted EBITDA and our free cash flow are up materially from 2022, where in fact our free cash flow was negative. Additionally today, and I've already cited this, you can see the key markers of our return to revenue growth, and this time it'll be profitable revenue growth. That is, first, the strong proprietary volume growth which I just mentioned, the first time in several years, and secondly, the stabilization of our network channel traffic. It's down a little bit quarter to quarter, but we now think it's at a stable exit rate, and we think it is going to be flat to moderately down next year. Those two together point us to growth next year along with the growth in revenue per lead. Finally, you can see the strong value creation looking ahead in what we've done in terms of being much higher value at lower sales force in our pro acquisition. The other key point in terms of what we've done over the last few years is the improvement in the quality of our customer experience. You can see it in our customer metrics over the last couple of years. We've invested in the core product functionality, and coupled with what we've done in terms of pruning our lower quality traffic, this has resulted in moving homeowner Net Promoter Score by 30 points over the last two years. We mentioned this last quarter, but it's still an accomplishment and it's still true this quarter. We've moved the total retention across all cohorts of our Pros by nearly 20% over the last two years. In this last quarter, we've moved both the hire and win rates. By that I mean a hire is when a homeowner who submits a service request on our platform hires a pro who's paid for that lead. Obviously, when the pro pays for a lead and they win it, that's their win rate. In June, our win rates on our core pro platform are up over 20%. In July, our internal early data is tracking to more than 30% up year over year, and the hire rates are coming right along with those win rates. We have done this progressively over the last couple of years, and at the same time, we've been improving the technology we operate on. A year and a half ago, we had four different technical platforms with relatively low fidelity integration in the U.S. and three platforms internationally. By the end of this year, we will only be operating on two in the United States and one internationally. At some point in the future, we see us as progressively, step by step, getting to a single modern international platform, which will give us a great deal of operating efficiency and more speed to market. We are quarter by quarter, piece by piece, putting all the pieces together to serve the trajectory that we project. We think steadily, piece by piece, putting the evidence out so that you can see it, too. We still think we're in the early innings and we still think we have a lot of work to do, but we're very optimistic going forward and excited to answer your questions today on the progress to date and where we're trying to go. With that, I'll turn it back over to you. Operator. Ladies and gentlemen, at this time, we'll begin the question and answer session. If you would like to ask a question. Question, please press star and then one on your telephone keypads. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. Our first question today comes from Sergio Segura from KeyBanc Capital Markets. Please go ahead with your question. Sergio, your line is open. Please proceed with your question. Is it possible your phone is on mute? Hey, can you guys hear me now? We can. Please proceed with your question. Great. Thanks for taking the questions. I guess, you know, first, it'd be helpful if you could delve more into the leads and service request trends you're expecting for both the proprietary network channels just for the second half of the year. That kind of underpinned the guidance that you guys gave in the shareholder letter. Sure, I'll take that. I think that's a pretty straightforward projection for us. We expect that service requests and leads to keep growing at approximately the same rate they were growing in the second quarter. The improvement in year-over-year revenue comparisons will come from more growth in revenue per lead. Just to remind everybody, that change in revenue per lead is somewhat driven by price optimization. The biggest driver there is our move to a single platform where we're moving our legacy Ads pros who really bought a basket of leads at a significant discount. We're averaging that portion of the network out by, A, in March we stopped selling them, then B, at the end of this quarter we'll start migrating them to the main platform. That will give us lift over time in the revenue per lead. Those are the elements of what we see as our revenue trajectory and our volume trajectory over the back part of the year. I guess the one other note I would say is we expect that our network volume will kind of stabilize at our exit run rates for the second quarter and be roughly stable the rest of the year. Great, thanks. That's helpful, and maybe if I could throw in a second one. Interested if you could talk more about your profitable acquisition opportunities and then how we should think about that consumer marketing expense line going forward. You know that was up year over year. Just wondering if Q2 is a good run rate as a percentage of revenue, or do you continue to see a nice runway to invest behind those opportunities, and we should expect that number increasing going forward. Thanks. Yeah, to just. To talk about margins. Broadly, Sergio. Where we are now after Homeowner Choice is we've had a little bit of a step up in our consumer marketing expense as a percent of revenue compared to where we were in the first quarter and last year as we're driving more on our paid proprietary acquisition channels. This quarter, we simply had strong execution there. What happens is on the margins, as we drive on the paid acquisition channels, on the margin, some of those acquisition ends up being a little bit lower margin than in the core of our paid channels. At the same time, we have a little bit lighter on our organic traffic. As you think about our margins this quarter, a little bit higher consumer marketing expense as a% of revenue, we're making some of that back in terms of our paid acquisition expense as we've moved all of our sales away onto the single pro platform and optimized our sales force. At the contribution margin line, it all kind of evens out. Going forward, we expect in Q3 and Q4 to be fairly stable on our contribution margins. Going from Q3 into Q4, we expect to have operating margin leverage that is similar to the path that we had in the same quarters in the prior years. However, without the fixed expense increase that we saw in the fourth quarter of last year, where we had some expenses that won't reoccur this year in the fourth quarter. That'll give us the ability to avoid some of the fixed expense margin deleverage that we saw in the fourth quarter and have more of our profitability flow through down to the bottom line. Got it. That's very helpful color. Thank you both. Great. Thank you. Our next question comes from Eric Sheridan from Goldman Sachs. Please go ahead with your question. Thanks so much for taking the question and appreciate all the detail in that shareholder letter. You know, anchoring around the part of the letter to talk about your highest priority product initiatives and improving the quality of match between homeowner and rights. Can you talk a little bit about the duration over which those three product initiatives that were highlighted would get implemented? By the company and how that implementation. Might inform elements of yield from those priorities in terms of translating into revenue. Growth or platform momentum. The second part would be I know it's very early, but maybe tying that broadly into how you're thinking about the exit velocity of growth this year and things like growth product initiatives. Contributing to a growth framework for next year. Thanks so much. Let me try and take the product and rate of product change question. I'll let Rusty talk about how we're thinking about how that rolls forward in terms of revenue and profit. To go up the step, our view is that the most important event in the user experience is the job done well. When a homeowner who submits a service request on our platform hires a pro based on that lead on the platform and the job gets done well, literally everybody is happy with what they've done. It fulfills our brand promise and encourages repeat and positive word of mouth about our brand from the customer. Pros are not here to chat with customers. They are here to get work done and get paid for it. It encourages them that they've achieved good ROI and they stay. Our view is we have not historically done the best job matching, and without a good match between the homeowner who wants to hire a specific type of pro and knowing that we're serving the specific type of pro to that homeowner, if that doesn't happen, we don't get a job done well. Our focus is getting that match done and trying to make sure the two communicate, get the job done well, and move on. We're investing first. There are three elements to this. One is getting the service request details correct. We know what the service request is. We can find the right pro. We have to make sure we serve the right pros with the right skills and qualifications, get them matched, and make sure that the contact is happening. We have a number of initiatives in play here. What we talked about in the letter is, first of all, we have rebuilt our question and answer technology. That's done. We've also implemented an LLM. We call it a helper, but what it really is is a place where if the homeowner is confused about the question, thinks they're answering the wrong question or has the wrong task or just can't really express it, they can come tell us in their own words. That allows us to get to the right question or move them to the right task and keep the homeowner going and not end up with the wrong task going to the wrong pro. We've built those two things. The next step is we have a team progressively building out and testing better questions and answers based on our internal domain knowledge and research. We've got nearly three quarters of our volume in test on these new improved questions. We've rolled out nearly 15%. We talked about some of the leading indicators in the letter of the progress we're making on that 15%. We have 20% fewer wrong task credit requests. That's our best leading indicator that we're matching much better. Our pro engagement, our higher rate, and our win rates are all up single digits across that 15% by the end of the year. We think we're going to get into the 80%+ range. We're going to be progressively realizing this, and then we're going to go back for round two in 2026 and tweak additionally and see how much more we can get out of this both by training the LLM and by relooking at our questions and getting feedback from pros. We're also starting to play with a service request Q&A path in the LLM. We planted this on some of our landing pages, so it's live now. It's very early stage. I think, as you know, the LLMs have to learn and condition themselves based on both the public databases they access and our internal database. That's where we're in early days there. Ultimately, we envision an LLM-enabled Q&A path which is trained and ultimately delivers better conversion and better matching, and of course the user interface that people are starting to get used to with ChatGPT and everyone else. That's what we're doing there. On the pro side, we're increasing the fidelity of match by only selling the product where the pros get to pick the tasks they want and the zip codes they want. A pro who chooses their task and zip code is basically telling you, this is where I'm a good match and this is what I want. Pros get the leads they want, they're much more likely to call, and if they're more likely to call, they're more likely to win and the homeowner gets their job done. We have historically had a significant portion of our network on the legacy Ads product, which just due to the construction of the technology was you had to accept a fixed basket of zip codes and you had to accept a fixed basket of tasks. The result is those pros call the homeowners less, they get matched to things they aren't as interested in because they're happy with the basket. The economic exchange we had to make was a more material discount to make the value work. This is why we're moving away from there. We're already getting better matches because we're shifting the composition of our pros, and when we migrate the Ads pros, all our pros will have that functionality. The other thing we're getting there is we've had a little bit of inconsistency in making sure we have all the skills aligned because of the nature of those categories versus the specific tasks on the two platforms. We are going to execute very consistently now and thus upgrade the overall quality we have and the confidence our customers have in that. We are going to be able to merchandise it well. All of these things will be base hits to get us around the bases and ultimately, I guess I can't say beat the Yankees. There's a high concentration of analyst investors in New York. We'll say win the game. Finally, we're rolling out, and sorry to keep going, but we are rolling out again. Online enroll. This version of online enroll is modeled on our successful European product which since the beginning of 2020 has brought in nearly 650,000 pros in a market that's probably a little less than half the size of the United States. We're optimistic on volume. In terms of the customer experience, what this does is these pros will come in as a view one by one and express interest, interact, interface. When pros view them one by one, you have sort of a crowdsourcing effect of better matching. Pros don't express interest in the ones they don't think match. They're decent judges. As our algorithm is in Europe, we have a more than 50% higher success rate. We think that this one by one effect helps there. That product is entirely one by one. We're bringing it to the U.S. so again, we're doing a range of things across the homeowner path. We're doing a range of things across the pro selection experience and quality experience. These will progressively impact the business. I think 80%+ of this will happen over the next year with a higher concentration of that over the next six months. We will continue to put 1% and 2% and 3% wins on the board over the next six to 12 months, build LTV, ideally build repeat rate, build our brand promise, and then support what Rusty is going to talk about in terms of future growth. Rusty, do you want to add anything there? Yeah sure. To give a bit of color. On how that all comes together in our financials and our metric outlook on the homeowner side, I'll reiterate how Jeff has characterized this. It's like a pretty simple story. It's flat plus growth equals growth. With our network channels, you expect it to be stable around the current levels going into next year. Just because we're lapping the rollout of homeowner choice in Q1 of this year, it will be mechanically down year over year next year, but then flat year over year for the balance of next year. The growth part of the formula comes from the proprietary channels, as Jeff mentioned, where we're making strides and developing additional opportunities there to fuel some future growth. On the pro side of the equation, our strategy is designed to deliver growth in revenue per lead and pro capacity next year. One reason that happens is the shifting the mix of the pro base that Jeff mentioned. We've also been targeting being more targeted in our sales, with more activity focused against the. Heart of our prospect pool. Better product offering and that's resulting in higher value sales. Jeff mentioned this in the letter, but I'll repeat it here because it's a powerful point. We acquired 39% fewer pros in Q2 versus last year, but the aggregate pro lifetime value sold in Q2 is down just 4% year over year. Each pro we're acquiring is much higher value. These two trends are creating a tailwind that will continue to benefit us into next year. We also have an opportunity to do a better job selling into larger pros, say pros in the 10- 20 employee range. Larger pros are already a meaningful part of our business now, and our product tends to work pretty well for larger pros. Compared to their portion of the overall industry, we're under indexed and think we can optimize our sales motion and grow the part of our sales force targeting this segment. Finally, online pro acquisition Jeff just talked about, on top of that, the launch of that, we have an online acquisition test we've been running in Boston. It provides kind of additional validation that there's a sizable opportunity to tap into incremental capacity, although that will take some time to optimize to achieve the potential there. Together we expect these initiatives will help us return to growth in pro acquisition next year and in overall pro spending capacity, and then the growth in the number of active pros occurring in the following year. Finally, when you combine where we're heading on both sides of the marketplace, with modest growth in SR volumes and revenue. Per lead, we expect to get to. Solid revenue growth, likely mid single digits percentage versus 2025 with healthy pro network dynamics on top of that. In terms of margins in 2026, we expect roughly flat on the contribution margins as a percent of revenue. As I mentioned on the last call, we're going to be modestly higher on the marketing driven by the paid channel expansion. We're expecting and hoping to be able to increase our TV spend next year. That will likely be offset partly by some modestly lower pro acquisition expense as a percent of revenue. On the fixed cost side, we expect to be able to remain relatively flat. We'll deliver modest leverage and result in adjusted EBITDA growth overall. That means similar to modestly higher EBITDA margins on a higher revenue base next year. Thank you so much. Thank you. Our next question comes from Cory Carpenter from JPMorgan. Please go ahead with your question. Yeah, thanks. I had two. Jeff, in the shareholder letter you talked about the evolution of organic versus paid traffic. Just hoping you could expand a bit on that dynamic and the implications that has for you. You've talked about this a few times, just want to dive a little deeper on the upcoming transition of ad service pros to the new platform. What can you tell us in terms of what needs to happen behind the scenes for that to effectively be executed and what some of the potential risks there are? Thank you. Great. Thanks, Cory. I think first in the letter we were specifically focused on free search organic traffic. I'll touch base on the range. I think free search organic traffic, which people often refer to as Google SEO, unbranded Google SEO, is probably a declining asset for most businesses you talk to, Internet marketplaces, content providers, et cetera. Google has not been growing its free rent over time. Five or six years ago our unbranded free search traffic was a little over 20% of our total volume. Now it's a little less than 10%. That's not a heroic accomplishment. Many people would look at it as the opposite, but it's sort of the trend of the industry. We've been able to hold share over the last year and a half or so in terms of where we are in share of voice, and we have been constantly working to get our technical setup right and make sure our content is fresh and applicable. We're going to continue to do that. That being said, we're not projecting growth in what Rusty just talked about in the free organic. All of our volume and all of our margin assumes continued declines. The good news is that when you're below 10%, the decline is not major. We're not banking on any of this here. We've done everything we've done in the second quarter with proprietary traffic without any help from Google SEO. We're going to do what we do going forward and our projections going forward are what they are without any help and, if anything, a little bit of hurt from the way Google runs its SEO. We look at our ability to grow as we are very effective online marketers and we have the leading brand of the industry in a changing ecosystem. We've been extremely effective both on Google and on other platforms with getting more efficient and driving volume. Again, our SEO is down and our proprietary traffic is up. I think that's all that you need in evidence there. Rusty's reference. We're going to continue to add to our TV spend next year and we have a set of other initiatives to drive there and we think we can execute. We're also positioning ourselves with our work on internally use the LLM and to set ourselves up to when the LLMs are ready to integrate there and, you know, serve our pros there and be able to keep growing the business and helping customers through new interfaces that emerge as the landscape changes. We have a pretty clear plan, we're executing on it and we think we can keep going. The new platform or the migration of pro platforms in the U.S. is also very much an execution story. We've done five successful migrations internationally of half to the same, half the size to maybe 50% larger than the number of pros we're migrating, and we've done them all pretty successfully. It's been over the period where we've taken the international business from, you know, single digits negative profit to $20 million-ish in profit. We've been able to kind of move the ball pretty well there. You go through a few steps. One is you have to do a feature gap analysis. What are the customers using, how are they monetizing that? We have to make sure it works on the new platform and how do we transition that. Secondly, you have to do technical work. You have to build what I will, in layman's terms, call the pipes to migrate the data, which means you need to make sure all of the data points you have on the platform have a place to go and that the customers will be able to operate on the new platform with that data. You have to build the pipes, I think. Three, you have to do an effective go-to-market plan. You have to communicate with the pros, explain the changes, explain what's happening. Four, you have to do the actual data migration, and then five, you have to do post-migration customer care and activation. In Europe we've had actually higher yield on our migrations than normal month-to-month retention because you get reactivation and you get the extra care. We've been over 100% free-to-post active pros a couple of times. We think we have a playbook. Past performance does not always guarantee future results. We are very focused on this, and we've had a team of people working on this for months. We think we're ready to go. The great insurance on this is that pros are coming to us to buy leads, to win, work to run their business. If you change the UX or you change the app, some of them are probably like me, when my bank moves a button in my bank app, I'm shouting in my office, you know, by myself. At the end of the day they want to buy the leads, they want to build, grow their business, fill in the gaps, and we sell leads. The interface isn't actually that different. We'll get some complaints, we'll move on. If we were able to replicate in the U.S. what we've done in Europe five times, then we'll be in good shape and we'll have everybody in a better product for them and for the homeowner. We're excited. Only selling on that platform or that product has worked pretty well, and we're selling into the same base of people who we've been selling into for a few decades at this point. Great. Thanks for all the time. I think I got both questions. Yep, you did. Thank you. Thank you. Our next question comes from Steven Ju from UBS. Please go ahead with your question. Hi, this is Vanessa on for Steven. I just wanted to lean into the marketing spend. What does the payback horizon look like on that? How should we measure ROI in terms of your marketing and sales channels? Just one more, it's what are you doing to build branded traffic? Hey Vanessa, I'll take that first one. Our approach to ROI on both sides of the marketplace is philosophically to acquire volumes out to incremental break even on a lifetime value basis with fully loaded costs. When we say incremental break even, that means that we're targeting for the last dollar we spend to break even, which means that our goal is to maximize the aggregate profit as opposed to targeting any specific margin percentage. For SR acquisition, we're doing this on a one year basis. Much of the payback does come in that first session, but there's still significant value from repeat use and engagement through our CRM campaigns in the first year. In our digital marketing, we apply data science models to establish our bids and that estimates whether or not it would be profitable to increase bids to, say, spend an extra dollar to acquire more volume. In some channels, incrementality is easier to determine. Google SEM is probably the best example of this. In other channels, we triangulate between multiple attribution approaches and then test up and down to determine our optimal levels of spend. On our pro acquisition, we want to scale our dials, meaning the time of our sales force until our lowest value prospects convert at a value equal to the cost of the last set of dials. The way to think of this is that if we add to the size of the sales force, that results in making additional dials against lower converting portions of our prospect database until you reach the point of diminishing returns. The cost of those dials exceeds the expected lifetime value of the. Pros acquired through those dials. Jeff actually laid out our approach to pro lifetime value in the shareholder letter. Essentially, we use our historical revenue retention rates to project the expected revenue we will collect over a 36 month period. We apply our current margins and that gives you lifetime value. We will size our sales force such that our lowest performing segments are still breaking even and covering the fully. Loaded cost of those sales. This approach has increased our LTV to CAC to 2.8x this past quarter, which is truly meaningful improvement over our acquisition efficiency in recent history. Philosophically, as I mentioned, our goal is actually not to target any particular LTV to CAC ratio. The objective is to maximize the total aggregate profit, which Jeff laid out is represented by LTV minus the acquisition costs. We're targeting that profit. For instance, as we look for new pockets of volume, that actually might mean that we're able to acquire incremental pros at an LTV to CAC ratio that is kind of just above 1.0. While that would average down our ratio, we would do that since it would grow our aggregate profit. The similar concept applies to marketing as well. Jeff, you want to take the branded traffic? Yeah, so I alluded to the branded traffic question a little bit earlier, but I think there's three elements. I think the most important element is a product and our experience have to deliver on our brand promise no matter what we say or do or whatever kind of cool, creative we put out, our version of Where's the Beef or whatever. We have to deliver when the homeowner gets to us and the pro gets to us. I think first of all, all of the work we're doing to raise our success rate and become a place that people will download an app for is really critical to our brand growth. At the end of the day, serving our customers leads to retention and repeat, which is, I think, the best form of growth we can get. I think secondly, we have historically been a pretty significant investor in TV. We backed off that a little bit this year and took TV out of the first quarter because we wanted to get through the Homeowner Choice transition and observe the landscape and really focus on our online acquisition and how the business model was going to behave. We've started the TV up again at a little lower rate than last year, but we are planning to probably, in aggregate, maybe even double our TV, something directionally up 50%- 100% from this year. Obviously, TV is a great way to reach homeowners and pros and deliver our USP and our brand promise and get them to come try us or use us again. I think thirdly, there's a whole other range of activities. We have launched this year a pretty strong and comprehensive effort against paid social. We have a significant internal effort. We've published multiple videos where we've gone and helped homeowners with their jobs. We're calling them house calls. We actually had one reach more than 25 million views. It was a custom doghouse where we supplied one of the pros. It was a collaboration with an influencer. 25 million views. I told the marketing team, I said I'll take one or two of those a month, please, going forward. We have a pretty significant effort there. We've engaged with an outside agency with a reputation for doing this well to augment our efforts. That's just getting up to speed. I mentioned the one collaboration with an influencer was really successful. We're also working with influencers, so we're not banking any of this in our forward numbers. We're looking at TV as delivering at kind of recent return rates, sort of analytically derived, and we think there's opportunity. It is safe to say by focusing on the product, by restarting our TV and by getting our branded message out in every other channel we can find, we are working on enhancing the leading brand in the business. I think our unaided awareness is still far and away the best in our aided awareness as well. It is a really key asset we have that we want to continue investing in. Our next question comes from Brad Erickson from RBC. Please go ahead with your question. Good morning, this is Audrey on for Brad. Thanks for taking the questions. I have two quick ones. The first one is how do you think about pro capacity and pros filling their book of business? If you can just run us through that, does it get to a point in time where this is a blocker for future incremental growth? Secondly, can you provide any insights into service provider supply constraints within the home services industry in general? Are these constraints contributing to the trends we've observed in the numbers of the past few quarters? Are you seeing any shifts or improvements in this area? Thank you. I'm going to try and take those two together. I think they're sort of related to overall pro capacity. Rusty touched earlier on near term what we're seeing, which is our nominal pro growth we think should inflect by 2027. However, because we're growing our capacity per pro by discipline on our prospect selection and dials and by shift of resources into higher capacity segments of the pro network, we're almost pari passu on lifetime value created before cost. Between those two areas, we think we're in pretty good shape to grow pro capacity for at least the next couple of years. Let me take on kind of industry trends and whether there's caps next. I want to get to this sort of a question that's bounced around a bit about how pro capacity works. In terms of the industry, we're a small portion of the industry. We think we have 5%, maybe 5% of pros in America on our platform. We think there's ample room to grow. As Rusty pointed out, we actually think we're under-indexed on the higher capacity pros, so we're probably under-indexed on overall capacity. We're probably below 5% capacity. As a very small portion of the market, we have a lot of opportunity there. We have great name recognition. Again, we're delivering good value creation, so we think we have some runway there. The trends in the industry have been a couple people have talked a lot about how kids aren't going into the trades these days because they all want to be machine learning people and CFOs like Rusty. Whether that's true or not, I think increasingly you also are reading about millennials and other people looking at the trades. The trades are paying better and better. I have two sons, one of them is going into construction. One story does not make a trend, but you see it more and more. Whether or not that's a major factor, we don't know, but there is more money to be made. Housing is a constraint. New housing is a constraint. People want to repair their old houses. We're not sure that this is a long-term secular issue in that business. It's been a pressure. We'll see. I think the other trend people pointed to is consolidation. You read a lot about private equity or you hear a lot anecdotally about private equity getting involved in some of these businesses, consolidating and building scale. When Rusty talks about looking harder at larger pros and the opportunity there, we're looking at the same thing. Again, for us, we're a very small fraction of the industry. If you look at online travel a few years ago, I haven't refreshed it, but a few years ago, half of all online travel was booked online, 80% through the OTAs, and then 80% of the OTA traffic was booking in Expedia. That means the two market leaders had 32%. We're below 2%. We're one of the market leaders for sure. We think we have some room that's both on the pro side and on the homeowner side. At the end of the day, people are going to need walls and roofs and electricity and plumbing, and people are going to serve this. We do not think that there is some massive secular trend working against us. If anything, pros are not going to get disintermediated the way some other jobs like CFO are getting projected to be. Rusty's laughing at me. Are projected to be disintermediated in terms of, there's a question we've commonly gotten that you might be making, which is an individual pro's lifetime capacity. How does that work? Do they win work and then get off the platform when they win a homeowner? Do they just keep that homeowner? There are a few elements to this. One is certain trades lend themselves to the tradesperson or the pro effectively taking a homeowner at lifetime value. My electrician is a HomeAdvisor guy who's been on since it was ServiceMagic. I hired him in 2018. He comes every time I call him. He's done probably north of $10,000 worth of work for me. I justify the value of a lot of his other leads, but I've not gone back to Angi for another electrician since 2018. That happens over time. Our value proposition should play. Sean knows that he gets somebody like me in every batch, and so we're a good value for him. He's been on for over 15 years. There is that phenomenon. The other phenomenon is, I'll just keep telling stories here, sometimes pros build their customer base and their word of mouth and they don't need us anymore. When I go to Europe, I talk to our pros there. One day, I finished, and one of the gentlemen who didn't speak very good English in Nascalite came up to me and grabbed me by the cheeks and planted a kiss on each cheek. Me being American, I was a little taken aback. For him, it was very normal. I was, of course, flattered. What he said to me was, listen, I've been with you for 15 years, since it was a different kind of business, and your product has gotten better every year. It's gotten so good that I've built an entire business and customer base, and I don't need you anymore. I feel very bad. I said, you just made me feel very good because we fulfilled our mission. We helped you build your business. You're happy, you like us. I hope you tell other pros and we've got a victory. That happens. The other side of it happens, which is when I moved into my most recent house in 2018, I had black mold in one of my ceilings. I had to hire a pro to mitigate that. He was from HomeAdvisor, came on, and I was quizzing him. At the time, it was HomeAdvisor, quizzing him. How do you feel about this? He's like, to be honest, it's made my life. I sometimes get frustrated when I don't get the win, but the wins come with a loss. I said, how's it made your life? He said, I started taking these jobs on the weekends. I realized I could have a business. I left my boss. I was able to hire one person, and then, because the HomeAdvisor leads, another person, and then another person. I was able to afford a new house where my sons could have separate rooms. Now I'm saving for their college educations. I didn't go to college. This is a big deal for me. I've hired four and five and six and seven people. There are pros who start out and keep scaling, and as long as they're winning with us, they're not going to leave us. Finally, there's the constant scale where we see our largest pros telling us constantly, we'll take more leads if you have them. Obviously, want them in a good enough quality, but we'll take more leads. On some level, there's unlimited capacity there. I think you have a range of use cases. I think all SMB businesses have this phenomenon where somebody like my optometrist in Manhattan who has a small office got on Zocdoc. I used to book him through Zocdoc. Now I can't. He's filled his book of business. He can't bring any more people into a small office. He's done and he's happy. This is a common SMB thing that'll happen. We have a lot of opportunity with larger pros. We still provide a great way for pros to scale and take more and more capacity and grow their business. While we think it is a real thing, we do not think it is a definitive limiter because we've effectively always been dealing with that phenomenon. Because we've skewed smaller, we probably have more opportunity to win there going forward. Hopefully I covered all the bases there on the various elements of pro capacity. You can let me know if you have a follow on or there's something you think I missed. No, that's great. Thank you so much. Thank you. Our next question comes from Ygal Arounian from Citi. Please go ahead with your question. Hi, good morning, guys. You've Max on for Ygal. Thanks for taking our questions. I guess just maybe on the macro, you know, we'd love you seeing, you know, in the macro trends and how that's impacting the better full year guidance. I think, you know, last quarter you included 3 points- 5 points of incremental headwinds. Just curious if that's still included. Then maybe secondly on capital allocation, you know, you guys were obviously very active in Q2 buying back stock. Just how do you think about maybe the pace of buybacks through the rest of the year and just your overall capital allocation strategy? Thanks. Let me take the beginning of that and then if Rusty has anything to add, he'll add. We saw a very significant impact in April impacting both homeowner traffic and wins for pro. We think we saw some disruption in our retention in April, May, as homeowners were hiring pros less on our platform. When we talked to our pros, especially our larger pros, they said, look, people's confidence in the economy is disrupted. You can read it in the paper or online, if you will. We think we're getting hired less. We're not overly worried about it. We think this will shift. As we exited June, we saw our wins per pro jumping and our hire rates jumping double digits. That's continued in July. On some level, that intent to hire has corrected itself. We don't have a totally comprehensive view of the consumer from where we sit. We still see some pressure in consumer traffic. Not dramatic. We're obviously very effective on the paid side, but we think we see in maybe our brand and our research, we see a little bit of pressure there, but not dramatic. At this point, the 300 basis points- 500 basis points is rolled into our run rates. We've come up a little from April, so maybe it's at the low end of that. Maybe it's 200 basis points or 300 basis points. We're not sure. I'm guesstimating. There's some pressure. We basically forecast off our run rates. We think we're excelling more on our paid execution than on the recovery, but there's obviously some recovery in there. We think we're on track on our full year numbers. We're actually outperforming. Again, it's more on the execution. We think that whatever the economic insecurity is, has improved, but there's still some embedded in the business. Rusty, I don't know if you'd add anything. Yeah, no, double down on just that. Our business performance we're happy with, but it's still just a cautious macro-economic environment. The only thing I'll add is the thing that we talked about last quarter is just reminding folks that our business has tended to have some modest countercyclical dynamics to it. One reason for that is that pros need us more when homeowners are hiring less. We tend to see a benefit in terms of retention, pro acquisition on both costs and volumes, and then pro engagement on the platform. The other reason is that two thirds of our business is in non-discretionary tasks that tend to be resilient through cycles, and that ratio has basically held this year. Did that answer your question? Do you have any follow-ons? Yeah. And then just maybe on capital allocation, just kind of thinking about buybacks through the rest of the year. On buybacks, obviously our board is going to do buybacks when it deems it a best and highest use of our capital at that time. We've done a bunch. The one thing I would say is we're not going to do this much every quarter for a variety of reasons. One of which is there's limitations on how many shares you can go out and buy back after doing a tax-free spin, you know, based on sort of historical IRS rulings and what's out there in the understanding and interpretation of the law and in our tax sharing agreement with our former parent. I wouldn't expect every quarter of this kind. I don't think it's unlikely that we'll buy in more shares over time, but we can't predict it. We'll monitor where it is and our board will make the decisions that it deems best. Obviously, the board thought it was a very good allocation of our capital in this last quarter and we made a significant move there and reduced our share base. Obviously, with the way we're looking at the business going forward, we're optimistic that that can be accretive. Okay, great. Thanks guys. Great. Thank you. Our next question comes from Dan Kurnos from The Benchmark Company. Please go ahead with your question. Yeah, thanks. Good morning. Obviously you've covered a lot of ground. Jeff, I just want to go back to your very comprehensive answer on sort of the market price, market approach, and SP capacity. If we get through double opt in and we go to a zip code based approach, which feels very similar to. What Zillow's done, is there any reason? To think why we can't get to a point where just a handful of top pros in each category dominate a zip code, and that frankly the total SP count in the market just doesn't matter as much relative to saying just improving the overall SP quality, and naturally improving the conversion through self-selection from both the consumer and the pro over time. I think your hypothesis may prove to be true. I think there are some differences with Zillow that suggest that there are alternate hypotheses that may also be true. A real estate agent's capacity probably works a little bit different than pro capacity depending on the category. In all our research, homeowners have always told us they want two or three pros to choose from, except with an immediate emergency or a pretty transparent repeat job. You are always going to have some rotation of pros. If you only have the large kind of bottomless pit type of pro appetite that we were talking about earlier with our really large pros, you might be able to serve zips and tasks with a few pros. What we've observed is that there is enough capacity for pro ship that we effectively need to measure that out over time and make sure that there are always multiple pros if we can. We're at two, two and a half per SR who we present. We always want to make sure there are multiple pros for the homeowners. That improves their hire rate, that improves their satisfaction, and improves their confidence because they can compare. I think there are dynamics in the pro segmentation that suggest to me that maybe it won't get to just three. I don't think you're wrong that we can cover at some point with a fixed set of pros all of the demand in these zip codes and tasks. It's just probably a longer drive than I can hit. I probably need a few, I probably need a few strikes at the ball before I can get onto that green and really, really answer that with high confidence. Yeah, that's fair. Jeff, very hypothetical question at this point. Since you're just going through the migration. On the growth in revenue per lead, is there how much of that is incremental category expansion versus just obviously improving conversion and sort of all of the other underlying metrics? Are there any other pieces that you haven't talked about that could help drive revenue per lead higher over time? If we drive the win rate up, we have opportunity to take more price per lead, and if we can deliver high confidence in the lifetime value lead above the job. I mean, our pros are basically judging their value by how much do I pay, what do I get? We can probably get more pricing there. I think there's some pricing opportunities, but that all has to do with value delivery. The pros buy into the value delivery. I think, secondly, if we could buy higher consideration jobs at cheaper prices, we would scale up there and that would shift our revenue per lead. The higher consideration jobs are probably more competitive out there, but we have found pools of them to access over the last few months with our online marketing. If we can shift average consideration up, that would shift revenue per lead. I think really the biggest driver for us is right now it's going to be shifting out of the old Ads model, which had a much higher discount than the 30% we're offering as an intro on our new subscription, more than double in some categories, and moving away from that and then giving those pros the leads they want at a lower discount and effectively delivering them the same value. We think that that's what's going to be the core driver over the next year or so of that consideration size and revenue per lead. Got it. Super helpful, Jeff. Thanks for all the color today. Appreciate it. Nice start to the year. Great. Thanks, Operator. I think we have time for one more question, if there is one. We do have an additional question. This comes from Matt Condon from Citizens. Please go ahead with your question. Great. Thank you so much for taking my questions. My first one is just on the. Proprietary service requests growing 7%. If you look at consumer marketing expenses at $13 million, can you just help me think about the efficiency of. Marketing spend specifically on the consumer side. The homeowner side of the marketplace? My second one is just how do you think about balancing the efficiency in pro acquisition, which is having enough supply on the network to drive. Just superior consumer experience? Thank you so much. Let me start. If Rusty has anything to add or he thinks I've missed anything, he'll jump in. On a simple ratio of proprietary growth versus marketing growth, I think the way you have to think about it is we've executed a mix shift. By executing the mix shift into paid proprietary, with the growth free Google SEO coming down a bit, you're paying more of the average per lead. However, Rusty explained our approach, which is incremental break even. As we look at our bidding, we're able to judge where the next incremental piece of spend would start losing money. We stop there and then our goal is as we get more efficient there is to move that break even point further out and create more profit under the curve, if you will, earlier in the curve. Not all platforms work the same way. Meta, for example, you're not as able to finely tune your incremental profitability, but we have ways to do it and we're constantly working on getting more efficient. I think you have a little bit of inefficiency built into the second quarter as we scaled up new channels, but again not material. They give a mix shift and I think that's the way that's working. I think we expect that to stabilize a little more going forward, but we will always sort of ebb and flow a little bit there. On the pro capacity, I think again Rusty hit that one. We do the same thing there where we again have a pretty high powered artificial intelligence machine learning team. They work on scoring all our prospects and bucketing them and we work on dialing till the last dials break even. Based on the likelihood as scored by our machine learning team that the job is going to convert and the anticipated LTV. On the average we've really been able to fine tune this. One of the net results has been an increased capacity per new pro. Our new subscription pros are 2x-3x as much capacity as our traditional leads pros. That's a combination of efforts there that have added up to that. We think we have the plan and we think we've been executing against it. We think you can see it on our numbers so far on the sales side and on the online enroll side. We're trying not to be too excited about that. If we're acquiring more than 10,000 pros a month in markets that collectively are half the GDP or less of the United States, we think we have an opportunity to add a few thousand a month there. Our European pros only buy 20% ish. Fewer leads per month than our legacy leads product pros. We think we have the opportunity to really expand capacity and have supply meet demand and grow the business. We think we've got a reasonable number of pieces of that thesis in evidence and can thus project what Rusty's talking about with 2026, which isn't overly aggressive with a fair amount of confidence. Yeah. The only thing that I'd add on the marketing side is that we're kind of talking about our marketing execution in isolation, but it's really a fully integrated commercial engine with our product and the pro side of the network. If you think about it, every day we have people working on optimizing our funnels, matching, bidding, conversion, and then there's the density and liquidity in the network. When we improve those things, it makes the monetization of every individual SR impacted. Right? We're able to move up that monetization through the product and optimizations in the product. When we do that, and we make each unit of volume more profitable, sometimes we're able to bid into that and get more volume, which might actually increase our marketing costs but increase our overall profit. Other times, we take that as profitability and we reduce our marketing costs. It can go either way on that. The goal is to grow overall profit through execution on marketing as well as optimizations in the product. Thank you so much. Thank you. I really thank everybody for all your time on a very busy earnings day, and look forward to talking to you all in the future. Ladies and gentlemen, that will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.