ANGI Q3 2026 earnings call transcript, November 4, 2026

Thanks for taking the questions and good morning. Mike, I appreciate the comments up front and how you're viewing the business and breakdown of the business. I'm curious, just as you've come into ANGI and developed your initial framework on strategy, how we should think about the priorities that were laid out over the past. few quarters from previous management. Are the core pillars largely intact or do you see any areas where you think you're going to make more meaningful changes?

Thanks, Sergio.

The core pillars are intact. From my time on the board, the time I've spent with Jeff and with the leadership team here since I joined, I believe we're very much on the right track. Taking advantage of the power of AI agents in our homeowner product and in our pro product can ensure many more people who need to get jobs done, get those jobs done, and our pros can recognize much more value in the marketplace. Making these better connections is what has compounding benefits to a marketplace in my experience. Secondly, the shift to large pros grows capacity and it brings you pros who often have a lot more resource to put against converting leads to happy satisfaction customers. Again, good for the marketplace and good for revenue. Finally, the work that the team has been doing and the great expertise we've built internally to plug into the LLMs and make sure that this trusted ANGI brand and the value we bring can open up this new channel for service requests through LLMs is right on the money. I would just add that I bring a high velocity operating system that insists on leadership being close to the action, making fast data-driven decisions. And the, you know, the rift that we were talking about today, while sad, I do believe for those who are staying with Angie now, sets this organization up to move with alacrity and to allow talented people to do their best work. Understood. And maybe just to follow up on the large pro strategy, can you just give us a little bit more detail? I'll go under the hood there on the traction you're seeing there and the opportunity.

that you see going forward? Yeah, so to reiterate from my script, with the SEO, unbranded SEO declines and the affiliate declines that the team has self-imposed, if you would, for the benefit of the marketplace, we needed less pro capacity to consume those service requests, which gave us the opportunity to both reduce the size of the small business sales team, but also to shift resources to larger pros. Shifting business, shifting those resources to larger pros does two things for us. One, these pros come with, you know, two orders of magnitude greater budget than the average small pro. And secondly, they often have these teams and sophisticated technology that they put to work to make sure an inbound lead turns into a job. We saw better than 20% growth in the large pro segment this quarter. It's our second consecutive 20% growth quarter. The team is scaling up with people who are skilled in enterprise sales. And I'm watching those new members of the team ramp in their productivity. So to me, it all looks, it looks very encouraging. Understood.

Thanks for the color, Mike.

Thanks so much.

Yeah.

Thank you, Eric.

I'll reiterate, we expect $40 to $50 million in annualized operating expense savings plus $10 million in reduced capital expenditures. I expect at least half of that to fall to the bottom line. And any reinvestment is going to be reinvestment in the strategic priorities I outlined. earlier. I'm looking forward to future earnings calls where I can give you more fidelity on the 2027 numbers as I get my arms all the way around the business. But for now, that's how to think about the positive financial impact of the restructuring of the company. Secondly, this is the second RIF this year. The first one impacted roughly 350 roles. This one roughly 300 roles. The way that I would say this one is different is it's very much focused on my operating principles of having leaders close to the action. The average manager should be able to manage between six and 12 people. At ANGI, the number of people managed by the average manager was three. With this change, we now put more responsibility into our managers. It also allows us to take down some support functions that were out of line with our investments in the company in the core work of building marketing and selling. And in my experience, and I've seen this work, when you put your leaders closer to the action, especially at a moment where you're bringing new technology into the organization, where you're bringing new features and capabilities in your products, it is so important and valuable to be close to the action that the restructuring that we've just done, while positive for

cash flow is most important for the velocity it can unlock in our organization.

So a couple for you and, you know, look, you've given us some great color already. I think there's some, you know, clearly some of the ad wind down is going to be impacting this. And I appreciate that you're going to refocus us on the KPIs that truly matter in your view going forward. Which I think has been a little jumbled in the past, but I will ask two kind of questions since we have what we have today. I think they're related on this. So you guys did address a little bit the pro churn. So it did increase pretty significantly year over year and quarter over quarter as you've shifted more towards larger and more tenured pros. And I guess we kind of know what's driving that, but I'm sort of curious if you want to give more color there and just where you think kind of the bottom is, how much more internal, decision you have to make around either reallocating resources or focusing more of those resources on large pro. And then as kind of a byproduct, you also have leads per service request have fallen, but you have seen that revenue per lead increase. And again, I think that's primarily large pro, but is that a trend that continues? You know, we've had some commentary in the past from prior management about, you know, shift towards small. Collar jobs, you know, the economy is kind of all over the place. So, if you could just help us think about how we should think about sort of those two trends, given your now strategic priorities, would be super helpful. Thank you.

So, regarding churn, so our approach churn has increased, and that's due to the launch of our online enroll product, which we started to ramp up in Q4 last year, and that's really scaled up. So, these online enroll pros, they sign up online with no upfront commitment, no upfront payment or commitment, and they have a much lower cost of acquisitions, so they do not talk to ourselves too. However, since they have lower commitments and low barriers to entry, these pros are less attached to ENGIE and have a higher churn rate as a result. So, today we signed up thousands of those pros, and these pros are less attached to ENGIE and have a higher churn rate as a result. This has driven our overall reported churn rate up. If you look at pros who have signed up through our traditional sales channel, so excluding online enroll, churn is actually meaningfully down year over year. Large pros, they have larger budgets. They tend to stay and increase their budgets over time with ENGIE when ENGIE works for them. So, in addition, we have like a smaller sales source, so that means we're acquiring less net new pros and have like more tenured and a more stable pro base with a higher retention rate. So, we're happy with the progress we're making to improve the pro experience and drive retention. However, the measure that really matters is pro capacity to serve service requests rather than the nominal numbers of pro.

So, active pro could decline while capacity and revenue rise. So, you should really like think about pro capacity. Yeah, and I want to double underline that. Pro capacity is the number for us. It's not hard to imagine having two small pros churn out and one large pro join and the capacity difference to be 100x to the positive. So, the number that really matters is capacity, not the number of pros or the churn of the total pro base. So, regarding your second question on LeadPair SRS, LeadPair Service Request. and revenue per lead. So, we wound down our legacy advertising product, and that generated a lot of very heavily discounted, or in many cases, free leads. And as a result, our number of leads per service request has fallen. But at the same time, revenue per lead has increased as we moved away from that product, and large pros became a higher part of the mix. So we're prioritizing the economics and success of the connection, and we're not maximizing the lead volume.

Got it.

Thank you both so much.

My first priority as we think about capital allocation is the 2028 notes. And I'm glad that we're going to be approaching that from a position of strength now with improved margins in the business. As for the rest of our capital allocation strategy, the core principle here is this is not our capital. It is our shareholders' capital. And it's our job to deploy it where it creates the most value for our shareholders. And all of the levers that you all know well will have our attention. And we will approach this in a way that maximizes shareholder value. And hopefully my track record gives you all confidence. I have a good record of career. creating value for my shareholders. Great. Thank you.

pro CRO work is the re-platforming that is foundational to it that Jeff talked about in our previous calls has continued on schedule and on budget. The early pro CRO work that we have in the field started with a small group of test pros. We now have about a thousand pros in that test. We launched the alpha migration of the re-platforming on the pro side on schedule earlier this week, all of which is giving us a lot of confidence in our ability to build these features. In the test group, and it's still early, we are seeing that the conversion rate to an appointment is in line with the conversion rates that you would expect when a human reaches out and talks to the homeowner. And that's very encouraging for what it can mean longer term for the value of our leads. It's early, but this is like, this is the kind of work I was excited to come here and dig into with the team. And what they've achieved so far gets me very excited. Yeah, regarding the Q3 EBITDA performance, so two items contributed to the other performance. First, we had lower fixed costs reflecting the workforce reduction we announced in the first quarter. And second, we had more disciplined marketing. As we said last quarter, we pulled back on T3 and other offline spans where the returns weren't there. And we shifted dollars to higher return channels like paid social. So as a result, consumer marketing was down from 41% of revenue in Q2 to 37% in Q3. And that came before the action we just announced. So the new savings are on top of that. On whether this carries forward, so we do think that

the structural pieces do carry forward over time. And we believe that this should be a structurally higher margin business prospectively. The lower fixed cost base is permanent and will continue to run marketing to a breakeven return on the last dollar. The majority of the new savings should reach the bottom line. However, add caution against extrapolating the Q3 margin quarter by quarter. Marketing is viable and will adjust it to returns. And in addition, regarding Q4, seasonality is softer and we do have a difficult revenue comparison against higher marketing Q4 last year. So as we said, on the Q2 call, Q4 usually comes down a bit. So in summary, quarterly results can still vary with seasonality, channel mix, and investment timing. Our goal is a system sustainably more efficient cost structure, not simply maximizing one quarter margin. But we do expect the cost action to drive higher adjusted EBITDA and stronger cash flow over time. Great.

Thanks for the color.

Hey, guys.

This is a big niche on for Brian.

Thanks for taking my question.

I guess you kind of touched on it, but just looking at the tech replatforming as a kind of key milestone to getting more agentic features to market, could you talk a little more about the status of the project and maybe what you kind of expect from this product in the future? And then second, real quick on accounting, I guess it seemed like the SBC depreciation and tax rate kind of had a notable step up. If you can share any color on that, it would be helpful. Thanks. Yeah. So, and I believe everyone has this background, but the tech rate re-platforming is bringing together the technology stack that drives our European marketplaces and the technology stack that drives our U.S. marketplace, I should say international and U.S. And there are advantages to each and bringing them together should give us the best of both and an easier platform to manage and maintain and a platform on which we can innovate and ship features a lot faster. The progress has been good here so far. I'm really proud of the work I've seen in my short time with the company from Chris Boone and the rest of the organization. Tech re-platforming are hard and these guys are on it and they have been hitting their milestones so far. The homeowner side, we've seen a large portion now of the homeowners and revenue moved to the new platform. On the pro side, the alpha product with a handful of pros launched earlier this week will continue to ramp these up incrementally. I want to test and make sure it has the

right impact on the marketplace performance before you scale it all the way. I've got a lot of confidence in this team and I'm optimistic that this will continue to click along on schedule. Regarding your accounting questions, so checking this into pieces on stock-based compensation, it was a higher in Q3, but that was due to a one-time acceleration of stock-based compensation expense related to the outcome. Doing CEO separation agreement terms, so it's really a one-time item. Depreciation expense that has been running a little higher for the last few quarters, this is linked to our one-platform work. We've been capitalizing more internally developed software costs, which we deprecate over two years, so that's showing up in a higher depreciation as we place the new platform. into service. We also have some assets that are being retired related to one platform and also resulted in some accelerated depreciations. And then last on tax, as a pre-tax, like income decrease and is closer to breakeven, the effective tax rate movements are magnified. In Q3 specifically, the rate is elevated because the Q3 pre-tax income, excluding discrete items, was significantly higher than Q1 and Q2. So a larger share of the year's tax expense was recognized in Q3, including a catch-up from applying the higher effective tax rate to pre-equaters. Year-to-date, the rate is negative and that's not meaningful because of the Q2 goodwill impairment, which is largely a non-deductible item.

So, the pre-tax loss generated little tax benefits.

Super helpful. Thank you.

Thank you so much.

Thank you, Matthew.

with LLMs and the shift of the composition of our revenue to accommodate more and more of a large pro capacity.

Matthew, your second question was about the AI strategy. So let me touch on it in three parts, each of which you've sort of heard through today's conversation. The first is when a homeowner comes to us, she has a problem that needs to be solved. And the problem is, you know, it's a problem. It's not always simple. It's not always as simple as, I need a plumber at zip code 1-0-0-0-1, right? People want to describe the problem. They want to describe when they're available, the kind of pro that they think they need. It could be something more complex, like a kitchen renovation or an addition to the home. All of these things are underserved by the historical sort of user experience that people run into on the web or on an app. And a gentle partner to that homeowner, however, can much better come to understand their needs and help to match them to the right solution in our marketplace. As I discussed on the pro side, having an agent there, especially for smaller pros who can step in and work with that homeowner and the pro to get you to that magical moment of an appointment, both I think will create a lot of incremental value for the participants in our marketplace and therefore for the marketplace. The second part, though, is bringing AI into the enterprise. And I have seen firsthand the power of this. When you move from being a company that doesn't really use AI, which is where most companies truly are today, to a company where people use AI to support their work, which is probably where Angie sits today, to becoming AI supercharged people who manage teams of agents and who not only like use those agents,

to help them do the work but who actually teach the agents how to do the work with them. We're already starting to see the results from that in our engineering organization, although it's still early. And we've got a roadmap for the ways that AI can take the busy work, the grunt work off the plates of our people and free them up to do the really high impact selling, marketing and building that's going to drive us, that's going to drive our growth in the future. What?

The last part I want to sort of leave us with is these LLMs in a lot of ways, to me, remind me of the early days when we were all figuring out Google. They would become a source, you know, Google was going to become a source of free traffic and was going to become a source of paid traffic. And the question was, how do you maximize your opportunity there? And one way was have a strong and trusted brand that people recognize, and Engie's very fortunate to have that. The second was to have your team very focused on it and to be building ahead of the growth in that platform. And that's what you see Angie doing today. And thirdly, there are technical capabilities. In the same way that we were building technical capabilities for SEO and SEM two and a half decades ago, Angie has built the technical capabilities in house to know how to partner with and embed with these LLMs to set us up for longer term success as the, you know, as the average user starts to become the power user in an agentic world. I think we're putting ourselves in the right position there. And we'll have another announcement later today that just shows the sort of the drumbeat of the work that we're doing here.