Glenn Schiffman - CFO and EVP Joseph Levin - CEO and Director Christopher Terrill - CEO, ANGI Homeservices Inc

Peter Stabler - Wells Fargo Securities Eric Sheridan - UBS Investment Bank John Blackledge - Cowen and Company Mario Lu - Barclays Daniel Salmon - BMO Capital Markets Jason Helfstein - Oppenheimer & Co. Brian Fitzgerald - Jefferies LLC Christopher Merwin - Goldman Sachs Group Justin Patterson - Raymond James Paul Bieber - Crédit Suisse AG Anthony DiClemente - Evercore ISI Cory Carpenter - JPMorgan Chase & Co. Samuel Kemp - Piper Jaffray Companies Christian Rice - Needham & Company

Good day, and welcome to the ANGI Homeservices Report Q4 2017 Results Conference Call. At this time, I would like to turn the conference over to Glenn Schiffman, CFO of IAC and ANGI Homeservices. Please go ahead, sir.

Thank you, Operator. Good morning, everyone. Glenn Schiffman here, and welcome to the ANGI Homeservices Fourth Quarter Earnings Call. Joining me today is Joey Levin, Chairman of ANGI Homeservices and CEO of IAC; and Chris Terrill, CEO of ANGI Homeservices. Joey and I will address any questions you may have on IAC's fourth quarter results. Similar to last quarter's supplemental to our quarterly earnings release -- releases, IAC has also published it's quarterly shareholder letter. We will not be reading the shareholder letter on this call. It is currently available on the Investor Relations section of our website. I'll shortly turn the call over to Joey to make a few introductory remarks and then we'll open it up to Q&A. Before we get to that, I'd like to remind you that during this call, we may discuss our outlook on future performance. These forward-looking statements typically may be preceded by words such as we expect, we believe, we anticipate or similar statements. These forward-looking views are subject to risks and uncertainties and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in both IAC's and ANGI Homeservices' fourth quarter press releases and our reports filed with the SEC. We'll also discuss certain non-GAAP measures, which as a reminder, include adjusted EBITDA, which we'll refer to today as EBITDA for simplicity during the call. I's also refer you to our press releases and again to the Investor Relations section of our websites for all comparable GAAP measures and full reconciliations for all material non-GAAP measures. Now let's jump right into it. Joey?

Welcome to the First Official ANGI Homeservices Quarterly Earnings Call. Of course, I'm sure we'll cover some IAC topics, too, and Glenn and I are happy to answer any questions you have on that. But let's go right to questions.

[Operator Instructions]. We'll take our first question from Peter Stabler with Wells Fargo Securities.

Two, if I could. On the Video segment for IAC, I'm wondering if you could talk a little bit about the investment curve there and maybe give a little bit more color, if you could, on the long-term EBITDA opportunity. And then switching gears, one for Joey on ANGI. Wonder if you could talk a little bit about the sales force strategy. It sounds like a lot of work on integration has been completed. Can you remind us kind of the structure there? And are these independent sales forces? How much overlap is there? And where are we in terms of completing the work in the integration?

Sure. Thanks, Peter. I'll let Chris do the ANGI question. On Video, just starting with the 2018 plans, I think there's a few things in there. Clearly, the biggest investment, biggest loss is Vimeo. But daily burn is in there for Q1, so that -- or, I mean, is in there for the year, but is more heavily -- losses are more heavily weighted in Q1 because that's a seasonal business, and so you do all the market in Q1 when people are starting their new fitness plans. The biggest area where we're investing in video generally and Vimeo specifically is really in sales and marketing. Obviously, we continue to invest in product. We continue to add technology and engineering resources. But the biggest growth is in sales and marketing. And we've got over a 4-year life on that, the subscribers in that business, which we've talked about a few times. That continues to hold or improve. And ARPU is up -- sorry, average revenue per user is also clearly rising right now, and that's as a result of launching new products like Live, which have a much higher price point. And we are -- our subscription products, our pro products, our business products, those are starting to work. Those are starting to get engagement from enterprises. And so we have sales people selling those products. We're very much leading into marketing and sales to bring in more customers with those metrics sitting behind them. And we can spend money very profitably in marketing. Part of that is going to be international marketing. We've got 50% of our paying subs at Vimeo are outside the U.S., but a greater portion of that, of our basic users, are -- probably more like 2/3, are outside the U.S. And we've done very little marketing internationally. We know the math should work, so we're going to really step on that growth. And the same will be true of our sales effort there in terms of starting to look at international customers. And it's a SaaS business, so this revenue builds. And The more customers we add and the more we can drive ARPU, the more we can drive retention, the more incremental services we add where we can sell to those existing customers, it makes sense for us to keep leaning in and adding to this customer base while the math works very strongly in our favor. So that sort of sets up, I guess, the answer to your second question, which is what is the long-term EBITDA opportunity? I think that this business -- I'm really talking about Vimeo specifically now. I think Vimeo can have very healthy margins in the future. I think it is not a near-term focus and this business does have some cost of goods sold, some actual gross margin expense because we have bandwidth and storage cost along with each customer with their videos. But after those costs, incremental customers are very high margin. The rest of that drops down to bottom line. And so I think we can have healthy margins in this business. I mean, I think we can have healthy margins in this business tomorrow if we stopped investing the way we're investing in it right now. So the profit is there in this business if we want it or when we want it. But we're going to keep pushed growth and trying to accelerate growth.

You saw in the letter, we talked about 2018 revenue of -- in the Vimeo business in excess of $100 million. In previous letters, we talked about gross margins in and around 60% and growing from there. So maybe that helps you dimensionalize it a little bit.

Chris, you want to talk about the ANGI side?

Sure. So Peter, your question on the sales force, I want to make sure I get it right. But just in general, we have right-sized the Angie's List sales force to be in a much better place to reflect how we've traditionally managed the sales force on the HomeAdvisor side in terms of the right number of sales folks doing the right jobs. We've also eliminated areas like e-commerce and replaced that with a much simpler system. And we've taken sales that we used to go against type that effort and got rid of those. I think we're in very good place with the sales force in terms of the Angie's List business. The same time, we transitioned 250 sales folks over to HomeAdvisor, which was important as a part of our broader surge to catch up to demand. We've invested heavily. We're still somewhat working through that process. As you can imagine, when you bring these folks over, they are not sort of top-tenured from the productivity perspective, so they're getting up to speed. But we believe that as they get up to speed, that will flow through to the rest of the year. So I think we're in a good place with the sales force. We've got everything, I think, right-sized. And we're continuing to add as we can. Training these folks and getting them up to speed is no easy stock task, but I think we're in very good position for the rest of the year.

You saw some of the early results of that sales force acceleration in some of the metrics we shared, SP grew 26% year-over-year, again, slightly above last quarter, and our net adds were in and around 9,000, our highest net adds in about 4 quarters. So again, that will take some time, as Chris said, as these sales professionals get tenured, when we get the productivity that we typically enjoy. But we're already starting to see the baby steps in that regard.

And our next question comes from Eric Sheridan with UBS.

Maybe two, if I can. Probably more for Joey than anything. One, on capital allocation, how should we broadly be thinking now after a couple of years of repositioning assets in the company, you've done the ANGI HomeAdvisor deal, you've IPO-ed Match. Sort of how should we think about where cash can go going forward in terms of driving some shareholder returns? Either inorganically into M&A or shareholder returns? Or how are you thinking about building the businesses that you already have in terms of incremental investments? And then maybe second, I would love to just get a little bit of color of what drove the inclusion of -- in the shareholder letter around sort of framing the opportunity that the platform companies gave you over the years and sort of the landscape of the platform companies versus the broader competitive dynamic in the Internet going forward.

Sure. On capital allocation, I think it's the same as we've always done, which is everything that you listed, Eric, are things that we have considered and continue to consider, meaning M&A is very much something that we spend real time and resources on. I said and continue to believe that we're likely to focus on smaller things rather than larger things, but certainly don't preclude the possibility that we could do something larger. Of course, on all that, we're going to be disciplined on price as we've always been. Dividends, share repurchases, things like that, also always something that we think about. In the last 2 years, I think we bought back or avoided dilution in terms of buying back the Tinder shares, close to $1 billion of stock. That is something that is always in the forefront of our mind. So the whole gamut is things we'll consider, and investing in our existing businesses. I mean, just going back to Peter's question, we're putting more money into Vimeo because we very clearly get a return on that. We'll look at that and we continue to look at that in all of our businesses, just investing directly through the P&L to get that return. On the question about the platforms, I think it was really 2 things motivated that. One is, I want to describe kind of some of IAC's competitive advantages, and I think we've built up real expertise in these areas and I think we've proven that, that real expertise is repeatable and valuable, and it is necessary in the Internet today. And the second thing was that I do think that we all, just people in this country, just companies competing here, should be focused on concentrating so much power in these platforms and how we can address that and make sure that they continue to operate for good and for the benefit of everybody. And it's just very rare to see so much power concentrated in so few hands, and that's something that we should all think about how to address.

Yes. I think it also ties to the back half of the letter as well, because as we think about the initiatives in each of our businesses and building the moats in each of our businesses, that's a very important component of it as well. And you see what we've been our businesses, the investments, the brands that we've created, it is to differentiate, enhance, accelerate and protect these business in the context of this ecosystem.

Our next question comes from John Blackledge with Cowen.

Joey, on the ANGI $270 million EBITDA guide, could you just provide some more color on your commentary around being on target? But kind of at the same time, you seemed to indicate you're not beholden to that guide if there was an investment opportunity or something came up this year. And then relatedly, kind of just wondering how the ANGI integration is going. And any color on the progress around synergies that you guys have called out prior?

Sure. Thanks, John. Maybe Chris and I will double-team this one. The comment, look, we are on pace for the $270 million. We're deep in the thick of it right now. I think that there's a lot to get right between now and the end of the year, but we feel good about our ability to do that. And I think the early signs that we have suggest that we're on pace for that. That's both in the synergy, the execution, all of that feels good. And we can kind enumerate where we are in each of the individual sort of buckets we've laid out previously. But I think it's important that everyone understand that our highest priority or -- sorry, rather $270 million is not our only priority. It may not be even our highest priority. It is our target. We are on pace for it, but winning the market long term is our highest priority, and that's always true. When we talk about guidance in any of our businesses, that's always true. We've put that as a note whenever we say forward-looking numbers, that we're looking to invest for the long term and we're looking to in the markets in which we compete. And that's the same way that we'll approach this over the course of the year. But we're on pace for the $270 million right now.

Sure. I'll talk to synergies. I want to first say, just, if you think about the size of these 2 companies, the complexity, the fact that we've been so much so quickly, the teams have done an amazing job. It's no easy task. And I'm just tremendously impressed with how well everyone is working, given the complexities of what we're trying to do. With that being said, cost savings, we're ahead and feeling good about those cost savings. They're relatively locked in, and I think we've communicated that in the past, and that hasn't changed. Traffic synergies are progressing. I'd say we're in line there. We just launched the integration of the matching path onto the Angie's List homepage recently. We are figuring out how to continue to optimize. We see tremendous opportunity in terms of continued optimization, tweaking, figuring this thing out. But Joey said, we're in the thick of it right in. We went from sort of the theoretical to now, we're actually executing. And every day, we learn something new and we're figuring things out. And I think we'll continue through the rest of the year. In terms of the sort of combined sales force, I think we've said that, that is a much further thing out in the future. But like everything we do, we're already starting to test and figure it out at a very small scale. We'll work through that, but it's going to take a long time to play out. But in general, I think we're feeling good about sort of what we communicated and where we are relative to executing against that.

Yes. And translating that into numbers like we did on the last call, I don't want to reiterate a lot of what I said on the last call. Remember, on the cost side, our $50 million to $75 million range is net of revenue foregone. We've taken out expenses well in excess of that number, but we've also factored in the revenue degradation. So we continue to feel great about that $50 million for 2018. And then the opportunity to hit the $70 million, the high end of the range, $75 million in 2019. Again, as we arrest of the revenue degradation in the Angie's List business, and we have, as Chris has talked about, I think, on the last call, we have designs on how to do that. That's increasing origination and that's stemming attrition and that's enhancing retention. And those are coming in throughout the year. Given the nature of this revenue stream, it takes a while to see that pull through. Again, these are more subscription-like revenue flows. On the traffic synergies, Chris said it very well, the Angie's List homepage was fully rolled out in January. And that gets tweaked, that gets optimized, and the synergies there from will accelerate throughout the year, and you see that also in our guide. So again, we feel great about the $50 million on the low end, and like we said last quarter, the $100 million on the high end is going into 2019. And we should have some real momentum leaving the year into '19 as we continue to optimize and tweak.

Our next question comes from Ross Sandler with Barclays.

This is Mario Lu on for Ross. I have a couple of questions. One, how does the new tax laws impact the P&L in 2018 and going forward? And two, are there any corporate structure incentives, like NOLs or the balance sheet, that make it better to keep Match, ANGI Homeservices and IAC core all under one roof instead of the tax-free spin-off idea?

Yes. Look, tax reform is going to be positive for us on a cash and a GAAP basis, including giving us the opportunity to repatriate about $445 million, and that will be tax free as a result of our existing NOLs. Effectively, we burn through some of these NOLs, shielding that repatriation tax. But given the reduction of tax rates to 21%, our NOLs last a little bit longer. Just to give you some details on it to forestall other questions, that $445 million, we'll keep some of that cash overseas to run our business. And then we will have, as you saw in our press release, a book transition tax hit at IAC of about $63 million. Again, that was in the fourth quarter numbers, that won't be in 2018. And you saw our Match yesterday at $24 million of a book transition tax. Again, we won't pay cash taxes that, given our NOL. We'll have a -- we had, as you saw in our press release, a onetime deferred tax write-off at the IAC level at about $1 million; at the Match level, about $69 million; and at ANGI, it's at $33 million. ANGI's, by the way, doesn't have any foreign cash, so there's no book transition tax there. Fortunately, with our NOLs, we're not a cash -- a full cash U.S. taxpayer at the IAC level till 2021. We'll pay some modest taxes in 2020. At Match, we're not a full cash taxpayer until 2020, we'll pay some modest cash taxes in '19. And then ANGI's, our NOLs without restriction, we'll probably fully utilize them in 2018. And then we have NOLs with restrictions from the ANGI HomeAdvisor merger that play out over the next couple of years, and we're not of full cash taxpayer till 2022. In terms of 2018 on a pro forma basis, our worldwide GAAP tax rate, again, this is for book and for modeling purposes. For IAC, it'll probably be mid- to high 20s. For Match, it'll be mid- to high 20s. And all this is pre the impact of SBC and 2016-09, the accounting for SBC. That goes through the income statement -- income tax provision. And then at ANGI's, probably in the high 20s in terms of our GAAP tax rate. I think it's important as you think about our tax position, the operating leverage and the free cash flow profile of our businesses, all 3 of our financing entities, or operating entities, if you will, IAC ex, Match and ANGI's will convert greater than 70% of EBITDA to free cash flow this year. So quite positive, indeed. In terms of anything around the tax position or inner workings of our tax agreements that would otherwise prevent any corporate action, the answer is no. The way these things work and our tax-sharing agreement with our subsidiaries work, to the extent they can't utilize an NOL and it's otherwise hung up on their balance sheet as a receivable from the U.S. government -- or yes, a receivable from the U.S. government, we can use that. And then when they have the opportunity to use that NOL, obviously, they can. So sure, there is efficiencies in the system in terms of sharing tax attributes, but that, in and of itself, won't drive any thoughts or discussion around strategic actions.

Mario, would you like us to go a little longer on taxes, or does that answer?

That was great.

We'll take our next question from Dan Salmon with BMO Capital Markets.

Chris, I asked this of your -- of Mandy at your corporate cousin yesterday. But similar to you, could you just, at a high level, walk through your current view on the competitive environment for ANGI Homeservices? Joey's comments in the letter, notwithstanding, about the big platforms that do have some sort of direct competition with you. We also have a group of start-ups in the area as well, more VC-backed players. And we also see them partnering or, at times, being acquired by some brick-and-mortar players. So I would love to just hear that view from you at the highest level.

Sure. So I think to your point, setting aside sort of the big, big players that everybody is sort of simultaneously working with and worrying about, I don't think we've seen the competitive landscape sort of radically change. The people who would have any kind of scale are still out there doing their thing. In terms of what we focus on day in and day out, it's still the opportunity to move the 90% of folks who are offline to online. And to try to go out there and do that, we're spending a lot on television and we're sort of going after them in terms of helping them understand why we're a better alternative to word-of-mouth. So I haven't seen anything in terms of start-ups. We haven't seen any start-ups that have got any sort of material traction. This is a very, very, very difficult space to start a business. It takes a tremendous amount of capital. It takes years and years and years to build up liquidity. And we've seen very few, if any, start-ups ever sort of get out of starting gate and get much further. That being said, we look at what everybody does, big, small or otherwise, and see if they're doing something interesting or unique. But I think at the end of the day, sort of we're setting the course in terms of our on demand product, how we're thinking about removing friction from the space, how we're leveraging our scale and our matching algorithms. That's what we're worried about every single day, and how do we get more people who are turning to friends and family to turn to us. .

The only thing I'd add to that, Dan, and I thought Mandy did a really nice job answering the question as well yesterday, and I think it's true of both Match and of ANGI, is just emphasizing the importance of liquidity in both of those markets, meaning there's lots of products that come out that have a particular product feature or a particular demographic appeal or a particular something. But in order to break out to the scale that we have and the size that we have, is you need to actually fulfill on the promise. And to fulfill on the promise of what the product delivers, liquidity is, more than anything else, going to be the driving factor in doing that. That's true in dating, that's true in matching consumers with home service professionals. And that's what we've sought to build in all these places. And that's what I think is the hardest to replicate, really, by anybody.

Large or small.

Large or small, I totally agree. So that -- we can't under emphasize the importance of that, because that liquidity is what really allows us to innovate in product. We can deliver incredible new features to our users by virtue of having the liquidity to actually fulfill.

Our next question comes from Jason Helfstein with Oppenheimer.

I'll ask two, one to Joe and then a follow-up to Glenn. So Joey, you clearly spent a good amount of the shareholder letter talking about the discount to the sum of the parts and kind of arguing why you don't deserve it. I mean, from our perspective, it seems pretty simple the way you get the discount in Arrow is you tell the market we're going to spin-off, first Match, and then initially ANGI when it's appropriate. And that discount will go away. And specifically to Match, they're on a trajectory now to basically have inefficient leverage by 2019, call it 1x EBITDA, would be inefficient. That's a business that should be levered probably closer to 3x, and this is an environment where you want to lock in low interest rates because they're only going higher. So how do you balance kind of the desire at the IAC level versus what's best at the Match level and then kind of achieve your overall agenda? So that's question one. And then, Glenn, just, you did go through kind of that $50 million to $100 million and then the $75 million. And what I thought I heard you say was -- is it fair to say that $50 million of the $50 million to $150 million on the funnel, that's kind of mentally already in your guidance for 2018, but not the $100 million? And then you're thinking of the $75 million more for next year, when you have the full sales force integration?

Want me to go first? Yes. In our guidance for '18 is the $100 million, which is the low end of the $100 million to $250 million that we articulated when we announced the deal. And then on the excess over the $100 million or the incremental $150 million, that will roll in over time. I imagine the bucket 3 synergies may not even be -- the bucket 3 synergies is the sales force optimization. That may not even be '19. That could be into '20. And Chris did a -- gave a great answer last call on what we're doing around that, how hard it is, but how much potential upside there is. So we'll be testing some things this year. We'll be learning this year. You may see a little bit of that $75 million. Remember, that bucket was 0 to $75 million. You may see some of that $75 million in '19, and that could flow into '20.

On the discount, Jason, and your questions. Look, we -- I'll give the answer that we always give, which is we think about spins and we think about capital structure and we think about what the right setup is for each of our companies all the time. And we'll continue to do that. I think as it relates to, for example, optimizing Match's balance sheet, look, the story for spin for Match a few quarters ago was there wasn't enough float, and that now, there is a lot more float. And the reason that there's a lot more float at Match is because that business has executed incredibly well, continues to grow and continues to grow their valuation. And the valuation of the shares in the public is therefore a lot more than it was, say, a year ago. That -- and I think the same can -- or similar arguments can be made for the balance sheet. There's lots of options of things to do with cash. There's lots of ways to deliver cash to shareholders. There's lots of ways to grow the business with cash. And a spin-off is not the only one. It is one and it is one that we think about and consider, but there are lots of other ones. Look, I think overall, our biggest priority and the thing that we spend the most time on is growing the businesses and executing at the businesses. And if there's a discount of a percentage or an amount at any particular time that we continue to grow the businesses and we continue to execute, then we can continue to grow the value of our companies. And if that discount remains static or relatively static, then we can still grow value for everybody. We maintain the optionality for those onetime step-function events which may or may not end up with the consequences that people hope or expect them to. But we maintain the optionality for those onetime step-function events. And we always think about them and we have historically taken advantage of opportunities when they arise. But it is not our biggest priority to eliminate that discount through capital structure maneuvers right now.

Yes. And look, I think just on your liquidity point. In bull markets, one thing that people often misprice is liquidity and the power of that liquidity. And I think the volatility of the last couple of weeks has taught a lot of people the power and importance of liquidity, of which we have at all 3 of our financing entities.

And our next question comes from Brian Fitzgerald with Jefferies.

On ANGI, you highlighted scale and liquidity. I wanted to know if we could drill down that a little bit, specifically of the success you've had recruiting service professionals to the platform. You mentioned in the letter, you've seen significant increases thus far in 2018. Is that starting to catch up with demand? And are you comfortable with the current balance you have in that marketplace? And then maybe a quick one on GDPR, how you see that impacting both companies as you roll in through May?

So in terms of service provs, we're making progress. We're still not where I think we can be and will be in terms of catching up to demand. As we've said, we've added a lot of sales folks, but it takes a long time for them to become tenured. That is no easy task. And we've gotten much, much better at getting them up to speed, but you still have to work through those large classes and let them sort of do what they do. I think at the same time, I don't always focus specifically on the nominal SPs, I focus on the quality of those SPs. And I think the ability for a service provider to be a high-quality service provider that has lots of capacity and stays in the system for a long time is incredibly important. We've made a lot of changes over the years to make sure that we're not just adding in nominal service providers that don't add anything to the network, that have no capacity or they're in some area where no one really needs their services. So I think we're doing a good job of getting our sales folks tenured. We'll keep pushing on that. As they get tenured, you'll see the flow through of service providers. And then we're continuing to push to make sure we bring in quality service providers so that they have a lot of capacity and ability to match demand.

And you see that quality quotient coming through revenue per SP. This quarter, it was up 5%. Last quarter, I think, it was up about 6%. So that's one of the metrics and where you see, what Chris said, translate into the financials. And then as Chris said, on the SP side, as we continue to grow the SPs through the effectiveness of the sales force, that's why this will be more of a back-end loaded year than we've seen.

We'll move to our next question with Chris Merwin with Goldman Sachs.

Sorry, before we go on to Chris.

Chris, we forgot GDPR. Look, we're taking it, obviously, extremely seriously. We've had a task force on this for the last 6-plus months. We're working diligently towards full compliance across all of our businesses when the law takes effect in May. But there shouldn't be a material impact at all on our businesses. We may be tweaking some practices here and there to make sure we're fully in the right spot. And yes, as I think Gary also alluded to on the call yesterday, there will be some increased costs around our business to ensure compliance and to throw the right resources at it. But all that's embedded in our guidance, of course. Sorry, Chris.

And Brian Fitzgerald with Jefferies is next.

No, I'm good. They got my questions. It's Chris next.

Yes. And Chris Merwin is next, operator. Or tried.

One moment, please.

Can we get Chris back on the line? Sorry, Chris.

And Mr. Merwin, your line is open.

Yes, just a couple for me. For Vimeo, I think you had bookings growth of 25%, and that was well ahead of sub growth at 14%. So it looks like ARPU trends are definitely getting better there. Can you talk a bit about what's driving that? Is that existing customers going upstream to higher-cost subscriptions? Are you bringing in new customers at higher levels of spend? And then secondly for ANGI, can you refresh us on what percentage of bookings are coming from Instant Book right now? I think in the past, it's been around 10%, but just curious about how that can move higher over time, given the bespoke nature of many of the jobs on HomeAdvisor. And to the extent it does move higher, does it make it easier to close the take rate gap that ANGI has today relative to some other marketplaces out there?

Thanks, Chris. On bookings and bookings growing faster than ARPU, it is a combination of the two things you said. It is both bringing in new higher-tier users, but also upsell. And I'd say it's probably more of the latter, meaning more upselling people into higher products than bringing in new. But it has to be a mix of both. It is a mix of both and will continue to be a mix of both. But upsells are bigger at the moment.

So on your Instant Booking and Instant Connect, our on demand products, it's still roughly 10%. But obviously, that base has grown nominally, so that is growing nominally. And they're huge numbers considering we just really rolled these things out in the last couple of years. I will say in terms of growth, there is some step-function to this. We introduced products and we learn from them and then we figure out what adoption looks like. And then you sort of see that plateau. And then we introduce new products and you see it jump up as well. We've got some interesting things in the pipeline that we're working on as well as we're continuing to learn. You find out things like instant, someone that's looking for same-day service, for example, you might think that means same day, but in our space, that may mean 72 hours. So we've introduced products that leverage those kinds of learnings. We'll get people to be exposed to those products, and you'll see sort of growth against our ability to let them understand how it works. In terms of take rate, we do charge more for our on demand products, but I would argue we charge much less than their intrinsic value. And we have probably time, over the years, as we get more adoption and more usage, to move the price of those. But right now, we're trying to keep it very simple. We do charge a bit of a premium, but it's not as much as we probably could over time.

And just a little bit back to -- sorry, Chris, just a little bit back to Vimeo. One of the things that drives ARPU is the Live product, which is at a much higher price point. And so that will -- we'll see as that adoption happens, that, that grow people into higher tiers. And we've also been changing features around it, like -- or services around, like, storage caps and things like that, where we're getting more competitive with the rest of the marketplace. And that drives people into the higher tiers.

Our next question comes from Justin Patterson with Raymond James.

To add on to Chris's question on Instant Booking, would love to get a better sense of the customer base and engagement there. How much of that's existing customers versus repeat? And just how the product or project sizes compare to what you typically get on ANGI Homeservices. And then stepping back, turning to the Angie's List acquisition. Would love to get a better sense of just that customer base and your learnings there relative to the HomeAdvisor customer base. With the HomeAdvisor-like experience on the site now, how are customers engaging with that? And then how do project sizes compare to those on HomeAdvisor?

Sure. I'll talk about sort of your question on IB and IC was -- if can you remind me again? Customer base engagement...

Getting a better sense of customer mix, new versus existing. And then how exactly those project sizes are.

Yes. So I don't think we've broken that out. Certainly, if you think about how the product is implemented, it could be just as much someone who is a repeat user experiencing it, or it could be someone first time. We give the user choices, they come through, decide how they want to engage in the product. So we haven't broken that out, and we haven't sort of, frankly, even spent a lot of time looking at that because it is a situational structure and it depends on the needs of the person submitting a service request at the time slot.

Probably by service request. You're not going to Instant Book a kitchen remodel to start 10:00 a.m. tomorrow morning. You will Instant Book -- or want an appointment for it.

Sure. And then you look at something like same-day service, that's obviously, I'm stuck in my garage, the garage door is broken, I need help right now. I've got a leak in the basement. I need immediate help. So it just depends on the type of need of the homeowner.

Also, the way that we're presenting the Instant Connect into our same-day service and next-day service, things like that, is based on our liquidity in that particular job. So we want to make sure that we can fulfill on the user and fulfill in a certain period of time. So we're going to do those in -- the way we're offering them is not based on a consumer's repeat rate or even necessarily the job value, although you can imagine certain things like Chris and Glenn were saying impacting the job value, it's based on our liquidity in that particular market in that particular job at that particular moment, is going to be a real driver.

Yes, I think the other question was on the customer basis. Are we seeing sort of material differences? We're not really. There's not sort of one group does remodeling, the other does repairs. It's not the case. It's a pretty normal bell curve. When you have sort of top brands with national reach and you're spending a lot of offline marketing to drive in home owners, you tend to get a pretty normal bell curve in terms of what people are submitting, what they look like. So we're not seeing any sort of material differences. I think the other question was the experience on Angie's List and how that has changed as we've talked about it. But we've introduced our matching into their ecosystem. We feel this is good on two fronts. One, it gives homeowners more choices to how they want to engage with a service provider. They can use the traditional Angie's List directory, which has some of the most reviews of any site out there; or they can use our matching engine if they want help immediately and want someone to do a little bit more for them. So we'll continue to look at what the right balance is, putting features and functionality on Angie's List that you'll see on HomeAdvisor. But so far, that's what we've worked through.

Our next question comes from Paul Bieber with Crédit Suisse.

Actually, most the questions have been answered, but I do have one question on the Publishing segment. I was hoping you could just spend a little bit of time about what some of the underlying drivers are in the Publishing segment that are resulting in a return to growth and just the better possibility outlook for 2018.

Sure. Probably, we're doing it in the two different pieces, which is we break Publishing into what we call Premium Brands and Ask and Other. And both of those things are growing and both of those things are delivering profits now. The biggest driver of growth in the premium brands is Dotdash. And Dotdash, I talked about it becoming the modern publisher. That's really our objective there. I think we have 6 verticals now within Dotdash, each one is a leader within its respective category as it relates to audience size. We're competitive now with folks like Vox, Meredith and Time Inc, Hearst, where we got that kind of audience and we've got those kinds of brands and advertisers are paying attention now. So Dotdash, I think, grew traffic over 50%, maybe go up to over 60% in Q4. And revenue is coming alongside that. I think Dotdash could grow revenue in Q1 on numbers like that, 50%, 60%. So that's good. Dictionary is also executing. I think it's just some blocking and tackling there and figuring out where to invest and where not to invest. And so that business is delivering more profits than it was previously. Investopedia is a business we continue to run at breakeven but has nice top line growth. What we're really trying to do in Investopedia is become a resource for people in this early stage of their financial career where they're making financial decisions, and we can help people make those decisions. And advertisers are very interested in people at that stage in the career, making the kind of decisions that they're making on our site, which is how to do their 401(k)s, how to invest their money, how to choose credit cards, how to choose borrowing, things like that. I think that we can really help them in that process, and also offer the tools to the consumers. We have the Investopedia Academy right now, where we're actually selling courses to consumers and we're seeing real nice adoption in that quickly. And then on the Ask and Other side, that business is really driven by performance marketing. And in any given period where we've figured out areas and opportunities to market that, and we've been able to figure out a lot over the course of 2017 and going to 2018. And we've been able to drive profit there. It's also been -- we did a huge restructuring in that business a year or so ago and took out a huge amount of cost. And we're seeing the benefits of all of that now flow through.

We'll take our next question from Anthony DiClemente with Evercore.

Maybe first for Joey. You talked earlier in the call about investments and planned investments in Vimeo, and that was helpful. And I know that you guys broadly have a quite positive view on the addressable market for Vimeo. My question is, are there ways for Vimeo to build upon its competitive position in the space it operates, perhaps by way of strategic partnerships? Are there other options? You've done the smaller acquisition of Livestream recently. So are there opportunities, whether it be partnerships or strategic options, just would be great to get an update on your thinking there as it pertains to that asset. And then another one, just more broadly, I guess, for anyone who's willing to kind of take it on marketing. I mean, it strikes me that InterActiveCorp has so much experience and institutional knowledge as to what works as far as marketing and media mix. And Match, yesterday, they said that TV wasn't working as well in terms of the ROI there. I think Chris said earlier that ANGI is spending on TV and marketing there. So I understood there are different demos and different considerations, but just wondering if you've got any thoughts around reaching people around digital and where your marketing spend should or could be optimized or emphasized in order to capture the maximum mind share.

Sure, Anthony. And well, I'll start with Vimeo. I thought you wrote a great report on Vimeo. I -- we absolutely are looking at partnerships and we absolutely have partnerships. So for example, folks like Dropbox, where we integrate with directly; apple, where we integrate with directly; Google, where we integrate directly, where people are using our tools around their video and may use that in conjunction with somewhere else that they're using storage or other things. And I think those sorts of on-ramps are useful to us and valuable to us and very valuable to our users. So we're going to continue to look for opportunities like that and lean into the opportunities that we have. I don't think that there's sort of 1 or 2 or 10 and transformational sorts of partnerships on the horizon or even existing within the business right now. But I do think that, that partnership channel in aggregate is an important one and one that we'll continue to focus on. And really in the interest -- not just in the interest of, of course, growing our business, but also in the interest of driving utility for our users. One of the things that we do at Vimeo, for example -- or will do at Vimeo is we give our users the ability to publish their videos into any platform. It's not just publishing onto Vimeo.com, it's publishing into any platform. We can do that as the sort of Switzerland here and make things easier for users, where for any individual user, any individual business, multiple platforms and their own proprietary platforms may be relevant to them, and we try and make that as seamless as possible for the user. On the marketing expertise, this is something we've thought a lot about recently, I've thought a lot about recently. And I think Mandy's comment on this and something we've all been feeling is television is a phenomenal marketing channel for us and has worked very well for a number of our businesses. And I think we've developed real expertise in that. The issue with television is that the audience in television is disappearing. And as that audience continues to taper off, what the television world has done is they've been raising prices. And we've continued to figure out how to keep getting better in our own technology and make that work where we could keep up with the price increases. But at some point, that audience decrease is just -- there's just less people to reach. And that sort of lean-back experience is relatively unique to television, meaning, audience listening to a story, a commercial story, but listening to a story that we're telling, is relatively unique to television. And we don't see it replicated as much online, where people are more mission-driven, meaning, they're going into something to watch something relatively short, and they're very focused on their path to that thing rather than leaning back. So what we're looking for and where we're doing a lot of experimentation, where I'm highly confident we will figure something out and be innovative, is where do you replicate that experience online? And we're experimenting with every platform that you can imagine, every media that you can imagine and figuring that out. And as we figure things out, we share that intelligence across the businesses. And I think we'll continue to develop expertise there. But that's kind of my overall view on where television is right now and how that's impacting the business. I think just Match relative to ANGI, Match has been in the television business and spending television at significant scale for probably a decade, and ANGI is spending at real scale but still relatively early in the lifetime ramp of that in terms of finding new media on television.

Our next question comes from Douglas Anmuth with JPMorgan.

This is Cory Carpenter on for Doug. Just as a follow-up to the earlier Vimeo investment question. Is it fair to think maybe 2018 could be the peak investment year in that business? Or could there -- could we see another step-up next year? Or maybe just any additional color on how you're thinking about the potential time line or path to profitability would be helpful.

Look, it's a very good question, and I don't know the answer to it definitively. I'd say that if we wanted 2018 to be the peak investment year in Vimeo, we certainly could do that. But what the horizon looks like beyond 2018, I'm not sure. It'll really depends on what things look like as we approach that.

Joey said in the letter, obviously, one of the main goals of Vimeo is to deploy more capital there, both on the marketing side and the M&A side. And obviously, we bought great business, Livestream, at the end of last year. That is money-losing, but that gives us another outstanding product to share with our users. So the M&A patterns also could impact that.

Also, just in the Vimeo segment overall, there are losses outside of Vimeo, and I do think those losses will go away one way or another.

Our next question comes from Sam Kemp with Piper Jaffray.

So Chris, last night, Yelp talked about rolling out a take rate model on its Request-a-Quote platform to better monetize the volume going through there. I was just wondering if you could talk from a high level about how you think about something like that in context to ANGI Homeservices. We've obviously -- we all are aware of the 3% to 5% effective take rate that you get and that, that could go higher. Is that one of the ways you could see enacting that? And then, Joey, we're certainly in a period of strength where Publishing has been doing very, very, very well. As you look out the landscape of kind of midscale publishing assets out there, is this a category or segment that you would feel comfortable putting meaningful M&A dollars behind?

I'll answer the last one first, which is I think Publishing will -- the question was will we put M&A dollars into Publishing? Yes, I don't expect that, no. Again, I don't want to say never on anything because anything's possible. But I wouldn't think that, that's where we'll put M&A dollars. I very much like the organic path. I think if we do have M&A in that area, it would likely be very small. And we've got so much to do and we're having such great progress on the organic path, I don't see M&A as likely in that area.

Sure. To your take rate question, I will say, the model that say that you can have a sort of take a part of the job are the unicorns of our space. Everybody says, "Wow, it would be great. It looks great on paper." We've tested it over and over and over again, and it's extremely difficult to execute. You have to rely on a completely closed-loop system, hope that everybody reports accurately within that net system, doesn't go outside of it. You got to sort of track the jobs, sometimes, that may take months before it's completed. Extremely difficult to execute. We've tried it over and over and over again. We've had some limited success at the high end, but I would say if you're building a business around that, which many start-ups have, good luck. That being said, we have payment processing that we're working on. That gets the SP closer into our ecosystem in a sort of natural way. With certain service providers, you could start to potentially see a deeper partnership, where we may take a percentage of the job with certain guys. I think we're also doing some fixed-price testing on smaller jobs, which makes a lot of sense because those are very discrete jobs and you could theoretically, over time, take a percentage of that as well. We're not against the idea, but I would be very cautious against that being some sort of amazing breakthrough. It's been tried over and over and it's extremely difficult to execute. We like it, we'll look at it, and we think about it. But it is not something that we're executing on right now.

I think we're just about out of time. So we can do one more question. Let's do one more question, operator.

And we'll go to Kerry Rice at Needham.

Thanks for fitting me in under the wire there. Maybe one more question on the marketing strategy, particularly as it relates to Angie's. Have you done any discernible changes in that marketing strategy, maybe since you acquired Angie's? It doesn't seem, at least from my own anecdotal evidence, that I see quite as many ANGI commercials there. That's the first question. The second question, and sorry if I missed this, did you give any update on the percentage of SP's spending capacity for the quarter? And then finally, the other part of revenue for ANGI Homeservices, the advertising and other that's made up of the small businesses, is it fair to assume -- it looked like it was about $8 million last year. So is it fair to assume it's about that same size? If you can give any context on that.

Yes. I'll get the third one, just to make it -- embedded in -- if you look at the pro forma line. And it's a great question because people have gotten confused on this. Look at the pro forma line in our operating metrics, in advertising and other includes the Angie's List historical business as well as mHelpDesk, Felix and our Canadian business. And the mHelpDesk, quarter-over-quarter, you saw it down about $8.5 million. Embedded in that negative $8.5 million is a $2 million gain in our other businesses. Said another way, those non-Angie's business is about -- comprise about $10 million of quarterly revenue. So by playing with that, you can see, obviously, the trend line a little better from the Angie's List business.

Get me to talk about marketing strategy. Sorry, go ahead.

Yes, the question is on marketing.

Yes, on the marketing strategy. So a couple of things. One, I think shortly after we closed, we actually had some new spots that we had created. The goal of those spots was to see if we could get similar performance in terms of response that we were seeing on HomeAdvisor. Those spots have been out there. We've been testing them. One of the things that we are working through is how do we drive greater monetization on the Angie's List platform so that all of our marketing can be more effective? We've made some good strides. We're continuing to work through that. We've put the matching engine onto their -- into their ecosystem. We're tweaking that matching engine to get these sort of monetization up to our HomeAdvisors. And I think once we get to that point, we'll be able to lean much more heavily into Angie's List offline marketing, in traditional TV marketing. But we are running additional spots. We are trying to get some baselines to understand how to improve performance in terms of response. And you'll see us leaning more into the business as we improve its underlying economics.

Yes. And just on a macro level obviously around marketing, given the strength of our SRs and given the strength of our historical marketing in 2018, marketing will be down -- won't grow as much as it has in the past. And that's one of the reasons why you're seeing such terrific incremental margin pick up in '18. And then, no, we didn't cover the unused cap. I think last quarter, we said it was 60%, which was 7% growth year-over-year from obviously 53%. We are inching that up. We're about 61% now...

Used, not unused.

I'm sorry. Used cap. So we're shrinking the unused cap. Thanks for the clarification, Joey.

All right. Thanks, everybody, for your time this quarter. And we'll speak to you next quarter.

And that does conclude today's conference. We thank you for your participation.