Glenn Schiffman - CFO, ANGI Homeservices Inc. Joseph Levin - CEO & Director Christopher Terrill - Former CEO

Anthony DiClemente - Evercore ISI Eric Sheridan - UBS Investment Bank Cory Carpenter - JPMorgan Chase & Co. John Blackledge - Cowen and Company Brent Thill - Jefferies Jason Helfstein - Oppenheimer Peter Stabler - Wells Fargo Securities Ross Sandler - Barclays Bank Christopher Merwin - Goldman Sachs Group Daniel Salmon - BMO Capital Markets Kunal Madhukar - Deutsche Bank

Good day, and welcome to the ANGI Homeservices Q2 2018 Results Conference Call. At this time, I'd like to turn the conference over to CEO, Glenn Schiffman. Please go ahead, sir.

CFO, Glenn Schiffman. But, thank you. Thank you, operator. Good morning, everyone. Glenn Schiffman here, and welcome to the ANGI Homeservices second 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 ANGI -- sorry, on IAC's second quarter results. Similar to last quarter, supplemental to our earnings releases, IAC will also publish its 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 will really turned over to Joey to make a few brief 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 and future performance. These forward-looking statements typically may be preceded by words, such as we expect, we believe, we anticipate or similar such 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 and ANGI Homeservices' second quarter press releases and our reports filed with the SEC. We'll 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 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. Before we jump into it, I wanted to wish Joey a happy birthday today. So take it easy on him, please.

Thanks. My wife asked me what I wanted to do for my birthday today and I said, so long as I spend the day surrounded by all of my closest analysts, it'll be a happy day. I think we had an incredible quarter this quarter here and a great start to the year and we're excited to talk about it. So let's start with the questions. Operator?

[Operator Instructions]. Our first question comes from Anthony DiClemente of Evercore.

Happy birthday, Joey. Thank you for taking my questions. I have two, if I may. So first off on ANGI, you increased the effective service capacity by 31% in the quarter, an impressive number. So it just seems like the company's resolve in these -- the supply side and capacity issues, the new opt-in products increasing, the monthly caps and adding new service providers. So I'd just love to hear about that. If you can talk about that. How those are trending as we head to the back half for ANGI. And then secondly, on Vimeo. In the quarter, revenue growth is exceeding sub growth, a strong revenue growth quarter, but what we want to ask about is a runway in terms of, let's say revenue per sub or ARPU. When should we expect sub growth to inflect upward and are you guys tracking on that previous $125 million revenue guide for Vimeo, I think, for 2018?

Hey, Anthony, this is Chris. I'll answer your first question. Capacity has been a huge win for us. It's an area that we've focused on and I get a lot of questions as to well, why capacity now and what -- why have you not done this in the past? And the reality is we have tried this in the past. The difference is the high quality of SRs coming through our branded channels, coming from Angie's List, have really changed our ability to have a completely different conversation. When we tried capacity expansion years ago, we were trying to push service providers into areas they didn't really want to be in. We were trying to get them to do tasks that they weren't that interested in. And so now the conversation is a much different conversation. It is about, I can give you more of what you want and what you'd like to do in either the areas you're already in or in areas -- jobs, that you may be doing that may be close to an area you typically work in. And so that has changed our ability to have that conversation, set those caps and have those caps stick. And so it has been a huge sort of awakening for us in many ways and we've taken advantage of that whether it's on a new sale, expanding the cap for someone coming in that's new, or on existing service clients [indiscernible] And so both of them highly effective. We think we'll continue to optimize that over time. We'll continue to lean into it, but both are going quite well, and we think this is a big part of our sort of long-term goal. Doesn't mean we're not going to continue to add nominal. We will add nominal, but this opportunity to expand capacity at a point in time when we have such high-quality SRs coming in has been a big boom for the company.

And look, Anthony, this is important to note, and you saw it in our letter, our opt-in product is actually outside of cap. So that is not included in the 31% increase in cap that we -- that you referenced in your question and we referenced in the letter. In terms of the roll out of that opt-in product, in May we rolled out the 75% of the markets. In July, we got to 100% of the markets. Now even though we're in 100% of the market, that represented only about 2/3 of our service requests, because service requests come in, in different ways. We'll probably get to 100% of service requests in August, which is why you see, obviously, the revenue acceleration in our guide in the third quarter and, obviously rolling into year-end. So the opt-in product, we enjoy. Obviously, a revenue uplift in the second quarter and we will enjoy a revenue uplift from that in the third quarter. Obviously, you see all of the efforts in our revenue per SP, which grew 7% this quarter to a record 1000 and I think 16, and I think that number was 3% last quarter. In terms of Vimeo, I'll turn it over to Joey.

Yes. Thanks. Anthony, on sub growth, we are -- there's a bunch of things that drives sub growth. So international is one. We've talked about this a lot. Our international audience is big. Our international users are big. Half of our subs -- subscribers are outside the U.S. But our marketing outside the U.S. is still very nascent. We've been slowly getting our way into this and learning things as we go. I think we've learned some lessons recently and we're continuing to improve on this international marketing, but I think there's a real opportunity for us in localizing the product and the marketing in a way that I think will be really compelling and drive the product. The other thing we've talked about is the enterprise sales. Enterprise is very new for us. We now have an enterprise sales team who's out calling on enterprise accounts and having real success in doing that. And that kind of gets to your answer on subs versus ARPU, an enterprise account can be worth 1,000, basic or plus accounts. So that, as we push enterprise, that will be less about nominal subscribers and more about ARPU. We talked about enterprise accounts could be an average -- in the neighborhood of $15,000 sale, as against a plus account, which is, I think, $60 or $80 a year or something like that. And the other piece is product, and we continue to innovate in product. The most basic innovation in product for Vimeo is continuing to evolve the platform to focus on the creator. So less about the showcasing of videos for Vimeo's benefit and more about showing creators and the video owners, the tools that are available on our platform and that applies to our website, like that applies to our apps. And as we evolve those things to really focus on that part of the business, we're seeing nice results there. So I think all of those things will be drivers and I think as we release more products to these users, ARPU will go up, both because of mixed shift to enterprise accounts and because of adding more products. And a lot of our ARPU move is giving people incremental services for incremental cost. Not so much price increase. We have increased some price, I think we have potential on price, although I don't think we've optimized that. It's really more about incremental services for incremental value. On the $125 million revenue guide, I think we're pacing comfortably ahead of that right now.

Yes. We're $63 million year-to-date. You saw us -- you see we get there by the 11% subscriber growth that we caught this quarter, plus we referenced in the letter 15% ARPU growth and accelerating. Revenue growth was 28%. And so if you look at the 28% plus the $63 million year-to-date, I'd say we were in line for the $125 million. On the last call, Joey said we'll do better than that and I think Joey's right.

Our next question comes from Eric Sheridan of UBS.

Maybe two on ANGI. One, any update on the international opportunity pace or cadence of investments to tackle that opportunity and how we might see it play out between the P&L over the next couple of years? And with respect to local broadly in the service provider pace, clearly a lot of other companies have also mentioned competition and getting into the space. What's the competitive intensity like? What does it mean for the need to spend on marketing against the existing brand strength you already have in the market?

I'll start on that one and then Chris and Glenn will add to that. On international, this is a long-term play and it's just like our HomeAdvisor, really was a long-term play, it took a lot of years to get the entire flywheel going. I think that we have real advantages from that. We have real learnings from that, but still in every market that we're in internationally, it's its own market, and we need to get the supply and demand side to scale and have the product work in between those things and that takes time. So I don't think you should -- I think we're best measured in years, not months. I don't think it requires a significant incremental investment. We will invest there. We will continue to invest there. I hope we have opportunities to invest more there, but I don't think you should expect a dramatic increase in our investment there, but I do think you should expect that it will take a while for us to get the flywheel going overall on -- internationally. On competition -- and then I'll turn it to Chris. We watch the competitive landscape closely. I think from a very macro perspective, this is an enormous market and still barely penetrated, if you look at all the players in aggregate. And so I think we see a lot of opportunity, but Chris can add to that and talk about who or what we see.

Yes, I think long -- I've been here for a while, used to see a lot of small players try to come in. I think it's getting harder and harder for small players. It's just too expensive, too difficult to build the sales force, too hard to build liquidity. And that leaves the larger players that have been around for a while, and we continue to not really bump up against them that much in the marketplace, as Joey said, this is still a relatively under-penetrated category. I think there's lots of room to run and I think as we create a better and better products, better experience, drive better ROI for our service providers, I'm not concerned about what the competition is doing out there.

Yes. And we've talked many times about our mode. It's our sales force. It's our SP network. It's the quality of our SP network. It's our operations team. We're still calling back 50% of the service request, 6.8 million service requests this quarter. So that's 3.2 million calls in human connections. Obviously, it's our advertising and our marketing investments and it's the product and the products that we're innovating around. I mean, even as we merged with ANGI, they overlap with a relatively small overlap and I think that just demonstrates to Joey's point how large the market is, how big the opportunity is and I think we're much more concerned on going out and getting all those service requests that are off-line to come to online, which is a huge opportunity and having a brand and then the products to satisfy those off-line to online SRs and getting more service providers is really what we're focused on.

And we can't overstate the importance of an active engaged nationwide service professional network. It really -- both of the importance and the difficulty of building there, it's taken us a very long time and it's critical for us in all regard, but especially for our ability to innovate in product, the opt-in product that we've talked about, that is only possible -- was only possible and it's a product we've dreamed about, Chris has dreamed about, for -- since we started here, but just couldn't be delivered until you had the liquidity in the network. And those kinds of innovations are the things that we're pretty excited about with that advantage.

Our next question comes from Douglas Anmuth of JPMorgan.

This is Cory Carpenter on for Doug. On ANGI Homeservices, you showed significant upside on profit in the quarter relative to your guide. Could you discuss some of the drivers here? And then maybe related to that, Glenn, could you help us on where you stand within the three synergy buckets and how you're tracking versus the initial expectation you initially laid out?

I'll do both of them. In terms of the upside in profit, look we're seeing a lot of strong margin flow through. Margins, you saw went from 10% to 23%. That's just the raw operating leverage in the business and the two answers tie together here. Revenue grew 63% and [indiscernible] marketing spend is about 55%. Marketing alone, that's more than two, marketing alone drove nine points of margin out of that 10% to 23% lift. And then remember, on these revenue expansion initiatives, those are high-margin products. The opt-in product we're selling unsold inventory effectively and on our upsell, there's little attended costs associated with that. So you see in our guide for the rest of the year a continued slight margin improvement, continued strong EBITDA conversion. I think we converted what, 45% of revenue to the EBITDA line, and we think that will continue and increase. In terms of synergies, your second question, we're definitely ahead of the $100 million that we articulated would be in 2018. And we have a clear path to the high end of the range over a multiyear period. What's become difficult to do is dissect and put the synergies in each of the three buckets that we articulated, because we're running the business on a more integrated fashion. We're making decisions across the two properties and it's just difficult to keep true to the buckets that we articulated about 18 months ago. Our business is just more dynamic than that. There's so many examples. I'll give you one. Chris talked about it, I think, on the last call, which we're increasing the marketing spend against the Angie's List site. Why? Because we're having great ROIs against that. That does sacrifice in some respects near-term bucket one synergies that drives bucket two synergies. So we're seeing a little bit of co-mingling of the buckets. Again, we're ahead of the low end of the range, have a path to the high end and that $100 million to $250 million of synergies, that underlied and underpinned our 20% to 25% revenue CAGR that we articulated and still absolutely stand by, articulated in May of last year. And the 35% long-term margins for the business, again, depending on the investment choices we make. Net-net, how do we feel about the acquisition? Joey said in the letter, we're ahead virtually across the board. We nailed the expense synergies, as we've talked about that, of course, is locked. We think over time, we can grow the Angie's List business given the revenue recognition dynamics that probably doesn't show up until 2020. The economies of scale are more pronounced than we thought. We're seeing that in our margins. The traffic synergies are higher. That's driving liquidity. Liquidity is driving innovation, as Joey and Chris just talked about in terms of our opt-in product, and that enables us to invest in category expansion. And that's really what we're all about here and what this merger was always about, is category expansion, driving this business. We're so under-penetrated in this market, it's a $400 billion TAM. And I think as we scratch and claw and we continue to see our position in the marketplace, we think that TAM actually will grow as there's more and more things we can do on top of our existing services.

Our next question comes from John Blackledge of Cowen.

On Publishing, Ask & Other posted revenue of nearly $100 million. It was almost double versus last year. Just wondering kind of key drivers and margin profile for that business and thoughts on longer-term growth. And then on Vimeo, how many enterprise sales people right now? And how should we think about the sub mix, kind of like enterprise versus everyone else over time?

Sure. On Publishing, Ask & Other did have a great quarter, that is driven by a lot of things, but really, that business is a marketing-driven business. And when they see opportunities in the marketplace to spend money profitably, they do. And those opportunities were available in the quarter. I think a lot of things contribute to that. I think a healthy ad market, healthy economy if they're making kind of margin on their advertising, just the fact that each of those things will go up, even if the margin stays the same, if prices are generally, higher, that's a good thing for that business. And [indiscernible] team is doing an excellent job, we've restructured that -- what was it now?

June '16.

Yes, so two years ago. And there's a lean and mean team there that's just doing an exceptional job. So there are margins there. There's healthy margins there. When we think about the future, as it relates to the Ask & Other portion of Publishing, it is -- there is -- we have experienced and can continue to experience volatility there. Again, I think it's not an issue with our team, I think it's the marketplace, and the way that business works and sort of moving into and out of opportunities as they become available. So there is, I think, potential volatility in that part of the business. But what they're doing right now seems good and seems to be working. On the other side of Publishing, the Premium Brands, that business, I think about differently in that it's not at all marketing driven. And on the monetization side, that all those kind of factors are much more within our control and I look at the outlook there and think very sustainable, lots of growth ahead and big opportunities there. On your question on Vimeo, enterprise sales as a percentage of total, I don't know, I don't think we're disclosing that. In terms of how many people we have doing enterprise sales, I think the number's --20 sales people and 10 account managers working. It's a -- the [indiscernible] in sales, as you know, are collaborative sales. Going back [indiscernible] a year ago. Coming back to your question on Ask & Other, in terms of defining what Joey meant by lean. Our fixed cost in Ask -- in our Ask Media segment are about 15% of total cost. So like never before, as the ecosystem evolves and the volatility, no doubt comes and goes, we can protect our P&L there and protect our profits there. And then that, as Joey said, attributes to the management team that's really got the cost structure in line there. So overall, it's in and around 10% -- 10% [indiscernible].

Our next question comes from Brent Thill of Jefferies.

Just on Dotdash, Joey. Can you just talk through the success you're seeing there, and the contribution to the Publishing line? And I had a quick follow up on Vimeo.

Sure. On Dotdash, it's probably around -- it's more than half of the premium revenue -- actually Glenn's telling me now 3/4. So that's 3/4 of the Premium revenue. Remember, that is -- that now includes Investopedia which we put underneath the Dotdash management and underneath the Dotdash umbrella as we think there's real synergy there. So think of Dotdash as 3/4 of the premium revenue. Did that answer your question, Brent? Do want to go to the Vimeo question?

Yes, that's great. And just kind of what you're seeing in terms of the sustainability of Dotdash, and what gets you excited in the back half?

Yes, look. I absolutely think it's the same. I think I've given these stats before and it remains true again, so it's worth reinforcing it. The top 10 advertisers at Dotdash are now the same top 10 advertisers three -- or I don't know if it's the same top 10, but all have come back three quarters in a row. We've never been seen that in one of our publishing businesses before. Advertisers come in and advertisers come out, there's brand advertising, people have different priorities. The advertisers on Dotdash are seeing real value in this inventory and to the point where they consistently come back. That of all the stats that we have, gives me the most confidence in the outlook in that business. We talked about the way that business is driven and in the letter, that's three things, freshest content, fastest page, fewest ads. Very simple. But very simple to say, but actually not that simple to do, but if we continue to do that, then I think it's hard for people to take our audience away. And it's hard for people to take our traffic. And if somebody's coming into this business, just a one-off person, it's very difficult for them to build the fastest site. It's very difficult for them to make the best content and it's very difficult for them to have an incentive to do that with the fewest stats, and so long as we continue to lean into that, which is a religion here, religion at Dotdash, I feel very good about the future there.

Okay. And just a quick follow-up. You mentioned in the letter how Vimeo is not a direct competitor to YouTube in terms of consumer eyeballs, but I think many of us have seen YouTube make bigger pushes around tools for creator pros creating their own channels and merchandising. Can you just under -- give us a sense of maybe we're hearing the noise from them but you're not seeing it in the field? What you're really seeing differentiating in the results here?

Sure. YouTube's tools, I think, are primarily about getting audience on YouTube and optimizing an audience on YouTube. We would be thrilled for our users, our subscribers, to go get an audience on YouTube and be successful on YouTube. We're dealing with them generally before that or concurrent with that as that, we talked about the letter, kind of the command center where they're storing their videos there, or working on their videos there, collaborating on their videos. I don't think others offer the private workflow and team collaboration tools. I know they don't offer the private workflow and team collaboration tools that we offer where people are sharing links, reviewing [indiscernible], working with their team on a video project. Those things are the kinds of things that Vimeo offers uniquely. We talked about being an agnostic distribution hub that matters to -- as YouTube and Facebook and Twitter or others, battle out who wants to be the best video outlet, we love seeing that because we're seeing the creators use our tool and use our tool in the background and then publish on all of them or publish alternately, where it makes sense, but use a tool that makes it easy for you to do that. The other thing that we spend a lot of time and resources on and that matters a lot to our users is the ability to fully control their brands and their viewers' experience. And we do it as their brand and their viewer and that's something you can do with 100% ad-free player. And I guess, the last piece is people are building video businesses using our tools, but off of our platform. So we've talked about this product, I think, before, but a subscription product, so a subscription [indiscernible] but a product that allows a video creator to launch their own subscription product where consumers are paying the creator and -- the creator and the consumer, their customers are interacting directly. They're interacting by email, they're interacting by however they want to interact, but they have a one-to-one communication with each other, or one-to-many communication with each other and the creator has that relationship with their audience, that's what our tools provides people, and I think that those things are all unique to Vimeo.

Our next question comes from Jason Helfstein of Oppenheimer.

So Chris, ANGI's playing out basically like you told us it would, you'd pull back on marketing, work on improving the supply side, you seem to be doing that. So help us understand as we move into next year, your thoughts around basically ramping that marketing and what it means for the growth of Angie's List if we think next year for top line? And Joey, in honor of your birthday, I'm not going to ask about spinning off Match and the current load and the incentive to create an arbitrage through IAC makes sense for shareholders. But we'll pass on this...

That's an incredible gift, Jason. I just want to thank you for that birthday gift. It's the first one I've received today.

So to answer your question, yes, this has been really great effort to sort of get supply back in line with where we want it to be. I think I've said this over and over again, this is a business where you're constantly sort of see-sawing your way up and balancing supply and demand. And as we get more and more sophisticated in understanding our ecosystem, as we get the network effects that Joey talked about, it is a constant battle. And so I think we will continue to invest up on either side of the business and both sides of the business simultaneously to stay in balance. I think going ahead we'll head to that 20% to 25% growth rate. And whether it is marketing opportunities or interesting profit -- product opportunities that merge, we'll take a look at what that investment means and how do we balance those things out. But I think on a go-forward basis, certainly if supply catches up, we have tremendous ability to lean into marketing. We're very sophisticated with our channel, our channel management, and we'll continue to do that so that we stay in equilibrium and can deliver good ROI to the service providers and a good experience to our homeowners.

As Chris has always said, it will never have the marketplace in perfect balance. It's 500 different primary work categories across 400 different geos. So Chris and his team are managing 200,000 mini marketplaces. So you could be up, you could be down, but as Chris said, we go into '19 in a much better spot. In terms of the revenue cadence, you saw our guide for the third quarter of 18%. We continue to believe we'll pierce through 20% in the fourth quarter and that will set us up real well for 2019, 20% to 25%. Given the force multiplier of our upsell efforts and our opt-in product, we'll probably see that more on revenue per SP. So higher revenue per SP because we really are doing a nice job of tapping into the latent capacity existing in our SP network. So as we are focusing on that latent capacity in the network, as we're focusing on the quality of SP, we'll probably see SP growth at 15% to 20% again, but still consistent and with our 20% to -- our strong 20% to 25% revenue growth on a go-forward basis.

And, Jason, by the way, I didn't mean to cut you off, so if you had a question there I'm happy to answer one.

No, no. We're going to give you pass on the spin-off and that for this quarter.

Thank you.

There is question comes from Peter Stabler of Wells Fargo Securities.

A couple for Joey, Glenn, on the video segment. So we hear about Vimeo and the news there is good, yet the Electus and Films I think the DailyBurn's still in there, account for about half that segment. So I'm just wondering, if you could help us think about modeling those businesses beyond this year into next year, what kind of margin profile could emerge for those? And then have you guys considered splitting out Vimeo from that segment to better highlight the growth and the underlying metrics and opportunity of that asset?

Sure. Splitting it out, I don't think -- oh we just got an echo there, Peter. I don't know if that's your -- let me try again. No, we've still got a big Echo. Operator? Are you hearing that?

Yes, sir. One moment, please.

All right. I think that's better. Thank you. I lost track where we were. Vimeo, what else in Vimeo? So as far as modeling, I don't think that you should count on the things outside of Vimeo in video for growth profits or frankly losses, there is one areas where we are investing in the video segment outside of Vimeo and that is in CollegeHumor and a product that they're launching, which we're putting a little bit of money into and going to launch that in the end of this year. It's a relatively small investment, but it is some net loss we're putting in there. The rest, in terms of Electus and Films, is generally, give or take, breakeven a little bit. Some years we make some money, some years we lose some money. I don't think you should think about that as either a drag on cash flow or a contributor to cash flow. And it is -- it's overall a relatively small effort. As far as bringing out Vimeo, it is something we've talked about. It is something I think we will probably do at some point, but I don't think necessary to do yet.

Our next question comes from Ross Sandler of Barclays.

Joey, in honor of your birthday, I thought I'd ask about the negative enterprise value assigned to core IAC. Jokes side, so that spread has been pretty static for the last 6 or 9 months or so -- and history would suggest at some point, you guys will do something to unlock it. I mean, that you've been doing buybacks, which I think are good. But any additional thoughts outside of buybacks, you have a Match spin idea about unlocking that negative $2.7 billion that you flagged in the letter? That's question number one. And then question two, just the -- back to Publishing. So you're coming up against some tougher comps, given the run up that Dotdash has had. So as we look out into 2019, is this a 20% growth segment consolidated? What do you think is the right steady-state growth rate for consolidated publishing going forward?

I'll start with the second one and then come back to the first one. It's -- I do think that those kinds of growth rates you talked about are reasonable, but remember, I think, we've got separate Premium and Ask & Other. I think Ask & Other could be volatile. I mean, that could go up meaningfully, it could go down. It's a -- that one's a little bit harder to bank on growth, and so I don't like, in the sort of consolidated sense, to give up a growth number. But we would want and expect Dotdash to be growing 20% at least long term for a while. And then how that comes to the aggregate, I don't know. I haven't done that mathematically -- there's not really a way to do that math because I struggle to put a sort of number on the Ask & Other piece. On the discounts, it is one of my favorite topics, but I think that one of the things -- well I've said a few things on this. Number one, I think investors in IAC should count on us to do our best to execute, do our best to deliver, be consistent in our story, be consistent in our execution. And so long as we're doing those things, we can do well by our investors. The kind of moment in time optimizations, onetime optimizations of capital structure are -- can happen, certainly have happened, are certainly things that we think about, but I don't think are things that in any particular short term period is something that people should count on if they're investing with us. And I think they should count on execution at the businesses. The other way to address the discount, I think, is for us to be delivering consistently. And people, I would hope at some point would say that something in this umbrella will deserve a premium rather than deserve a discount because it has the potential to more likely create value and grow over time, that it might outside of this umbrella. Now that may perhaps be wishful thinking, but that's certainly one of our goals in the things that we think about.

Our next question comes from Chris Merwin of Goldman Sachs.

Just two from me. So first on Vimeo. When we think about the longer-term opportunity there, what are the key investments you're making to drive that growth? I imagine there's sales force, you have marketing and new product, but how would you quantify or rank order those investment opportunities? And then just a second one on HomeAdvisor, can you remind us what the percentage of bookings at HomeAdvisor are from Instant Book and Instant Connect? I think the last number you gave was around 10%. But how focused are you on driving that number higher? And do you think that will promote more repeat usage on the platform and maybe lead to a higher take rate in time?

I'll start on Vimeo. I wouldn't rank order them. I think they all are important. In any given moment, one may exceed the other, but marketing, international, product, enterprise are the drivers of that and will continue to be the drivers for quite some time. The enterprise early progress, it's very encouraging for us, and we see a significant amount of runway there. Product, when we launched the live product that opened up a whole new bit of ARPU and a whole new segment of the market and that drove growth. Marketing, we've continued to increase and continue to see returns on that, and so I think that I'll be disappointed if we can't meaningfully improve our ability to spend marketing profitably there -- our ability to spend more marketing profitably there. And same thing on international. International has a bit of an overlap with marketing because we're not making a bespoke product for international. We're making bespoke marketing or making bespoke kind of interfaces. But that, I think, ties into the marketing piece. I'm trying to be helpful and provide a little bit more color, but there isn't really -- I wouldn't say one meaningfully over the other, and it moves around. Do you want to do...

Sure. I'll answer it. You'd asked where we were or not, I think our Instant Connect, Instant Booking in our -- all of our sort of on-demand products were at about 10% rate in terms of all SRs and obviously those have a very high win rate and take rate. So I think the thing that's more interesting as you look in the opt-in product and what does that to over time. How does that change how our service providers think about these types of products? How does that change? Who engages with it? And how did that potentially expand? I think it's still early to see where that goes, but I wouldn't be surprised if we see some stairstep functions in the future coming out of that.

Yes, Chris has always said, it's product and it's liquidity that will create a stairstep and the opt-in could be it. I've talked about the pacing of opt-in. The other thing to talk -- to dimensionalize the progress on opt-in. I think as of August 1, only 50% of our SPs have used the opt-in product. So we're pretty bullish around that one.

Our next question comes from Dan Salmon of BMO Capital Markets.

Joey, maybe could we just first return to Vimeo's competitive sets. You obviously highlighted the big consumer platforms in there as not being the primary set. Could you maybe remind us, who you do see as the primary set. And of those big platforms, I'd wonder if you do make a carve out for Amazon Video Direct or if you see that more as the mixed-media style of model versus the SaaS path that you're taking Vimeo down a little bit more? And then, just a second one for either you or Glenn, you highlighted the changes coming in the Chrome browser and potential impact to the application segment. Could you just provide some color on how mechanically you expect that to impact your business and maybe a little bit on the track record that you've had reacting to these sort of changes in the Google ecosystem in the past?

Sure. All good questions, Dan. Competitors, I think, that's a fair point on Amazon. I think as I understand it may be at more of the mega enterprise level than the small business level with that product. But I think that is, I think Amazon is [indiscernible] better. But when I think about the competitors, the bigger competitors would be Adobe, would be Dropbox to some extent. I think -- then there's a number of very small players that are sort of privately funded that take pieces of our product and focus just on kind of one slice of the end-to-end Vimeo solution. And we're very focused on each of those to build a product that's better than any particular site that somebody else can deliver. On applications, the substance of the change is when we distribute our products through the -- through Chrome, which are Chrome add-ons, they are now being -- we could distribute them sort of with our own UI historically and our own funnel with the consumer and they're going to be now forced to do -- all distribution happens directly through the Chrome web store and the substance there is that has some conversion implications on our business. I think you point out and I agree, we've had issues like this many times in the past and if we adapt to the landscape and optimize and figure out how to distribute a product in a way that works for our customers and our business, et cetera. And I have great confidence in our team and their ability to do it, I mean it was just amazing when this announcement came out and people got straight to work in figuring out how to deal with it and it was a sort of inspiring thing to see. The -- as far as the numbers, we've talked about $25 million to $30 million a quarter out of this business for a while, I think more recently, we've been closer to $30 million or above $30 million, but I still think that $25 million to $30 million a quarter for this business is a reasonable place to be and something that we would think would be our goal post rollout of this change.

Now look, there's two other things driving that. In addition to the management team's resilience and ability to battle back as they always have. One, our fixed expense base in that -- in the desktop applications business is less than 20% of total expenses. So again, our cost structure can endure volatility and still protect P&L. And second, we talked a little bit about, in the letter, our mobile business. We haven't talked about it on the call. Our mobile business inside of applications. And that's really something we all ought to dwell on because that's a real bright spot in that business. We talked about it being 20% of revenue by the fourth quarter. We actually have hit that in the second quarter, and we think it'll continue to grow as a percentage of the total. We've just passed 1 million subscribers there. Actually, the path to 1 million has been quite steep. We added 400,000 in the second quarter and 2/3 and climbing of the mobile business is subscription. So that's a real bright spot in the applications business that again will protect the P&L going into 2019 and beyond.

Operator, I think we have time for one more and we'll let everyone get on with their day.

Absolutely. Our final question comes from Kunal Madhukar of Deutsche Bank.

A question, primarily around Angie's. In terms of how much of the service request do you think you adequately provided leads for? In terms of the number of leads and the quality of leads that you ideally think your platform should provide? And second, are there any holes in terms of either GOs or services or anything else that where you absolutely need to add service professionals in?

The second one is -- GOs really need to answer service professionals -- they're really specific ones...

Sure. So I'll start with the first. We're constantly, and as, I think Glenn said, we've got 200,000 little mini markets that were balancing supply and demand. So what's interesting about our business and what's interesting about the scale we have and the sophistication we have is we've gotten better and better over time at identifying where those needs are and then deploying the sales force against them. Part of our sort of quality sales initiatives that we put in over the last year, 1.5 years, has been to identify an area and then to incent the sales team to go after that. And so if we know we have more demand in there and less supply, we will go out and try to fill that. And it's one of the complications that makes this business difficult. Although it's also one of the opportunities for us as we get stronger and stronger and better at identifying and filling that, so that we're in balance in all those small markets or little mini markets as well as nationally. So it's an ongoing process. I couldn't right now sit down and tell you we need to go get more roofers in Atlanta, but we probably do, and we probably do in lots of places where we are out of balance, but we go after those, and we get in balance quickly. So that's an ongoing part of how we manage the business and why I think we're very good at it.

There was some interference in the line. Can you repeat your first question? I don't think we got it.

The first question was with regard to optimizing for, again, these holes that you just talked about. And one of the numbers that you used to give in the past was the percent of unused ad budgets. Where is that metric today or at least in the second quarter?

Yes. That continues to creep up. In terms of users, it's continuing to creep up and we're at 62%. This quarter, it was 63%. What I said on the last quarter call, as you probably recall, is that we're more successful on the upsell strategy and increasing cap. That progress may stop and may even go down, but to obviously a terrific benefit to our whole -- the whole ecosystem and our whole revenue profile. So yes, we continue to make progress on that 63%, as against 62% I think it's up from, what, like 57% a year ago. So great progress, but we may be making more progress on increasing overall cap. You saw that in -- we talked about in the first question, 31% overall cap growth in the quarter.

Thank you everybody for joining us this morning and taking part in my birthday party, and we will see you next quarter.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.

Thank you.