ANGI

Market Opportunity

• The total U.S. home services market is estimated at $700 billion, with less than 1.5% currently flowing through Engie's platform, leaving significant room for penetration.
• The core lead generation business targets the $70-$80 billion U.S. pro customer acquisition market. The company currently holds less than 0.5% share of the large pro segment (pros with >20 employees, which makes up 65% of total spend) and ~4% share of the small-to-mid-sized pro (SMB) segment (35% of total spend). Penetrating the large pro segment to match SMB segment share would deliver ~$2.5 billion in additional core revenue.
• The adjacent pro software and services market is estimated to be the same size as the lead acquisition market, creating a total addressable market of ~$150 billion for the company's combined offerings.

Core Strategic Priorities

1. Return the core business to growth via large pro segment penetration: The segment is already growing more than 20% year-over-year with less than one-third of planned headcount in place. The company is building a targeted prospect database, expanding the sales team to 30 members by year-end, and shifting from a volume-discount lead model to a strategic operating partnership model focused on helping large pros improve lead-to-close conversion. Lead win rates have risen ~20% year-over-year (from 1 win per 9 leads two years ago to 1 win per 6 leads currently), improving product-market fit for large pros.

2. Migrate to a new AI-first single platform: The legacy technology stack is frozen, and full replatforming is underway. The homeowner account experience is already live on the new platform, with full homeowner migration targeted for end of 2026. The first test cohort of pros is targeted for migration by the end of Q1 2027. The migration combines U.S. and international systems; international platform pro churn after 6 months of tenure is half the U.S. rate, and capturing half of that churn reduction would deliver a 10% growth tailwind.

3. Leverage AI to improve pro win rates, retention, and customer experience:

   • Homeowner Agent: Already serves 50% of homeowner traffic, converting traffic at 3x the rate of non-AI supported traffic, improving matching quality. The company is building capabilities to serve homeowner demand across all channels including LLMs, and is already profitably advertising on ChatGPT with a $3 million annual revenue run rate.
   • Pro CRO (Chief Revenue Officer) Agent Suite: The first MVP (AI front desk) is already live with dozens of pros, booking appointments at rates comparable to human call centers with 80% ongoing usage among early adopters. The full suite will automate lead response, appointment scheduling, estimating, follow-up, and routing. Management estimates this could double win rates and cut churn in half, with a full demo planned for the November 17 investor day. Potential monetization includes improving core lead retention/LTV or adding new recurring subscription/usage fees for the software tools.

Operational Progress

• The company reallocated $6 billion of inefficient TV ad spend to higher ROI channels in Q2, with an equivalent cut planned for Q3, as TV advertising has underperformed historical efficiency benchmarks.
• Pro capacity decline has slowed from 13% year-over-year in Q1 to 2% year-over-year in June 2026 and flat year-over-year in July 2026, driven by growth in average pro capacity from large pro acquisition and retention (average pro capacity grew 13% year-over-year in Q2).
• Homeowner repeat traffic is up 20% year-over-year, lowering customer acquisition costs and supporting brand traffic at reduced TV spend levels.

• Management is not reinstating full formal guidance at this time, and reaffirms that acceleration in growth is expected in 2027 if strategic milestones are met.
• The company remains on track to hit its full-year 2026 target of $50 million for adjusted EBITDA minus CAPEX.
• Modest sequential improvement in revenue is expected each quarter for the remainder of 2026. Q3 2026 is tracking for strong margin following July's 700 basis point margin improvement over Q2, though Q4 2026 is expected to see a modest seasonal margin decline.
• All planned AI and platform migration investments remain within the previously communicated annual cash flow framework, with no incremental unbudgeted spending required.

The company does not break out formal product segment financials in this call, but reports core business results: Q2 2026 total revenue was down 11% year-over-year. Network channel revenue (a legacy channel the firm is exiting) declined 34% year-over-year. U.S. service requests declined 6% year-over-year, total leads declined 13% year-over-year, while revenue per lead increased 1% year-over-year driven by the phase-out of discounted legacy ad products. Sequentially from Q1 2026 to Q2 2026, revenue grew, and adjusted EBITDA grew faster with approximately 50% flow through. A non-cash goodwill impairment charge of $235 million was recorded exclusively for the U.S. reporting unit; the international reporting unit retained substantial fair value headroom. The company remains on track to hit its full-year target of $50 million for adjusted EBITDA minus CAPEX. July 2026 EBITDA margin is 700 basis points higher than Q2 2026 margin, supported by cuts to inefficient TV advertising spend.

• Further goodwill impairment charges are possible in future periods if market capitalization declines further, operating performance deteriorates, or valuation assumptions change; this is a requirement of accounting rules and does not reflect underlying business performance, and has no impact on cash or liquidity.
• Macroeconomic weakness following global events in March 2026 shifted homeowner demand: homeowners are canceling or postponing projects, and completing fewer larger jobs, which reduced Q2 revenue significantly (Q2 revenue was in the double-digit percent range below pre-March 11 run rates). While trends have improved modestly, revenue remains below pre-event levels.
• AI/LLMs are capturing growing share of unbranded organic informational search traffic, which has historically driven homeowner traffic to the platform; unbranded SEO traffic now makes up less than 5% of total service requests, and management does not expect this channel to recover.
• Successful return to growth depends on execution of the large pro segment penetration strategy and AI product roadmap; there is no guarantee that expected churn reduction, win rate improvement, or new revenue growth will materialize.

Q: Dan Kernos (StoneX) asked how investors should model sequential revenue and margin improvements through the end of 2026, and how much of 2027 growth depends on the large pro segment. / A: Julie Araujo confirmed that only modest sequential quarterly improvements are expected, with no formal guidance provided. July has been strong for margins so far, though Q4 will see a typical seasonal dip. Jeff Kip noted that large pro penetration is the core driver of returning to growth, as SMB growth will level off once replatforming is complete. If execution stays on track, the company should return to growth sometime in 2027, though no firm timing is committed. (193 characters)

Q: Brad Erickson (RBC) asked what are the most critical metrics to track for a return to growth, and what are the main gating factors to hitting 2027 growth targets. / A: Jeff Kip explained that pro win rates and overall pro capacity growth are the most important metrics. Pros that win more work stay as customers longer, so growing net pro capacity (adding more capacity than churned) is required to grow leads and revenue. The main gating factors are successfully penetrating the underpenetrated large pro segment, and continuing to improve win rates to reduce churn and grow available capacity, which is the core focus of the company's current strategy. (286 characters)

Q: Tarini Padmanabhan (UBS) asked what drives pro capacity growth, and how the company will monetize its new AI pro agent products. / A: Julie Araujo clarified that pro capacity measures total available pro marketing budget on the platform; nominal pro count is down, but average pro capacity is up 13% year-over-year from targeting and retaining larger pros, aligned with the large pro strategy. Jeff Kip noted that the first priority is improving win rates and retention, which directly grows core revenue. Additional monetization can come from add-on subscription or usage fees for the AI tools. With 100,000 existing pros and near-zero customer acquisition cost for add-ons, even 25-33% conversion to paid plans at $50/month would create meaningful incremental recurring revenue. (392 characters)

Q: Sergio Segura (KeyBanc) asked how the company balances marketing growth and efficiency, and how the ChatGPT channel compares to traditional channels for economics and conversion quality. / A: Jeff Kip explained that marketing spend is almost entirely variable, and the company only buys traffic until the marginal dollar hits breakeven, pulling back from underperforming channels like inefficient TV (a $6 million cut was made in Q2 with another planned for Q3). ChatGPT ads are already profitable at current low volume, with margins slightly below Meta and Google but expected to converge over time. Conversion and traffic quality for ChatGPT is consistent with other traditional channels at the current sample size. (298 characters)

Q: Eric Sheridan (Goldman Sachs) asked how much of July's improvement comes from easing macro headwinds versus organic business improvements, and if AI/platform investments fit within the existing cash flow framework. / A: Jeff Kip confirmed that all planned investments are already included in the prior cash flow guidance, with no incremental spending needed. July's improvement partially reflects easing homeowner macro weakness, but a significant portion comes from organic improvements: pro capacity is stabilizing after earlier declines, and the marketing team has retuned campaigns to generate more profit from lower revenue levels. (241 characters)