Angi CEO Jeff Kip Talks AI Pivot, Earnings Report | Bloomberg Talks

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0:07 Well, it's sort of like hitting your finger with a hammer.

0:10 Uh we've all done that.

0:12 [laughter]

0:11 It really hurts.

0:13 Um and I'm just pointing this out because we

0:15 did see shares of Angie dropping 35% last Wednesday

0:18 following its latest earnings release after the online portal

0:21 for home improvement reported first quarter revenue that missed expectations.

0:25 They also plan to stop issuing quarterly guidance and outlay

0:28 outlined a major strategic pivot to refocus on AI.

0:32 I do want to be fair though.

0:33 The stock did bounce back the following 2 days after

0:36 the earning share price drop gaining about 21% in that bounce back.

0:40 Stock is down though another 12% in today's session.

0:43 It's about a $207 million market cap stock.

0:46 It is down to him about 60% year-to-date.

0:49 Uh after that intro, I'm going to let you bring in [laughter] Jeff.

0:52 Jeff, if you want to come in, um we do welcome you back.

0:55 We like talking to you.

0:56 We think it's an interesting platform.

0:59 Tells us a lot about small business owners.

1:01 Talks to us about the consumer,

1:03 um and about kind of the home market, uh and then so much more.

1:07 Jeff Kip is the CEO of Angie.

1:08 He joins us from Cohasset, Massachusetts.

1:11 You guys have a lot going on, Jeff.

1:13 Um since we talked with you in mid-February,

1:16 you got changes to your CFO and COO.

1:19 Um that happened in March and April.

1:21 What's What happened that you guys said, "We got to do something different?" So,

1:27 we have been working on the same technologies at HomeAdvisor for over 20 years.

1:34 Uh from the Angie's List and Handy businesses a little less.

1:37 But, we've had three old platforms we've been working on.

1:40 The older your technology gets, the more code is layered on top of other code.

1:45 Slows you down.

1:46 Makes innovation harder.

1:47 And we have been plotting a path to a new platform.

1:51 Uh but, we have just decided now's the time.

1:53 We needed to move quicker.

1:54 The big catalysts are what I would call

1:57 the biggest changes in technology in a generation,

2:00 which we really saw February when you saw things like Open Claw,

2:05 Cloud Opus 0.6 released.

2:07 And now our engineers are able to move a lot

2:09 faster and the capabilities we have are a lot greater.

2:12 And it's time for us to stop fighting the old

2:13 platform and kind of move into the present, if you will.

2:16 So, what does that look like?

2:18 Not just from, you know, this is a two-sided market.

2:20 So, what does it look like from Sure.

2:22 the provider and the home services professional standpoint,

2:26 but also from the customer standpoint?

2:28 So, if you think about the homeowner customer,

2:31 I think we are going to be able to have a more nuanced,

2:34 more natural language conversation with the homeowner.

2:36 Homeowners are not natural experts at describing

2:39 their problems that they need pros to work on.

2:42 And we're going to be able to ask better questions, upload photos,

2:45 and get to a better identification of the details that need work,

2:48 give the homeowner better estimates.

2:50 So, we'll be going there over the course of the next year.

2:52 The first stage of our new platform is to put

2:54 the homeowner experience into place over the course of this year.

2:58 On the pro side, we're going to build a set of tools for the pro.

3:01 We referred to it in our release

3:03 in our letter as the Angie pro chief revenue officer.

3:07 Pros are very good at doing work.

3:09 They're not always good at calling the homeowner right away.

3:12 They're not always good at making sure there's

3:14 a sales trained technician or a salesperson at the appointment.

3:17 They're not always good at following up.

3:19 They're juggling a lot of balls in the air.

3:21 We believe that agents really change the game for pros.

3:25 You can already see it out there.

3:26 There are startups out there doing pieces of this.

3:28 We believe we can build a toolkit to make sure

3:31 that our pros win jobs at a much higher rate, gets more value from the platform,

3:36 and then if our pros are winning,

3:38 the homeowners are getting more value from the platform,

3:40 too, cuz their jobs are getting done well by our pros.

3:43 So, what are the changes that happen internally

3:45 at Angie to to facilitate something like this?

3:47 And And what can investors uh uh,

3:50 you know, understand about how this changes margins,

3:54 what it looks like for the business,

3:55 and and where they actually see differences.

3:58 So, internally, we need to change the way our teams work and the way they code.

4:04 What Cloud Opus 4.6 did, and you can read about all over the place,

4:08 is that now you can not only write code,

4:11 but you can write more code, and you can check code using AI.

4:15 Now, you still have to have engineers who understand systems,

4:18 understand the business, and understand the ultimate product.

4:21 They also need to understand how to test and spot issues in the code,

4:24 but there's really a game-changer there that it's

4:27 going to allow our organization to move much quicker.

4:29 Mhm.

4:30 One piece of what we're doing is we

4:32 were midstream on building our homeowner experience afresh.

4:36 We're now writing some of that with AI,

4:39 but we're going to rebuild our entire pro back end much faster using AI.

4:43 So, effectively, our teams are going to move to AI-first coding.

4:47 So, we're going through a really

4:48 material transition with our product, technology, UX,

4:51 and data teams to make sure that we can do this effectively,

4:55 but we think it's going to double our speed to market.

4:57 You know, some analysts are out with with different views.

4:59 I'm just going to read from read from Benchmarks' uh, note.

5:02 Uh, they say, "We have no idea how much this is going to cost and over

5:05 what timeframe we should expect a return

5:07 on investment." What would you say to Benchmark?

5:11 So, Dan is a great guy, very very smart guy.

5:15 Uh, I think that we are going to fund it effectively internally.

5:19 In other words, we're not going to add headcount.

5:21 We are probably going to add some token and AI software costs, but not massive.

5:26 So, we're going to fund it internally.

5:28 I think what we're really talking about is opportunity cost,

5:31 where the reason we decided to pull our guidance is instead of working away

5:35 at our old platform to optimize revenue

5:38 and deliver product changes that deliver revenue,

5:40 which ultimately are hard to do on the old code,

5:43 we are going to go fast forward to the new

5:45 platform and be able to develop from there.

5:47 We've estimated it's going to take us a year or so to get to the new

5:50 platform and in that time we're also

5:53 going to start building our first pro agents, which we don't plan to monetize.

5:57 We plan for it to improve the experience of our pros and maybe ultimately

6:01 we'll monetize it if they want to use it for other leads from other platforms.

6:04 But effectively what we said is we're not going to talk

6:07 to you about where our revenue is going for a year.

6:09 We gave some very rough directional comments

6:13 and so that's really going to be the cost.

6:15 Okay.

6:15 Hey, one of the things well and also

6:17 in that note from Benchmark that we also got Jeff,

6:22 he said given the out of the blue nature of the new game plan,

6:26 we suspect investors are simply going to assume

6:29 that Angie's core business model just is not working.

6:33 The strategy could work out, but a lot of questions have to be

6:36 answered for investors to get even remotely comfortable.

6:39 Is Is that the case that the core business model was not

6:42 what working and and I I bring up to the decline in revenue.

6:46 56% drop in network revenue related

6:49 to the implementation of homeowner choice last year

6:52 was a practice of letting homeowners

6:53 on the platform select which professionals they match with.

6:57 Was it a strategy mistake and and was the is the core business not working?

7:01 Cuz is this just a case about creating velocity?

7:04 Yeah.

7:05 The core business is working quite well.

7:07 Fundamentally, if you look at Angie over the last few years,

7:10 we've gone from 1.5 billion to roughly

7:13 a billion in revenue in the last few years.

7:16 Most of that is giving up less profitable and lower quality revenue.

7:20 So we've actually made a decision to move

7:22 off what you might have termed an inflated model,

7:24 bring it down so that the quality of the experience

7:27 is much better for the homeowner and for the pro.

7:29 You can see that.

7:30 Our NPS has moved 30 points over 3 years.

7:33 That is a cataclysmic change in the world of NPS.

7:37 Our pro churn has come down 30%.

7:39 We see that our win rate for pros has

7:41 moved directionally about the same amount in terms of improvement.

7:45 So, we've dramatically changed the experience.

7:47 We had a bit of an overbuilt revenue base,

7:49 but we've pivoted and we still have the strongest brand,

7:52 the best acquisition machine,

7:54 and the largest pro network of anybody in our space.

7:57 Right.

7:57 And we are spinning the flywheel as we go through this change.

8:00 Jeff, real quickly, 20 seconds.

8:01 How long is this going to take to kind of play have an impact positively,

8:06 much more positively, real quickly.

8:09 We think we need a year to get our new

8:10 platform in place and build out the first set of agents,

8:13 but we think we should start seeing good moves by the end

8:15 of this year and start accelerating our revenue in 2027.

8:19 Well, we look forward to continuing

8:21 the conversation with you as you guys evolve.

8:23 Jeff Kipp, he's the CEO of Angie joining

8:25 us right here on Bloomberg Business Week daily.