Angi's Profitable Rebirth: From Revenue Shedding to Sustainable Growth (NASDAQ:ANGI) - ANGI Stock Research Report

## Executive Summary / Key Takeaways * Strategic Pivot Yields Quality Growth: Angi has successfully transitioned from a revenue-at-all-costs model to a customer-centric strategy, shedding over $400 million in low-quality revenue to prioritize "jobs done well." This pivot is evidenced by a near-positive homeowner Net Promoter Score and a 10% jump in pro win rates post-homeowner choice implementation. * Technological Edge Driving Efficiency: Core to this transformation is Angi's aggressive platform consolidation and AI integration, including an LLM-based helper and enhanced Q&A, which are improving match quality and operational efficiency. These innovations are foundational to its competitive moat and future growth. * Proprietary Channel Momentum: The company reported its first quarter of proprietary volume growth since early 2021 in Q2 2025, signaling a return to profitable revenue expansion. This, combined with stabilizing network channels and anticipated revenue per lead growth, underpins a projected mid-single-digit revenue growth in 2026. * Improved Financial Health & Outlook: Despite short-term revenue declines in 2025 due to strategic shifts, Angi expects to hold profitability flat for the year, demonstrating strong operating efficiency. Adjusted EBITDA and free cash flow have materially improved from 2022, with further EBITDA margin expansion expected in 2026 on a higher revenue base. * Competitive Positioning for Long-Term Value: As an independent entity post-IAC (TICKER:IAC) spin-off, Angi is leveraging its leading brand, network effects, and technological advancements to differentiate itself in a fragmented market. Its focus on higher-capacity pros and efficient customer acquisition is building a more resilient and valuable pro network. ## The Phoenix Rises: Angi's Strategic Transformation for Sustainable Value Angi Inc. operates at the nexus of a vast, fragmented, and essential market, connecting homeowners with skilled professionals across over 500 service categories. Under brands like Angi, HomeAdvisor, and Handy in the U.S., and a suite of international marketplaces, the company facilitates everything from minor repairs to major renovations. The home services industry, while massive, has historically been dominated by word-of-mouth referrals, presenting a significant opportunity for digital marketplaces that can build trust and efficiency. Angi, a market leader, currently serves approximately 5% of professionals in America, indicating substantial room for expansion within this multi-trillion-dollar sector. The company has undergone a profound multi-year transformation, pivoting from a strategy that prioritized revenue volume to one focused on profitable, customer-centric growth. This journey, initiated in early 2023 following a period of "troubled" performance characterized by a substantial EBITDA drop and soaring capital expenditures, involved a strategic shedding of over $400 million in low-quality, unprofitable revenue. This deliberate reduction, while impacting top-line figures, was a calculated move to enhance customer lifetime value and the long-term health of the enterprise. The core mantra became "jobs done well," a North Star guiding all operational and product development efforts. ### Technological Differentiators: The Engine of Angi's Evolution Angi's competitive moat is increasingly fortified by its proprietary technology and aggressive innovation, which are directly translating into improved customer experience and operational efficiency. A critical initiative has been the consolidation of its technical platforms. Just 1.5 years ago, Angi operated on four distinct platforms in the U.S. and three internationally. By the end of 2025, this will be streamlined to just two in the U.S. and one internationally, with a long-term vision for a single, modern global platform. This consolidation is expected to yield "a great deal of operating efficiency and more speed to market," reducing overhead and accelerating product development. The company is also at the forefront of AI integration to enhance its core matching capabilities. An LLM-based AI helper has been implemented in the homeowner service request path, designed to improve the accuracy of job details. This helper is "increasing the quality of the match without actually hurting conversion," a tangible benefit that directly addresses a key pain point for both homeowners and pros. Furthermore, Angi has rebuilt its question-and-answer technology for service requests. Nearly three-quarters of its volume is currently in testing with these new, improved questions, and 15% has already been rolled out. Early results are promising, showing "20% fewer wrong task credit requests" and a "single digits" increase in pro engagement, hire rates, and win rates across the rolled-out portion. The company expects to reach an "80% plus range" by year-end, significantly improving the precision of matches. Another significant technological shift is the move to a single Pro product. Historically, Pros on the "Ads" product had less specific control over tasks and ZIP codes compared to "Leads" Pros. By migrating all Pros to a unified platform where they can pick specific tasks and geographies, Angi anticipates driving "better matching, higher Pro engagement, and improved win rates." This unification also promises "commercial efficiency" by streamlining sales and marketing efforts. Complementing this, Angi is rolling out an online Pro enrollment system, modeled after its highly successful European product, which has acquired "nearly 650,000 pros" since 2020 in a market less than half the size of the U.S. This online model has demonstrated "more than 50% higher success rate" for one-by-one lead viewing in Europe and a Boston test provides "additional validation that there's a sizable opportunity." This initiative is crucial for cost-efficiently expanding Angi's pro network and increasing liquidity across various tasks and geographies. These technological advancements are not merely incremental improvements; they are foundational to Angi's strategy of delivering superior customer experiences, which in turn drives higher retention, repeat business, and ultimately, profitable growth. ### A Turnaround in Motion: Financial Performance and Strategic Shifts The strategic pivot has begun to manifest in Angi's financial and operational performance. In Q2 2025, Angi reported its first quarter of proprietary volume growth since early 2021, a significant milestone underscoring the efficacy of its customer-centric approach. This achievement comes after a period of deliberate revenue reduction, with Q2 2025 revenue at $278.22 million, down 12% year-over-year, and H1 2025 revenue at $524.13 million, down 16% year-over-year.

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The Domestic segment, which accounts for the vast majority of revenue ($245.53 million in Q2 2025), saw declines across all revenue streams, including lead, advertising, services, and membership subscriptions. This was a direct consequence of "marketing optimization, sales force consolidation, and full implementation of homeowner choice in January 2025." Conversely, the International segment, despite a 2% revenue decline in Q2 2025 to $32.69 million, saw its Adjusted EBITDA increase by 6% to $5.42 million. This was driven by a strategic decision to transform the Canadian business model to a more profitable, self-serve European platform, which, while reducing revenue, has seen "profitability... already jumped materially." Profitability metrics reflect the impact of operational streamlining. Gross Profit Margin (TTM) stands at a healthy 94.76%. Operating income surged by 92% in Q2 2025 to $17.67 million and an impressive 217% in H1 2025 to $37.68 million, primarily due to significant expense reductions. Selling and marketing expenses decreased due to headcount reductions and lower offline advertising, while general and administrative expenses saw substantial declines from reduced lease expenses and improved credit loss rates. Depreciation also fell by 58% year-over-year in Q2 and H1 2025, reflecting reduced capitalized software spend and real estate footprint optimization. Adjusted EBITDA, while down 22% in Q2 and H1 2025 due to the revenue declines, is expected to stabilize, with the TTM EBITDA Margin at 11.69%. Net Income (TTM) is $36.00 million, with Q2 2025 net income at $10.90 million.

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Angi's cash flow generation remains robust, with TTM Operating Cash Flow at $155.94 million and TTM Free Cash Flow at $105.45 million. The company's balance sheet is solid, with $362.48 million in cash and cash equivalents as of June 30, 2025, and long-term debt of $497.25 million (3.88% Senior Notes due 2028). Management is confident that existing liquidity and expected positive cash flows will cover operational needs for the next twelve months. The company has also been active in share repurchases, buying back 5.2 million shares for $78 million in H1 2025, with a new 5 million share authorization approved in May 2025.

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### Competitive Landscape and Strategic Positioning Angi operates in a highly competitive environment, facing direct rivals like Thumbtack, Porch (NASDAQ:PORCH), Yelp (NYSE:YELP), and even Home Depot (NYSE:HD) through its services division. Its "biggest competitor is still word of mouth," highlighting the challenge of digitizing a traditionally offline market. Angi's network effects are a significant competitive advantage. Its extensive professional directory and strong brand recognition foster customer loyalty and recurring revenue. This allows Angi to differentiate itself from more agile, app-focused platforms like Thumbtack by offering a more comprehensive ecosystem. Against Porch (NASDAQ:PORCH), Angi's broader international presence and integrated advertising model provide a more robust market position and greater strategic adaptability. While Yelp (NYSE:YELP) boasts a vast review database, Angi's specialized focus on home services and dedicated tools for quoting and invoicing offer a more targeted and efficient user experience. Compared to Home Depot's (NYSE:HD) retail-backed services, Angi's digital-first model provides greater flexibility and accessibility. The company's proprietary technology, particularly its AI-driven matching and platform consolidation, is a key differentiator. This technology enhances user engagement and conversion, giving Angi an edge in operational efficiency and potentially higher profitability margins compared to competitors. The "homeowner choice" model, fully implemented in January 2025, is a strategic response to market dynamics. While competitors did not follow suit after an FCC rule was vacated, Angi chose to proceed, believing it creates "a significantly better customer experience" and positions it strongly for the long term, despite short-term market disruption. Angi is also strategically addressing its pro network. It is "under-indexed on the higher capacity pros" and sees an opportunity to target larger professionals (10-20 employees). The efficiency of pro acquisition has dramatically improved, with the LTV to CAC ratio reaching 2.8x in Q2 2025. The company acquired 39% fewer Pros in Q2 2025, but the aggregate Pro lifetime value sold was down only 4%, indicating a focus on higher-value, higher-capacity professionals. This strategic shift is building a more engaged and productive pro network, essential for long-term supply and liquidity. ### Outlook and Risks Angi's management projects a clear path to profitable growth. Following sequential quarterly improvements in revenue declines through 2025, the company anticipates "solid revenue growth, likely mid-single digits percent versus 2025" for 2026. This growth is expected to be driven by continued proprietary volume expansion, stabilization of network channels, and increasing revenue per lead from the migration to a single pro product. Profitability is expected to be held flat in 2025, with "modestly higher EBITDA margins on a higher revenue base next year" in 2026, as fixed costs are projected to remain relatively flat. Capital expenditures are expected to increase by 15-25% in 2025 over 2024's $50.5 million, primarily for capitalized software, reflecting continued investment in technology. Marketing spend will see a "modestly higher" allocation to paid channels in 2026, with TV spend potentially doubling from 2025 levels, as the company aims to enhance its leading brand.

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However, risks remain. A "cautious macroeconomic environment" led to a "modest bump down in homeowner volume" in April 2025, with an estimated 3-5 percentage point impact on run rates. While Angi's business has shown some countercyclical dynamics and two-thirds of its services are non-discretionary, prolonged economic weakness could still pose headwinds. The decline in unbranded Google SEO traffic is a persistent challenge, though Angi's focus on paid proprietary channels mitigates this. International regulatory impacts, such as Europe's Digital Services Act requiring Pro ID checks, have caused temporary network disruption. Furthermore, post-IAC (TICKER:IAC) spin-off, there are limitations on the pace of share repurchases. ## Conclusion Angi Inc. stands at a pivotal juncture, having successfully executed a multi-year strategic transformation that prioritized customer experience and profitable unit economics over raw revenue growth. The company's commitment to its "jobs done well" North Star, underpinned by significant technological advancements in AI-driven matching, platform consolidation, and a unified pro product, is now yielding tangible results. The return to proprietary volume growth in Q2 2025, coupled with a clear roadmap for revenue per lead expansion and a more efficient pro network, positions Angi for sustainable mid-single-digit revenue growth and expanding EBITDA margins in 2026. Despite a cautious macroeconomic backdrop and competitive pressures, Angi's differentiated technology, strong brand, and disciplined operational execution provide a robust foundation. The company's ability to drive higher customer satisfaction and pro retention, while efficiently scaling its network, underscores a compelling investment thesis. As Angi moves forward as an independent entity, its strategic focus on quality, innovation, and profitability is poised to unlock significant long-term value in the vast and evolving home services market.