WEBVTT - Angi CEO Jeff Kip Talks AI Pivot, Earnings Report

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Well, it's sort of like hitting your finger with a hammer.

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<v Speaker 2>We've all done that. It really hurts. And I'm just

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<v Speaker 2>pointing this out because we did see shares of Angie

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<v Speaker 2>dropping thirty five percent last Wednesday following its latest earnings release,

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<v Speaker 2>after the online portal for home improvement reported first quarter

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<v Speaker 2>revenue that missed expectations. They also plan to stop issuing

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<v Speaker 2>quarterly guidance, and outliner outlined a major strategic pivot to

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<v Speaker 2>refocus on AI. I do want to be fair. Though

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<v Speaker 2>the stock did bounce back the following two days after

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<v Speaker 2>the earning share price drop, getting about twenty one percent

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<v Speaker 2>in that bounce back. Stock is down though another twelve

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<v Speaker 2>percent in today's session. It's about a two hundred and

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<v Speaker 2>seven million dollar market cap stock. It is down tim

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<v Speaker 2>about sixty percent year to date.

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<v Speaker 1>After that intro, I'm gonna.

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<v Speaker 2>Let you, yeah, Jeff, if you want to come in,

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<v Speaker 2>we do welcome you back. We like talking to you.

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<v Speaker 2>We think it's an interesting platform, tells us a lot

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<v Speaker 2>of small business owners, talks to us about the consumer

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<v Speaker 2>and about kind of the home market, and then so

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<v Speaker 2>much more. Jeffkip is the CEO of Angie. He joins

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<v Speaker 2>us from Gohaset, Massachusetts. You guys have a lot going on, Jeff,

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<v Speaker 2>since we talked with you in mid February, got changes

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<v Speaker 2>to your CFO and COO that happened in March and April.

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<v Speaker 2>What's what happened that you guys said? We got to

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<v Speaker 2>do something different.

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<v Speaker 3>So we have been working on the same technologies at

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<v Speaker 3>Home Advisor for over twenty years from the Angie's List

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<v Speaker 3>and handy businesses a little less, but we've had three

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<v Speaker 3>old platforms we've been working on. The older your technology gets,

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<v Speaker 3>the more code is layered on top of other code

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<v Speaker 3>slows you down, makes innovation harder, and we have been

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<v Speaker 3>plotting a path to a new platform, but we have

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<v Speaker 3>just decided now's the time we needed to move quicker.

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<v Speaker 3>The big catalysts are what I would call the biggest

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<v Speaker 3>changes in technology and a generation, which we really saw

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<v Speaker 3>February when you saw things like open Claw claud Opus

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<v Speaker 3>zero point six released. And now our engineers are able

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<v Speaker 3>to move a lot faster and the capabilities we have

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<v Speaker 3>are a lot greater, and it's time for us to

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<v Speaker 3>stop fighting the old platform and kind of move into

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<v Speaker 3>the present, if you will.

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<v Speaker 1>So what does that look like? Not just from you know,

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<v Speaker 1>this is a two sided market, So what does it

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<v Speaker 1>look like from the provider and the home services professional standpoint,

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<v Speaker 1>but also from the customer standpoint?

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<v Speaker 3>So if you think about the homeowner customer, I think

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<v Speaker 3>we are going to be able to have a more nuanced,

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<v Speaker 3>more natural language conversation with the homeowner. Homeowners are not

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<v Speaker 3>natural experts at describing their problems that they need pros

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<v Speaker 3>to work on, and we're going to be able to

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<v Speaker 3>ask better questions, upload photos, and get to a better

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<v Speaker 3>identification of the details that need work, give the homeowner

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<v Speaker 3>better estimates. So we'll be going there over the course

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<v Speaker 3>of the next year. The first stage of our new

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<v Speaker 3>platform is to put the homeowner experience into place over

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<v Speaker 3>the course of this year.

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<v Speaker 4>On the pro side, we're going to.

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<v Speaker 3>Build a set of tools for the pro We refer

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<v Speaker 3>to it in our release and our letter as the

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<v Speaker 3>Angie Pro Chief Revenue Officer. Pros are very good at

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<v Speaker 3>doing work. They're not always good at calling the homeowner

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<v Speaker 3>right away. They're not always good at making sure there's

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<v Speaker 3>a sales trained technician or a salesperson at the appointment

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<v Speaker 3>they're not always good at following up. They're juggling a

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<v Speaker 3>lot of balls in the air. We believe that agents

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<v Speaker 3>really change the game for pros. You can already see

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<v Speaker 3>it out there. There's startups out there doing pieces of this.

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<v Speaker 3>We believe we can build a toolkit to make sure

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<v Speaker 3>that our pros win jobs at a much higher rate,

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<v Speaker 3>gets more value from the platform. And then if our

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<v Speaker 3>pros are winning, the homeowners are getting more value from

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<v Speaker 3>the platform too because their jobs are getting done well

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<v Speaker 3>by our pros.

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<v Speaker 1>So what are the changes that happen internally at Angie

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<v Speaker 1>to facilitate something like this, and what can investors understand

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<v Speaker 1>about how this changes margins, what it looks like for

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<v Speaker 1>the business, and where they actually see differences.

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<v Speaker 3>So internally, we need to change the way our teams

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<v Speaker 3>work and the way they code.

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<v Speaker 4>What Cloude Opus.

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<v Speaker 3>Four point six did, and you can read about all

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<v Speaker 3>over the place, is that now you can not only

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<v Speaker 3>write code, but you can write more code and you

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<v Speaker 3>can check code using AI. Now you still have to

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<v Speaker 3>have engineers who understand systems, understand the business, and understand

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<v Speaker 3>the ultimate product. They also need to understand how to

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<v Speaker 3>test and spot issues in the code. But there's really

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<v Speaker 3>a game changer there that it's going to allow our organization.

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<v Speaker 4>To move much quicker.

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<v Speaker 3>One piece of what we're doing is we were midstream

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<v Speaker 3>on building our homeowner experience afresh. We're now writing some

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<v Speaker 3>of that with AI. But we're going to rebuild our

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<v Speaker 3>entire pro back end much faster using AI, so effectively,

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<v Speaker 3>our teams are going to move to AI first coding.

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<v Speaker 3>So we're going through a really material transition with our

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<v Speaker 3>product technology, UX and data teams to make sure that

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<v Speaker 3>we can do this effectively. But we think it's going

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<v Speaker 3>to double our speed to market.

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<v Speaker 1>You know, if some analysts are out with different views,

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<v Speaker 1>I'm just going to read from Benchmark's note. They say

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<v Speaker 1>we have no idea how much this is going to

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<v Speaker 1>cost and over what timeframe we should expect to return

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<v Speaker 1>on investment. What would you say to Benchmark?

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<v Speaker 3>So Dan is a great guy, very very smart guy.

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<v Speaker 3>I think that we are going to fund it effectively internally.

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<v Speaker 3>In other words, we're not going to add headcount. We

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<v Speaker 3>are probably going to add some token and AI software costs,

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<v Speaker 3>but not massive, So.

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<v Speaker 4>We're going to fund it internally. I think what we're

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<v Speaker 4>really talking about is.

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<v Speaker 3>Opportunity costs where the reason we decided to pull our

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<v Speaker 3>guidance is instead of working away at our old platform

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<v Speaker 3>to optimize revenue and deliver product changes that deliver revenue,

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<v Speaker 3>which ultimately are hard to do on the old code,

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<v Speaker 3>we are going to go fast forward to the new

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<v Speaker 3>platform and be able to develop from there. We've estimated

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<v Speaker 3>it's going to take us a year or so to

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<v Speaker 3>get to the new platform, and in that time we're

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<v Speaker 3>also going to start building our first pro agents, which

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<v Speaker 3>we don't plan to monetize. We plan for it to

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<v Speaker 3>improve the experience of our pros and maybe ultimately will

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<v Speaker 3>monetize it if they want to use it for other

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<v Speaker 3>leads from other platforms. But effectively, what we said is

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<v Speaker 3>we're not going to talk to you about where our

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<v Speaker 3>revenue is going for a year. We gave some very

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<v Speaker 3>rough directional comments and so that's really going to be

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<v Speaker 3>the cast.

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<v Speaker 2>Hey, one of the things well, and also in that

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<v Speaker 2>note from Benchmark that we also got, Jeff, he said,

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<v Speaker 2>but b U, given the out of the blue nature

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<v Speaker 2>of the new game plan, we suspect investors are simply

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<v Speaker 2>going to assume that Angie's core business model just is

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<v Speaker 2>not working. The strategy could work out, but a lot

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<v Speaker 2>of questions have to be answered for investors to get

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<v Speaker 2>even remotely comfortable. Is that the case that the core

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<v Speaker 2>business model was not working? And I bring up to

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<v Speaker 2>the decline in revenue fifty six percent drop in network

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<v Speaker 2>revenue related to the implementation of Homeowner Choice last year

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<v Speaker 2>as a practice of letting homeowners on the platform select

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<v Speaker 2>which professionals they match with. Was it a strategy mistake?

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<v Speaker 2>And was the is the core busines is not working?

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<v Speaker 2>Because is this just a case that creative Yeah, the.

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<v Speaker 4>Core business is working quite well. Fundamentally.

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<v Speaker 3>If you look at Angie over the last few years,

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<v Speaker 3>we've gone from one point five billion to roughly a

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<v Speaker 3>billion in revenue in the last few years. Most of

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<v Speaker 3>that is giving up less profitable and lower quality revenue.

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<v Speaker 3>So we've actually made a decision to move off what

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<v Speaker 3>you might have termed an inflated model, bring it down

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<v Speaker 3>so that the quality of the experience is much better

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<v Speaker 3>for the homeowner and for the pro You can see

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<v Speaker 3>that our NPS has moved thirty points over three years.

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<v Speaker 3>That is a cataclysmic change in the world of NPS.

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<v Speaker 3>Our pro churt has come down thirty percent. We see

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<v Speaker 3>that our win rate for pros has moved directionally about

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<v Speaker 3>the same amount in terms of improvement, so we've dramatically

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<v Speaker 3>changed the experience. We had a bit of an over

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<v Speaker 3>built revenue base, but we've pivoted and we still have

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<v Speaker 3>the strongest brand, the best acquisition machine, and the largest

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<v Speaker 3>pro network of anybody in our space.

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<v Speaker 4>And we are spinning the flywheel as we go through this.

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<v Speaker 2>Jeff, real quickly, twenty seconds. How long is this going

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<v Speaker 2>to take to kind of play have an impact? Positively?

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<v Speaker 2>Much more positively? Real quickly.

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<v Speaker 4>We think we need a year.

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<v Speaker 3>To get our new platform in place and build out

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<v Speaker 3>the first set of agents, but we think we should

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<v Speaker 3>start seeing good moves by the end of this year

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<v Speaker 3>and start accelerating our revenue in twenty twenty seven.

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<v Speaker 2>Well, we look forward to continue the conversation with you

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<v Speaker 2>as you guys evolve. Jeff Kip here's the CEO of Angie,

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<v Speaker 2>joining us right here on Bloomberg Business Week. Deli