October 22, 2014

Angie's List Reports Third Quarter 2014 Results

  • Gross member additions of approximately 350,000 at an average cost per acquisition of $64
  • Revenue of $81.3 million, representing a 24% increase over the prior year
  • Cash provided by operations of $8.0 million for the nine month period ended September 30, 2014

INDIANAPOLIS, Oct. 22, 2014 (GLOBE NEWSWIRE) -- Angie's List, Inc. (Nasdaq:ANGI) announced today financial results for the quarter ended September 30, 2014.

"We continue to add new members and grow revenue while we transition our business to a marketplace model," said Angie's List CEO Bill Oesterle. "Margins improved significantly as we reduced our marketing spend and improved operating efficiency. While we made strides executing on our marketplace, we see opportunity for further improvement."

Key Operating Metrics

Three months ended9/30/149/30/13Change
Total paid memberships (end of period) 2,983,439 2,378,867 25%
Gross paid memberships added (in period) 350,376 371,318 (6)%
Marketing cost per paid membership acquisition (in period) $ 64 $ 76 (16)%
First-year membership renewal rate (in period) 74% 75%(1.0) pts
Average membership renewal rate (in period) 77% 78%(1.0) pts
Participating service providers (end of period) 51,997 44,876 16%
Total service provider contract value (end of period, in thousands) $ 236,303  $ 181,975 30%
       
       
Nine months ended9/30/149/30/13Change
Gross paid memberships added (in period) 1,035,814 993,556 4%
Marketing cost per paid membership acquisition (in period)  $ 79  $ 76 4%
First-year membership renewal rate (in period) 74% 75%(1.0) pts
Average membership renewal rate (in period) 77% 78%(1.0) pts

Market Cohort Analysis

"Penetration rates in each of our cohorts and total average revenue per member continue to grow, reflecting the strength and stability of the model," continued Oesterle. "Combined with improved operating margins, these strong results provide the foundation for investment in new growth."

       ServiceAverage    Annual
   AverageMembershipProviderMarketing  EstimatedMembership
 # ofRevenue/Revenue/PaidRevenue/PaidExpense/Total PaidPenetrationGrowth
CohortMarketsMarketMembershipMembershipMarketMembershipsRate*Rate
Pre-2003 10  $ 7,258,018  $ 34.01  $ 108.50  $ 1,416,968 564,568 14.9% 24%
2003-2007 35 5,416,899 30.35 99.70 1,486,922 1,622,252 11.7% 25%
2008-2010 103 341,123 16.35 41.03 204,621 674,337 12.0% 23%
Post 2010 105 39,230 12.05 28.46 59,383 122,282 7.3% 51%
Total 253         2,983,439    

Cohort table presents financial and operational data for the twelve months ended September 30, 2014.

* Demographic information used in penetration rate calculations is based on a third-party study we commissioned in September 2014. According to the study, the number of U.S. households in our target demographic was 28 million.

Third Quarter Results

Total revenue for the third quarter of 2014 was $81.3 million, an increase of 24 percent compared to the prior year period. Membership revenue in the third quarter of 2014 was $18.3 million, an increase of 7 percent compared to the prior year period. Service provider revenue remains the largest and fastest growing component of total revenue at $63.0 million for the quarter, representing a 30 percent growth rate year over year. Service provider revenue includes revenue from advertising contracts and fees from e-commerce transactions. Advertising revenue was $56.0 million in the third quarter of 2014, an increase of 33 percent compared to the prior year period, and e-commerce revenue was $7.0 million, an increase of approximately 9 percent year over year.

Marketing expense decreased 20 percent, or $5.7 million, compared to the prior year period. Net loss for the quarter was $5.2 million, with selling expense of $32.1 million and marketing expense of $22.5 million, compared to a net loss of $13.5 million, with selling expense of $24.0 million and marketing expense of $28.2 million, in the prior year period. Adjusted EBITDA loss, a non-GAAP financial measure, was $1.3 million for the period as compared to a loss of $11.3 million in the prior year period.

Cash used in operations for the third quarter was approximately $9.6 million. At September 30, 2014, the balance of cash, cash equivalents and investments was $79.1 million.

Business Outlook

The Company's financial and operating expectations for the fourth quarter of 2014 are as follows:

  • Total revenue of $80 million to $82 million.
  • Marketing expense of approximately $5 million.

The Company expects to generate positive adjusted EBITDA for the full year 2014.

Angie's List, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
 
 September 30,
 2014
December 31,
2013
 (Unaudited)  
Assets    
Cash and cash equivalents$ 62,319 $ 34,803
Restricted cash50 50
Short-term investments16,739 21,055
Accounts receivable, net14,250 12,385
Prepaid expenses and other current assets18,196 13,651
Total current assets111,554 81,944
Property, equipment and software, net43,443 18,657
Goodwill1,145 1,145
Amortizable intangible assets, net3,031 3,500
Other assets, noncurrent1,874 397
Total assets$ 161,047 $ 105,643
     
Liabilities and stockholders' deficit    
Accounts payable$ 16,309 $ 6,838
Accrued liabilities32,010 21,770
Deferred membership revenue38,114 35,560
Deferred advertising revenue47,638 39,448
Current portion of obligations under leases217
Total current liabilities134,288 103,616
Long-term debt, net58,793 14,918
Deferred membership revenue, noncurrent5,058 4,909
Deferred advertising revenue, noncurrent605 521
Obligations under leases351
Other liabilities, noncurrent1,342 169
Total liabilities200,437 124,133
Stockholders' deficit:    
Common stock67 67
Additional paid-in-capital263,951 257,505
Treasury stock(23,719) (23,719)
Accumulated deficit(279,689) (252,343)
Total stockholders' deficit(39,390) (18,490)
Total liabilities and stockholders' deficit$ 161,047 $ 105,643
 
 
Angie's List, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
         
 Three Months Ended Nine Months Ended 
 September 30,September 30,
 2014201320142013
 (Unaudited)(Unaudited)
Revenue        
Membership $ 18,279  $ 17,050 $ 55,095  $ 47,598
Service provider63,027 48,450177,764 129,288
Total revenue81,306 65,500232,859 176,886
Operating expenses        
Operations and support14,119 11,01639,413 29,418
Selling32,078 23,96088,478 65,582
Marketing22,508 28,18981,909 75,870
Product and technology8,696 7,56524,243 20,064
General and administrative8,639 7,79825,080 20,304
Total operating expenses86,040 78,528 259,123 211,238
Operating loss(4,734) (13,028)(26,264) (34,352)
Interest expense, net 468579 1,395
Loss on debt extinguishment458 458
Loss before income taxes(5,192) (13,496)(27,301) (35,747)
Income tax expense15 1545 45
Net loss $ (5,207)  $ (13,511) $ (27,346)  $ (35,792)
Net loss per common share — basic and diluted $ (0.09)  $ (0.23) $ (0.47)  $ (0.62)
Weighted average common shares outstanding — basic and diluted58,517 58,38958,508 58,164
         
Non-cash stock-based compensation        
Operations and support $ 20  $ 19 $ 45  $ 52
Selling109 50292 101
Product and technology387 (408)838 (45)
General and administrative1,901 1,0154,770 2,558
Total non-cash stock-based compensation $ 2,417  $ 676 $ 5,945  $ 2,666
         
Reconciliation of net loss (unaudited) to adjusted EBITDA (loss)        
Net loss $ (5,207)  $ (13,511) $ (27,346)  $ (35,792)
Income tax expense15 1545 45
Interest expense, net 468579 1,395
Depreciation and amortization1,450 1,0504,018 2,874
Non-cash stock-based compensation2,417 6765,945 2,666
Loss on debt extinguishment458458
Litigation settlement accrual adjustment(450)(450)
Adjusted EBITDA (loss) $ (1,317) $ (11,302) $ (16,751) $ (28,812)
 
 
Angie's List, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
 
 Nine Months Ended
September 30,
 20142013
 (Unaudited)
Operating activities    
Net loss$ (27,346) $ (35,792)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization4,018 2,874
Amortization of debt discount, deferred financing fees and bond premium301 420
Non-cash loss on debt extinguishment266
Non-cash compensation expense5,945 2,666
Changes in certain assets:    
Accounts receivable(1,865) (2,849)
Prepaid expenses and other current assets(4,545) 4,810
Changes in certain liabilities:    
Accounts payable7,546 (3,175)
Accrued liabilities12,653 21,423
Deferred advertising revenue8,274 12,577
Deferred membership revenue2,703 10,494
Net cash provided by operating activities7,950 13,448
     
Investing activities    
Purchase of investments(13,164) (27,572)
Sale of investments17,400 16,855
Acquisition of business assets (2,150)
Property, equipment and software(12,904) (5,685)
Capitalized website and software development costs(12,785)
Intangible assets(841) (701)
Net cash used in investing activities(22,294) (19,253)
     
Financing activities    
Proceeds from exercise of stock options501 4,776
Principal payments on long-term debt(15,000)
Proceeds from long-term debt issuance60,000
Fees paid to lender(1,210)
Cash paid for financing fees(1,879)
Payment of contingent consideration from acquisition of business assets(500)
Payments on capital lease obligations(52)
Net cash provided by financing activities41,860 4,776
Net increase (decrease) in cash and cash equivalents$ 27,516 $ (1,029)
Cash and cash equivalents, beginning of period34,803 42,638
Cash and cash equivalents, end of period$ 62,319 $ 41,609

Conference Call Information

The Company will host a conference call on October 22, 2014 at approximately 8:30 AM (ET) / 5:30 AM (PT) to discuss the quarterly financial results with the investment community. A live webcast of the event will be available on the Angie's List Investor Relations website at http://investor.angieslist.com/.

A live domestic dial-in is available at (877) 380-5664 or (253) 237-1143 internationally. An audio replay will be available at (855) 859-2056 domestically or (404) 537-3406 internationally, using Conference ID 13194470 through October 28, 2014.

Live audio webcast of the presentation will be available on the Angie's List Investor Relations website at http://investor.angieslist.com/.

About Angie's List

Angie's List helps facilitate happy transactions between nearly 3.0 million consumers nationwide and its collection of highly-rated service providers in 720 categories of service, ranging from home improvement to health care. Built on a foundation of authentic reviews of local service, Angie's List connects consumers directly to its online marketplace of services from member-reviewed providers, and offers unique tools and support designed to improve the local service experience for both consumers and service professionals.

Non-GAAP Financial Measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States (GAAP), Angie's List has disclosed in this press release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP Adjusted EBITDA, which Angie's List defines as earnings before interest, income taxes, depreciation, amortization, loss on debt extinguishment, non-cash stock-based compensation and the legal settlement accrual adjustment. Angie's List uses Adjusted EBITDA internally in analyzing its financial results and has determined to disclose this measure to investors because it believes it will be useful to them, as a supplement to GAAP measures, in evaluating Angie's List's operating performance relative to its industry sector and competitors. Angie's List believes that the use of Adjusted EBITDA provides additional insight for investors to use in evaluation of ongoing operating results and trends. However, non-GAAP financial measures such as Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Angie's List has significant uses of cash flows, including capital expenditures and other contractual commitments, interest payments and income taxes that are not reflected in adjusted EBITDA. Adjusted EBITDA does not consider the potentially dilutive impact of issuing non-cash stock-based compensation to Angie's List's management and other employees. It should also be noted that other companies, including companies in the same industry, may calculate Adjusted EBITDA in a different manner than Angie's List. Angie's List has provided a reconciliation of the Adjusted EBITDA measure to the most directly comparable GAAP financial measure.

Forward-Looking and Cautionary Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expected revenue, future marketing expense and growth opportunities. These forward-looking statements are based on Angie's List's current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: our ability to accurately measure and predict revenue per paid membership, membership acquisition costs or costs associated with servicing our members; our ability to protect our brand and maintain our reputation among consumers and local service providers; our ability to attract and retain local service providers to advertise on our service; our ability to increase our pricing on memberships and service provider contracts as we increase our market penetration; our ability to replicate our business model in our less penetrated markets; our success in converting consumers and local service providers into paid memberships and participating service providers; competitive factors; our ability to stay abreast of modified or new laws and regulations applying to our business, including those regarding sales or transaction taxes and privacy regulation; our ability to adequately protect our intellectual property; our ability to manage our growth; and general economic conditions worldwide.

Further information on these factors and other risks that may affect our business is included in filings we make with the Securities and Exchange Commission from time to time, including Angie's List's Annual Report on Form 10-K and its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

These documents are or will be available online from the SEC or on the SEC Filings section of the Investor Relations section of our website at http://investor.angieslist.com. Information on our website is not part of this release. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events.

CONTACT: Investor Relations:

         Leslie Arena

         317-808-4527

         lesliea@angieslist.com

         

         Public Relations:

         Debra DeCourcy

         317-396-9134

         debra.decourcy@angieslist.com


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