October 21, 2015

Angie's List Reports Third Quarter 2015 Results

  • First profitable third quarter in Company history
  • Revenue of $87.0 million, representing 7 percent growth from the year ago quarter, with growing participating service providers on a sequential basis
  • Adjusted EBITDA, a non-GAAP financial measure, of $3.2 million, a $4.5 million improvement from the year ago quarter
  • Net income of $0.1 million, an improvement from a net loss of $5.2 million in the year ago quarter
  • Growth in total paid memberships, total contract value, web traffic and e-commerce participation by service providers

INDIANAPOLIS--(BUSINESS WIRE)-- Angie's List, Inc. (NASDAQ:ANGI) today announced financial results for the quarter ended September 30, 2015.

"We are pleased to report the first profitable third quarter in the history of Angie's List. This was a quarter with stabilizing results. We are seeing good progress in key areas of our business, many of which are leading indicators for future results," said Scott Durchslag, Angie's List President and Chief Executive Officer.

"Improved efficiencies, including in selling and marketing expenses, together with increased quarter over quarter revenues, led to expanding margins. The increased revenue reflects improved service provider metrics from a year ago, including increases in contract value, backlog, total members, first year member retention, web traffic, mobile web traffic and consumer and service provider participation in e-commerce. Additionally, we turned around last quarter's sequential decline in participating service providers. With our announcement this morning of Angie's Fair Price Guarantee and Angie's Service Quality Guarantee, we've further differentiated and strengthened our position as the leader in home services and taken our commitment to ensuring happy transactions between members and service providers to an entirely new level."

"That said, we have much work remaining to achieve our full potential," continued Durchslag. "Our top priority is to improve operational execution to reignite revenue growth, drive adjusted EBITDA and deliver free cash flow. We've already begun to take action, including identifying millions in annualized cost reductions to be implemented in 2016, redesigning our sales force, baselining our Net Promoter Scores and improving our marketing execution by shifting mix and changing agencies. This quarter we expect to begin scaling our new Angie's List 4.0 platform, release our new service provider mobile application and improve execution in e-commerce, all capitalizing on investments that have already been made. Looking further ahead, we expect to introduce new products and partnerships that will monetize our more than 100 million unique visitors across all of our platforms. While it will take some time to realize the full benefit, I believe improvements will be more visible in our results in 2016. Ultimately, I am confident that through these actions, and given the Company's many strengths, Angie's List is well positioned to drive significant value creation for our shareholders and customers alike."

     

Key Operating Metrics

 
Three months ended September 30,
2015
September 30,
2014
Change
Total paid memberships (end of period) 3,248,239 2,983,439 9 %
Gross paid memberships added (in period) 298,922 350,376 (15 )%
Marketing cost per paid membership acquisition (in period) $ 78 $ 64 22 %
First-year membership renewal rate (in period) 75 % 74 % 1 pt
Average membership renewal rate (in period) 77 % 77 % flat
Participating service providers (end of period)* 53,918 54,392 (1 )%
Total service provider contract value (end of period, in thousands) $ 270,904 $ 236,303 15 %
Total service provider contract value backlog (end of period, in thousands) $ 162,817 $ 145,829 12 %
 
Nine months ended   September 30,
2015
  September 30,
2014
  Change
Gross paid memberships added (in period) 818,775 1,035,814 (21 )%
Marketing cost per paid membership acquisition (in period) $ 80 $ 79 1 %
First-year membership renewal rate (in period) 74 % 74 % flat
Average membership renewal rate (in period) 77 % 77 % flat

* We include in participating service providers the total number of service providers under contract for advertising, e-commerce or both at the end of the period.

         

Market Cohort Analysis

 
Pre-2003   2003-2007   Post-2007   Total  
September 30,   September 30,   September 30,   September 30,  
2015   2014   2015   2014   2015   2014   2015   2014  
Number of Markets 10   10 35   35 208   208 253   253
Average Revenue/Market $ 7,957,661 $ 7,258,018 $ 6,107,238 $ 5,416,899 $ 223,525 $ 188,725 $ 1,343,174 $ 1,191,409
Average Marketing Expense/Market $ 1,070,334 $ 1,416,968 $ 1,126,209 $ 1,486,922 $ 99,040 $ 131,304 $ 279,530 $ 369,657
 
Membership Revenue/Paid Member $ 26.59 $ 34.01 $ 24.41 $ 30.35 $ 14.77 $ 15.74 $ 22.29 $ 27.15
Service Provider Revenue/Paid Member $ 107.18     $ 108.50     $ 101.31     $ 99.70     $ 41.88     $ 39.24     $ 86.77     $ 85.27  
Total Revenue/Paid Member $ 133.77 $ 142.51 $ 125.72 $ 130.05 $ 56.65 $ 54.98 $ 109.06 $ 112.42
 
Total Paid Memberships 625,159 564,568 1,778,286 1,622,252 844,794 796,619 3,248,239 2,983,439
Estimated Penetration Rate* 17 % 15 % 13 % 12 % 12 % 11 % 13 %

12

%

Annual Membership Growth Rate 11 %   24 %   10 %   25 %   6 %   26 %   9 %  

25

%

Cohort table presents financial and operational data for the twelve months ended September 30, 2015 and 2014.

* Demographic information used in penetration rate calculations is based on third-party studies we commissioned in September 2015 and September 2014, respectively. According to these studies, the number of U.S. households in our target demographic was 27 million for the period ended September 30, 2015 and 28 million for the period ended September 30, 2014.

Third Quarter Results

Revenue

Total revenue for the third quarter of 2015 was $87.0 million, an increase of 7 percent compared to the prior year period, driven by higher service provider revenue, which increased 11 percent to $69.8 million, offset by a decline in membership revenue of 6 percent to $17.2 million from a year ago.

The growth in service provider revenue, which includes both advertising and e-commerce revenue, quarter over quarter was largely the result of a 12 percent increase in service provider revenue per participating service provider as well as a 15 percent quarter over quarter increase in service provider contract value. These gains were partially offset by lower average e-commerce take rates on higher unit sales compared to the year ago period.

The decline in membership revenue quarter over quarter is primarily the result of a 14 percent decrease in membership revenue per paid member attributable to tiered pricing, which has reduced average membership fees across all markets, as well as a 15 percent decrease in gross paid memberships added, partially offset by a 9 percent increase in the total number of paid memberships over the same time period.

Operating Expenses

Operations and support expense was $14.0 million, representing a $0.1 million decrease from the same period in the prior year, attributable to reductions in outsourced services expenditures and personnel costs, offset by increases in publication costs and credit card processing fees.

Selling expense was $29.0 million, a decline of $3.0 million quarter over quarter, due to lower headcount and increased efficiency. Total sales personnel declined 17 percent year over year, resulting in reduced selling compensation and personnel-related costs for commissions, wages and other employee benefits.

Marketing expense was $23.5 million, an increase of $0.9 million period over period, attributable to the planned timing and trajectory of our marketing spend in the current year.

Product and technology expense was $9.0 million, an increase of $0.3 million from the year ago period, due to an increase in technology-related outsourced services associated with the maintenance and support of our legacy technology infrastructure.

General and administrative expense was $10.7 million, representing an increase of $2.1 million quarter over quarter, driven by personnel headcount growth as well as costs incurred related to the search, identification and hiring of our new President and Chief Executive Officer.

Adjusted EBITDA

Adjusted EBITDA, a non-GAAP financial measure, was $3.2 million for the period as compared to an adjusted EBITDA loss of $1.3 million in the year-ago period, an improvement of $4.5 million.

Cash

Cash used in operations for the third quarter was approximately $1.8 million. At September 30, 2015, the balance of cash, cash equivalents and investments was $58.2 million.

Business Outlook

For 2015, Angie's List has updated its full year guidance for revenue and adjusted EBITDA. The Company now expects full year revenue for 2015 of $344 million to $348 million, an adjustment from our previous revenue guidance range of $357 million to $363 million.

The Company expects adjusted EBITDA to be in the range of $27 million to $30 million for full year 2015, an adjustment from prior guidance of $30 million to $32 million resulting from lower expected revenue, one-time expenses associated with the search, identification and hiring of the Company's new President and Chief Executive Officer as well as professional services fees related to activist activity in the Company's stock.

   

Angie's List, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 
September 30,
2015
December 31,
2014
 
(Unaudited)
Assets
Cash and cash equivalents $ 33,662 $ 39,991
Short-term investments 24,542 24,268
Accounts receivable, net 16,215 15,141
Prepaid expenses and other current assets 21,168   18,120  
Total current assets 95,587 97,520
Property, equipment and software, net 72,786 51,264
Goodwill 1,145 1,145
Amortizable intangible assets, net 2,169 2,755
Other assets, noncurrent 1,560   1,854  
Total assets $ 173,247   $ 154,538  
 
Liabilities and stockholders' deficit
Accounts payable $ 13,112 $ 5,490
Accrued liabilities 30,368 23,189
Deferred membership revenue 35,442 33,767
Deferred advertising revenue 49,039 48,399
Current maturities of long-term debt 750    
Total current liabilities 128,711 110,845
Long-term debt, net 58,285 58,854
Deferred membership revenue, noncurrent 4,121 4,744
Deferred advertising revenue, noncurrent 532 669
Other liabilities, noncurrent 1,430   1,600  
Total liabilities 193,079 176,712
Stockholders' deficit:
Common stock 67 67
Additional paid-in-capital 272,144 265,895
Treasury stock (23,719 ) (23,719 )
Accumulated deficit (268,324 ) (264,417 )
Total stockholders' deficit (19,832 ) (22,174 )
Total liabilities and stockholders' deficit $ 173,247   $ 154,538  
 

 

Angie's List, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

   
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015   2014 2015   2014
 
(Unaudited) (Unaudited)
Revenue
Membership $ 17,178 $ 18,279 $ 51,427 $ 55,095
Service provider 69,814   63,027   206,443   177,764  
Total revenue 86,992 81,306 257,870 232,859
Operating expenses
Operations and support 14,022 14,119 43,476 39,413
Selling 29,034 32,078 89,467 88,478
Marketing 23,450 22,508 65,245 81,909
Product and technology 8,990 8,696 26,977 24,243
General and administrative 10,721   8,639   34,204   25,080  
Total operating expenses 86,217 86,040 259,369 259,123
Operating income (loss) 775 (4,734 ) (1,499 ) (26,264 )
Interest expense, net 684 2,380 579
Loss on debt extinguishment   458       458  
Income (loss) before income taxes 91 (5,192 ) (3,879 ) (27,301 )
Income tax expense 9   15   28   45  
Net income (loss) $ 82   $ (5,207 ) $ (3,907 ) $ (27,346 )
 
Net income (loss) per common share — basic and diluted $ 0.00 $ (0.09 ) $ (0.07 ) $ (0.47 )
 
Weighted average common shares outstanding — basic and diluted 58,517 58,517 58,517 58,508
 
Non-cash stock-based compensation
Operations and support $ 29 $ 20 $ 78 $ 45
Selling 182 109 343 292
Product and technology 256 387 678 838
General and administrative 1,259   1,901   5,150   4,770  
Total non-cash stock-based compensation $ 1,726   $ 2,417   $ 6,249   $ 5,945  
 
Reconciliation of net income (loss) to Adjusted EBITDA (loss)
Net income (loss) $ 82 $ (5,207 ) $ (3,907 ) $ (27,346 )
Income tax expense 9 15 28 45
Interest expense, net 684 2,380 579
Depreciation and amortization 1,588 1,450 4,791 4,018
Non-cash stock-based compensation 1,726 2,417 6,249 5,945
Loss on debt extinguishment 458 458
Litigation settlement adjustment (881 ) (450 ) (1,841 ) (450 )
Non-cash long-lived asset impairment charge     686    
Adjusted EBITDA (loss) $ 3,208   $ (1,317 ) $ 8,386   $ (16,751 )
 

   

Angie's List, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015   2014 2015   2014
 
(Unaudited) (Unaudited)
Operating activities
Net income (loss) $ 82 $ (5,207 ) $ (3,907 ) $ (27,346 )
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization 1,588 1,450 4,791 4,018
Amortization of debt discount, deferred financing fees and bond premium 171 86 526 301
Non-cash stock-based compensation 1,726 2,417 6,249 5,945
Non-cash loss on debt extinguishment 266 266
Non-cash long-lived asset impairment charge 686
Non-cash loss on disposal of long-lived assets 279
Changes in certain assets:
Accounts receivable (907 ) (1,140 ) (1,074 ) (1,865 )
Prepaid expenses and other current assets 209 146 (3,048 ) (4,545 )
Changes in certain liabilities:
Accounts payable (1,872 ) (4,639 ) 8,046 7,546
Accrued liabilities (2,664 ) (7,213 ) 7,338 12,653
Deferred advertising revenue (1,459 ) 2,356 503 8,274
Deferred membership revenue 1,359   1,909   1,052   2,703  
Net cash (used in) provided by operating activities (1,767 ) (9,569 ) 21,441 7,950
 
Investing activities
Purchases of investments (4,480 ) (1,640 ) (13,680 ) (13,164 )
Sales of investments 2,360 6,320 13,355 17,400
Property, equipment and software (2,957 ) (5,373 ) (6,473 ) (12,904 )
Capitalized website and software development costs (6,580 ) (4,565 ) (20,429 ) (12,785 )
Intangible assets (173 ) (96 ) (379 ) (841 )
Net cash (used in) investing activities (11,830 ) (5,354 ) (27,606 ) (22,294 )
 
Financing activities
Proceeds from exercise of stock options 501
Principal payments on long-term debt (15,000 ) (15,000 )
Proceeds from long-term debt issuance 60,000 60,000
Fees paid to lender (1,210 ) (1,210 )
Cash paid for financing fees (1,879 ) (1,879 )
Payment of contingent consideration from acquisition of business assets (500 ) (500 )
Payments on capital lease obligations (56 ) (35 ) (164 ) (52 )
Net cash (used in) provided by financing activities (56 ) 41,376   (164 ) 41,860  
Net (decrease) increase in cash and cash equivalents $ (13,653 ) $ 26,453 $ (6,329 ) $ 27,516
Cash and cash equivalents, beginning of period 47,315   35,866   39,991   34,803  
Cash and cash equivalents, end of period $ 33,662   $ 62,319   $ 33,662   $ 62,319  
 

Conference Call Information

The Company will host a conference call on October 21, 2015 at approximately 8:30 AM (ET) / 5:30 AM (PT) to discuss the quarterly financial results with the investment community. A live audio 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 50932366 through October 27, 2015.

About Angie's List

Angie's List helps facilitate happy transactions between more than three 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), we disclose in this press release financial information that was not prepared in accordance with GAAP. This information includes non-GAAP Adjusted EBITDA, which we define as earnings before interest, income taxes, depreciation, amortization, non-cash stock-based compensation, loss on debt extinguishment, the litigation settlement adjustment and non-cash long-lived asset impairment charges. We use Adjusted EBITDA internally in analyzing our financial results and determined to disclose this measure to investors as we believe it will be useful to them, as a supplement to GAAP measures, in evaluating our operating performance relative to our industry sector and competitors. We believe 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. We have 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 our 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 we do. We have provided a reconciliation of the Adjusted EBITDA measure to the most directly comparable GAAP financial measure herein.

Forward-Looking and Cautionary Statements

This press release contains "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended, including statements regarding expected revenue, increased margins, expansion of technology and mobile platforms, future products, attraction of new members, future marketing expense and growth opportunities. These forward-looking statements are based on our 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 service providers; our ability to attract and retain service providers to advertise and sell e-commerce on our platforms; our ability to successfully monetize our memberships and service provider contracts as we grow our business; our success in converting consumers and service providers into paid memberships and participating service providers, respectively; our ability to renew memberships and participating service providers; our ability to predict and respond in a timely manner to changes in consumer demand; our ability to attract and retain key management and personnel; 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 successfully implement our growth strategies or effectively manage our growing business; and general economic conditions and the corresponding impact on consumer confidence and spending.

For a discussion of these factors and other risks and uncertainties that may affect our business or cause actual results to differ materially from those contained in our forward-looking statements, please refer to the filings we make with the Securities and Exchange Commission from time to time, including our 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, whether as a result of new information, future events or otherwise.

Angie's List
Investor Relations:
Leslie Arena, 317-808-4527
lesliea@angieslist.com
or
Public Relations:
Debra DeCourcy, APR, 317-713-0479
debra.decourcy@angieslist.com

Source: Angie's List, Inc.

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