February 23, 2016

Angie's List Reports Fourth Quarter and Full Year 2015 Results

  • First profitable year in Company history with net income of $10.2 million for the full year 2015 and $14.2 million for the fourth quarter of 2015; full year growth represents a positive swing of $22.3 million in net income
  • Revenue of $344.1 million for the full year 2015 and $86.3 million for the fourth quarter of 2015
  • Adjusted EBITDA1 of $28.0 million for the full year 2015 and $19.6 million for the fourth quarter of 2015
  • Growth in total paid memberships, participating service providers and total contract value for the full year and fourth quarter
  • Gross member additions of 1,033,222 for the full year 2015 and 214,447 in the fourth quarter of 2015

INDIANAPOLIS--(BUSINESS WIRE)-- Angie's List, Inc. (NASDAQ:ANGI) today announced financial results for the quarter and year ended December 31, 2015. Angie's List achieved the financial guidance provided on the previous quarter's earnings call.

"Angie's List marked a number of major milestones in 2015. We achieved the first profitable year in our history, with net income of $10 million - a $22 million positive swing from the prior year," said Scott Durchslag, Angie's List President and Chief Executive Officer. "Since 1995, the Company has set the bar for delivering excellent outcomes between our members and service providers. We've accumulated more than ten million verified reviews, built a base of more than three million members, created the iconic brand in home services, and today, attract 10-12 million unique visitors per month to our website. However, we can do more to capitalize on this strong foundation."

"Since I joined Angie's List just six months ago, we've launched change across the Company to strengthen customer loyalty, improve operating efficiency, and enhance our product, technology and marketing capabilities. New products, including LeadFeed, Angie's Fair Price Guarantee and Angie's Service Quality Guarantee, as well as the initial rollout of our new Angie's List 4.0 technology platform are just a few examples. We are executing smarter, faster and with more discipline based on data driven decisions than ever before."

"For the full year, we increased the number of participating service providers and grew service provider revenue by 14%. While member revenue declined from a year ago, we grew total members by 8% to 3.3 million."

"In the fourth quarter, we generated $19.6 million in adjusted EBITDA1 as we grew revenue and delivered leverage in key expense line items. We improved member renewal rates, formally baselined our Net Promoter Score and grew the number of unique visitors to our site."

"While we expect to share details on our Profitable Growth Plan and our priorities for 2016 at our upcoming investor day on March 3, given the progress we are making, I have great confidence in the growth and value creation opportunities that lie ahead."

1 Adjusted EBITDA is a non-GAAP financial measure.

 

Key Operating Metrics

 
Three months ended      

December 31,
2015

   

December 31,
2014

    Change
Total paid memberships (end of period) 3,297,395 3,041,651 8 %
Gross paid memberships added (in period) 214,447 206,671 4 %
Marketing cost per paid membership acquisition (in period) $ 29 $ 27 7 %
First-year membership renewal rate (in period) 73 % 70 % 3.0 pts
Average membership renewal rate (in period) 76 % 74 % 2.0 pts
Participating service providers (end of period)* 54,402 54,240 %
Total service provider contract value (end of period, in thousands) $ 270,841 $ 249,045 9 %
Total service provider contract value backlog (end of period, in thousands) $ 162,478 $ 153,137 6 %
 

Twelve months ended

December 31,
2015

December 31,
2014

Change

Gross paid memberships added (in period) 1,033,222 1,242,485 (17 )%
Marketing cost per paid membership acquisition (in period) $ 69 $ 70 (1 )%
First-year membership renewal rate (in period) 74 % 73 % 1.0 pts
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
December 31, 2015   December 31, 2015   December 31, 2015   December 31, 2015
2015   2014   2015   2014   2015   2014   2015   2014
Number of Markets 10   10   35   35   208   208   253   253
Average Revenue/Market $ 8,028,688 $ 7,485,052 $ 6,190,457 $ 5,653,860 $ 225,912 $ 202,317 $ 1,359,457 $ 1,244,338
Average Marketing Expense/Market $ 1,082,897 $ 1,327,562 $ 1,139,388 $ 1,388,742 $ 100,129 $ 122,617 $ 282,744 $ 345,399
 
Membership Revenue/Paid Member $ 25.37 $ 32.81 $ 23.41 $ 29.41 $ 14.52 $ 15.92 $ 21.45 $ 26.46
Service Provider Revenue/Paid Member   107.12       110.14       101.68       102.16       41.99       41.32       87.06       87.48
Total Revenue/Paid Member $ 132.49 $ 142.95 $ 125.09 $ 131.57 $ 56.51 $ 57.24 $ 108.51 $ 113.94
 
Total Paid Memberships 635,015 576,980 1,806,226 1,657,882 856,154 806,789 3,297,395 3,041,651
Estimated Penetration Rate* 17% 16% 13% 12% 12% 11% 14% 13%
Annual Membership Growth Rate 10%   23%   9%   23%   6%   22%   8%   22%

Cohort table presents financial and operational data for the twelve months ended December 31, 2015 and 2014.

* Demographic information used in penetration rate calculations is based on third-party studies we commissioned in December 2015 and December 2014. According to these studies, the number of U.S. households in our target demographic was 27 million for each of the periods ended December 31, 2015 and 2014.

Fourth Quarter Results

Revenue

Total revenue for the fourth quarter of 2015 was $86.3 million, an increase of 5% compared to the prior year period, driven by higher service provider revenue, which increased 9% to $69.7 million, offset by a decline in membership revenue of 8% to $16.6 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 an 8% increase in service provider revenue per participating service provider as well as a 9% quarter over quarter increase in service provider contract value. These gains were partially offset by the impact on service provider revenue associated with 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 15% decrease in membership revenue per paid member attributable to tiered pricing, which has reduced average membership fees across all markets, partially offset by the impact on membership revenue associated with the 8% increase in the total number of paid memberships and a 4% increase in gross paid memberships added over the same time period.

Operating Expenses

Operations and support expense was $12.6 million, representing a $0.7 million decrease from the same period in the prior year, attributable to quarter over quarter reductions in compensation and personnel-related costs and publication expenditures, partially offset by an increase in operations and support outsourced services expenditures over the same time period.

Selling expense was $27.9 million, a decline of $0.8 million quarter over quarter, due to lower headcount and increased efficiency. Total sales personnel declined 11% year over year, resulting in reduced selling compensation and personnel-related costs for commissions, wages and other employee benefits.

Marketing expense was $6.3 million, an increase of $0.8 million period over period, attributable to the planned timing and trajectory of our marketing spend in the current year. We plan our quarterly marketing spend based on expectations of consumer spending and manage to marginal cost per acquisition in doing so.

Product and technology expense was $9.7 million, a decrease of $0.1 million from the year ago period, due to the impact of long-lived asset impairment charges recorded in the fourth quarter of each of the last two years, amounting to $1.8 million and $0.9 million in 2014 and 2015, respectively, partially offset by an increase in technology-related outsourced services associated with the maintenance and support of our legacy technology platform as we prepare to launch and transition to our new technology platform in 2016.

General and administrative expense was $15.0 million, representing an increase of $6.1 million quarter over quarter, driven by increases in compensation and personnel-related and professional services fees.

Adjusted EBITDA1

Adjusted EBITDA1 was $19.6 million for the period as compared to adjusted EBITDA1 of $20.9 million in the year-ago period, a decline of $1.3 million.

Cash

Cash provided by operations for the fourth quarter was approximately $5.3 million. At December 31, 2015, the balance of cash, cash equivalents and investments was $56.6 million.

1 Adjusted EBITDA is a non-GAAP financial measure.

Full Year 2015 Results

Revenue

Full year 2015 revenue was $344.1 million, an increase of 9% compared to the prior year, driven by higher service provider revenue, which increased 14% to $276.1 million, offset by a decline in membership revenue of 7% to $68.0 million from the prior year.

The growth in service provider revenue, which includes both advertising and e-commerce revenue, year over year was largely the result of a 14% increase in service provider revenue per participating service provider as well as a 9% year over year increase in service provider contract value. These gains were partially offset by the impact on service provider revenue associated with lower average e-commerce take rates on higher unit sales compared to the prior year.

The decline in membership revenue year over year is primarily the result of a 19% decrease in membership revenue per paid member attributable to tiered pricing, which has reduced average membership fees across all markets, as well as a 17% decrease in gross paid memberships added, partially offset by the 8% increase in the total number of paid memberships over the same time period.

Operating Expenses

Operations and support expense was $56.1 million, representing a $3.3 million increase from the prior year, attributable to year over year increases in publication costs, associated with the circulation of the Angie's List Magazine, and credit card processing fees, attributable to the growing volume of service provider transactions and membership enrollments on our platforms, partially offset by a decrease in operations and support outsourced services expenditures over the same time period.

Selling expense was $117.4 million, an increase of $0.2 million year over year, primarily due to costs we incurred to host a three-day service provider conference in May, partially offset by the impact on selling expense associated with lower headcount and increased efficiency. Total sales personnel declined 11% year over year, resulting in reduced selling compensation and personnel-related costs for commissions, wages and other employee benefits.

Marketing expense was $71.5 million, a decrease of $15.9 million year over year. While we continued to make significant investments in increasing our paid membership base and expanding our market reach via national offline and online advertising, we purposefully reduced our marketing spend in 2015 as compared to 2014 as we focused on the efficiency and effectiveness of our spend while making strategic investments in other areas of the business.

Product and technology expense was $36.7 million, an increase of $2.6 million from the prior year, largely attributable to an increase in technology-related outsourced services associated with the maintenance and support of our legacy technology platform as we prepare to launch and transition to our new technology platform in 2016.

General and administrative expense was $49.2 million, representing an increase of $15.2 million year over year, driven by increases in compensation, personnel-related costs, professional services fees, and costs incurred to identify and hire our President and Chief Executive Officer.

Adjusted EBITDA1

Adjusted EBITDA1 was $28.0 million for the year as compared to adjusted EBITDA1 of $4.2 million in the prior year, an improvement of $23.8 million.

Cash

Cash provided by operations for the year was approximately $26.7 million. At December 31, 2015, the balance of cash, cash equivalents and investments was $56.6 million

1 Adjusted EBITDA is a non-GAAP financial measure.

Business Outlook

The Company expects to provide revenue and adjusted EBITDA1 guidance for 2016 and its long-term outlook as part of its Investor Day on March 3, 2016.

1 Adjusted EBITDA is a non-GAAP financial measure.

 

Angie's List, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

 
     

December 31,
2015

 

December 31,
2014

 
(Unaudited)
Assets
Cash and cash equivalents $ 32,599 $ 39,991
Short-term investments 23,976 24,268
Accounts receivable, net 17,019 15,141
Prepaid expenses and other current assets 19,026   18,120  
Total current assets 92,620 97,520
Property, equipment and software, net 77,635 51,264
Goodwill 1,145 1,145
Amortizable intangible assets, net 2,011 2,755
Other assets, noncurrent 1,462   1,854  
Total assets $ 174,873   $ 154,538  
 
Liabilities and stockholders' deficit
Accounts payable $ 10,525 $ 5,490
Accrued liabilities 20,287 23,189
Deferred membership revenue 32,702 33,767
Deferred advertising revenue 48,930 48,399
Current maturities of long-term debt 1,500    
Total current liabilities 113,944 110,845
Long-term debt, net 57,596 58,854
Deferred membership revenue, noncurrent 3,742 4,744
Deferred advertising revenue, noncurrent 640 669
Other liabilities, noncurrent 1,332   1,600  
Total liabilities 177,254 176,712
Stockholders' deficit:
Common stock 67 67
Additional paid-in-capital 275,445 265,895
Treasury stock (23,719 ) (23,719 )
Accumulated deficit (254,174 ) (264,417 )
Total stockholders' deficit (2,381 ) (22,174 )
Total liabilities and stockholders' deficit $ 174,873   $ 154,538  
 
 

Angie's List, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)

 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2015   2014 2015   2014
 
(Unaudited) (Unaudited)
Revenue
Membership $ 16,565 $ 18,018 $ 67,992 $ 73,113
Service provider 69,690   64,134   276,133   241,898  
Total revenue 86,255 82,152 344,125 315,011
Operating expenses
Operations and support 12,598 13,347 56,074 52,760
Selling 27,923 28,698 117,390 117,176
Marketing 6,289 5,477 71,534 87,386
Product and technology 9,684 9,796 36,661 34,039
General and administrative 15,004   8,932   49,208   34,012  
Total operating expenses 71,498 66,250 330,867 325,373
Operating income (loss) 14,757 15,902 13,258 (10,362 )
Interest expense, net 591 624 2,971 1,203
Loss on debt extinguishment       458  
Income (loss) before income taxes 14,166 15,278 10,287 (12,023 )
Income tax expense 16   6   44   51  
Net income (loss) $ 14,150   $ 15,272   $ 10,243   $ (12,074 )
 
Net income (loss) per common share — basic $ 0.24 $ 0.26 $ 0.18 $ (0.21 )
Net income (loss) per common share — diluted $ 0.24 $ 0.26 $ 0.17 $ (0.21 )
 
Weighted-average common shares outstanding — basic 58,532 58,517 58,521 58,510
Weighted-average common shares outstanding — diluted 59,722 58,517 58,783 58,510
 
Non-cash stock-based compensation expense
Operations and support $ 31 $ 20 $ 109 $ 65
Selling 145 105 488 397
Product and technology 253 18 931 856
General and administrative 2,197   1,801   7,347   6,571  
Total non-cash stock-based compensation expense $ 2,626   $ 1,944   $ 8,875   $ 7,889  
 
Reconciliation of net income (loss) to Adjusted EBITDA
Net income (loss) $ 14,150 $ 15,272 $ 10,243 $ (12,074 )
Income tax expense 16 6 44 51
Interest expense, net 591 624 2,971 1,203
Depreciation and amortization 1,611 1,558 6,402 5,576
Non-cash stock-based compensation expense 2,626 1,944 8,875 7,889
Loss on debt extinguishment 458
Litigation settlement adjustment (272 ) (252 ) (2,113 ) (702 )
Non-cash long-lived asset impairment charge 892   1,778   1,578   1,778  
Adjusted EBITDA $ 19,614   $ 20,930   $ 28,000   $ 4,179  
 
 

Angie's List, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)

 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2015   2014 2015   2014
 
(Unaudited) (Unaudited)
Operating activities
Net income (loss) $ 14,150 $ 15,272 $ 10,243 $ (12,074 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 1,611 1,558 6,402 5,576
Amortization of debt discount, deferred financing fees and bond premium 171 177 697 478
Non-cash stock-based compensation 2,626 1,944 8,875 7,889
Non-cash loss on debt extinguishment 266
Non-cash long-lived asset impairment charge 892 1,778 1,578 1,778
Non-cash loss on disposal of long-lived assets 21 300
Deferred income taxes 17 11 17 11
Changes in certain assets:
Accounts receivable (804 ) (891 ) (1,878 ) (2,756 )
Prepaid expenses and other current assets 2,142 126 (906 ) (4,419 )
Changes in certain liabilities:
Accounts payable (2,579 ) (10,498 ) 5,467 (2,952 )
Accrued liabilities (9,877 ) (8,962 ) (2,539 ) 3,691
Deferred advertising revenue (1 ) 825 502 9,099
Deferred membership revenue   (3,119 ) (4,661 ) (2,067 ) (1,958 )
Net cash provided by (used in) operating activities 5,250 (3,321 ) 26,691 4,629
 
Investing activities
Purchases of investments (10,857 ) (13,507 ) (24,537 ) (26,671 )
Sales of investments 11,411 5,960 24,766 23,360
Property, equipment and software (2,602 ) (3,831 ) (9,075 ) (16,735 )
Capitalized website and software development costs (4,764 ) (7,337 ) (25,193 ) (20,122 )
Intangible assets   (119 ) (143 ) (498 ) (984 )
Net cash (used in) investing activities (6,931 ) (18,858 ) (34,537 ) (41,152 )
 
Financing activities
Proceeds from exercise of stock options 675 675 501
Principal payments on long-term debt (15,000 )
Proceeds from long-term debt issuance 60,000
Fees paid to lender (1,210 )
Cash paid for financing fees (78 ) (1,957 )
Payment of contingent consideration from acquisition of assets (500 )
Payments on capital lease obligation (57 ) (71 ) (221 ) (123 )
Net cash provided by (used in) financing activities   618   (149 ) 454   41,711  
Net (decrease) increase in cash and cash equivalents $ (1,063 ) $ (22,328 ) $ (7,392 ) $ 5,188
Cash and cash equivalents, beginning of period   33,662   62,319   39,991   34,803  
Cash and cash equivalents, end of period   $ 32,599   $ 39,991   $ 32,599   $ 39,991  
 

Conference Call Information

The Company will host a conference call today, February 23, 2016, at approximately 8:30 AM (ET) to discuss the 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 31672542 through February 28, 2016.

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 10 million verified 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 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 statements that constitute "forward-looking statements" within the meaning 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. All statements other than statements of historical fact, including statements regarding market and industry prospects and future results of operations or financial position, made in this press release are forward-looking. In many cases, you can identify forward-looking statements by terminology, such as "may", "should", "will", "expects", "intends", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of such terms and other comparable terminology. The forward-looking information may include, among other information, statements concerning our estimated and projected earnings, revenues, costs, expenditures, cash flows, growth rates, financial results, our plans and objectives for future operations, changes to our business model, growth initiatives or strategies (including, but not limited to, merger and acquisition activity) or the expected outcome or impact of pending or threatened litigation. There may also be other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Risks and uncertainties may affect the accuracy of forward-looking statements.

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 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

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