July 26, 2017

Angie's List Reports Second Quarter 2017 Results

- Total members of 6.4 million at June 30, 2017, up from 3.3 million members at June 30, 2016; gross member additions of 0.9 million, up 229% from 0.3 million in the second quarter of 2016
- Revenue of $72.8 million as compared to $83.1 million for the second quarter of 2016
- Net loss of $8.1 million as compared to net income of $4.7 million for the second quarter of 2016
- Adjusted EBITDA1 of $4.8 million as compared to $13.4 million for the second quarter of 2016, partly due to the shift in timing of marketing spend from a year ago
- Transaction with IAC's HomeAdvisor expected to close in the fourth quarter of 2017

INDIANAPOLIS, July 26, 2017 /PRNewswire/ -- Angie's List, Inc. (NASDAQ: ANGI) today announced financial results for the quarter ended June 30, 2017.

"We achieved several key milestones this quarter," said Scott Durchslag, President and Chief Executive Officer of Angie's List. "We surpassed six million members, nearly doubling our base from a year ago. We also had the highest number of visits to our site in the history of Angie's List. This progress speaks to the strength of our brand and the appeal of our freemium offer."

"Our top priorities continue to be engaging customers and improving operating efficiency," continued Durchslag. "We updated our member mobile app to deliver a new user experience, and we took action to reduce expenses, leading to a year over year decline in selling costs and operations and support expense. While these improvements were largely offset by higher marketing spend due to a shift in the timing of investment from last year, we have made significant progress aligning our cost structure with our freemium model. The lagging effect from last year's technology platform migration as well as a reduction in sales headcount resulted in lower revenue compared to the year-ago quarter. Overall, our second quarter financial performance was in line with the projections provided to IAC/HomeAdvisor earlier in the merger process, as discussed in our proxy statement."

We continue to progress toward consummation of the previously announced transaction with IAC's HomeAdvisor business, and on July 13, 2017, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. We continue to expect the transaction to close in the fourth quarter of 2017.

In light of the pending transaction, Angie's List will not be hosting a conference call to discuss its results for the second quarter of 2017. More details on the pending transaction can be found on IAC's website at http://www.iac.com/Investors.

1 Adjusted EBITDA is a non-GAAP financial measure.

Key Operating Metrics

 

Three months ended

 

June 30,
 2017

 

June 30,
 2016

 

Change

Total free memberships (end of period)1

 

4,303,566

   

152,586

   

2,720

%

Total paid memberships (end of period)

 

2,083,328

   

3,147,566

   

(34)

%

Total memberships (end of period)

 

6,386,894

   

3,300,152

   

94

%

             

Gross free memberships added (in period)2

 

914,042

   

152,586

   

499

%

Gross paid memberships added (in period)

 

14,093

   

129,534

   

(89)

%

Gross memberships added (in period)

 

928,135

   

282,120

   

229

%

             

Average paid membership renewal rate (in period)3

 

65

%

 

73

%

 

(8)

pts

             

Participating service providers (end of period)4

 

48,782

   

49,674

   

(2)

%

Total service provider contract value (end of period, in thousands)

 

$

246,303

   

$

258,467

   

(5)

%

Total service provider contract value backlog (end of period, in thousands)

 

$

147,022

   

$

151,813

   

(3)

%

                       
             

Six months ended

 

 

June 30,
 2017

 

June 30,
 2016

 

Change

Gross free memberships added (in period)2                

   

1,763,907

   

152,586

 

1,056

%

Gross paid memberships added (in period)

   

24,449

   

317,776

   

(92)

%

Gross memberships added (in period)

   

1,788,356

   

470,362

 

280

%

             

Average paid membership renewal rate (in period)3

   

66

%

 

74

%

 

(8)

pts

   

(1) Total free memberships reflects the number of free members as of the end of the period who joined subsequent to us dropping our ratings and reviews paywall in June 2016, as well as the number of former paid members who requested a change in membership status from paid to free over the same time period.

 
   

(2) Gross free memberships added represents the total number of new free members added during the reporting period. This figure does not include former paid members who requested a change in membership status from paid to free.

 
   

(3) Average paid membership renewal rate reflects the percentage of all paid memberships expiring in the reporting period that are renewed as paid members.

 
   

(4) As part of our sharpened strategic and financial focus, we are no longer offering service providers the option of only selling e-commerce offers as a means for participating in our network. Accordingly, participating service providers now represents the total number of service providers under contract for advertising at the end of the period. For the periods ended March 31, 2016, September 30, 2016, December 31, 2016 and March 31, 2017, the number of participating service providers, excluding those only under contract for e-commerce, was 50,351, 50,522, 49,441 and 49,200, respectively.

 

Second Quarter Results

Total revenue for the second quarter of 2017 was $72.8 million, compared to $83.1 million in the year-ago quarter, driven by declines in service provider and membership revenue.

Service provider revenue was $62.6 million, a decline of approximately 7% compared to a year ago, due in part to lower originations revenue in recent periods. Further, the challenges we experienced in the prior year in connection with the migration to our new technology platform, which resulted in lower originations and renewals bookings in 2016, continued to have a negative impact on service provider revenue in the second quarter of 2017 given the average duration of our service provider contracts.

Membership revenue was $10.2 million, down approximately 35% from the year-ago quarter, due largely to the impact of our removal of the ratings and reviews paywall in June 2016.

Operations and support expense was $6.9 million, a decrease from $10.2 million in the year-ago quarter, primarily due to a reduction in publication costs, attributable to our implementation of a digital content distribution strategy and a decline in our paid membership base, as well as lower compensation and personnel-related costs.

Selling expense was $23.2 million, down from $27.0 million in the year-ago period, largely related to a reduction in compensation and personnel-related costs.

Marketing expense was $20.6 million, an increase from $14.4 million in the year-ago quarter, due to an increase in advertising spend as we adjusted the level and timing of such spend in the second quarter of 2017 as compared to the second quarter of 2016 when we shifted spend to the third quarter to fund our freemium launch.

Product and technology expense was $14.9 million, an increase from $13.3 million in the year-ago period, largely attributable to higher compensation and personnel-related costs, driven by a reduction in capitalized internal labor costs.

General and administrative expense was $13.7 million, an increase from $12.1 million in the year-ago quarter, driven primarily by transaction costs incurred during the quarter in connection with our pending transaction with IAC's HomeAdvisor business, partially offset by a period over period reduction in outsourced services expenditures and professional fees.

Net loss for the quarter was $8.1 million as compared to net income of $4.7 million in the year-ago quarter. Adjusted EBITDA1 was $4.8 million for the period as compared to $13.4 million in the year-ago period.

Cash provided by operations for the quarter was $4.5 million. At June 30, 2017, the balance of cash, cash equivalents and investments was $48.8 million. Capital expenditures declined to $1.0 million in the quarter as compared to $5.8 million in the year-ago quarter.

1 Adjusted EBITDA is a non-GAAP financial measure.

Angie's List, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 
   

June 30,
 2017

 

December 31,
 2016

         
   

(Unaudited)

Assets

       

Cash and cash equivalents

 

$

38,362

   

$

22,402

 

Short-term investments

 

10,480

   

16,541

 

Accounts receivable, net

 

15,006

   

16,371

 

Prepaid expenses and other current assets

 

20,251

   

17,002

 

Total current assets

 

84,099

   

72,316

 

Property, equipment and software, net

 

77,459

   

82,714

 

Goodwill

 

1,145

   

1,145

 

Amortizable intangible assets, net

 

930

   

1,219

 

Total assets

 

$

163,633

   

$

157,394

 
         

Liabilities and stockholders' equity

       

Accounts payable

 

$

2,953

   

$

2,886

 

Accrued liabilities

 

30,452

   

23,128

 

Deferred membership revenue

 

20,255

   

23,208

 

Deferred advertising revenue

 

40,661

   

42,297

 

Current maturities of long-term debt

 

3,000

   

1,500

 

Total current liabilities

 

97,321

   

93,019

 

Long-term debt, net

 

55,092

   

56,142

 

Deferred membership revenue, noncurrent

 

1,404

   

2,032

 

Deferred advertising revenue, noncurrent

 

328

   

456

 

Other liabilities, noncurrent

 

654

   

1,245

 

Total liabilities

 

154,799

   

152,894

 

Stockholders' equity:

       

Common stock

 

69

   

68

 

Additional paid-in-capital

 

300,612

   

290,182

 

Treasury stock

 

(23,734)

   

(23,719)

 

Accumulated deficit

 

(268,113)

   

(262,031)

 

Total stockholders' equity

 

8,834

   

4,500

 

Total liabilities and stockholders' equity

 

$

163,633

   

$

157,394

 

 

Angie's List, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 
   

Three Months Ended
 June 30,

 

Six Months Ended
 June 30,

   

2017

 

2016

 

2017

 

2016

                 
   

(Unaudited)

 

(Unaudited)

Revenue

               

Membership

 

$

10,193

   

$

15,645

   

$

21,717

   

$

31,979

 

Service provider

 

62,557

   

67,415

   

124,165

   

134,937

 

Total revenue

 

72,750

   

83,060

   

145,882

   

166,916

 

Operating expenses

               

Operations and support

 

6,928

   

10,172

   

15,215

   

22,381

 

Selling

 

23,153

   

26,983

   

49,510

   

54,815

 

Marketing

 

20,618

   

14,432

   

30,441

   

33,547

 

Product and technology

 

14,905

   

13,323

   

29,218

   

23,357

 

General and administrative

 

13,729

   

12,135

   

24,595

   

30,820

 

Total operating expenses

 

79,333

   

77,045

   

148,979

   

164,920

 

Operating income (loss)

 

(6,583)

   

6,015

   

(3,097)

   

1,996

 

Interest expense, net

 

1,469

   

1,352

   

2,965

   

1,968

 

Income (loss) before income taxes

 

(8,052)

   

4,663

   

(6,062)

   

28

 

Income tax expense

 

10

   

6

   

20

   

13

 

Net income (loss)

 

$

(8,062)

   

$

4,657

   

$

(6,082)

   

$

15

 
                 

Net income (loss) per common share — basic

 

$

(0.13)

   

$

0.08

   

$

(0.10)

   

$

0.00

 

Net income (loss) per common share — diluted

 

(0.13)

   

0.08

   

(0.10)

   

0.00

 
                 

Weighted-average number of common shares outstanding — basic

 

60,274

   

58,710

   

59,893

   

58,662

 

Weighted-average number of common shares outstanding — diluted

 

60,274

   

59,644

   

59,893

   

59,638

 
                 

Non-cash stock-based compensation expense

               

Operations and support

 

$

56

   

$

57

   

$

98

   

$

88

 

Selling

 

243

   

430

   

691

   

709

 

Marketing

 

83

   

121

   

135

   

227

 

Product and technology

 

432

   

566

   

1,001

   

875

 

General and administrative

 

1,960

   

2,657

   

4,105

   

5,597

 

Total non-cash stock-based compensation expense

 

$

2,774

   

$

3,831

   

$

6,030

   

$

7,496

 
                 

Reconciliation of net income (loss) to Adjusted EBITDA1

               

Net income (loss)

 

$

(8,062)

   

$

4,657

   

$

(6,082)

   

$

15

 

Income tax expense

 

10

   

6

   

20

   

13

 

Interest expense, net

 

1,469

   

1,352

   

2,965

   

1,968

 

Depreciation and amortization

 

4,210

   

3,579

   

8,211

   

5,254

 

Non-cash stock-based compensation expense

 

2,774

   

3,831

   

6,030

   

7,496

 

Legal settlement accrual

 

   

   

   

3,500

 

Merger transaction costs

 

4,429

   

   

4,429

   

 

Adjusted EBITDA1

 

$

4,830

   

$

13,425

   

$

15,573

   

$

18,246

 
 

1 Adjusted EBITDA is a non-GAAP financial measure.

 

Angie's List, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 
   

Three Months Ended
 June 30,

 

Six Months Ended
 June 30,

   

2017

 

2016

 

2017

 

2016

                 
   

(Unaudited)

 

(Unaudited)

Operating activities

               

Net income (loss)

 

$

(8,062)

   

$

4,657

   

$

(6,082)

   

$

15

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

               

Depreciation and amortization

 

4,210

   

3,579

   

8,211

   

5,254

 

Amortization of debt discount, deferred financing fees and bond premium

 

213

   

166

   

450

   

333

 

Non-cash stock-based compensation expense

 

2,774

   

3,831

   

6,030

   

7,496

 

Non-cash long-lived asset impairment charge

 

   

   

190

   

 

Non-cash loss on disposal of long-lived assets

 

1

   

18

   

3

   

171

 

Deferred income taxes

 

5

   

   

10

   

 

Changes in certain assets:

               

Accounts receivable, net

 

787

   

(678)

   

1,365

   

129

 

Prepaid expenses and other current assets

 

423

   

3,808

   

(3,249)

   

728

 

Changes in certain liabilities:

               

Accounts payable

 

(1,165)

   

(2,052)

   

318

   

(2,542)

 

Accrued liabilities

 

7,848

   

(5,052)

   

6,776

   

9,557

 

Deferred advertising revenue

 

(2,136)

   

(2,161)

   

(1,764)

   

(2,769)

 

Deferred membership revenue

 

(413)

   

(1,031)

   

(3,581)

   

(4,086)

 

Net cash provided by operating activities

 

4,485

   

5,085

   

8,677

   

14,286

 
                 

Investing activities

               

Purchases of investments

 

(5,960)

   

(7,203)

   

(5,960)

   

(11,274)

 

Sales of investments

 

7,680

   

7,000

   

12,021

   

11,320

 

Property, equipment and software

 

(65)

   

(2,304)

   

(199)

   

(3,208)

 

Capitalized website and software development costs

 

(948)

   

(3,484)

   

(2,854)

   

(8,973)

 

Intangible assets

 

(39)

   

(7)

   

(70)

   

(129)

 

Net cash provided by (used in) investing activities

 

668

   

(5,998)

   

2,938

   

(12,264)

 
                 

Financing activities

               

Proceeds from exercise of stock options

 

5,871

   

498

   

5,919

   

500

 

Proceeds from employee stock purchase plan

 

462

   

   

462

   

 

Taxes paid on behalf of employees related to net share settlement

 

(1,913)

   

(303)

   

(1,980)

   

(430)

 

Purchases of treasury stock

 

   

   

(15)

   

 

Payments on capital lease obligation

 

   

(59)

   

(41)

   

(116)

 

Net cash provided by (used in) financing activities

 

4,420

   

136

   

4,345

   

(46)

 

Net increase (decrease) in cash and cash equivalents

 

$

9,573

   

$

(777)

   

$

15,960

   

$

1,976

 

Cash and cash equivalents, beginning of period

 

28,789

   

35,352

   

22,402

   

32,599

 

Cash and cash equivalents, end of period

 

$

38,362

   

$

34,575

   

$

38,362

   

$

34,575

 

About Angie's List

Finding a pro for a job well done is made easy online by visiting Angieslist.com. More than six million members nationwide use Angie's List, a leading provider of reviews, offers and information in over 700 service categories, to help them improve their homes. Built on a foundation of more than 10 million verified reviews of local service, Angie's List connects members directly to its online marketplace of services and offers unique tools and support designed to improve the local service experience for both members 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 generally define as earnings before interest, income taxes, depreciation and amortization, non-cash stock-based compensation expense, amounts recorded for any legal settlement accrual, certain non-cash long-lived asset impairment charges, as applicable, and merger transaction costs. We use Adjusted EBITDA internally in analyzing our financial results and performance and determined to disclose this measure as we believe it is useful, as a supplement to GAAP measures, in evaluating our operating performance relative to our industry sector and competitors, thereby providing additional insight for investors to use with respect to our ongoing operating results and trends. Adjusted EBITDA, as defined in the financing agreement that governs our long-term indebtedness, is also a financial debt covenant with which we are required to comply, further supporting our decision to disclose this measure. 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 provide 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 the consummation of the pending transaction with IAC/HomeAdvisor (please refer to the Form S-4 filed with the U.S. Securities and Exchange Commission by ANGI Homeservices Inc. on June 30, 2017 for a more complete discussion of the pending transaction with IAC's HomeAdvisor business), 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, profitability plans, availability of debt or equity financing to support our liquidity needs 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 U.S. 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.

Contact
Investor and Media Relations:
Leslie Arena
317-408-4527
lesliea@angieslist.com

 

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