ANGI HOMESERVICES INC. 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, June 30, Change
2017 2016
--- ---- ----
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, Change
2016
June 30,
2017
--- ----
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 March 31, 2016, September 30, 2016,
are no longer offering service December 31, 2016 and March 31,
providers the option of only selling 2017, the number of participating
e-commerce offers as a means for service providers, excluding those
participating in our network. only under contract for e-commerce,
Accordingly, participating service was 50,351, 50,522, 49,441 and
providers now represents the total 49,200, respectively.
number of service providers under
contract for advertising at the end
of the period. For the periods ended
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 EBITDA(1) 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, December 31,
2017 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 Six Months Ended
June 30, 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 EBITDA(1)
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 EBITDA(1) $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 Six Months Ended
June 30, 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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SOURCE Angie's List
