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| 8-K - FORM 8-K - Angie's List, Inc. | angi2016930-8k.htm |
Exhibit 99.1
www.angieslist.com
Angie’s List Reports Third Quarter 2016 Results
• | Record-setting gross member additions of 1.6 million, up 436% from 0.3 million in the third quarter of 2015, bringing total membership count to 4.5 million at the end of the quarter, with new member engagement metrics approximately tripling |
• | Net participating service provider additions of 1,367, the highest in over two years, and an increase from the second quarter of 2016 |
• | Revenue of $79.7 million as compared to $87.0 million for the third quarter of 2015 |
• | Net loss of $16.8 million as compared to net income of $0.1 million for the third quarter of 2015 |
• | Adjusted EBITDA1 loss of $7.5 million as compared to adjusted EBITDA1 of $3.2 million for the third quarter of 2015 |
INDIANAPOLIS — November 1, 2016 — Angie’s List, Inc. (NASDAQ: ANGI) today announced financial results for the quarter ended September 30, 2016.
“Since removing the reviews paywall, we’ve had great success attracting new members,” said Scott Durchslag, President and Chief Executive Officer of Angie’s List. “We’ve added nearly two million members since June and now have 4.5 million members nationwide. These record-setting new member additions are up five-fold year over year, with a near tripling in new members viewing service provider profiles and new members searching Angie’s List. At the same time, our brand is getting even stronger, reaching record-setting levels of aided brand awareness of 97% and unaided brand awareness of 61%.”
“Service provider metrics were also strong as we added nearly 1,400 net new service providers in the quarter and grew new service provider contract value, or what we call 'originations bookings,' both sequentially and year over year. Overall, we are making good progress on the plan that we announced in March and leading indicators of future results are improving nicely.”
“That said, our revenue and adjusted EBITDA1 are down year over year so our financial results are lagging the leading indicators in our operating metrics, as often happens when changing business models. While we’ve previously implemented changes in our cost structure to align it with our new business model, including $10 million in operating expense reductions, we are now able to execute an additional $15 million to $20 million of annualized cost efficiencies and reductions in the fourth quarter that will benefit 2017 and beyond.”
“We are continuing to see a robust impact from executing our turnaround plan and are extremely focused on opportunities to further accelerate our growth,” continued Durchslag. “To that end, we have decided to explore strategic alternatives to achieve the full potential of our new platform. Therefore, we have recently engaged Allen & Company LLC and BofA Merrill Lynch to explore these strategic opportunities. We believe this is the right step for the Company at this time and look forward to pursuing a path to maximizing value creation for our shareholders.”
1 Adjusted EBITDA is a non-GAAP financial measure.
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Key Operating Metrics
Three months ended | September 30, 2016 | September 30, 2015 | Change | ||||||||
Total free memberships (end of period)1 | 1,742,995 | — | N/A | ||||||||
Total paid memberships (end of period) | 2,767,848 | 3,248,239 | (15 | )% | |||||||
Total memberships (end of period) | 4,510,843 | 3,248,239 | 39 | % | |||||||
Gross free memberships added (in period)2 | 1,580,648 | — | N/A | ||||||||
Gross paid memberships added (in period) | 21,228 | 298,922 | (93 | )% | |||||||
Gross memberships added (in period) | 1,601,876 | 298,922 | 436 | % | |||||||
Average paid membership renewal rate (in period)3 | 65 | % | 77 | % | (12) pts | ||||||
Participating service providers (end of period)4 | 56,057 | 53,918 | 4 | % | |||||||
Total service provider contract value (end of period, in thousands) | $ | 256,711 | $ | 270,904 | (5 | )% | |||||
Total service provider contract value backlog (end of period, in thousands) | $ | 151,844 | $ | 162,817 | (7 | )% | |||||
Nine months ended | September 30, 2016 | September 30, 2015 | Change | ||||||
Gross free memberships added (in period)2 | 1,733,234 | — | N/A | ||||||
Gross paid memberships added (in period) | 339,004 | 818,775 | (59 | )% | |||||
Gross memberships added (in period) | 2,072,238 | 818,775 | 153 | % | |||||
Average paid membership renewal rate (in period)3 | 71 | % | 77 | % | (6) 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. For the three and nine months ended September 30, 2016, this figure includes new free members added since we dropped our ratings and reviews paywall in June 2016 but does not include former paid members who requested a change in membership status from paid to free over the same periods.
(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) 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.
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Third Quarter Results
Revenue
Total revenue for the third quarter of 2016 was $79.7 million, compared to $87.0 million in the year-ago quarter, driven by a decline in service provider and membership revenues.
Service provider revenue, which includes advertising and e-commerce, was $66.1 million, a decline of 5% compared to a year ago. Service provider revenue was negatively impacted by our technology platform migration, which contributed to lower e-commerce revenue and service provider renewal rates.
Membership revenue was $13.7 million, down 20% from $17.2 million in the year-ago quarter, due to decreases in paid membership renewal and conversion rates associated with the removal of our ratings and reviews paywall in June, which drove quarter over quarter declines in both gross paid memberships added and total paid memberships.
Operating Expenses
Operations and support expense was $10.2 million, a decrease from $14.0 million in the year-ago quarter, due to a decline in publication costs associated with our implementation of a digital content distribution strategy as well as lower compensation and personnel-related costs.
Selling expense was $29.7 million, up from $28.7 million in the year-ago period, largely related to slight increases in selling-related outside services expenditures and compensation and personnel-related costs.
Marketing expense, which now includes the marketing costs that were previously classified in general and administrative expense, was $25.3 million, a decrease from $26.2 million in the year-ago quarter, due to a reduction in advertising spend as we adjusted the level and timing of such spend in the current year to align with our integrated marketing launch for freemium.
Product and technology expense was $17.0 million, an increase from $9.0 million in the year-ago period, largely due to depreciation expense on our new technology platform and an increase in compensation and personnel-related costs incurred in connection with the execution of our technology platform migration and rollout of our product roadmap.
General and administrative expense was $12.9 million, an increase from $8.3 million in the year-ago quarter, driven by period over period increases in outside services expenditures and professional fees, compensation and personnel-related costs, including non-cash stock-based compensation expense, and bad debt expense.
Net Income (Loss)
Net loss for the quarter was $16.8 million as compared to net income of $0.1 million in the year-ago quarter, due to a decline in revenue and an increase in operating expenses over the same time period.
Adjusted EBITDA (Loss)1
Adjusted EBITDA1 loss was $7.5 million for the period as compared to an adjusted EBITDA1 gain of $3.2 million in the year-ago period.
Cash
Cash used in operations for the third quarter was $15.6 million as we invested in marketing for our nationwide freemium launch and product and technology to strengthen our product and services portfolio to improve the user experience. At September 30, 2016, the balance of cash, cash equivalents and investments was $37.8 million.
Capital Expenditures
Capital expenditures declined to $3.8 million for the quarter as compared to $9.5 million in the year-ago quarter due in large part to reductions in capitalized website and software development costs associated with our new AL 4.0 technology platform.
1 Adjusted EBITDA is a non-GAAP financial measure.
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Angie’s List, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, 2016 | December 31, 2015 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 13,661 | $ | 32,599 | ||||
Short-term investments | 24,172 | 23,976 | ||||||
Accounts receivable, net | 16,817 | 17,019 | ||||||
Prepaid expenses and other current assets | 18,750 | 19,026 | ||||||
Total current assets | 73,400 | 92,620 | ||||||
Property, equipment and software, net | 83,926 | 77,635 | ||||||
Goodwill | 1,145 | 1,145 | ||||||
Amortizable intangible assets, net | 1,413 | 2,011 | ||||||
Total assets | $ | 159,884 | $ | 173,411 | ||||
Liabilities and stockholders’ deficit | ||||||||
Accounts payable | $ | 7,683 | $ | 10,525 | ||||
Accrued liabilities | 27,469 | 20,287 | ||||||
Deferred membership revenue | 26,675 | 32,702 | ||||||
Deferred advertising revenue | 44,749 | 48,930 | ||||||
Current maturities of long-term debt | 750 | 1,500 | ||||||
Total current liabilities | 107,326 | 113,944 | ||||||
Long-term debt, net | 57,359 | 56,134 | ||||||
Deferred membership revenue, noncurrent | 2,526 | 3,742 | ||||||
Deferred advertising revenue, noncurrent | 395 | 640 | ||||||
Other liabilities, noncurrent | 1,096 | 1,332 | ||||||
Total liabilities | 168,702 | 175,792 | ||||||
Stockholders’ deficit: | ||||||||
Common stock | 68 | 67 | ||||||
Additional paid-in-capital | 285,812 | 275,445 | ||||||
Treasury stock | (23,719 | ) | (23,719 | ) | ||||
Accumulated deficit | (270,979 | ) | (254,174 | ) | ||||
Total stockholders’ deficit | (8,818 | ) | (2,381 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 159,884 | $ | 173,411 | ||||
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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, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Revenue | ||||||||||||||||
Membership | $ | 13,661 | $ | 17,178 | $ | 45,640 | $ | 51,427 | ||||||||
Service provider | 66,084 | 69,814 | 201,021 | 206,443 | ||||||||||||
Total revenue | 79,745 | 86,992 | 246,661 | 257,870 | ||||||||||||
Operating expenses | ||||||||||||||||
Operations and support | 10,236 | 14,022 | 32,617 | 43,476 | ||||||||||||
Selling | 29,659 | 28,743 | 84,474 | 88,587 | ||||||||||||
Marketing | 25,343 | 26,175 | 58,890 | 73,730 | ||||||||||||
Product and technology | 16,973 | 8,990 | 40,330 | 26,977 | ||||||||||||
General and administrative | 12,914 | 8,287 | 43,734 | 26,599 | ||||||||||||
Total operating expenses | 95,125 | 86,217 | 260,045 | 259,369 | ||||||||||||
Operating income (loss) | (15,380 | ) | 775 | (13,384 | ) | (1,499 | ) | |||||||||
Interest expense, net | 1,417 | 684 | 3,385 | 2,380 | ||||||||||||
Income (loss) before income taxes | (16,797 | ) | 91 | (16,769 | ) | (3,879 | ) | |||||||||
Income tax expense | 23 | 9 | 36 | 28 | ||||||||||||
Net income (loss) | $ | (16,820 | ) | $ | 82 | $ | (16,805 | ) | $ | (3,907 | ) | |||||
Net income (loss) per common share — basic and diluted | $ | (0.28 | ) | $ | 0.00 | $ | (0.29 | ) | $ | (0.07 | ) | |||||
Weighted-average number of common shares outstanding — basic and diluted | 59,496 | 58,517 | 58,736 | 58,517 | ||||||||||||
Non-cash stock-based compensation expense | ||||||||||||||||
Operations and support | $ | 77 | $ | 29 | $ | 165 | $ | 78 | ||||||||
Selling | 576 | 180 | 1,285 | 340 | ||||||||||||
Marketing | 132 | 52 | 359 | 189 | ||||||||||||
Product and technology | 590 | 256 | 1,465 | 678 | ||||||||||||
General and administrative | 2,659 | 1,209 | 8,256 | 4,964 | ||||||||||||
Total non-cash stock-based compensation expense | $ | 4,034 | $ | 1,726 | $ | 11,530 | $ | 6,249 | ||||||||
Reconciliation of net income (loss) to Adjusted EBITDA1 (loss) | ||||||||||||||||
Net income (loss) | $ | (16,820 | ) | $ | 82 | $ | (16,805 | ) | $ | (3,907 | ) | |||||
Income tax expense | 23 | 9 | 36 | 28 | ||||||||||||
Interest expense, net | 1,417 | 684 | 3,385 | 2,380 | ||||||||||||
Depreciation and amortization | 3,854 | 1,588 | 9,108 | 4,791 | ||||||||||||
Non-cash stock-based compensation expense | 4,034 | 1,726 | 11,530 | 6,249 | ||||||||||||
Contingent liabilities and adjustments | — | (881 | ) | 3,500 | (1,841 | ) | ||||||||||
Non-cash long-lived asset impairment charge | — | — | — | 686 | ||||||||||||
Adjusted EBITDA1 (loss) | $ | (7,492 | ) | $ | 3,208 | $ | 10,754 | $ | 8,386 | |||||||
1 Adjusted EBITDA is a non-GAAP financial measure.
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Angie’s List, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Operating activities | ||||||||||||||||
Net income (loss) | $ | (16,820 | ) | $ | 82 | $ | (16,805 | ) | $ | (3,907 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||
Depreciation and amortization | 3,854 | 1,588 | 9,108 | 4,791 | ||||||||||||
Amortization of debt discount, deferred financing fees and bond premium | 160 | 171 | 493 | 526 | ||||||||||||
Non-cash stock-based compensation | 4,034 | 1,726 | 11,530 | 6,249 | ||||||||||||
Non-cash long-lived asset impairment charge | — | — | — | 686 | ||||||||||||
Non-cash loss on disposal of long-lived assets | — | — | 171 | 279 | ||||||||||||
Deferred income taxes | 15 | — | 15 | — | ||||||||||||
Changes in certain assets: | ||||||||||||||||
Accounts receivable, net | 73 | (907 | ) | 202 | (1,074 | ) | ||||||||||
Prepaid expenses and other current assets | (452 | ) | 209 | 276 | (3,048 | ) | ||||||||||
Changes in certain liabilities: | ||||||||||||||||
Accounts payable | 640 | (1,872 | ) | (1,902 | ) | 8,046 | ||||||||||
Accrued liabilities | (2,241 | ) | (2,664 | ) | 7,316 | 7,338 | ||||||||||
Deferred advertising revenue | (1,657 | ) | (1,459 | ) | (4,426 | ) | 503 | |||||||||
Deferred membership revenue | (3,157 | ) | 1,359 | (7,243 | ) | 1,052 | ||||||||||
Net cash provided by (used in) operating activities | (15,551 | ) | (1,767 | ) | (1,265 | ) | 21,441 | |||||||||
Investing activities | ||||||||||||||||
Purchases of investments | (6,200 | ) | (4,480 | ) | (17,474 | ) | (13,680 | ) | ||||||||
Sales of investments | 5,940 | 2,360 | 17,260 | 13,355 | ||||||||||||
Property, equipment and software | (798 | ) | (2,957 | ) | (4,006 | ) | (6,473 | ) | ||||||||
Capitalized website and software development costs | (2,987 | ) | (6,580 | ) | (11,960 | ) | (20,429 | ) | ||||||||
Intangible assets | (27 | ) | (173 | ) | (156 | ) | (379 | ) | ||||||||
Net cash (used in) investing activities | (4,072 | ) | (11,830 | ) | (16,336 | ) | (27,606 | ) | ||||||||
Financing activities | ||||||||||||||||
Proceeds from exercise of stock options | 856 | — | 1,356 | — | ||||||||||||
Taxes paid on behalf of employees related to net share settlement | (2,088 | ) | — | (2,518 | ) | — | ||||||||||
Payments on capital lease obligation | (59 | ) | (56 | ) | (175 | ) | (164 | ) | ||||||||
Net cash (used in) financing activities | (1,291 | ) | (56 | ) | (1,337 | ) | (164 | ) | ||||||||
Net decrease in cash and cash equivalents | $ | (20,914 | ) | $ | (13,653 | ) | $ | (18,938 | ) | $ | (6,329 | ) | ||||
Cash and cash equivalents, beginning of period | 34,575 | 47,315 | 32,599 | 39,991 | ||||||||||||
Cash and cash equivalents, end of period | $ | 13,661 | $ | 33,662 | $ | 13,661 | $ | 33,662 | ||||||||
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Conference Call Information
The Company will host a conference call today, November 1, 2016 at 8:30 a.m. 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 (404) 537-3406 domestically or (855) 859-2056 internationally, using passcode 95151733 through November 8, 2016.
About Angie’s List
Finding a pro for a job well done is made easy online by visiting Angieslist.com. More than four and a half 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. www.angieslist.com.
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 expense, contingent liabilities and adjustments and non-cash long-lived asset impairment charges, as applicable. We use Adjusted EBITDA internally in analyzing our financial results and performance and determined to disclose this measure as we believe it will be 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 is also a financial covenant with which we are required to comply under the financing agreement that governs our long-term indebtedness, 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 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 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), profitability plans 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.
Contact
Investor Relations: | Public Relations: | |||
Leslie Arena | Cheryl Reed | |||
317-808-4527 | 317-396-9134 | |||
lesliea@angieslist.com | cherylr@angieslist.com | |||
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