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

News Resources

Media Inquiries

Cheryl Reed

317-396-9134

cherylr@angieslist.com

Angie TV Partnerships

Cheryl Reed

317-396-9134

cherylr@angieslist.com

Angie's List on Twitter