SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x¨	Accelerated filer	¨x
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of registrant’s common stock outstanding as of April ~~20, 2015~~18, 2016 was ~~58,516,677.~~58,634,118.

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

Angie’s List, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

See accompanying notes.

~~Table of Contents~~

Angie’s List, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)


	Three Months Ended March 31,					Three Months Ended March 31,
	2015		2014			2016			2015

	(Unaudited)					(Unaudited)
Revenue
Membership	$	17,339	$	18,300		$	16,334		$	17,339
Service provider	66,204		54,357			67,522			66,204
Total revenue	83,543		72,657			83,856			83,543
Operating expenses
Operations and support	13,998		11,548			12,209			13,998
Selling	28,609		26,122			27,832			28,292
Marketing	16,276		23,481			19,115			18,829
Product and technology	8,416		7,457			10,034			8,416
General and administrative	10,962		7,356			18,047			8,726
Operating income (loss)	5,282		(3,307		)	(3,381		)	5,282
Interest expense, net	912		461			616			912
Income (loss) before income taxes	4,370		(3,768		)	(3,997		)	4,370
Income tax expense	10		15			7			10
Net income (loss)	$	4,360	$	(3,783	)	$	(4,004	)	$	4,360

Net income (loss) per common share — basic and diluted	$	0.07	$	(0.06	)	$	(0.07	)	$	0.07
Weighted average number of common shares outstanding — basic and diluted	58,516,677		58,491,230

Weighted-average number of common shares outstanding — basic and diluted						58,613,879			58,516,677

See accompanying notes.

~~Table of Contents~~

Angie’s List, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2015			2014			2016			2015

	(Unaudited)						(Unaudited)
Operating activities
Net income (loss)	$	4,360		$	(3,783	)	$	(4,004	)	$	4,360
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,590			1,220			1,675			1,590
Amortization of debt discount, deferred financing fees and bond premium	171			106			167			171
Non-cash stock-based compensation	2,256			1,533			3,027			2,256
Non-cash loss on disposal of long-lived assets							153			—
Changes in certain assets:
Accounts receivable	(700		)	(1,053		)	807			(700		)
Prepaid expenses and other current assets	(4,117		)	(2,081		)	(3,080		)	(4,117		)
Changes in certain liabilities:
Accounts payable	6,075			2,201			(490		)	6,075
Accrued liabilities	10,732			14,843			14,609			10,732
Deferred advertising revenue	2,991			3,475			(608		)	2,991
Deferred membership revenue	(2,112		)	(1,516		)	(3,055		)	(2,112		)
Net cash provided by operating activities	21,246			14,945			9,201			21,246

Investing activities
Purchases of investments	(3,120		)	(2,595		)	(4,071		)	(3,120		)
Sales of investments	2,835			2,640			4,320			2,835
Property, equipment and software	(1,116		)	(2,257		)	(904		)	(1,116		)
Capitalized website and software development costs	(6,754		)	(3,953		)	(5,489		)	(6,754		)
Intangible assets	(93		)	(390		)	(122		)	(93		)
Net cash used in investing activities	(8,248		)	(6,555		)
Net cash (used in) investing activities							(6,266		)	(8,248		)

Financing activities
Proceeds from exercise of stock options	—			461			2			—
Payments on capital lease obligations	(54		)	—
Net cash (used in) provided by financing activities	(54		)	461
Taxes paid on behalf of employees related to net share settlement							(127		)	—
Payments on capital lease obligation							(57		)	(54		)
Net cash (used in) financing activities							(182		)	(54		)
Net increase in cash and cash equivalents	$	12,944		$	8,851		$	2,753		$	12,944
Cash and cash equivalents, beginning of period	39,991			34,803			32,599			39,991
Cash and cash equivalents, end of period	$	52,935		$	43,654		$	35,352		$	52,935

Supplemental cash flow disclosures
Capital expenditures incurred but not yet paid	$	2,080		$	974		$	1,010		$	2,080

See accompanying notes.

~~Table of Contents~~

Angie’s List, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(in thousands, except share and per share data)

1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies

Angie’s List, Inc. (collectively with its wholly owned subsidiaries, the “Company”, “we”, “us” or “our”) operates a national local services consumer review service and marketplace where consumers can research, shop for and purchase local services for critical needs, such as home, health and automotive services, as well as rate and review the providers of these services. Ratings and reviews, which are available only to the Company's members, assist members in identifying and hiring ~~the best~~a highly-rated provider for their local service needs. Membership subscriptions are sold on a monthly, annual and multi-year basis. The consumer rating network "Angie's List" is maintained and updated based on consumer feedback. The Company also sells advertising in its monthly publication, on its website and mobile applications and through its call center to service providers that meet certain ratings criteria. In addition, the Company's e-commerce marketplace offerings provide consumers with the opportunity to purchase services directly through the Company's marketplace from highly-rated service providers. The Company's services are provided in markets located across the continental United States.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States ("(“U.S. ~~GAAP"~~GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP were condensed or omitted pursuant to such rules and regulations. Accordingly, ~~they~~the accompanying unaudited condensed consolidated financial statements do not include all information and footnotes necessary for fair presentation of financial position, results of operations and cash flows in conformity with U.S. ~~GAAP.~~GAAP and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. The accompanying unaudited condensed consolidated balance sheet as of December 31, 2015 was derived from the audited consolidated financial statements as of that date but does not include all disclosures required by U.S. GAAP, including certain notes thereto.

The condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered, in the opinion of management, necessary to fairly present the results for the periods presented. Operating results from interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

For additional information, including a discussion of the Company’s significant accounting policies, refer to the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015.

Operating Segments

Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one operating segment.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes as well as the disclosure of contingent assets and liabilities and reported revenue and expenses. Actual results could differ from those estimates. ~~The condensed~~

Reclassification of Prior Year Presentation

Certain prior year amounts were reclassified for consistency with the current period presentation, including the marketing compensation and personnel-related costs and general marketing operating expenditures that were moved from general and administrative expense and selling expense to marketing expense within the consolidated statements of operations. These reclassifications did not materially impact the consolidated financial ~~statements reflect all adjustments~~statements.

Significant Accounting Policies

As of ~~a normal recurring nature considered,~~January 1, 2016, the Company adopted the Financial Accounting Standards Board (the “FASB”) Accounting Standards Update No. 2015-03: Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, resulting in the ~~opinion~~Company reclassifying the deferred financing fees previously recorded in other noncurrent assets, including $1,462 as of ~~management, necessary~~December 31, 2015, to ~~fairly present~~net long-term debt in the ~~results~~consolidated balance sheets. There were no other material changes to the Company's significant accounting policies from those described in the Company's Annual Report on Form 10-K for the ~~periods.~~

~~Table of Contents~~

~~Revenue Recognition and Deferred Revenue~~

The Company recognizes revenue when all of the following conditions are met: there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fees is reasonably assured and the amount of fees to be paid by the customer is fixed or determinable.

~~Membership Revenue~~

Revenue from the sale of membership subscriptions is recognized ratably over the term of the associated subscription. Prior to 2014, the Company generally received a one-time, nonrefundable enrollment fee at the time a member joined. Enrollment fees are deferred and recognized on a straight-line basis over an estimated average membership life of 80 months for annual or multi-year members and 13 months for monthly members, which is based on historical membership experience. The Company reviews the estimated average membership lives on an annual basis, or more frequently if circumstances change. Changes in member behavior, performance, competition and economic conditions may cause attrition levels to change, which could impact the estimated average membership lives. The Company discontinued charging one-time nonrefundable enrollment fees in 2014.

~~Service Provider Revenue~~

~~Revenue from the sale of advertising in the Company’s~~ year ended December 31, 2015.~~Angie's List Magazine~~ publication is recognized in the period in which the publication is published and distributed. Revenue from the sale of website, mobile and call center advertising is recognized ratably over the time period the advertisements run. Revenue from e-commerce vouchers is recognized on a net basis when the voucher is delivered to the purchaser. While the Company is not the merchant of record with respect to its customers for these transactions, it does offer customers refunds in certain circumstances. Accordingly, revenue from e-commerce transactions is recorded net of a reserve for estimated refunds.

~~Deferred Revenue~~

Deferred revenue includes the unamortized portion of revenue associated with membership and service provider fees for which the Company received payment in advance of services or advertising to be provided. Deferred revenue is recognized as revenue when the related services or advertising are actually provided.

Income Taxes - Valuation Allowance

The Company evaluates whether it will realize the benefits of its net deferred tax assets and establishes a valuation allowance to reduce the carrying value of its deferred tax assets to the amount considered more likely than not to be recognized. Deferred tax assets arise as a result of tax loss carryforwards and various differences between the book basis and the tax basis of such assets. The Company periodically reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences. Should there be a change in the ability to recover deferred tax assets, the tax provision would be adjusted in the period in which the assessment is changed. There ~~has been~~was no change to the Company's assessment during the three ~~months~~month period ended March 31, ~~2015.~~

While the Company is reporting net income within the condensed consolidated statement of operations for the three months ended March 31, 2015, the Company estimates that taxable income will be considerably less in 2015 as any taxable income will be reduced by net operating loss carryforwards. The Company maintains a full valuation allowance against its deferred tax assets, and as a result, there is no federal income tax expense recorded within the condensed consolidated statement of operations for the three months ended March 31, 2015.2016.

Contractual Obligations

The Company's contractual obligations primarily consist of long-term noncancellable operating leases expiring through ~~2020~~2021 and long-term debt comprised of a $60,000 term loan scheduled to mature on September 26, 2019. There ~~were~~have been no significant changes in the Company's contractual obligations from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. Total combined future minimum payment obligations under long-term noncancellable operating leases ~~amount~~amounted to approximately ~~$10,353~~$8,613 as of March 31, ~~2015, while~~2016, and the Company had ~~$58,914~~$57,792 in outstanding borrowings, net of unamortized deferred financing fees and unamortized fees paid to the lender, under the term loan as of the same date.

~~Table of Contents~~

Recent Accounting Pronouncements

In March 2016, the FASB issued Accounting Standards Update No. 2016-09: Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The amendments in this update simplify several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 will be effective for the Company in fiscal year 2017, but early adoption is permitted. The Company is currently evaluating the impact of this update on the consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02: Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require lessees, among other things, to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous authoritative guidance. This update also introduces new disclosure requirements for leasing arrangements. ASU 2016-02 will be effective for the Company in fiscal year 2019, but early adoption is permitted. The Company is currently evaluating the impact of this update on the consolidated financial statements.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01: Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The amendments in this update address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In particular, the amendments in this update supersede, for public business entities, the requirement to disclose the methods and significant assumptions used in calculating the fair value of financial instruments required to be disclosed for financial instruments measured at amortized cost on the balance sheet. ASU 2016-01 will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not believe that the adoption of the guidance set forth in this update will have a material impact on the consolidated financial statements.

In April 2015, the ~~Financial Accounting Standards Board (FASB)~~FASB issued Accounting Standards Update No. 2015-05: Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement ("(“ASU ~~2015-05"~~2015-05”). The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the update specifies that the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. The update further specifies that the customer should account for a cloud computing arrangement as a service contract if the arrangement does not include a software license. ASU 2015-05 ~~will be~~is effective for the Company in fiscal year 2016. The Company ~~is currently assessing the future~~adopted ASU 2015-05 as of January 1, 2016 on a prospective basis, noting no material impact ~~of this update to the consolidated financial statements.~~

~~In April 2015, the FASB issued Accounting Standards Update No. 2015-03:~~ ~~Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs~~ ("ASU 2015-03"). The update sets forth a requirement that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in this update. ASU 2015-03 will be effective for the Company in fiscal year 2016. The Company is currently assessing the future impact of this update to the consolidated financial statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15: Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("“ASU ~~2014-15"~~2014-15”). ~~The~~This update sets forth a requirement for management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern, a responsibility that did not previously exist in U.S. GAAP. The amendments included in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period, including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 ~~will be~~is effective for the Company in fiscal year 2016. The Company ~~is currently assessing the future~~adopted ASU 2014-15 as of January 1, 2016, noting no material impact ~~of this update~~ to the consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09: Revenue from Contracts with Customers (Topic 606) ("(“ASU ~~2014-09"~~2014-09”). ~~The~~This update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that ~~"an~~“an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.~~" The~~” This update also requires significantly expanded disclosures related to revenue recognition. ASU 2014-09 will be effective for the Company in fiscal year ~~2017.~~2018 following the issuance of Accounting Standards Update No. 2015-14: Deferral of the Effective Date in August 2015, which deferred the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued Accounting Standards Update No. 2016-08: Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”), amending the principal-versus-agent implementation guidance set forth in ASU 2014-09. Among other things, ASU 2016-08 clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. In April 2016, the FASB issued Accounting Standards Update No. 2016-10: Identifying Performance Obligations and Licensing (“ASU 2016-10”), which amends certain aspects of the guidance set forth in the FASB's new revenue standard related to identifying performance obligations and licensing implementation. The Company is currently evaluating the future impact and method of adoption of ~~this update~~these updates with respect to the consolidated financial statements.

~~Table of Contents~~

2. Net Income (Loss) Per Common Share

Basic and diluted net income (loss) per common share is computed by dividing consolidated net income (loss) by the ~~weighted average~~weighted-average number of common shares outstanding for the period. Basic and diluted net income (loss) per common share was ~~$0.07~~$(0.07) and ~~$(0.06)~~$0.07 for the three months ended March 31, ~~2015~~2016 and ~~2014,~~2015, respectively.

The following potentially dilutive equity ~~securities~~awards are not included in the diluted net income (loss) per common share calculation as they would have an antidilutive ~~effect:~~effect for the periods presented:


	March 31, 2015	March 31, 2014	March 31, 2016	March 31, 2015
Stock options	7,053,887	4,761,665	7,394,111	7,053,887
Restricted stock units	416,155	—	1,290,502	416,155
Performance awards of restricted stock units			232,208	—

3. Fair Value Measurements

Whenever possible, quoted prices in active markets are used to determine the fair value of the Company's financial instruments. The Company's financial instruments are not held for trading or other speculative purposes. The estimated fair value of financial instruments was determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may materially impact the estimated fair value amounts.

Fair Value Hierarchy

Fair value is based on the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with ~~ASC~~Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, the Company categorized the financial assets and liabilities that are adjusted to fair value based on the priority of the inputs to the valuation technique, following the three-level fair value hierarchy prescribed by ASC 820, as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs that are used when little or no market data is available.

Valuation Techniques

The Company’s money market fund investments, the maturities for which are less than 90 days, are classified as cash equivalents within Level 1 of the fair value hierarchy on the basis of valuations using quoted market prices. Short-term investments consist of certificates of deposit, corporate bonds and ~~certificates of deposit~~U.S. Treasury securities with maturities of more than 90 days but less than one year. As many fixed income securities do not trade daily, fair values are often derived using recent trades of securities with similar features and characteristics. When recent trades are not available, pricing models are used to determine these prices. These models calculate fair values by discounting future cash flows at estimated market interest rates. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities, based on the credit quality, industry and structure of the asset. Typical inputs and assumptions to pricing models include, but are not limited to, a combination of benchmark yields, reported trades, issuer spreads, liquidity, benchmark securities, bids, offers, reference data and industry and economic events. The Company’s fixed income certificates of deposit, U.S. Treasury securities and corporate bond investments ~~and certificates of deposit~~ with fixed maturities are valued using recent trades or pricing models and are therefore classified within Level 2 of the fair value hierarchy.

Recurring Fair Value Measurements

There were no movements between fair value measurement levels for the Company’s cash equivalents and investments ~~during 2015~~ to date during 2016 or ~~2014,~~in 2015, and there were no material unrealized gains or losses as of March 31, ~~2015~~2016 or December 31, ~~2014.~~2015.

~~Table of Contents~~

The following tables summarize the Company's financial instruments at fair value based on the fair value hierarchy for each class of instrument as of March 31, ~~2015~~2016 and December 31, ~~2014:~~2015:


			Fair Value Measurement at March 31, 2015 Using								Fair Value Measurement at March 31, 2016 Using
	Carrying Value at March 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value at March 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds	$	331	$	331	$	—	$	—	$	1,264	$	1,264	$	—	$	—
Investments:
Certificates of deposit	21,520		—		21,514		—		16,910		—		16,911		—
U.S. Treasury securities									5,802		—		5,806		—
Corporate bonds	3,020		—		3,017		—		1,006		—		1,006		—
Total assets	$	24,871	$	331	$	24,531	$	—	$	24,982	$	1,264	$	23,723	$	—

Quoted Prices in Active Markets

for Identical Assets

The Company reviews its investment portfolio for other-than-temporary impairment whenever events or changes in circumstances indicate that the carrying ~~amounts~~amount of the investment may be impaired, considering such factors as the duration, severity and reason for the decline in value as well as the potential recovery period. During the three months ended March 31, 2016 and 2015, the Company did not recognize any other-than-temporary impairment losses.

The carrying amount of the term ~~loans approximate~~loan approximates fair value, using Level 2 inputs, as ~~these borrowings bear~~this borrowing bears interest at a variable (market) ~~rates~~rate at March 31, ~~2015~~2016 and December 31, ~~2014, respectively.~~2015.

Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis under circumstances and events, including those described in Note 6, ~~"Goodwill~~“Goodwill and Amortizable Intangible Assets,"” that are adjusted to fair value ~~only~~in certain circumstances when the carrying values are more than the fair values. The categorization of the framework used to price the assets in the event of an impairment is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value.

Assets and liabilities acquired in business combinations are recorded at their fair value as of the date of ~~acquisition.~~acquisition using Level 2 and Level 3 inputs.

The carrying amounts of accounts receivable and accounts payable reported in the condensed consolidated balance sheets approximate fair value.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets was comprised of the following as of March 31, ~~2015~~2016 and December 31, ~~2014:~~2015:

5. Property, Equipment and Software

Property, equipment and software was comprised of the following as of March 31, ~~2015~~2016 and December 31, ~~2014:~~2015:

Included in the Company's net property, equipment and software balance at March 31, 2015 was approximately $28,703 in construction in progress, comprised of $127 for furniture and equipment, $1,273 for buildings and improvements, $56 for software and $27,247 for capitalized website and software development costs, which includes $1,776 of capitalized interest.

At December 31, 2014, the Company's construction in progress balance was $22,418, consisting of $76 for furniture and equipment, $826 for buildings and improvements, $138 for software and $21,378 for capitalized website and software development costs, which included $1,410 of capitalized interest.

6. Goodwill and Amortizable Intangible Assets

The Company has goodwill as well as certain amortizable intangible assets consisting of data acquisition costs, a member list, content, core technology and other intangible assets related to the purchase of a website domain name. Amortization of the intangible assets is computed using the straight-line method over the estimated lives of the assets, which are six years for the member list and three years for the content, core technology, data acquisition costs and other intangible ~~assets, respectively.~~assets.

Amortizable intangible assets as of March 31, ~~2015~~2016 and December 31, ~~2014 are~~2015 were as follows:

Weighted-Average Remaining

Amortization Period (in years)

Weighted-Average Remaining

Amortization Period (in years)

The Company’s recorded goodwill balance atas of both March 31, ~~2015~~2016 and December 31, ~~2014~~2015 was $1,145.

7. Accrued Liabilities

Accrued liabilities was comprised of the following as of March 31, ~~2015~~2016 and December 31, ~~2014:~~2015:

~~Table of Contents~~

8. Debt and Credit Arrangements

Long-term debt, net, was comprised of the following as of March 31, ~~2015~~2016 and December 31, ~~2014:~~2015:


	March 31, 2015			December 31, 2014			March 31, 2016			December 31, 2015
Term loan	$	60,000		$	60,000		$	60,000		$	60,000
Fees paid to lender	(1,086		)	(1,146		)
Unamortized deferred financing fees							(1,364		)	(1,462		)
Unamortized fees paid to lender							(844		)	(904		)
Total debt, net	58,914			58,854			57,792			57,634
Less current maturities	—			—			(2,250		)	(1,500		)
Total long-term debt, net	$	58,914		$	58,854		$	55,542		$	56,134

On September 26, 2014, the Company entered into a financing agreement for a $60,000 term loan and a $25,000 delayed draw term loan.

Amounts outstanding under the financing agreement bear interest at a per annum rate, at the option of the Company, equal to (i) the LIBOR rate for the interest period in effect, subject to a floor of 0.5%, plus 6.75% or (ii) the reference rate, which is based on the prime rate as published by the Wall Street Journal, subject to a floor of 3.25%, plus 5.75%. The financing agreement requires monthly ~~interest-only~~interest payments on the first business day of each month until maturity on any principal amounts outstanding under either debt facility. The financing agreement obligates the Company to make quarterly principal payments on the term loan of $750 on the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining balance of the term loan at maturity. The Company is required to make principal payments on the outstanding balance of the delayed draw term loan equal to 1.25% of the amount of such loan funded at or prior to the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining outstanding balance of the delayed draw term loan at maturity. From the effective date of the financing agreement through September 26, 2017, the Company is also required to pay a commitment fee equal to 0.75% per annum of the unborrowed amounts of the delayed draw term loan.

The Company may prepay the amounts outstanding under the financing agreement at any time and is required to prepay the loans with (i) the net proceeds of certain asset sales, issuances of debt or equity, and certain casualty events, and (ii) up to 50% of consolidated excess cash flow, as defined in the financing agreement, for each fiscal year during the term of the financing agreement, commencing with the year ended December 31, 2015. The ~~Company must pay a 1% premium on prepayments made on or before September 26, 2015, subject to certain exceptions set forth in the financing agreement. The~~ Company’s obligations under the financing agreement are guaranteed by each of its subsidiaries and are secured by first priority security interests in all of their respective assets and a pledge of the equity interests of the Company’s subsidiaries. The term loan and the delayed draw term loan mature on September 26, 2019. As of March 31, ~~2015,~~2016, the Company had ~~$58,914~~$57,792 in outstanding borrowings, net of unamortized deferred financing fees of $1,364 and unamortized fees paid to the lender of ~~$1,086,~~$844, under the term loan and availability of $25,000 under the delayed draw term loan.

The financing agreement contains various restrictive covenants, including restrictions on the Company's ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to stockholders or repurchase outstanding stock, enter into related-party transactions and make capital expenditures, other than upon satisfaction of the conditions set forth in the financing agreement. The Company is also required to comply with certain financial covenants, including minimum consolidated EBITDA as defined in the financing agreement, minimum liquidity, maximum consolidated capital expenditures and minimum membership revenue. Upon an event of default, which includes certain customary events such as, among other things, a failure to make required payments when due, a failure to comply with covenants, certain bankruptcy and insolvency events, defaults under other material indebtedness, or a change in control, the lenders may accelerate amounts outstanding, terminate the agreement and foreclose on all collateral. The Company was in compliance with all financial and non-financial covenants at March 31, ~~2015.~~2016.

As a result of its entry into the new financing agreement in September 2014, the Company incurred financing costs of $1,957 that were capitalized as a deferred financing fee asset and are being amortized into interest expense over the term of the credit facility. Deferred financing fees, net of accumulated amortization, totaled $1,756 and $1,854 at March 31, 2015 and December 31, 2014, respectively.

9. Commitments and Contingencies

~~From time~~The Company is regularly involved in litigation, both as a plaintiff and as a defendant, relating to ~~time, the Company has or may become party to litigation incident to the ordinary course of business.~~its business and operations. The Company assesses the likelihood of any ~~adverse~~ judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, the Company considers other relevant factors that could impact its ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. The Company’s reserves may change in the future due to new developments or changes in strategy in handling these matters. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of the matters listed below will not have a material adverse effect on its business, consolidated financial position, results of operations or cash flows. Regardless of the outcome, litigation can adversely impact the Company as a result of defense and settlement costs, diversion of management resources and other factors.

~~Putative Securities Class Action Litigation.~~ On December 23, 2013, the first of two putative securities class action complaints was filed in the United States District Court for the Southern District of Indiana, naming the Company and various of its current and former directors and officers as defendants. The first complaint is styled as ~~Baron~~Moore v. ~~Angie’s List, Inc. et al., 1:13-cv-2032. On January 9, 2014, the second putative securities class action was filed in the United States District Court for the Southern District of Indiana. The second complaint is styled as~~ ~~Bartolone v. Angie’s~~Angie's List, Inc., ~~et al,~~ ~~1:14-cv-0023~~. Both complaints allege that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) by making material misstatements in and omitting material information from the Company’s public disclosures concerning the Company’s business prospects. On June 16, 2014, the Court consolidated the two cases and appointed United Food & Commercial Workers Local 464A Pension Fund as lead plaintiff (“Local 464A”). On August 29, 2014, Local 464A filed its consolidated Amended Complaint (the "Amended Complaint"). The Amended Complaint alleges that Angie's List made material misrepresentations and omissions regarding its paid membership model ("PPM"). The defendants filed a motion to dismiss the Amended Complaint, which has yet to be ruled upon by the Court.

~~Korda v. Oesterle, et al.~~ On January 3, 2014, a derivative complaint was filed in the United States District Court for the Southern District of Indiana, naming the Company’s Board of Directors and various current and former officers as individual defendants. The Company is named as a nominal defendant. The complaint is styled as ~~Korda v. Oesterle, et al.~~, 1:14-cv-00004. The complaint asserts that the individual defendants breached their fiduciary duty based on their knowledge that the Company’s public statements during 2013 concerning the Company’s business prospects were allegedly misleading. The complaint also alleges that certain defendants breached their fiduciary duty by selling shares of Angie’s List common stock between December 2012 and December 2013. The plaintiff asks for unspecified amounts in damages, interest and costs as well as ancillary relief. The Court issued an order staying the action pending a ruling on the motion to dismiss Local 464A’s Amended Complaint in the Putative Securities Class Action Litigation described above.

~~Clark v. Oesterle, et al.~~ On October 17, 2014, a derivative complaint was filed in the Court of Chancery of the State of Delaware, naming members of the Company’s Board of Directors and various current and former officers as individual defendants. The Company is named as a nominal defendant. The complaint is styled as ~~Clark v. Oesterle, et al.~~, C.A. No. 10255. The complaint alleges that the individual defendants breached their fiduciary duties by making misleading representations regarding, among other things, the Company’s business prospects. The complaint also alleges that certain individual defendants breached their fiduciary duties by selling shares of Angie’s List common stock between February 2013 and October 2013. The plaintiff asks for unspecified amounts in damages, interest and costs as well as ancillary relief. The Court issued an order staying the action pending a ruling on the motion to dismiss Local 464A’s Amended Complaint in the Putative Securities Class Action Litigation described above.

~~Moore v. Angie’s List, Inc.~~2:15cv-01243-SD. On March 11, 2015, a lawsuit seeking class action status was filed against the Company in the U.S. District Court for the Eastern District of ~~Pennsylvania (the “Court”).~~Pennsylvania. The lawsuit alleges claims offor breaches of contract and the covenant of good faith and fair dealing, fraud and fraudulent inducement, unjust enrichment and violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law ~~alleging, in part,~~premised on the allegations that the Company ~~lures consumers to purchase membership fees for “access to purportedly unfiltered~~does not disclose that it accepts advertising payments from service providers or that the payments allegedly will impact the service provider letter grade ratings, the content and availability of reviews ~~ratings~~about the provider and the provider's place in search result rankings.” The Company filed a motion to dismiss on May 13, 2015, which was granted in part on August 7, 2015. In particular, the plaintiff's claims for breach of the covenant of good faith and fair dealing and unjust enrichment were dismissed from the action. The parties proceeded to exchange extensive written and document discovery and have conducted depositions. Pursuant to the court’s recently amended scheduling order, the deadline to complete discovery passed on April 14, 2016 with summary judgment motions due by April 25, 2016. Certain other cases with similar allegations also were filed by some of the same plaintiffs’ counsel in federal court in California and New Jersey. The Company has not been served with the summons and complaint in the California matter, and no action is currently necessary as a result. Following mediation sessions held on April 4, 2016 and April 12, 2016, the parties executed a Memorandum of Understanding (“MOU”) on April 19, 2016 to settle the claims on a class-wide basis. Among other relief, the settlement provides for a cash payment of up to $2,350 to create a fund for the payment of cash to settlement class members and for the payment of attorneys’ fees and costs to plaintiffs’ counsel as approved by the court. Settlement class members will have the option of sharing in the cash fund or selecting a free period of membership of up to four months depending on the date and length of their membership with Angie’s List. The settlement also provides certain prospective relief in the form of enhanced explanations in the Company's Membership Agreement and in responses to Frequently Asked Questions concerning, among other things, the advertising revenue earned from service providers. In accordance with U.S. GAAP, the Company recorded a $3,500 contingent liability related to this matter, and this amount includes the cost of the cash fund described above as well as the payment of reasonable notice and administration costs, attorneys’ fees and an assumption of revenue the Company will forego as a result of certain class members selecting the option for a free period of membership. Pursuant to the MOU, the Company and plaintiffs’ counsel will seek to stay all remaining pending deadlines to allow the parties to confer in drafting a definitive settlement agreement and to facilitate the court-approval process. The California plaintiff also has agreed to contact the California court to seek a further stay of the action pending the anticipated approval proceedings in the Moore litigation. The New Jersey matter is separately addressed below.

Glick v. Angie's List, Inc., 2:16-cv-00546. On February 1, 2016, Gary Glick, an Angie's List member, filed a putative class action lawsuit in the United States District Court for the District of New Jersey. The plaintiff alleges that the Company deceives its consumers by representing that service providers “can't pay” or “don't pay” to be on Angie's List, while concealing that service providers pay advertising fees to influence their search result ranking, and further asserts other claims substantially similar to those alleged in the Moore litigation. The plaintiff's complaint includes claims for breach of contract and for a violation of the New Jersey Consumer Fraud Act. Glick served the summons and complaint on February 23, 2016, and the parties have filed a joint stipulation to extend the response deadline by 75 days as the outcome of the Moore litigation could moot further proceedings in the Glick action. The court approved the stipulation on March 9, 2016, setting the Company's response deadline for May 31, 2016. Pursuant to the Memorandum of Understanding to settle these actions, the plaintiff shall seek a further stay of the Glick action pending the anticipated approval proceedings in the Moore litigation.

Williams v. Angie’s List, Inc. 1:16-cv-878; Crabtree v. Angie’s List, Inc. 1:16-cv-877. On April ~~10, 2015,~~20, 2016, a group of former sales representatives filed separate lawsuits in the United States District Court ~~issued an Order approving~~for the ~~parties' proposed responsive pleadings deadline.~~Southern District of Indiana. The lawsuits allege that we failed to pay (i) wages earned in a timely manner as required under Indiana Wage Payment Statutes and (ii) overtime wages in violation of the Fair Labor Standards Act (29 U.S.C. §§ 206-07) and is requesting payment of all damages, including unpaid wages, interest, attorneys’ fees and other charges. The Company is currently unable to determine the likely outcome or reasonably estimate the amount or range of potential liability, if any, related to these matters, and accordingly, has not established any reserves for these matters.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) 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 Form 10-Q are forward-looking. In many cases, you can identify forward-looking statements by terminology, such as “may”, “should”, ~~"will"~~“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. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors, many of which are beyond the Company’s control.

The Company has based these forward-looking statements on its current expectations and projections about future events. Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate. As a result, the forward-looking statements based upon those assumptions also could be incorrect. Risks and uncertainties may affect the accuracy of forward-looking ~~statements. Some, but not all, of these risks are listed~~statements, including, without limitation, those set forth in Item 1A. of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2014~~2015 and ~~as applicable,~~ in ~~Item 1A. of Part II of this Form 10-Q.~~other reports we file with the Securities and Exchange Commission (“SEC”).

The forward-looking statements included in this report are made only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Overview

We operate a national local services consumer review service and marketplace where consumers can research, shop for and purchase local services for critical needs, such as home, health and automotive services, as well as rate and review the providers of these services across 253 markets in the United States. Our ratings and reviews, which are available only to our members, assist our members in identifying and hiring ~~the best~~a highly-rated provider for their local service ~~needs. We concluded~~needs, and our dynamic tools and products provide consumers with multiple ways to get work done while reducing the ~~quarter ended March 31, 2015 with more than 3.1 million paid memberships.~~time and effort required to hire a service provider.

We currently generate revenue from both ~~consumers, including our~~service providers and members, as well as non-members, and service providers. The primary source of membership revenue is subscription fees, which are typically charged in advance and are recognized ratably over the subscription period. At March 31, 2015, approximately 96% of our total membership base purchased annual or multi-year memberships. These subscription fees represent a significant source of working capital and provide a relatively predictable revenue stream. During 2014, in an effort to drive deeper penetration via enhanced membership growth and retention and to generate increased service provider participation, we introduced a new tiered pricing membership model on a national basis, offering three different membership plans with varying levels of service and benefits at tiered price points. The introduction of tiered pricing decreased membership fees, on average, across all markets and is resulting in reduced membership revenue per paid member as members are largely opting for the membership plan offering with the lowest price point tier to date.

non-member consumers. We derive service provider revenue principally from term-based sales of advertising, including on our website and mobile applications, in our publication and through our call center, to service ~~providers. We enable service~~ providers ~~who are rated highly by our members to advertise discounts and other promotions to our members.~~meeting certain eligibility criteria. Our members grade service providers on an “A” to “F” scale, and we invite service providers with an average grade of “B” or better and at least two reviews submitted in the last three years to advertise to our members through any or all of our platforms. Service provider contracts can be prepaid or invoiced monthly at the option of the service provider and carry an early termination penalty. We recognize service provider revenue ratably over the period ine-commerce solutions, which an advertising campaign is run. Our high service provider renewal rates, both in number of service providers renewing and as a percentage of initial contract value renewed, provide us with an additional relatively predictable revenue stream.

~~Table of Contents~~

In addition to traditional advertising on our platforms, our e-commerce marketplace solutions offer consumers the opportunity to purchase services through us from highly-rated service providers. These e-commerce offerings are available through postings on our website and mobile applications as well as via email promotions, offer consumers the opportunity to purchase services through us from highly-rated service providers and provide us with additional service provider monetization opportunities. Service provider revenue as a percentage of total revenue has continued to increase as we evolve and enhance the value proposition we offer service providers and leverage new service provider monetization strategies. Our primary source of membership revenue is currently subscription fees, which are ~~an important aspect~~typically charged in advance. Membership revenue as a percentage of total revenue has continued to decline due to the downward pressure on our membership revenue attributable to tiered membership pricing, a trend we expect to continue as we introduce a free membership tier for consumers for the first time later in the year.

In early 2016, we announced our new long-term profitable growth plan, which will feature a redefined product and service experience for consumers and service providers alike, transforming our legacy business model by removing the ratings and reviews paywall and enabling consumers to access certain aspects of our ~~business. When~~service for free. In addition to free memberships for consumers, our new model will provide consumers with revamped tiered membership options with an array of premium services at varying price points. Service providers will also be able to take advantage of a ~~consumer completes an e-commerce purchase from~~tiered value proposition under our ~~marketplace,~~new model, offering varying levels of service and tools based on the ~~transaction is processed through Angie’s List,~~nature and ~~we receive a portion~~extent of the ~~price paid as a processing fee. The purchaser can then indicate scheduling preferences automatically using~~service provider's relationship with Angie's List.

Our new long-term profitable growth plan will entail three phases implemented over several years:

Strengthen and Reposition the Core Business - includes redefining the paywall and launching premium consumer services, improving our ~~tools or work directly with~~consumer experience by scaling our new platform and optimizing the service provider sales organization to ~~schedule~~better monetize consumer traffic;

Leverage the ~~service. E-commerce offerings provide our consumers with an easier and more convenient way to fulfill their service needs and may offer a discount as well. We have increased our focus~~Home Services Platform - includes expanding value-added services provided on our ~~e-commerce marketplace as a way~~platforms and improving our customer and service provider relationships with personalized offerings; and

Expand to ~~further~~Adjacencies - includes expanding our consumer and service provider bases and developing partnerships to provide additional value-added services.

Our new model is designed to identify and leverage more ways to attract, engage and ultimately monetize consumer and service provider traffic on our platforms. Once fully implemented, we believe our long-term profitable growth plan will enhance the value of our ~~services for both consumers~~service and ~~service providers.~~

~~As we continue the process of transitioning~~generate accelerated growth, retention and engagement across our business to a marketplace model wherein we act as an intermediary in local services transactions between consumers and service providers, our approach to generating revenue from e-commerce has evolved such that e-commerce is now a core component of the value proposition we offer to service providers and an increasingly important aspect of our service provider packaging, pricing and monetization strategies. Accordingly, we are making substantial investments in the development of our marketplace platforms, and initiatives, including a complete redesign and rebuild of our website and user interface, in an effort to provide greater value to consumers, improve consumer engagement, drive higher dollar service provider renewals, increase the number of service providers who sell e-commerce and enhance service provider retention. Additionally, we are investing in technology to enable the mechanisms by which we, ~~objectively measure the quality of interactions between service providers~~in turn, believe will drive increased market penetration and members, which is an important component of our focus on driving better transaction outcomes between service providers and consumers. Our completely redesigned mobile application gives consumers three easy ways to get work done: (1) search for providers, (2) shop for specific home improvement services and (3) SnapFix a project, which is our revolutionary new feature that streamlines the process of hiring a service professional.reignite meaningful revenue growth.

While we continue to expand the breadth and depth of the service provider side of our business, attracting new paid members and strengthening our market reach remain among our key growth strategies. Increased penetration in a market results in more reviews of service providers, which enhances the value of our service to consumers and drives further growth in that market. Market penetration also generates growth in service provider revenue and supports higher advertising rates as the pool of consumers actively seeking to hire service providers grows. However, our ability to increase advertising rates tends to lag increased penetration of our markets due to our inability to increase rates under existing service provider contracts prior to renewal.

Our primary strategy for new member acquisition is national offline and online advertising, including an increasing emphasis on digital marketing platforms. Our marketing expense is generally higher in the second or third quarters of the year as we increase our investment in advertising to attract consumers during the periods when we have found they are most actively seeking our services. We traditionally focused our marketing efforts on acquiring new members to increase our market penetration. In 2014, we began to shift our marketing focus from solely driving member growth to also highlighting our e-commerce offerings and marketplace initiatives, the objective of which was to take better advantage of traffic to our site and open our platforms and services to a broader base of consumers. Our marketing strategy includes a mix of offline advertising via national cable and broadcast television, national broadcast radio and magazines as well as online through search engine marketing, web display and other forms of digital advertising. We also utilize our original content to supplement our marketing spend and further strengthen our brand as well as to drive more marketplace transactions through search engine optimization ("SEO"). We optimize our marketing channel mix and creative to improve targeting effectiveness, drive efficiency in our spend and amplify our messaging.

As described further in the “Market Cohort Analysis” herein, we believe that our estimated penetration rate and average revenue per market will increase as markets mature, and over the long-term, we believe that these increased revenues will offset our operating expenses and declines in membership pricing. Given that our marketing contracts are typically short-term, we can rapidly adjust marketing expense and thus decrease total operating expenses to reduce cash used in operations or generate cash and profits from operations should we begin to experience adverse trends in marketing cost per paid membership acquisition or wish to optimize for profitability. We believe that our high membership renewal rates and “word of mouth” referrals from existing members, combined with effective purchasing of lower volumes of advertising and increased utilization of SEO should enable us to maintain and potentially grow the size of our paid membership base should we decide to reduce our overall level of advertising spending.

~~Table of Contents~~

Market Cohort Analysis

To assist with the evaluation of our performance, we compile certain financial and operating data for our markets, grouped by the years in which the markets transitioned to paid membership status. The table below summarizes this data for the twelve month periods ended March 31, ~~2015~~2016 and ~~2014~~March 31, 2015 by each respective cohort. The pre-2003 cohort includes our ten most established markets where we initially built out our business model. The markets in this cohort include several mid-sized urban markets in the Midwest as well as Chicago and Boston. The 2003-2007 cohort is comprised of the first major subset of markets, including many of our largest potential markets, that we targeted in our national expansion strategy. The post-2007 cohort primarily consists of smaller markets that we entered to fill out our national presence.

Pre-2003 2003-2007 Post-2007 Total
March 31, March 31, March 31, March 31,
2015 2014 2015 2014 2015 2014 2015 2014
# of Markets 10
10
35
35
208
208
253
253
Average Revenue/Market (1)
$ 7,696,718
$ 6,662,119
$ 5,851,214
$ 4,766,477
$ 211,270
$ 156,235
$ 1,287,367
$ 1,051,165
Average Marketing Expense/Market (2)
$ 1,214,269
$ 1,375,876
$ 1,276,429
$ 1,456,256
$ 112,324
$ 127,476
$ 316,921
$ 360,643

Membership Revenue/Paid Member (3)
$ 30.89
$ 38.54
$ 27.83
$ 33.79
$ 15.66
$ 16.47
$ 25.18
$ 30.11
Service Provider Revenue/Paid Member (4)
$ 110.87
$ 113.63
$ 103.33
$ 100.09
$ 42.03
$ 37.12
$ 88.47
$ 86.01
Total Revenue/Paid Member $ 141.76
$ 152.17
$ 131.16
$ 133.88
$ 57.69
$ 53.59
$ 113.65
$ 116.12

Total Paid Memberships (5)
592,037
493,817
1,694,950
1,427,873
816,380
707,014
3,103,367
2,628,704
Estimated Penetration Rate (6)
16 % 13 % 13 % 10 % 12 % 9 % 13 % 10 %
Annual Membership Growth Rate (7)
20 % 29 % 19 % 34 % 16 % 40 % 18 % 35 %



	Pre-2003						2003-2007						Post-2007						Total
	March 31,						March 31,						March 31,						March 31,
	2016			2015			2016			2015			2016			2015			2016			2015
Number of Markets	10			10			35			35			208			208			253			253
Average Revenue/Market⁽¹⁾	$	8,011,151		$	7,696,718		$	6,200,540		$	5,851,214		$	226,773		$	211,270		$	1,360,866		$	1,287,367
Average Marketing Expense/Market ⁽²⁾	$	1,272,695		$	1,367,509		$	1,339,087		$	1,437,514		$	117,678		$	126,499		$	332,300		$	356,917

Membership Revenue/Paid Member⁽³⁾	$	24.42		$	30.89		$	22.71		$	27.83		$	14.47		$	15.66		$	20.89		$	25.18
Service Provider Revenue/Paid Member⁽⁴⁾	105.59			110.87			100.92			103.33			42.04			42.03			86.49			88.47
Total Revenue/Paid Member	$	130.01		$	141.76		$	123.63		$	131.16		$	56.51		$	57.69		$	107.38		$	113.65

Total Paid Memberships⁽⁵⁾	640,384			592,037			1,815,927			1,694,950			852,855			816,380			3,309,166			3,103,367
Estimated Penetration Rate⁽⁶⁾	17		%	16		%	13		%	13		%	12		%	12		%	14		%	13		%
Annual Membership Growth Rate⁽⁷⁾	8		%	20		%	7		%	19		%	4		%	16		%	7		%	18		%


(1)	Average revenue per market is calculated by dividing the revenue recognized for the markets in a given cohort by the number of markets in the cohort at period end.

(2)

Average marketing expense per market is calculated by first by allocating marketing expense to each cohort based on the percentage of our total target demographic for all markets in each cohort, as determined by third-party data, and then dividing the allocated cohort marketing expense by the number of markets in the cohort at period end. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort. According to ~~a March 2015~~ demographic ~~study~~studies by Merkle Inc. that we commissioned in December and March of 2015, there were approximately 27 million households in the United States in our target demographic, which consists of homeowners aged 35 to 64 with an annual household income of at least ~~$75,000. Approximately~~$75,000, including 24 million ~~of these~~ households ~~were~~located in our markets. ~~The~~These studies also determined that the average number of households per market in our target demographic was 370,000, 390,000 and 30,000 for the pre-2003, 2003-2007 and post-2007 cohorts, respectively, for the period ended March 31, 2015. According to a March 2014 demographic study by Merkle Inc., there were approximately 29 million households in the United States in our target demographic, and approximately 26 million of these households were in our markets. The average number of households per market in our target demographic was 390,000, 410,000 and 40,000 for the pre-2003, 2003-2007 and post-2007 cohorts, respectively, for the period ended March 31, 2014.respectively.


(3)	Membership revenue per paid membership is calculated as membership revenue in the cohort divided by the average number of paid memberships in the cohort. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort.


(4)	Service provider revenue per paid membership is calculated as service provider revenue in the cohort divided by the average number of paid memberships in the cohort. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort.


(5)	Total paid memberships in each cohort as of March 31, ~~2015~~2016 and ~~2014~~2015 includes a de minimis number of complimentary memberships in our paid ~~markets for the period presented.~~markets.


(6)	Estimated penetration rate is calculated by dividing the number of paid memberships in a given cohort as of March 31, 2016 and 2015, ~~and 2014~~respectively, by the number of households meeting our target demographic criteria in that cohort.


(7)	Annual membership growth rate represents the rate of increase in the total number of paid memberships in the cohort between March 31, 2016 and 2015 for 2016 and March 31, 2015 and 2014 for ~~the current year and March 31, 2014 and 2013 for the prior year.~~2015.

~~Table of Contents~~

Our average revenue per market has generally grown with the maturity and corresponding increased penetration of our markets. Total revenue per paid membership fluctuates from period to period, reflecting the timing of our ability to adjust service provider rates given our contract terms and membership pricing innovations designed to drive increased penetration. In the first quarter of 2015, total revenue per paid membership was down across certain cohorts and in total as compared to the prior year, which primarily reflects the impacts associated with the adoption of tiered pricing and, more recently, the shift to service provider subscription pricing. Factors that may drive fluctuations in total revenue per paid membership include:

Our average service provider contract term typically approximates one year, and we are only able to increase rates for a given participating service provider upon contract renewal. As such, there is a lag in our ability to leverage increased penetration in a market into increased service provider rates;

Increasingly, we are seeing members opt for annual memberships, and as such, the percentage of our membership base on monthly memberships is declining. While we believe annual memberships are more beneficial to members and promote high renewal rates, these memberships generate reduced proceeds as compared to monthly memberships on an annualized basis;

On average across all markets, we are utilizing lower membership pricing and generating reduced membership revenue per paid member as part of our tiered pricing membership structure for varying levels of service and benefits that was introduced on a national basis during the prior year with the goal of driving deeper penetration via enhanced membership growth and retention and generating increased service provider participation; and

As we continue the process of transitioning our business to a marketplace model, our approach to generating revenue from e-commerce has evolved such that e-commerce is now a core component of the value proposition we offer to service providers and an increasingly important aspect of our service provider packaging, pricing and monetization strategies. The shift to subscription pricing for service providers concurrent with the aforementioned transition is resulting in lower e-commerce take rates and putting near-term downward pressure on service provider revenue with the expectation that the associated benefit will materialize over time in the form of higher dollar subscription renewals, increases in the number of service providers that sell e-commerce and enhanced service provider retention.

One of our most important growth strategies remains expanding our membership base, which creates the network effects of a more valuable service for consumers and a more attractive commercial platform for service providers. We intend to continue to evaluate and adopt innovative packaging, pricing and monetization strategies, such as tiered membership offerings, in an effort to deliver compelling value to our members and thereby support membership growth and retention. Although the dynamics associated with the introduction of such strategies have caused and may continue to cause membership revenue per paid membership to decline sequentially in some of our cohorts, we believe that the increase in our membership base is critical for producing overall growth in average revenue per market, service provider revenue per paid membership and total revenue per paid membership across all cohorts.

As a market matures, our penetration rate typically increases. Historically, while the absolute number of paid members ~~may grow~~has generally grown faster in larger markets, our smaller markets have often ~~achieve~~achieved greater penetration over a shorter period of time than our larger markets. We believe that a principal reason for our lower penetration rates in larger markets is the manner in which we market Angie’s List to our target demographic in such markets. We spend the majority of our marketing dollars on national advertising, including an ~~increasing~~increased emphasis on digital marketing platforms, and we believe ~~that~~ this marketing strategy provides us the most cost effective and efficient manner of acquiring new ~~paid memberships.~~memberships and attracting and engaging traffic on our platforms. However, advertising nationally means we deliver the same volume of advertising regardless of the size of the market. Since each market differs in terms of the number of advertising outlets available, the impact of our spending on national advertising varies across markets. In our experience, smaller markets typically provide fewer advertising outlets than larger markets. Therefore, we believe the same volume of advertising in a smaller market is more effective in building brand awareness and generating new memberships and traffic on our platforms than in larger markets.

Our average service provider contract term typically approximates one year, and we do not increase rates for a given service provider prior to contract renewal. As such, there is a lag in our ability to leverage increased penetration in a market into increased advertising rates;

On average across all markets, we have utilized lower membership pricing and generated reduced membership revenue per paid member as part of our tiered pricing membership structure for varying levels of service and benefits that was introduced on a national basis during 2014. This trend will likely be further exacerbated by the forthcoming introduction of a free membership tier for consumers later in 2016. As our business evolves, we may again alter or refine our strategy with regard to membership pricing in the future;

Our approach to generating revenue from e-commerce continues to evolve as we refine the value proposition we offer to service providers and, concurrently, our service provider monetization strategies. Accordingly, we have in the past adjusted our approach with respect to e-commerce take rates in order to more effectively monetize our e-commerce offerings, and we may do so again in the future; and

As we implement and scale our new technology platform, we have experienced and may continue to experience near-term revenue losses as a result of temporary disruptions common to significant platform migrations such as this one.

At March 31, 2016, total revenue per paid membership was down across all cohorts and in total as compared to March 31, 2015, reflecting the impacts associated with the continued adoption of tiered membership pricing and, more recently, near-term reductions in average e-commerce take rates in previous periods as well as transitory revenue losses attributable to the migration to our new technology platform. We ~~expect~~intend to continue to ~~see lower relative~~evaluate and adopt innovative packaging, pricing and monetization strategies, such as our tiered membership offerings, as well as introduce new products and services, in an effort to deliver compelling value to our consumers and service providers and thereby generate growth, retention and engagement across the business. Although the dynamics associated with the introduction of such strategies have caused and may continue to cause revenue per paid membership to decline sequentially in some or all of our cohorts in the near term, we believe that these strategies are critical to driving increased market penetration ~~rates~~and reigniting meaningful revenue growth across all cohorts over time.

As our business evolves, the ways in which we measure our performance and understand and evaluate our operations and underlying trends in our ~~larger markets for these reasons. As several of these larger markets are in~~business, such as the ~~2003-2007~~market cohort ~~over time our penetration rate in this cohort~~analysis, may ~~lag other cohorts.~~change.

~~Table of Contents~~

Key Operating Metrics

In addition to the line items in our condensed consolidated financial statements, we regularly review a number of other operating metrics related to our membership and service provider bases to evaluate our business, determine the allocation of resources and make decisions regarding business strategies. We believe these metrics are useful for investors and analysts to understand the underlying trends in our business. However, as our business evolves, the metrics we currently identify as critical to the evaluation of our operations and performance may change.

The following table summarizes our key operating metrics, which are unaudited, for the three months ended March 31, ~~2015~~2016 and ~~2014:~~2015:


	Three Months Ended March 31,						Three Months Ended March 31,
	2015			2014			2016			2015
Total paid memberships (end of period)	3,103,367			2,628,704			3,309,166			3,103,367
Gross paid memberships added (in period)	229,987			286,626			188,242			229,987
Marketing cost per paid membership acquisition (in period)	$	71		$	82
First-year membership renewal rate (in period)	71		%	73		%	73		%	71		%
Average membership renewal rate (in period)	75		%	76		%	75		%	75		%
Participating service providers (end of period)	54,341			51,522			54,864			54,341
Total service provider contract value (end of period, in thousands)	$	263,349		$	211,635		$	267,302		$	263,349
Total service provider contract value backlog (end of period, in thousands)							$	165,360		$	165,600

Total paid memberships. Total paid memberships reflects the number of paid memberships at the end of each period presented. Total paid memberships also includes a de minimis number of complimentary memberships in our paid markets for all periods presented. We generally expect that there will be one membership per household and, as such, each membership may actually represent multiple individual consumers.

Gross paid memberships added. Gross paid memberships added, which tends to fluctuate based on our level of investment in advertising as well as the nature of our messaging included in such advertising, reflects the total number of new paid memberships added in a reporting ~~period and is an important performance indicator as increasing paid memberships is a key growth strategy.~~

~~Marketing cost per paid membership acquisition. We calculate marketing cost per paid membership acquisition in a reporting period as marketing expense divided by gross paid memberships added in that~~ period. As we advertise in national media, a portion of our marketing expenditures also increase the number of unpaid memberships. On a comparative basis, marketing cost per paid membership acquisition can reflect our success in generating new paid memberships through our SEO efforts, “word of mouth” referrals and experimentation and adjustments to our marketing expense to focus on more effective advertising outlets for membership acquisition, as well as changes in membership pricing. We typically incur higher marketing expense in the second or third quarters of the year in order to attract consumers during the periods when we have found they are most actively seeking our services. We generally reduce our marketing expense in the fourth quarter due to decreased consumer activity in the service sector and higher advertising rates associated with holiday promotional activity.

Membership renewal rates. First-year membership renewal rate reflects the percentage of paid memberships expiring in the reporting period after the first year of membership that are renewed. Average membership renewal rate reflects the percentage of all paid memberships expiring in the reporting period that are renewed. Renewal rates do not include monthly memberships, which comprised approximately 4%3% of our total membership base as of March 31, 2015. Given the correlation between increased penetration and higher total revenue per paid membership, we view first-year membership renewal rate and average membership renewal rate as key indicators of expected operating results in future periods. The decline in first-year membership renewal rate for the three months ended March 31, 2015 as compared to the three months ended March 31, 2014 reflects the impact of the expiration of promotional membership rates offered in 2014 as well as modest pressure from lower credit card success rates.2016.

Participating service providers. 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. For the periods ended June 30, 2014, September 30, 2014 and December 31, 2014, the number of participating service providers, including those only under contract for e-commerce, was 53,374, 54,392 and 54,240, respectively.

Total service provider contract value. We calculate service provider contract value as the total contract value of active service provider contracts at the end of the period. Contract value is the total payment obligation of a service provider to us, including amounts already recognized in revenue, over the stated term of the contract.

~~In addition, we also track~~Total service provider contract value backlog ~~as a key metric. Contract~~. Service provider contract value backlog consists of the portion of service provider contract value at the ~~stated date which~~end of the period that is not yet recognized as revenue. ~~At March 31, 2015 and 2014, our contract value backlog was $165.6 million and $132.1 million, respectively.~~

~~Table of Contents~~

Results of Operations

The following tables set forth our results of operations for the periods presented in absolute dollars and as a percentage of our revenue for those periods. The ~~period-to-period comparison of~~ financial results isbelow are not necessarily indicative of future results.


	Three Months Ended March 31,					Three Months Ended March 31,
	2015		2014			2016			2015

	(in thousands)					(in thousands)
Revenue
Membership	$	17,339	$	18,300		$	16,334		$	17,339
Service provider	66,204		54,357			67,522			66,204
Total revenue	83,543		72,657			83,856			83,543
Operating expenses
Operations and support (1)	13,998		11,548			12,209			13,998
Selling (1)	28,609		26,122			27,832			28,292
Marketing(1)	16,276		23,481			19,115			18,829
Product and technology (1)	8,416		7,457			10,034			8,416
General and administrative (1)	10,962		7,356			18,047			8,726
Operating income (loss)	5,282		(3,307		)	(3,381		)	5,282
Interest expense, net	912		461			616			912
Income (loss) before income taxes	4,370		(3,768		)	(3,997		)	4,370
Income tax expense	10		15			7			10
Net income (loss)	$	4,360	$	(3,783	)	$	(4,004	)	$	4,360

~~Table of Contents~~

Comparison of the ~~three months ended~~Three Months Ended March 31, ~~2015~~2016 and ~~2014~~2015

Revenue


	Three Months Ended March 31,								Three Months Ended March 31,
	2015			2014			% Change		2016			2015			% Change

	(dollars in thousands)								(dollars in thousands)
Revenue
Membership	$	17,339		$	18,300		(5	)%	$	16,334		$	17,339		(6)	%
Service provider	66,204			54,357			22	%	67,522			66,204			2	%
Total revenue	$	83,543		$	72,657		15	%	$	83,856		$	83,543		—	%

Percentage of revenue by type
Membership	21		%	25		%			19		%	21		%
Service provider	79		%	75		%			81		%	79		%
Total revenue	100		%	100		%			100		%	100		%

Total paid memberships (end of period)	3,103,367			2,628,704			18	%	3,309,166			3,103,367			7	%
Gross paid memberships added (in period)	229,987			286,626			(20	)%	188,242			229,987			(18)	%
Participating service providers (end of period)	54,341			51,522			5	%	54,864			54,341			1	%

Total revenue increased ~~$10.9~~$0.3 million for the three months ended March 31, ~~2015~~2016 as compared to the three months ended March 31, ~~2014.~~2015.

Membership revenue decreased $1.0 million ~~year over year, primarily due~~for the three months ended March 31, 2016 as compared to ~~the 20% decrease in membership revenue per paid membership in~~ the three months ended March 31, 2015, primarily due to a 12% decrease in membership revenue per average paid membership period over period as ~~compared to~~well as an 18% decline in gross paid memberships added during the ~~prior year,~~quarter, partially offset by the ~~18%~~impact associated with a 7% increase in the total number of paid memberships over the same time period. The decrease in membership revenue per average paid membership iswas largely the result of reductions in membership fees, on average, across all markets ~~related~~due to ~~the~~ tiered ~~pricing~~ membership ~~model that was introduced on a national basis during the second quarter of the prior year~~pricing as members ~~are largely opting for~~typically select the membership plan offering with the lowest price ~~point tier.~~point. The ~~decrease~~decline in gross paid memberships added period over period was attributable to adjustments in the level of our advertising spend, as well as the messaging associated with that spend, in the first quarter of 2016 as compared to the first quarter of 2015. We decreased advertising spend quarter over quarter by $1.6 million while simultaneously continuing to shift our marketing focus away from solely driving member growth to also highlighting our new products and services, as well as our e-commerce offerings, in an effort to generate traffic to and transactions on our platforms, thus negatively impacting gross paid memberships added, and thereby membership revenue, ~~per paid membership in the three months ended March 31, 2015 also resulted from an increase from 94% to 96% of total memberships constituting annual and multi-year memberships year~~period over ~~year.~~period. Membership revenue accounted for ~~21%~~19% and ~~25%~~21% of total revenue for the three months ended March 31, ~~2015~~2016 and ~~2014,~~2015, respectively, and we generally expect membership revenue as a percentage of total revenue to continue to decline ~~as a result of the implementation of our tiered pricing membership plans, which is putting~~due to downward pressure on ~~both~~ our membership revenue ~~and~~associated with the evolution of our membership ~~revenue per paid member.~~plan offerings and pricing, including the forthcoming introduction of a free membership tier for consumers.

Service provider revenue increased ~~$11.9~~$1.3 million ~~year over year,~~for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015, primarily as a result of ~~a 15% increase~~modest quarter over quarter increases in service provider revenue per average participating service provider, ~~as well as~~service provider contract value and the ~~impact associated with the 5% increase in the~~overall number of participating service ~~providers as we continue the process of transitioning our business to a marketplace model and evolve our service provider packaging, pricing and monetization strategies in doing so.~~providers. Service provider revenue primarily consists of revenue from advertising contracts with service providers. As our penetration of a given market increases, we are typically able to charge higher rates for advertising as service providers are able to reach a larger base of potential customers. However, as we only increase advertising rates at the time of contract renewal, increases in service provider revenue in a given market may trail increases in market penetration. Revenue from our e-commerce ~~marketplace~~offerings is also included in service provider revenue and will fluctuate from period to period as offerings and monetization strategies evolve and due to seasonality. Near-term reductions in average e-commerce take rates in previous periods and transitory revenue losses attributable to the migration to our new technology platform contributed to a realization of slower service provider revenue growth rates quarter over quarter. Service provider revenue accounted for ~~79%~~81% and ~~75%~~79% of total revenue for the three months ended March 31, ~~2015~~2016 and ~~2014,~~2015, respectively, and we generally expect service provider revenue as a percentage of total revenue to continue to increase as we evolve and enhance the value proposition we offer service providers and leverage new service provider ~~packaging, pricing and~~ monetization ~~strategies.~~strategies, subject to any near-term impacts associated with the migration to our new technology platform.

Operations and support

Operations and support expense ~~increased $2.5~~decreased $1.8 million for the three months ended March 31, ~~2015~~2016 as compared to the three months ended March 31, ~~2014. This increase~~2015. The decline in operations and support expense was ~~due~~largely the result of a quarter over quarter reduction in ~~part~~compensation and personnel-related costs of $1.2 million related to a ~~$1.0 million increase~~25% reduction in ~~personnel-related costs as we increased our~~ operations and support headcount year over ~~year by approximately 15% in order to service our growing member~~year. Operations and ~~service provider populations. Additionally, we incurred a $0.9 million increase in publication costs associated with the increased circulation of the~~ ~~Angie’s List Magazine~~ ~~as we continue to expand our membership. There~~support expense was also positively impacted by a ~~$0.7 million increase~~period over period decline in credit card processing fees ~~year over year~~of $0.4 million, attributable to the ~~growing volume of membership enrollment and service provider transactions.~~quarter over quarter decline in gross paid memberships added as well as disruptions associated with the migration to our new technology platform that negatively impacted e-commerce unit sales in the current quarter. Operations and support expense ~~increased~~decreased slightly as a percentage of revenue ~~year~~quarter over ~~year. We expect~~quarter, and we believe this trend will continue as we leverage identified operations and support ~~expense to continue to increase as we grow our membership and service provider bases, subject to seasonal trends.~~efficiencies over the course of 2016.

Selling expense ~~increased $2.5~~decreased $0.5 million for the three months ended March 31, ~~2015~~2016 as compared to the three months ended March 31, ~~2014, much of which~~2015. While selling expense generally correlates with ~~the growth~~fluctuations in service provider revenue, we experienced modest quarter over quarter leverage in selling expense as service provider revenue increased 2% for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015, while selling expense declined 2% over the same time period. ~~We increased~~Headcount was the most significant factor contributing to the period over period leverage in selling expense, as there was a 7% reduction in the total number of employees in our sales ~~personnel~~organization from March 31, 2015 to March 31, 2016, and ~~management responsible for contract renewals by 10% year over year to 261, and, together~~when coupled with the ~~745~~impact of recent changes in our sales ~~personnel and management responsible for originating new advertising contracts and e-commerce transactions as of the end of the quarter, this contributed to an approximately $2.2~~compensation structure, yielded a $0.5 million ~~increase~~decrease in selling compensation and personnel-related costs for commissions, wages and other employee ~~benefits for the three months ended March 31, 2015 as compared to the prior year period. Selling~~benefits. Although selling expense as a percentage of both total revenue ~~experienced a slight decline~~and service provider revenue declined in the first quarter of ~~2015~~2016 as compared to ~~2014. Our~~the first quarter of 2015, our general expectation is that selling expense will fluctuate with service provider revenue and the composition of that revenue over ~~time, but for fiscal year 2015, we expect selling expense to decline as a percentage of service provider revenue as compared to 2014.~~time.

Marketing expense, ~~decreased $7.2~~which now includes the marketing compensation and personnel-related costs and general marketing operating expenditures that were formerly classified as general and administrative expenses, increased $0.3 million for the three months ended March 31, ~~2015~~2016 as compared to the three months ended March 31, ~~2014.~~2015. While we continue to make ~~significant~~ investments in increasing our ~~paid~~ membership base and expanding our market reach, ~~via national offline and online advertising, the pace of our marketing spend~~ in the first quarter of 2015 was slower than it was for the same period in 2014 based on the planned timing of our current year spend trajectory and our focus on the efficiency and effectiveness of our spend. Accordingly, marketing expense as a percentage of revenue decreased from the prior year period as total revenue increased by 15% year over year, while marketing expense declined by 31% over the same time period. Our marketing cost per paid membership acquisition declined from $82 for the three months ended March 31, 2014 to $71 for the three months ended March 31, 2015, reflecting efficiency in our spend as well as the combined impact of tiered pricing, improved brand awareness, successful SEO efforts, improved effectiveness in purchasing advertising and "word of mouth" benefits associated with increased market penetration. In 2014,recent years we ~~began to shift~~shifted our marketing focus from solely driving member growth to also highlighting our e-commerce offerings, as well as new products and ~~marketplace initiatives,~~services, and that strategy ~~remains~~remained in place during the first quarter of 2016. Accordingly, our marketing expense is not only a reflection of the cost incurred to obtain new members but also the marketing dollars we are spending to generate traffic to and transactions on our platforms. For the three months ended March 31, 2016, the most significant factors contributing to the quarter over quarter increase in ~~2015.~~marketing expense were a $1.5 million increase in outsourced service expenditures and a $0.6 million increase in marketing compensation and personnel-related costs, partially offset by a $1.6 million decline in advertising expenses as we purposefully reduced our advertising spend in the first quarter of 2016 as compared to 2015, in order to make strategic investments in other areas of the business, while focusing on the efficiency and effectiveness of our advertising spend. Consistent with the seasonality that characterizes our business, we generally expect marketing expense ~~and marketing cost per paid membership acquisition~~ to peak in either the second or third ~~quarters~~quarter of the year. ~~We expect marketing expense~~In 2016, we are planning for this peak to ~~decrease as a percentage~~occur in the third quarter in conjunction with the launch of ~~revenue for fiscal year 2015 as compared to 2014,~~our new long-term profitable growth plan and ~~we anticipate that average marketing cost per paid membership acquisition will decline year over year as well.~~the removal of the ratings and reviews paywall.

Product and technology

Product and technology expense increased ~~$1.0~~$1.6 million for the three months ended March 31, ~~2015~~2016 as compared to the three months ended March 31, ~~2014.~~2015. The increase in product and technology expense was largely ~~attributable to a $0.8 million~~the result of year over year increases in our product and technology headcount. Specifically, the number of product and technology personnel we employ increased 18% from March 31, 2015 to March 31, 2016, yielding an additional $0.9 million in compensation and personnel-related costs quarter over quarter. Product and technology expense was also negatively impacted by a $0.6 million increase in ~~technology-related outsourced services, which can be attributed~~office and utilities expenditures as we continued to incur costs ~~incurred for~~around the maintenance and support of our existing technology platform and infrastructure ~~and website as well as~~while development efforts associated with our ~~investments in~~ new ~~product development and~~technology platform continued throughout the ~~implementation of new technologies and applications focused on driving enhanced customer experiences and business efficiencies. Product~~quarter. While product and technology expense increased slightly as a percentage of revenue ~~was consistent year~~period over ~~year, and~~period, we expect ~~this trend~~a more pronounced increase to ~~generally perpetuate from period to period. We anticipate that~~ product and technology expense, ~~will increase~~ in both absolute dollars ~~for fiscal year 2015~~and as ~~compared to 2014~~a percentage of revenue, over the course of 2016 as we execute on the development efforts around, and complete the migration to, our new technology ~~platforms~~platform. As depreciation of the related assets commences, certain platform expenditures, including internal labor, that do not represent qualifying upgrades, enhancements or new functionality will shift from capitalized website and ~~infrastructure and subsequently launch and transition during the year.~~software development costs to operating expense on a go-forward basis.

General and administrative

General and administrative expense, which no longer includes the marketing compensation and personnel-related costs and general marketing operating expenditures that are now classified as marketing expenses, increased ~~$3.6~~$9.3 million for the three months ended March 31, ~~2015~~2016 as compared to the three months ended March 31, ~~2014.~~2015. The most significant driver of the ~~fluctuation~~increase in general and administrative expense ~~year~~period over ~~year~~period was a ~~$4.2~~$4.4 million increase in ~~personnel-related~~outsourced service expenditures and professional fees attributable to third-party consulting costs ~~including~~incurred for, among other things, the development of our new long-term profitable growth plan, optimization of our service provider go-to-market activities and activist activity in our stock. Additionally, general and administrative expense was negatively impacted by a ~~$0.8~~$3.5 million one-time contingent liability recorded during the quarter for the pending Moore litigation and related cases. A $1.3 million increase in ~~non-cash stock-based~~ compensation ~~expense, attributable to 34%~~and personnel-related costs, resulting from the 20% growth in our headquarters headcount from March 31, 2015 to March 31, 2016, also contributed to the quarter over quarter increase in general and administrative expense. The headquarters personnel added over the ~~prior year. The additional personnel~~past year reflect hiring in strategic growth areas such as ~~marketing,~~finance, human resources ~~finance~~ and project ~~management. The increase in general~~management as well as the addition of our new President and Chief Executive Officer. General and administrative expense attributable to personnel-related costs was offset by a year over year reduction in general and administrative expense related to the satisfaction of the obligation associated with the litigation settlement accrual during the first quarter of 2015 in the amount of $0.5 million. Asas a percentage of revenue ~~general and administrative expense~~ increased ~~slightly~~two-fold for the three months ended March 31, ~~2015~~2016 as compared to the three months ended March 31, 2014. While we expect general and administrative expense as a percentage of revenue to generally remain constant or decrease over time as we realize efficiencies and economies of scale as we grow, we anticipate that general and administrative expense will increase in absolute dollars2015, and, as a percentage of revenue, we expect period over period increases in ~~fiscal~~general and administrative expense over the course of the year ~~2015~~ as ~~compared to 2014 as~~a result of the impact of personnel added in ~~2014 is annualized.~~2015 as well as recent stock-based compensation awards.

Interest expense for the three months ended March 31, ~~2015~~2016 was ~~$0.9~~$0.6 million as compared to ~~$0.5~~$0.9 million for the three months ended March 31, ~~2014,~~2015, reflecting the impact of recurring monthly interest payments on ~~the~~our outstanding long-term debt and monthly interest charges for ~~loan~~deferred financing fee and debt discount amortization related to the September 2014 debt financing transaction, partially offset by capitalized interest on website and software development.

~~Table of Contents~~

Liquidity and Capital Resources

General

At March 31, ~~2015,~~2016, we had ~~$52.9~~$35.4 million in cash and cash equivalents and ~~$24.5~~$23.7 million in short-term investments. Cash and cash equivalents consists of bank deposit accounts and money market funds as well as any investments in ~~corporate bonds or~~ certificates of deposit, U.S. Treasury securities or corporate bonds with contractual maturities of three months or less, which, at times, may exceed federally insured limits. Short-term investments consist of ~~corporate bonds and~~ certificates of deposit, U.S. Treasury securities and corporate bonds with maturities of more than 90 days but less than one year. To date, the carrying values of these investments ~~approximates~~approximate their fair values, and we have incurred no material loss in these accounts.

Summary cash flow information for the three months ended March 31, ~~2015~~2016 and ~~2014~~2015 is set forth below.

Three Months Ended
March 31,
2015
2014
Net cash provided by operating activities
$ 21,246

$ 14,945
Net cash used in investing activities
(8,248 )
(6,555 )
Net cash (used in) provided by financing activities
(54 )
461



	Three Months Ended March 31,
	2016			2015

	(in thousands)
Net cash provided by operating activities	$	9,201		$	21,246
Net cash (used in) investing activities	(6,266		)	(8,248		)
Net cash (used in) financing activities	(182		)	(54		)

Net Cash Provided by Operating Activities

~~Our~~Cash provided by operating ~~cash flows will continue to be impacted principally by~~activities for the ~~extent to which we continue to pursue our growth strategy, including investments in national advertising and our transition~~three months ended March 31, 2016 of $9.2 million was generated despite a net loss $4.0 million incurred over the same time period, primarily attributable to a ~~marketplace model, changes~~$14.1 million net increase in ~~price per average paid membership, the size~~accounts payable and composition of our sales force responsible for originating and renewing service provider contracts and fluctuations in headcount as we grow our business. Our largest source of operating cash flows is cash collections from our service providers and members. We expect positive operating cash flows in some periods and negative operating cash flows in others, depending on seasonalityaccrued liabilities since December 31, 2015 related to, among other things, accrued marketing expenses, accrued e-commerce, accrued compensation and the ~~extent~~expected timing of payment of these balances, as well as a $3.5 million one-time contingent liability recorded during the quarter for the pending Moore litigation and related cases. Operating cash flow for the three months ended March 31, 2016 was also positively impacted by $5.0 million of non-cash activity during the quarter, including $3.0 million in stock-based compensation expense and $1.7 million in depreciation and amortization. Uses of cash from operations for the period included a $3.7 million net decrease in deferred revenue, which was primarily the result of declines in membership revenue associated with our ~~investments~~realization of lower membership revenue per member, as well as a $3.1 million net increase in ~~future growth of the business.~~prepaid expenses and other current assets attributable to an increase in prepaid compensation expense at March 31, 2016 as compared to December 31, 2015.

Cash provided by operating activities for the three months ended March 31, 2015 of $21.2 million, which ~~includes~~included first quarter net income of $4.4 million, was predominately attributable to a $16.8 million net increase in accounts payable and accrued liabilities, driven by increases in accrued marketing expenses, trade accounts payable, accrued e-commerce, accrued base payroll and the expected timing of payment of these balances. Additionally, ~~the~~an increase in total combined deferred advertising revenue, offset by ~~the~~a corresponding decline in total combined deferred membership revenue, resulted in a net $0.9 million increase to operating cash flow for the quarter, reflecting the impact of increases in service provider contract values and concurrent decreases in membership revenue per paid membership. Non-cash activity, including $2.3 million in ~~non-cash~~stock-based compensation expense and $1.6 million in depreciation and amortization, accounted for a $4.0 million positive contribution to operating cash flows for the quarter. Uses of cash included a $4.1 million increase in prepaid expenses and other current assets associated with certain technology and marketing service agreements and a $0.7 million increase in accounts receivable attributable to growth in service provider billings.

Net Cash ~~provided by operating~~(Used In) Investing Activities

Our use of cash in investing activities of $6.3 million for the three months ended March 31, ~~2014 of $14.9 million was achieved despite a net loss of $3.8 million. Our cash provided by operating activities~~2016 was primarily attributable to ~~a $17.0~~the total combined $6.4 million ~~net increase~~ in ~~accounts payable~~capital expenditures for property, equipment and accrued liabilities related to increases in accrued marketing expenses, accrued e-commerce, accrued base payroll, general accounts payable and the expected timing of payment of these balances. The increase in deferred advertising revenue of $3.5 million, which related to the increase in the number of service providers participating in our advertising programs, also contributed to cash provided by operations forsoftware during the period, ~~ended March 31, 2014. In addition,~~consisting of $5.5 million in capitalized website and software development costs as we continued to develop and scale our ~~net loss was adjusted~~new technology platform, as well as $0.9 million for ~~$2.8 million of non-cash expenses, which included $1.5 million of stock-based compensation expense~~facilities improvements and ~~$1.2 million of depreciation~~technology hardware and amortization. Uses of cash included a $1.1 million increase in accounts receivable attributable to an increase in service provider billings, a $2.1 million increase in prepaid expenses and other current assets and a $1.5 million decrease in deferred membership revenue.

~~Table of Contents~~

~~Net Cash Used in Investing Activities~~software.

Our use of cash in investing activities of $8.2 million for the three months ended March 31, 2015 was largely attributable to the total combined $7.9 million in capital expenditures for property, equipment and software during the quarter, consisting of $6.8 million for capitalized website and software development as ~~we continue to make significant investments in the technology infrastructure supporting our web and mobile platforms to sustain our current and anticipated future growth as~~ well as $1.1 million for ~~campus expansion and improvement efforts~~facilities improvements and upgrades and additions to technology hardware and software. Our current period purchases of investments, net of sales at maturity, in corporate bonds and certificates of deposit with maturities of more than 90 days but less than one year also contributed to our use of cash in investing activities in the amount of $0.3 million as purchases of short-term investments exceeded sales in the quarter. We also spent $0.1 million during the quarter in the form of data acquisition costs to acquire consumer reports on service providers.

~~Our use~~Net Cash (Used In) Financing Activities

Net cash used in financing activities of ~~cash in investing activities in~~$0.2 million for the three months ended March 31, ~~2014~~2016 was largely attributable to taxes paid for net share settlements associated with the ~~total combined $6.2 million in property, equipment and software related spend~~vesting of restricted stock units during the period, ~~consisting of $2.3 million for facilities and information technology hardware and software and nearly $4.0 million for capitalized website and software development costs,~~ as ~~we continued to make significant upgrades to~~well as payments on our web and mobile platforms and implement new information technology infrastructure to support our growth. We also spent approximately $0.4 million during the quarter on data acquisition to acquire consumer reports on service providers and to purchase a website domain name.capital lease obligation.

~~Net Cash (Used in) Provided by Financing Activities~~

Net cash used in financing activities for the three months ended March 31, 2015 was entirely attributable to payments on our capital lease obligation during the quarter.

~~Net cash provided by financing activities for the three months ended March 31, 2014 consisted solely of proceeds from the exercise of employee stock options.~~

Debt Obligations

On September 26, 2014, we entered into aan $85.0 million financing agreement, ~~that provided for~~comprised of a $60.0 million term loan and a $25.0 million delayed draw term ~~loan.~~loan, to provide increased financial flexibility for investments in growth while simultaneously reducing our interest rate. Amounts outstanding under the financing agreement bear interest at a per annum rate, at ~~the~~our option, ~~of us,~~ equal to (i) the LIBOR rate for the interest period in effect, subject to a floor of 0.5%, plus 6.75% or (ii) the reference rate, which is based on the prime rate as published by the Wall Street Journal, subject to a floor of 3.25%, plus 5.75%. The financing agreement requires monthly ~~interest-only~~interest payments on the first business day of each month until maturity on any principal amounts outstanding under either debt facility. The financing agreement obligates us to make quarterly principal payments on the term loan of $0.8 million on the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining balance of the term loan at maturity. We are required to make principal payments on the outstanding balance of the delayed draw term loan equal to 1.25% of the amount of such loan funded at or prior to the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining outstanding balance of the delayed draw term loan at maturity. ~~The~~

We may prepay the amounts outstanding under the financing agreement ~~contains a provision~~at any time and are required to prepay the loans with (i) the net proceeds of certain asset sales, issuances of debt or equity, and certain casualty events, and (ii) up to 50% of consolidated excess cash flow, as defined in the financing agreement, for ~~penalties related to early prepayment.~~each fiscal year during the term of the financing agreement, commencing with the year ended December 31, 2015. Our obligations under the financing agreement are guaranteed by each of our subsidiaries and are secured by first priority security interests in all of our respective assets and a pledge of the equity interests of our subsidiaries. The term loan and the delayed draw term loan mature on September 26, 2019. As of March 31, ~~2015,~~2016, we had ~~$58.9~~$57.8 million in outstanding borrowings, net of unamortized deferred financing fees of $1.4 million and unamortized fees paid to the lender of ~~$1.1~~$0.8 million, under the term loan and availability of $25.0 million under the delayed draw term loan.

The financing agreement contains various restrictive covenants, including restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to stockholders or repurchase outstanding stock, enter into related-party transactions and make capital expenditures. We are also required to comply with certain financial covenants, including minimum consolidated EBITDA as defined in the financing agreement, minimum liquidity, maximum consolidated capital expenditures and minimum membership revenue. Upon an event of default, which includes, among other things, a failure to make required payments when due, a failure to comply with covenants, certain bankruptcy and insolvency events, defaults under other material indebtedness, or a change in control, the lenders may accelerate amounts outstanding, terminate the agreement and foreclose on all collateral. We were in compliance with all financial and non-financial covenants at March 31, ~~2015.~~2016.

~~Table of Contents~~

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet activities, other than long-term noncancellable operating leases as described ~~below,~~herein, nor do we maintain any off-balance interests in variable interest entities, special-purpose entities or other structured finance entities.

Contractual Obligations

Our contractual obligations primarily consist of long-term noncancellable operating leases expiring through ~~2020~~2021 and long-term debt comprised of a $60.0 million term loan scheduled to mature on September 26, 2019. There were no material changes in our contractual obligations from those disclosed in ~~the~~our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. Total combined future minimum payment obligations under long-term noncancellable operating leases ~~amount~~amounted to approximately ~~$10.4~~$8.6 million as of March 31, ~~2015, while~~2016, and we had ~~$58.9~~$57.8 million in outstanding borrowings, net of unamortized deferred financing fees and unamortized fees paid to the lender, under the term loan as of the same date.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results ~~could~~may differ from these estimates. With respect to critical accounting policies, we believe there is now sufficient historical data available for the volatility of our common stock, and as such, we began utilizing our own historical volatility data for the volatility input to our calculation of the estimated fair value of stock option awards in the determination of stock-based compensation expense in 2016. There were no other material changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015.

Recent Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our condensed consolidated financial statements, see Note 1, ~~"Summary~~“Description of Business, Basis of Presentation and Summary of Significant Accounting ~~Policies"~~Policies” in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1. of Part I of this Form 10-Q.

~~Table of Contents~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in our exposure to market risk since the disclosure in our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. Please refer to Part II, Item 7A. ~~"Quantitative~~“Quantitative and Qualitative Disclosures about Market ~~Risk"~~Risk” included in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2014~~2015 for a more complete discussion of the market risks we encounter.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ~~Exchange Act)~~“Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in ~~SEC~~U.S. Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the ~~period covered by this report~~first quarter of 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~Limitations on Effectiveness of Controls and Procedures~~

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

~~Table of Contents~~

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in Part I, Item 1. ~~"Financial Statements"~~“Condensed Financial Statements” — Note 9, ~~"Commitments~~“Commitments and Contingencies,” of this Quarterly Report on Form 10-Q and is incorporated by reference herein.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. In addition to the information set forth in this Quarterly Report on Form 10-Q, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2014. The risks~~2015 as well as the risk factor discussed ~~in our Annual Report on Form 10-K~~below, all of which could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K and below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may become important factors that may materially affect our business, financial condition and future results. The trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose all or part of your investment.

Our business will suffer if we encounter significant problems migrating members or service providers to our new technology platform or if the new platform does not meet expectations.

In the fourth quarter of 2015, we began implementing our new technology platform, AL 4.0, in certain markets, and the rollout of AL 4.0 continued throughout the first quarter of 2016. Ultimately, we intend to migrate all of our members and service providers, as well as back-office functionality, to our new technology platform over time. We have limited experience migrating users from one platform to another, and given the complexity and significance of this transition, including the amount of data, tools, services and functionality within our systems that is being migrated, our relationships, our reputation and our overall business performance, among other things, could be severely damaged if the migration to AL 4.0 goes poorly. To the extent we encounter difficulties migrating our new technology platform, we may be required to incur additional costs, including research and development costs, to address issues identified during implementation. In addition, we have incurred additional expenses as a result of maintaining two separate technology platforms (AL 4.0 and our legacy technology platform), and if we experience any delays or technical problems during the course of the migration to AL 4.0, we may incur such additional expenses for a much longer period of time than originally expected, thereby harming our business and financial performance. Further, one of the anticipated benefits of AL 4.0 is a reduction in the amount of time necessary to implement new products and services. Delays in the full migration to AL 4.0 or in our ability to timely achieve functional parity would yield corresponding delays in our ability to achieve these anticipated benefits and could result in member and service provider dissatisfaction. Similarly, even if the migration to AL 4.0 goes smoothly, our business operations and relationships will be at risk if the new platform does not meet our performance expectations, or those of our users, which could harm our business in numerous ways including, without limitation, losses of revenue, memberships or service provider contracts or damage to our reputation.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

~~Table of Contents~~

ITEM 6. EXHIBITS ~~AND FINANCIAL STATEMENT SCHEDULES~~



		~~Incorporated by Reference~~
~~Exhibit~~ ~~No.~~	~~Exhibit Description~~	~~Form~~	~~File No.~~	~~Exhibit~~	~~Filing~~ ~~Date~~	~~Filed~~ ~~Herewith~~
~~31.01~~	~~Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act~~					X
~~31.02~~	~~Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act~~					X
~~32.01~~	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act *					X
~~32.02~~	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act *					X
~~101~~	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 and (iv) Notes to Condensed Consolidated Financial Statements					X



		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.01	Amended and Restated Certificate of Incorporation	S-1/A	333-176503	3.1	10/31/2011
3.02	Amended and Restated Bylaws	S-1/A	333-176503	3.2	10/31/2011
14	Code of Business Conduct and Ethics, as amended March 15, 2016	8-K	001-35339	14	3/17/2016
31.01	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
31.02	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
32.01	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act *					X
32.02	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act *					X
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 and (iv) Notes to Condensed Consolidated Financial Statements					X

* Furnished, not filed.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April ~~23, 2015.~~21, 2016.



	ANGIE’S LIST, INC.

	By:	/s/ CHARLES HUNDT
	Name:	Charles Hundt
	Title:	Chief Accounting Officer (Duly Authorized Officer and Principal Accounting Officer)

~~Table of Contents~~

EXHIBIT INDEX



		~~Incorporated by Reference~~
~~Exhibit~~ ~~No.~~	~~Exhibit Description~~	~~Form~~	~~File No.~~	~~Exhibit~~	~~Filing~~ ~~Date~~	~~Filed~~ ~~Herewith~~
~~31.01~~	~~Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act~~					X
~~31.02~~	~~Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act~~					X
~~32.01~~	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act*					X
~~32.02~~	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act*					X
~~101~~	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 and (iv) Notes to Condensed Consolidated Financial Statements					X



		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.01	Amended and Restated Certificate of Incorporation	S-1/A	333-176503	3.1	10/31/2011
3.02	Amended and Restated Bylaws	S-1/A	333-176503	3.2	10/31/2011
14	Code of Business Conduct and Ethics, as amended March 15, 2016	8-K	001-35339	14	3/17/2016
31.01	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
31.02	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
32.01	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act*					X
32.02	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act*					X
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 and (iv) Notes to Condensed Consolidated Financial Statements					X

* Furnished, not filed.

3129



Delaware		27-2440197
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
1030 E. Washington Street Indianapolis, IN		46202
(Address of principal executive offices)		(Zip Code)



		Page No.
PART I – FINANCIAL INFORMATION		2

ITEM 1.	Condensed Financial Statements	2

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	2725

ITEM 4.	Controls and Procedures	2725

PART II – OTHER INFORMATION		2826

ITEM 1.	Legal Proceedings	2826

ITEM 1A.	Risk Factors	2826

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2826

ITEM 3.	Defaults Upon Senior Securities	2826

ITEM 4.	Mine Safety Disclosures	2826

ITEM 5.	Other Information	2826

ITEM 6.	Exhibits ~~and Financial Statement Schedules~~	2927

	Signatures	28


	March 31, 2015			December 31, 2014			March 31, 2016			December 31, 2015

	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	52,935		$	39,991		$	35,352		$	32,599
Short-term investments	24,540			24,268			23,718			23,976
Accounts receivable, net of allowance for doubtful accounts of $1,436 and $1,651 at March 31, 2015 and December 31, 2014, respectively	15,841			15,141
Accounts receivable, net of allowance for doubtful accounts of $1,894 and $1,658 at March 31, 2016 and December 31, 2015, respectively							16,212			17,019
Prepaid expenses and other current assets	22,237			18,120			22,106			19,026
Total current assets	115,553			97,520			97,388			92,620
Property, equipment and software, net	57,865			51,264			81,970			77,635
Goodwill	1,145			1,145			1,145			1,145
Amortizable intangible assets, net	2,469			2,755			1,857			2,011
Other assets, noncurrent	1,756			1,854
Total assets	$	178,788		$	154,538		$	182,360		$	173,411

Liabilities and stockholders’ deficit
Accounts payable	$	11,773		$	5,490		$	9,556		$	10,525
Accrued liabilities	33,541			23,189			34,926			20,287
Deferred membership revenue	31,835			33,767			29,965			32,702
Deferred advertising revenue	51,476			48,399			48,480			48,930
Current maturities of long-term debt							2,250			1,500
Total current liabilities	128,625			110,845			125,177			113,944
Long-term debt, net	58,914			58,854			55,542			56,134
Deferred membership revenue, noncurrent	4,564			4,744			3,424			3,742
Deferred advertising revenue, noncurrent	583			669			482			640
Other liabilities, noncurrent	1,660			1,600			1,218			1,332
Total liabilities	194,346			176,712			185,843			175,792
Commitments and contingencies (Note 9)	—			—			—			—
Stockholders’ deficit:
Preferred stock, $0.001 par value: 10,000,000 shares authorized, no shares issued or outstanding at March 31, 2015 and December 31, 2014	—			—
Common stock, $0.001 par value: 300,000,000 shares authorized, 67,075,389 and 67,075,389 shares issued and 58,516,677 and 58,516,677 shares outstanding at March 31, 2015 and December 31, 2014, respectively	67			67
Preferred stock, $0.001 par value: 10,000,000 shares authorized, no shares issued or outstanding at March 31, 2016 and December 31, 2015							—			—
Common stock, $0.001 par value: 300,000,000 shares authorized, 67,192,376 and 67,162,990 shares issued and 58,633,664 and 58,604,278 shares outstanding at March 31, 2016 and December 31, 2015, respectively							67			67
Additional paid-in-capital	268,151			265,895			278,347			275,445
Treasury stock, at cost: 8,558,712 shares of common stock at March 31, 2015 and December 31, 2014	(23,719		)	(23,719		)
Treasury stock, at cost: 8,558,712 shares of common stock at March 31, 2016 and December 31, 2015							(23,719		)	(23,719		)
Accumulated deficit	(260,057		)	(264,417		)	(258,178		)	(254,174		)
Total stockholders’ deficit	(15,558		)	(22,174		)	(3,483		)	(2,381		)
Total liabilities and stockholders’ deficit	$	178,788		$	154,538		$	182,360		$	173,411


	March 31, 2015		December 31, 2014		March 31, 2016		December 31, 2015
Prepaid and deferred commissions	$	11,242	$	11,378	$	8,268	$	8,573
Other prepaid expenses and current assets	10,995		6,742		13,838		10,453
Total prepaid expenses and other current assets	$	22,237	$	18,120	$	22,106	$	19,026


	March 31, 2015			December 31, 2014			March 31, 2016			December 31, 2015
Furniture and equipment	$	12,908		$	12,450		$	14,533		$	14,179
Land	3,105			3,101			3,448			3,392
Buildings and improvements	17,692			17,082			19,217			19,035
Software	4,818			4,696			5,665			5,814
Capitalized website and software development costs	29,832			23,214			53,115			47,877
Total property, equipment and software	68,355			60,543			95,978			90,297
Less accumulated depreciation	(10,490		)	(9,279		)	(14,008		)	(12,662		)
Total property, equipment and software, net	$	57,865		$	51,264		$	81,970		$	77,635



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			Fair Value Measurement at December 31, 2014 Using								Fair Value Measurement at December 31, 2015 Using
	Carrying Value at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value at December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds	$	365	$	365	$	—	$	—	$	970	$	970	$	—	$	—
Certificates of deposit	240		—		240		—
Investments:
Certificates of deposit	21,235		—		21,211		—		19,310		—		19,292		—
U.S. Treasury securities									3,652		—		3,649		—
Corporate bonds	3,033		—		3,028		—		1,014		—		1,013		—
Total assets	$	24,873	$	365	$	24,479	$	—	$	24,946	$	970	$	23,954	$	—


	Cost		Accumulated Amortization		Net		Weighted-Average Remaining Amortization Period (in years)	Cost		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Amortization Period (in years)
March 31, 2015
March 31, 2016
Member list	$	1,670	$	464	$	1,206	4.3	$	1,670	$	742	$	928	3.3
Content	140		78		62		1.3	140		124		16		0.3
Core technology	110		61		49		1.3	110		98		12		0.3
Data acquisition costs	2,598		1,638		960		1.4	1,824		1,015		809		1.5
Other intangible assets	300		108		192		1.9	300		208		92		0.9
Total amortizable intangible assets	$	4,818	$	2,349	$	2,469		$	4,044	$	2,187	$	1,857


(1) Includes non-cash stock-based compensation as follows:
(1) Includes non-cash stock-based compensation expense as follows:
Operations and support	$	20	$	13	$	31	$	20
Selling	10		104		279		11
Marketing					106		61
Product and technology	196		209		309		196
General and administrative	2,030		1,207		2,302		1,968
Total non-cash stock-based compensation	$	2,256	$	1,533
Total non-cash stock-based compensation expense					$	3,027	$	2,256