UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, ~~2016~~2017



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

For the transition period from to

Commission file number 001-35339

ANGIE’S LIST, INC.

(Exact name of registrant as specified in its charter)



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)

(888) 888-5478

(~~Registrant’s~~Registrant’s telephone number, including area code)

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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act.



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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~~As of May 1, 2017, the number of shares of the registrant’s common stock outstanding ~~as of April 18, 2016~~ was ~~58,634,118.~~

59,866,659.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Angie’s List, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)


	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016

	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	35,352		$	32,599		$	28,789		$	22,402
Short-term investments	23,718			23,976			12,200			16,541
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
Accounts receivable, net of allowance for doubtful accounts of $3,456 and $3,296 at March 31, 2017 and December 31, 2016, respectively							15,793			16,371
Prepaid expenses and other current assets	22,106			19,026			20,674			17,002
Total current assets	97,388			92,620			77,456			72,316
Property, equipment and software, net	81,970			77,635			80,494			82,714
Goodwill	1,145			1,145			1,145			1,145
Amortizable intangible assets, net	1,857			2,011			1,054			1,219
Total assets	$	182,360		$	173,411		$	160,149		$	157,394

Liabilities and stockholders’ deficit
Liabilities and stockholders’ equity
Accounts payable	$	9,556		$	10,525		$	4,179		$	2,886
Accrued liabilities	34,926			20,287			22,466			23,128
Deferred membership revenue	29,965			32,702			20,448			23,208
Deferred advertising revenue	48,480			48,930			42,684			42,297
Current maturities of long-term debt	2,250			1,500			2,250			1,500
Total current liabilities	125,177			113,944			92,027			93,019
Long-term debt, net	55,542			56,134			55,629			56,142
Deferred membership revenue, noncurrent	3,424			3,742			1,624			2,032
Deferred advertising revenue, noncurrent	482			640			441			456
Other liabilities, noncurrent	1,218			1,332			726			1,245
Total liabilities	185,843			175,792			150,447			152,894
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, 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
Commitments and contingencies (Note 8)							—			—
Stockholders’ equity:
Preferred stock, $0.001 par value: 10,000,000 shares authorized, no shares issued or outstanding at March 31, 2017 and December 31, 2016							—			—
Common stock, $0.001 par value: 300,000,000 shares authorized, 68,262,657 and 67,979,486 shares issued and 59,702,135 and 59,420,774 shares outstanding at March 31, 2017 and December 31, 2016, respectively							68			68
Additional paid-in-capital	278,347			275,445			293,419			290,182
Treasury stock, at cost: 8,558,712 shares of common stock at March 31, 2016 and December 31, 2015	(23,719		)	(23,719		)
Treasury stock, at cost: 8,560,522 and 8,558,712 shares of common stock at March 31, 2017 and December 31, 2016, respectively							(23,734		)	(23,719		)
Accumulated deficit	(258,178		)	(254,174		)	(260,051		)	(262,031		)
Total stockholders’ deficit	(3,483		)	(2,381		)
Total liabilities and stockholders’ deficit	$	182,360		$	173,411
Total stockholders’ equity							9,702			4,500
Total liabilities and stockholders’ equity							$	160,149		$	157,394

See accompanying notes.

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,
	2016			2015		2017		2016

	(Unaudited)					(Unaudited)
Revenue
Membership	$	16,334		$	17,339	$	11,524	$	16,334
Service provider	67,522			66,204		61,608		67,522
Total revenue	83,856			83,543		73,132		83,856
Operating expenses
Operations and support	12,209			13,998		8,287		12,209
Selling	27,832			28,292		26,357		27,832
Marketing	19,115			18,829		9,823		19,115
Product and technology	10,034			8,416		14,313		10,034
General and administrative	18,047			8,726		10,866		18,685
Operating income (loss)	(3,381		)	5,282		3,486		(4,019		)
Interest expense, net	616			912		1,496		616
Income (loss) before income taxes	(3,997		)	4,370		1,990		(4,635		)
Income tax expense	7			10		10		7
Net income (loss)	$	(4,004	)	$	4,360	$	1,980	$	(4,642	)

Net income (loss) per common share — basic and diluted	$	(0.07	)	$	0.07
Net income (loss) per common share — basic						$	0.03	$	(0.08	)
Net income (loss) per common share — diluted						$	0.03	$	(0.08	)

Weighted-average number of common shares outstanding — basic and diluted	58,613,879			58,516,677
Weighted-average number of common shares outstanding — basic						59,508,503		58,613,879
Weighted-average number of common shares outstanding — diluted						59,861,900		58,613,879

See accompanying notes.

Angie’s List, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016

	(Unaudited)						(Unaudited)
Operating activities
Net income (loss)	$	(4,004	)	$	4,360		$	1,980		$	(4,642	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,675			1,590			4,001			1,675
Amortization of debt discount, deferred financing fees and bond premium	167			171			237			167
Non-cash stock-based compensation	3,027			2,256
Non-cash stock-based compensation expense							3,256			3,665
Non-cash long-lived asset impairment charge							190			—
Non-cash loss on disposal of long-lived assets	153			—			2			153
Deferred income taxes							5			—
Changes in certain assets:
Accounts receivable	807			(700		)
Accounts receivable, net							578			807
Prepaid expenses and other current assets	(3,080		)	(4,117		)	(3,672		)	(3,080		)
Changes in certain liabilities:
Accounts payable	(490		)	6,075			1,483			(490		)
Accrued liabilities	14,609			10,732			(1,072		)	14,609
Deferred advertising revenue	(608		)	2,991			372			(608		)
Deferred membership revenue	(3,055		)	(2,112		)	(3,168		)	(3,055		)
Net cash provided by operating activities	9,201			21,246			4,192			9,201

Investing activities
Purchases of investments	(4,071		)	(3,120		)	—			(4,071		)
Sales of investments	4,320			2,835			4,341			4,320
Property, equipment and software	(904		)	(1,116		)	(134		)	(904		)
Capitalized website and software development costs	(5,489		)	(6,754		)	(1,906		)	(5,489		)
Intangible assets	(122		)	(93		)	(31		)	(122		)
Net cash (used in) investing activities	(6,266		)	(8,248		)
Net cash provided by (used in) investing activities							2,270			(6,266		)

Financing activities
Proceeds from exercise of stock options	2			—			48			2
Taxes paid on behalf of employees related to net share settlement	(127		)	—			(67		)	(127		)
Purchases of treasury stock							(15		)	—
Payments on capital lease obligation	(57		)	(54		)	(41		)	(57		)
Net cash (used in) financing activities	(182		)	(54		)	(75		)	(182		)
Net increase in cash and cash equivalents	$	2,753		$	12,944		$	6,387		$	2,753
Cash and cash equivalents, beginning of period	32,599			39,991			22,402			32,599
Cash and cash equivalents, end of period	$	35,352		$	52,935		$	28,789		$	35,352

Supplemental cash flow disclosures
Capital expenditures incurred but not yet paid	$	1,010		$	2,080		$	65		$	1,010

See accompanying notes.

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~~members 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 free-of-charge, assist members in identifying and hiring a ~~highly-rated~~ provider for their local service needs. The ~~Company's~~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”) 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, 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 and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. The accompanying unaudited condensed consolidated balance sheet as of December 31, ~~2015~~2016 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~~report the results for the periods presented. Operating results from interim periods are not necessarily indicative of results ~~that may~~to 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~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

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.

~~Reclassification of~~ Significant Accounting Policies

During the three months ended March 31, 2017, there were no material changes to the Company’s significant accounting policies from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Prior Year Presentation

~~Certain prior year amounts were reclassified for consistency~~In connection 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 statementsCompany’s early adoption of ~~operations. These reclassifications did not materially impact the consolidated financial statements.~~

~~Significant Accounting Policies~~

~~As of January 1, 2016, the Company adopted the~~ Financial Accounting Standards Board (the “FASB”) Accounting Standards Update No. ~~2015-03:~~ ~~Interest - Imputation~~2016-09 during the third quarter of ~~Interest (Subtopic 835-30): Simplifying~~2016, the ~~Presentation~~Company was required to record a modified retrospective transition adjustment at the time of ~~Debt Issuance Costs, resulting~~adoption to reflect an increase in stock-based compensation expense for 2016 related to the Company’s forfeitures election under the new standard. Although this adjustment was recorded during the third quarter of 2016, given the modified retrospective nature of the adjustment, the Company was precluded from presenting the full amount of the adjustment for the quarter ended September 30, 2016 and was instead required to update amounts previously reported, yielding a retrospective increase to general and administrative expense for the quarter ended March 31, 2016. As a result, the general and administrative expense, operating loss, net loss and corresponding per share figures presented in the ~~Company reclassifying the deferred financing fees previously recorded in other noncurrent assets, including $1,462 as~~condensed consolidated statement of December 31, 2015, to net long-term debt in the 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-Koperations for the ~~year~~three months ended ~~December~~March 31, ~~2015.~~2016 differ from amounts previously reported.

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 was no change to the ~~Company's~~Company’s assessment during the three ~~month period~~months ended March 31, ~~2016.~~2017. While the Company reported net income for the three months ended March 31, 2017, any taxable income for the period will ultimately 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 in the condensed consolidated statement of operations for the three months ended March 31, 2017.

Contractual Obligations

The ~~Company's~~Company’s contractual obligations primarily consist of long-term ~~noncancellable~~ operating leases expiring through 2021 and long-term debt comprised of a $60,000 term loan scheduled to mature on September 26, 2019. In March 2017, the Company provided notice of termination, effective May 1, 2018, of an operating lease for office space that was previously scheduled to conclude in April 2020, yielding a reduction in the Company’s future minimum lease payment obligations. There ~~have been~~were no other significant changes in the ~~Company's~~Company’s contractual obligations during the three months ended March 31, 2017 from those disclosed in the ~~Company's~~Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. Total combined future minimum payment obligations as of March 31, 2017 under long-term ~~noncancellable~~ operating leases amounted to approximately ~~$8,613 as of March 31, 2016,~~$3,049, including $1,599 in 2017, $933 in 2018, $369 in 2019, $140 in 2020 and ~~the~~$8 in 2021. The Company had ~~$57,792~~$57,879 in outstanding borrowings, net of unamortized deferred financing fees and unamortized fees paid to the lender, under the term loan as of March 31, 2017.

Stock-Based Compensation

On June 29, 2016, the Company granted 3,034,329 performance awards of restricted stock units (“PRSUs”) under a long-term incentive plan (the “2016 LTIP”) to its executive officers and other members of the Company’s senior leadership team as of that date. The PRSUs granted are contingent upon the Company’s performance with respect to certain predetermined Total Cumulative Revenue targets over the 33-month period commencing April 1, 2016 and concluding December 31, 2018, subject to the Company’s achievement of a predetermined cumulative Adjusted EBITDA threshold over the same time period. Of the 3,034,329 PRSUs granted, 2,633,570 PRSUs remained outstanding as of March 31, 2017, representing the number of shares to be issued at the 100% target achievement level for this award. The decline from the number of PRSUs granted under the 2016 LTIP is due to forfeitures since the date of grant. During the first quarter of 2017, the Company cancelled the “stretch” component of the 2016 LTIP such that the maximum achievement level under this award is now the 100% target achievement level. Accordingly, the number of shares ultimately issued could be 0% or range from 75% (threshold achievement level) to 100% (target, and now maximum, achievement level) of the number of PRSUs outstanding, based on the Company’s performance in relation to the performance conditions, and linear interpolation will be applied should Total Cumulative Revenue fall between the threshold and target achievement levels. Any PRSUs earned under the 2016 LTIP will vest in full on May 31, 2019, subject to continued employment as of that date. The Company evaluates whether or not to recognize stock-based compensation expense for these awards over the vesting period based on the projected probability of achievement of the aforementioned performance conditions as of the end of each reporting period during the performance period and may periodically adjust the recognition of such expense, as necessary, in response to any changes in the Company’s forecasts with respect to the performance conditions. For the three months ended March 31, 2017, the Company did not recognize any stock-based compensation expense related to the 2016 LTIP based on the Company’s determination that achievement of the performance conditions was not probable as of that date.

Proposed Merger with IAC/HomeAdvisor

On May 1, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IAC/InterActiveCorp (“IAC”), Halo TopCo, Inc., a wholly owned subsidiary of IAC (“NewCo”) and Casa Merger Sub, Inc., a direct wholly owned subsidiary of NewCo (“Merger Sub”).

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, prior to the effective time of the Merger, IAC will contribute its HomeAdvisor business, along with certain cash, to NewCo in exchange for shares of NewCo Class B common stock. At the effective time of the Merger, the Company will become a subsidiary of NewCo through a subsidiary merger in which the outstanding shares of the Company’s common stock will be converted into shares of NewCo Class A common stock and/or cash (the “Merger”). NewCo will be renamed ANGI Homeservices Inc. and will apply to list its Class A common stock on the NASDAQ.

Subject to the terms and conditions of the Merger Agreement, the Company will merge with a subsidiary of ANGI Homeservices Inc., and the Company’s stockholders may elect to receive, in exchange for each share of the Company’s common stock owned, either one share of ANGI Homeservices Inc. Class A common stock, or $8.50 per share in cash. Elections by the Company’s stockholders will be subject to proration to the extent the total number of stockholders electing to receive cash would result in payment of more than $130,000. The ANGI Homeservices Inc. Class A common stock issued in the Merger will possess one vote per share and is expected to be listed for trading on the NASDAQ Stock Market at the closing of the transaction. ANGI Homeservices Inc. will also issue shares of Class B common stock, possessing 10 votes per share, to IAC in exchange for the contribution by IAC of its HomeAdvisor business. Upon the closing of the transaction, depending on the number of Company stockholders electing to receive cash, former stockholders of the Company will hold NewCo Class A common stock representing between 10% and 13% of the value and less than 2% of the total voting power of NewCo’s stock, and IAC will hold NewCo Class B common stock representing between approximately 87% and 90% of the value and approximately 98% of the total voting power of NewCo’s stock.

The completion of the Merger is subject to certain conditions, including the receipt of the necessary approval from the Company’s stockholders, the satisfaction of certain regulatory approvals and other customary closing conditions. The transaction is expected to close in the fourth quarter of 2017.

The Merger Agreement provides certain termination rights for the Company and IAC. Upon termination of the Merger Agreement under specified circumstances, such as the Company accepting a superior proposal or the Company’s Board of Directors withdrawing its recommendation regarding the Merger, or failure to obtain the necessary approval from the Company’s stockholders, the Company may be required to pay IAC a termination fee of $20,000.

The Company’s pursuit of strategic alternatives, culminating in the execution of the Merger Agreement, did not materially impact the Company’s condensed consolidated financial statements for the three months ended March 31, 2017. For additional information on the Merger Agreement, please refer to the Current Report on Form 8-K we filed with the U.S. Securities and Exchange Commission on May 3, 2017, including a copy of the Merger Agreement filed as Exhibit 2.1 thereto.

Recent Accounting Pronouncements - Not Yet Adopted

In ~~March 2016,~~January 2017, the FASB issued Accounting Standards Update No. ~~2016-09:~~ 2017-04:~~Compensation~~ Intangibles - ~~Stock Compensation~~Goodwill and Other (Topic ~~718)~~350): ~~Improvements to Employee Share-Based Payment Accounting~~Simplifying the Test for Goodwill Impairment (“ASU ~~2016-09”~~2017-04”). The amendments in this update simplify ~~several aspects of~~ the accounting for ~~employee share-based payment transactions, including~~goodwill impairments by eliminating step 2 from the ~~accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification~~goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the ~~statement~~total amount of ~~cash flows.~~goodwill allocated to the reporting unit. ASU ~~2016-09~~2017-04 will be effective for the Company in fiscal year ~~2017,~~2020, but early adoption is permitted. The Company is currently evaluating the impact of this update on the consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15: Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The amendments in this update add to or clarify existing U.S. GAAP guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 will be effective for the Company in fiscal year 2018, but early adoption is permitted. The guidance set forth in this update must be applied retrospectively to all periods presented but may be applied prospectively if retrospective application would be impracticable. The Company is currently evaluating the impact of this update on the consolidated financial statements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13: Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in this update add to U.S. GAAP a current expected credit loss impairment model that is based on expected losses rather than incurred losses, requiring consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. ASU 2016-13 will be effective for the Company in fiscal year 2020, but early adoption is permitted beginning in 2019. 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 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”). 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 is effective for the Company in fiscal year 2016. The Company adopted ASU 2015-05 as of January 1, 2016 on a prospective basis, noting no material impact 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”). 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 is effective for the Company in fiscal year 2016. The Company adopted ASU 2014-15 as of January 1, 2016, noting no material impact 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”). 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 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.” This update also requires significantly expanded disclosures related to revenue recognition. ~~ASU 2014-09 will be effective for the Company in fiscal year 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~~FASB’s new revenue standard related to identifying performance obligations and licensing implementation. In May 2016, the FASB issued Accounting Standards Update No. 2016-12: Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), amending certain aspects of ASU 2014-09 to address implementation issues identified by the FASB’s transition resource group and clarify the new revenue standard’s core revenue recognition principles. In December 2016, the FASB issued Accounting Standards Update No. 2016-20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”), which clarified or corrected unintended application of certain aspects of the guidance set forth under ASU 2014-09. ASU 2014-09 will be effective for the Company in fiscal year 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.

The Company ~~is currently evaluating~~continues to analyze the ~~future~~full impact ~~and method~~ of the adoption of ASU 2014-09, which could result in material differences between current revenue recognition practices and those required under the new guidance. As of the date of these ~~updates with respect~~condensed consolidated financial statements, the Company has substantially completed the diagnostic assessment phase of its ASU 2014-09 adoption, including preliminary assessment and project planning, revenue stream scoping and reviews of certain contracts. As part of the Company’s ongoing evaluation of ASU 2014-09, the following revenue streams were identified: membership revenue, service provider advertising revenue and service provider e-commerce revenue. Each of these revenue streams will continue to be further evaluated in detail based on the criteria established under ASU 2014-09 and will serve as the basis for the accounting analysis and documentation as it relates to the impact of the standard. The significant implementation matters yet to be addressed under ASU 2014-09 include completing the final analysis of the impact to the consolidated financial ~~statements.~~statements and calculating the transition adjustment, if any, upon adoption of the standard, internal controls considerations and disclosure requirements.

The Company currently anticipates adopting ASU 2014-09 effective January 1, 2018 utilizing the modified retrospective method of adoption. Accordingly, upon adoption, the Company currently anticipates recognizing the cumulative effect of adopting this guidance as an adjustment to the opening balance of the accumulated deficit within the consolidated balance sheet for the period of adoption, and prior periods will not be retrospectively adjusted. While the Company has completed a preliminary assessment of the key provisions of ASU 2014-09, the evaluation of the full impact of the standard on the consolidated financial statements and related disclosures is ongoing, and the Company is therefore not yet able to reasonably estimate the financial statement impact of ASU 2014-09 upon adoption. The Company continues to actively monitor outstanding issues currently being addressed by the FASB’s Transition Resource Group as conclusions reached by this group may impact the Company’s application of ASU 2014-09.

2. Net Income (Loss) Per Common Share

Basic and diluted net income (loss) per common share isare computed by dividing consolidated net income (loss) by the basic and diluted weighted-average number of common shares outstanding, respectively, for the period. Basic ~~and diluted~~ net income (loss) per common share was ~~$(0.07)~~$0.03 and ~~$0.07~~$(0.08) for the three months ended March 31, 2017 and 2016, respectively. Diluted net income (loss) per common share was $0.03 and ~~2015,~~$(0.08) for the three months ended March 31, 2017 and 2016, respectively.

The following table shows the calculation of the diluted weighted-average number of common shares outstanding:



	Three Months Ended March 31,
	2017	2016
Weighted-average number of common shares outstanding — basic	59,508,503	58,613,879
Total dilutive effect of outstanding share-based payments	353,397	—
Weighted-average number of common shares outstanding — diluted	59,861,900	58,613,879

The following potentially dilutive ~~equity awards are~~share-based payments were not included in the diluted net income (loss) per common share ~~calculation~~calculations as ~~they~~the impact would have anbeen antidilutive ~~effect~~ for the periods presented:


			Three Months Ended March 31,
	March 31, 2016	March 31, 2015	2017	2016
Stock options	7,394,111	7,053,887	6,768,262	7,394,111
Restricted stock units	1,290,502	416,155	2,875,876	1,290,502
Performance awards of restricted stock units	232,208	—	3,088,801	232,208
Shares to be purchased under employee stock purchase plan			31,514	—

The PRSUs outstanding under the 2016 LTIP as of March 31, 2017 were not included in the computation of diluted net income (loss) per common share as the number of shares that will ultimately be issued is contingent upon the Company’s achievement of certain predetermined performance conditions and does not meet the criteria for inclusion per the applicable U.S. GAAP guidance.

3. Fair Value Measurements

Whenever possible, quoted prices in active markets are used to determine the fair value of the ~~Company's~~Company’s financial instruments. The ~~Company's~~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 Accounting Standards Codification (“ASC”) 820, Fair Value Measurement(“ASC 820”), 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 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 and U.S. Treasury securities ~~and corporate bond investments 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 ~~to date during 2016~~in the three months ended March 31, 2017 or in ~~2015,~~2016, and there were no material unrealized gains or losses as of March 31, ~~2016~~2017 or December 31, ~~2015.~~

2016.

The following tables summarize the ~~Company's~~Company’s financial instruments at fair value based on the fair value hierarchy for each class of instrument as of March 31, ~~2016~~2017 and December 31, ~~2015:~~

2016:


			Fair Value Measurement at March 31, 2016 Using								Fair Value Measurement at March 31, 2017 Using
	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)		Carrying Value at March 31, 2017		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	$	1,264	$	1,264	$	—	$	—	$	6,791	$	6,791	$	—	$	—
Investments:
Certificates of deposit	16,910		—		16,911		—		11,200		—		11,198		—
U.S. Treasury securities	5,802		—		5,806		—		1,000		—		1,000		—
Corporate bonds	1,006		—		1,006		—
Total assets	$	24,982	$	1,264	$	23,723	$	—	$	18,991	$	6,791	$	12,198	$	—


			Fair Value Measurement at December 31, 2015 Using								Fair Value Measurement at December 31, 2016 Using
	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)		Carrying Value at December 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	$	970	$	970	$	—	$	—	$	2,419	$	2,419	$	—	$	—
Investments:
Certificates of deposit	19,310		—		19,292		—		13,840		—		13,837		—
U.S. Treasury securities	3,652		—		3,649		—		2,701		—		2,702		—
Corporate bonds	1,014		—		1,013		—
Total assets	$	24,946	$	970	$	23,954	$	—	$	18,960	$	2,419	$	16,539	$	—

The Company reviews its investment portfolio for other-than-temporary impairment whenever events or changes in circumstances indicate ~~that~~ the carrying 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~~The Company did not recognize any other-than-temporary impairment ~~losses.~~losses during the three months ended March 31, 2017 or 2016.

The carrying amount of the term loan approximates fair value, using Level 2 inputs, as this borrowing bears interest at a variable (market) rate at March 31, ~~2016~~2017 and December 31, ~~2015.~~2016.

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 and Amortizable Intangible Assets,”~~ that are adjusted to fair value 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 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, ~~2016~~2017 and December 31, ~~2015:~~2016:


	March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Prepaid and deferred commissions	$	8,268	$	8,573	$	9,546	$	8,869
Other prepaid expenses and current assets	13,838		10,453		11,128		8,133
Total prepaid expenses and other current assets	$	22,106	$	19,026	$	20,674	$	17,002

5. Property, Equipment and Software

Property, equipment and software was comprised of the following as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:


	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Furniture and equipment	$	14,533		$	14,179		$	16,473		$	16,439
Land	3,448			3,392			3,466			3,466
Buildings and improvements	19,217			19,035			20,771			20,768
Software	5,665			5,814			5,873			5,853
Capitalized website and software development costs	53,115			47,877			62,331			60,811
Total property, equipment and software	95,978			90,297			108,914			107,337
Less accumulated depreciation	(14,008		)	(12,662		)	(28,420		)	(24,623		)
Total property, equipment and software, net	$	81,970		$	77,635		$	80,494		$	82,714

~~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.

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

Cost
Accumulated
Amortization

Net Carrying
Amount

Weighted-Average Remaining
Amortization Period (in years)
March 31, 2016
Member list $ 1,670
$ 742
$ 928
3.3
Content 140
124
16
0.3
Core technology 110
98
12
0.3
Data acquisition costs 1,824
1,015
809
1.5
Other intangible assets 300
208
92
0.9
Total amortizable intangible assets $ 4,044
$ 2,187
$ 1,857

Cost
Accumulated
Amortization

Net Carrying
Amount

Weighted-Average Remaining
Amortization Period (in years)
December 31, 2015
Member list $ 1,670
$ 673
$ 997
3.6
Content 140
113
27
0.6
Core technology 110
88
22
0.6
Data acquisition costs 1,920
1,072
848
1.5
Other intangible assets 300
183
117
1.2
Total amortizable intangible assets $ 4,140
$ 2,129
$ 2,011

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

7.6. Accrued Liabilities

Accrued liabilities was comprised of the following as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:


	March 31, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Accrued sales commissions	$	1,600	$	1,461	$	1,847	$	1,469
Sales and use tax	4,409		4,307		3,789		3,792
Accrued compensation	10,372		6,826		6,020		7,369
Uninvoiced accounts payable	8,406		2,384		6,297		4,333
Contingent legal liability	3,500		—
Legal settlement accrual					145		2,601
Other accrued liabilities	6,639		5,309		4,368		3,564
Total accrued liabilities	$	34,926	$	20,287	$	22,466	$	23,128

8.7. Debt and Credit Arrangements

Long-term debt, net, was comprised of the following as of March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:


	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Term loan	$	60,000		$	60,000		$	60,000		$	60,000
Unamortized deferred financing fees	(1,364		)	(1,462		)	(973		)	(1,071		)
Unamortized fees paid to lender	(844		)	(904		)	(1,148		)	(1,287		)
Total debt, net	57,792			57,634			57,879			57,642
Less current maturities	(2,250		)	(1,500		)	(2,250		)	(1,500		)
Total long-term debt, net	$	55,542		$	56,134		$	55,629		$	56,142

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~~On June 10, 2016, the Company entered into a first amendment to the financing agreement which, among other things, (i) extended the commencement of the Company’s quarterly repayment obligations under the term loan from September 30, 2016 to September 30, 2017; (ii) revised the financial covenant for minimum consolidated EBITDA, as defined in the financing agreement, for periods ending after June 30, 2016; (iii) revised the financial covenant related to minimum required liquidity; (iv) removed the financial covenant related to minimum membership revenue for periods ending after March 31, 2016; and (v) modified the basis for the calculation of the applicable interest rate.

On November 1, 2016, the Company entered into a second amendment to the financing agreement which, among other things, (i) added a new financial covenant related to consolidated active service provider contract value beginning with the period ending December 31, 2016; (ii) revised the financial covenant for minimum consolidated EBITDA, as defined in the financing agreement and subsequently modified under the second amendment, for periods ending after September 30, 2016; (iii) revised the financial covenant related to minimum required liquidity; (iv) modified the basis for the calculation of the applicable interest rate; (v) modified the dates under which the prepayment premium is applicable; and (vi) modified certain terms related to the delayed draw term loan. Additionally, the second amendment set forth a fee to be paid by the Company to the lender, in three equal annual installments, in connection with the execution of the amendment, and this fee was capitalized along with the existing unamortized fees paid to lender contra liability and is being amortized to interest expense over the remaining term of the financing agreement.

The financing agreement requires monthly interest payments on the first business day of each month until maturity on any principal amounts outstanding under either debt facility. In accordance with the second amendment to the financing agreement, if the Company’s consolidated EBITDA for the trailing four consecutive fiscal quarters is less than $20,000 or the Company’s qualified cash, as defined in the financing agreement, is less than $20,000 as of the applicable period end, 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%~~9.5% 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%~~8.5%. ~~The financing agreement requires monthly~~If the Company’s qualified cash is greater than $20,000, and the Company’s consolidated EBITDA for the trailing four consecutive fiscal quarters is:

greater than $20,000 but less than $25,000, the applicable LIBOR interest ~~payments on~~rate is 8.5%, and the ~~first business day of each month until maturity on any principal amounts outstanding under either debt facility.~~ applicable reference interest rate is 7.5%;

greater than $25,000 but less than $30,000, the applicable LIBOR interest rate is 7.5%, and the applicable reference interest rate is 6.5%; or

greater than $30,000, the applicable LIBOR interest rate is 6.5%, and the applicable reference interest rate is 5.5%.

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,~~2017, 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. As specified by the second amendment to the financing agreement, ~~commencing with~~ the ~~year ended December 31, 2015.~~Company must pay a 1% premium on prepayments made on or before November 1, 2017, 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, ~~2016,~~2017, the Company had ~~$57,792~~$57,879 in outstanding borrowings under the term loan, net of unamortized deferred financing fees of ~~$1,364~~$973 and unamortized fees paid to the lender of ~~$844, under~~$1,148, both of which are being amortized into interest expense over the term ~~loan~~of the financing agreement, and availability of $25,000 under the delayed draw term loan.

The financing agreement contains various restrictive covenants, including restrictions on the ~~Company's~~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 and subsequently modified under the second amendment, minimum liquidity, minimum consolidated active service provider contract value and maximum consolidated capital ~~expenditures and minimum membership revenue.~~expenditures. 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, ~~2016.~~2017.

8. Commitments and Contingencies

The Company is regularly involved in litigation, both as a plaintiff and as a defendant, relating to its business and operations. The Company assesses the likelihood of any 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.

Moore, et al. v. ~~Angie's~~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 lawsuit ~~alleges~~alleged claims for 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 premised on the allegations that the Company does not disclose that it accepts advertising payments from service providers or that the payments allegedly ~~will~~ impact the service provider ~~letter grade~~letter-grade ratings, the content and availability of reviews about the provider and the ~~provider's~~provider’s place in ~~search result~~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~~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 onOn 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 12,19, 2016, the parties ~~executed a Memorandum of Understanding (“MOU”) on April 19, 2016~~agreed to settle the claims on a class-wide basis. Among other relief, the settlement ~~provides~~provided 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 plaintiffs’ attorneys’ fees and costs ~~to plaintiffs’ counsel~~ as approved by the ~~court.~~Court. Settlement class members ~~will have~~were given 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~~provided certain prospective relief in the form of enhanced explanations in the ~~Company's Membership Agreement~~Company’s membership agreement and in responses to ~~Frequently Asked Questions~~frequently asked questions concerning, among other things, the advertising revenue earned from service providers. ~~In accordance with U.S. GAAP, the~~The Company recorded a $3,500 contingent liability related to this matter in the first quarter of 2016, and this amount ~~includes~~included the estimated 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~~would forego as a result of certain class members selecting the option for a free period of membership. ~~Pursuant~~On December 12, 2016, the Court entered an order granting final approval of the settlement. One class member appealed the order, but the plaintiff settled with the class member, and the class member stipulated to dismiss the appeal. On January 13, 2017, the Third Circuit Court of Appeals entered an order dismissing the appeal, and the settlement became final and effective as of that date.

The Company, with the assistance of its third-party settlement administrator, is now in the process of administering the settlement. On January 30, 2017, the Company made the above-referenced cash payment into an escrow account to be paid to the ~~MOU,~~class members who selected the cash class benefit, as well as to plaintiffs’ counsel. On February 13, 2017, the Company ~~and plaintiffs’ counsel will seek to stay all remaining pending deadlines to allow the parties to confer in drafting a definitive settlement~~updated its membership agreement and relevant website FAQs to ~~facilitate~~include the ~~court-approval process.~~above-referenced enhanced explanations regarding advertising revenue earned from service providers. Also, in February 2017, the Company provided instructions on how to redeem membership extensions to the class members who selected the membership extension class benefit. The ~~California plaintiff also has agreed to contact the California court to seek a further stay~~aforementioned contingent legal liability was subsequently reduced by $671 following completion of the ~~action pending~~election period for settlement class members during the ~~anticipated approval proceedings in the~~ ~~Moore~~ ~~litigation.~~fourth quarter of 2016. The ~~New Jersey~~Company’s accrual for this matter ~~is separately addressed below.~~

~~Glick v. Angie's List, Inc., 2:16-cv-00546. On February 1,~~was $2,601 and $145 as of December 31, 2016 ~~Gary Glick, an Angie's List member, filed a putative~~and March 31, 2017, respectively. Although class ~~action lawsuit in the United States District Court~~members may redeem their membership extension class benefit for ~~the District of New Jersey. The plaintiff alleges that~~up to two years, 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.~~considers this matter closed.

Williams, et al. v. Angie’s List, Inc., 1:~~16-cv-878; Crabtree v. Angie’s List, Inc. 1:16-cv-877.~~16-cv-878.On April 20, 2016, a group of former ~~sales representatives~~employees filed ~~separate lawsuits~~a lawsuit in the United States District Court for the Southern District of Indiana. The ~~lawsuits allege that we~~lawsuit alleges the Company 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. Six amended complaints were filed, adding additional named plaintiffs, and the Company filed its answer to the sixth amended complaint on April 10, 2017. The plaintiffs filed a motion for conditional certification on June 10, 2016, and the Company filed its response brief in opposition on July 15, 2016. The Court denied the plaintiffs’ motion for conditional certification on November 30, 2016 but allowed the plaintiffs to refile with a more narrow class definition. On December 9, 2016, the plaintiffs filed a renewed motion for conditional certification. The Company filed its response to the renewed motion on January 6, 2017, and the plaintiffs filed their reply on January 17, 2017. The Court denied the plaintiffs’ renewed motion for conditional certification on April 28, 2017. The Company is currently unable to determine the likely outcome or reasonably estimate the amount or range of potential liability, if any, related to this matter, and accordingly, has not established any reserve for this matter.

Crabtree, et al. v. Angie’s List, Inc., 1:16-cv-877. On April 20, 2016, three former employees filed a lawsuit in the United States District Court for the Southern District of Indiana. The lawsuit alleges the Company failed to pay (i) wages earned in a timely manner as required under Indiana Wage 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 plaintiffs filed a first amended complaint in May 2016, adding one additional Indiana wage statute claim. The Company filed its answer and defenses on June 9, 2016. Discovery with respect to this matter is ongoing. 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,~~this matter, and accordingly, has not established any ~~reserves~~reserve for ~~these matters.~~this matter.

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.~~1995. 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”, “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, availability of debt or equity financing to support our liquidity needs, the expected outcome or impact of pending or threatened ~~litigation.~~ litigation, evaluation of strategic alternatives or consummation of the proposed merger with IAC/HomeAdvisor, including the possibility that the closing conditions to the proposed merger may not be satisfied or waived, failure to obtain a necessary regulatory approval, a delay in closing the proposed merger or the possibility of a failure to consummate the proposed merger, the occurrence of any event that could give rise to termination of the proposed merger, the risk that stockholder litigation in connection with the proposed merger may impact the timing or result in significant costs of defense, indemnification and liability, risks inherent in the achievement of cost synergies and the timing thereof, risks related to the disruption of the proposed merger and the effect of the announcement of the proposed merger on our ability to attract and retain key personnel and maintain relationships with our members, service providers and vendors.

There may also be other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Risks and uncertainties may affect the accuracy of forward-looking statements, including, without limitation, those set forth in Item ~~1A.~~1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015~~2016 and in Item 1A of Part II of this Form 10-Q, as well as in other reports we file with the U.S. Securities and Exchange ~~Commission (“SEC”).~~

Commission. 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~~members 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 free-of-charge, assist our members in identifying and hiring a ~~highly-rated~~ provider for their local service needs, and our dynamic tools and products provide ~~consumers~~members with multiple ways to get work done while reducing the time and effort required to hire a service provider.

~~We currently generate revenue from both service providers~~ Our business model, which is designed to identify and ~~members, as well as non-member consumers. We derive service provider revenue principally from term-based sales of advertising, including~~leverage opportunities to attract, engage and ultimately monetize traffic on our website and mobile applications, in our publication and through our call center, to service providers meeting certain eligibility criteria. Our e-commerce solutions, which are available through postings on our website and mobile applications as well as via email promotions, offerplatforms, provides 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 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~~options offering an array of services at varying price points, including 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~~enables service providers alike, transforming our legacy business model by removing the ratings and reviews paywall and enabling consumers to access certain aspects of our 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 ~~tiered value proposition under our new model, offering varying levels~~host of ~~service~~services and tools based on the nature and extent of ~~the service provider's~~their relationship with ~~Angie's List.~~us.

~~Our new long-term profitable~~In 2017, we are focused on three key priorities: (1) building products to increase member engagement, (2) strengthening the value proposition to our service providers and (3) continuing to improve our cost structure. During the first quarter of 2017, we made progress against each of these priorities. We experienced robust membership growth ~~plan will entail three phases~~and engagement and a year over year increase in the number of participating service providers. On a sequential basis, we also generated improvements in service provider originations and renewals, and accordingly, total service provider contract value backlog. With respect to our cost structure, we continued to leverage initiatives implemented in this regard during the fourth quarter of 2016, driving year over ~~several years:~~year reductions in operations and support, selling, marketing and general and administrative costs.

~~Strengthen and Reposition~~For the ~~Core Business~~ ~~- includes redefining~~three months ended March 31, 2017, we generated net income of $2.0 million on revenue of $73.1 million. While our progress with respect to our key priorities for 2017 did not manifest in revenue growth during the ~~paywall and launching premium consumer services, improving~~quarter, as we continue to execute against our ~~consumer experience by scaling our new platform and optimizing the service provider sales organization to better monetize consumer traffic;~~

~~Leverage the Home Services Platform~~ ~~- includes expanding value-added services provided on our platforms and improving our customer and service provider relationships with personalized offerings; and~~

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

~~Our new~~business 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~~we will enhance the value of our ~~service~~services and generate ~~accelerated growth, retention and~~improved engagement across our platforms, which we, in turn, believe will ultimately drive increased market penetration and ~~reignite meaningful~~ revenue ~~growth.~~growth over time.

~~Market Cohort Analysis~~Proposed Merger with IAC/HomeAdvisor

~~To assist~~On May 1, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IAC/InterActiveCorp (“IAC”) pursuant to which we will be combined with IAC’s HomeAdvisor business into a new, publicly traded company, to be called ANGI Homeservices Inc. (“NewCo”). Under the terms of the Merger Agreement, we will merge with a subsidiary of NewCo (the “Merger”). In the Merger, our stockholders will have the right to elect to receive either one share of NewCo’s common stock or $8.50 per share in cash, for each share of our common stock that they own, with the ~~evaluation~~total amount of cash available in the transaction capped at $130 million.

Upon completion of the transaction, depending on the number of our ~~performance, we compile~~stockholders electing to receive cash, our former stockholders will own between approximately 10% and 13% of NewCo, and IAC will own between approximately 87% and 90% of NewCo. The transaction is expected to close in the fourth quarter of 2017, subject to certain conditions, including regulatory and shareholder approvals.

While our pursuit of strategic alternatives and subsequent execution of the Merger Agreement did not materially impact our condensed consolidated 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~~statements for the ~~twelve month periods~~three months ended March 31, 2016 and 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,
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 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 demographic 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, including 24 million households located in our markets. 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.


~~(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, 2016 and 2015 includes a de minimis number of complimentary memberships in our paid 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, 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 2015.~~

As a market matures, our penetration rate typically increases. Historically, while the absolute number of paid members has generally grown faster in larger markets, our smaller markets have often 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 increased emphasis on digital marketing platforms, and we believe this marketing strategy provides us the most cost effective and efficient manner of acquiring new 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 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 impact of a variety of factors, including:

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,2017, we may ~~again alter or refine our strategy with regard~~incur transaction-related costs estimated at approximately $16 million 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~~$20 million during 2017 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 intend to continue to 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 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 business, such as the market cohort analysis, may change.~~

Merger Agreement.

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, ~~2016~~2017 and ~~2015:~~2016:


	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016
Total free memberships (end of period)							3,372,551			—
Total paid memberships (end of period)	3,309,166			3,103,367			2,347,480			3,309,166
Total memberships (end of period)							5,720,031			3,309,166

Gross free memberships added (in period)							849,865			—
Gross paid memberships added (in period)	188,242			229,987			10,356			188,242
First-year membership renewal rate (in period)	73		%	71		%
Average membership renewal rate (in period)	75		%	75		%
Gross memberships added (in period)							860,221			188,242

Average paid membership renewal rate (in period)							66		%	75		%

Participating service providers (end of period)	54,864			54,341			55,673			54,864
Total service provider contract value (end of period, in thousands)	$	267,302		$	263,349		$	246,830		$	267,302
Total service provider contract value backlog (end of period, in thousands)	$	165,360		$	165,600		$	154,434		$	165,360

Total ~~paid~~ memberships. Total ~~paid~~free memberships reflects the number of free members as of the end of the period who joined subsequent to us dropping our ratings and reviews paywall in June 2016, as well as the number of former paid members who requested a change in membership status from paid to free over the same time period. Total paid memberships represents the number of paid members at the end of each period presented. Total paid memberships as of March 31, 2016 also ~~includes~~included a de minimis number of complimentary memberships in what formerly comprised our paid ~~markets for all periods presented.~~markets. These complimentary memberships are no longer included in our paid membership counts and are therefore not reflected in the paid membership totals presented in the table above as of March 31, 2017. 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 free memberships added represents the total number of new free members added during the reporting period. This figure does not include former paid members who requested a change in membership status from paid to free. 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~~members added in athe reporting period.

~~Membership renewal rates. First-year~~Average paid membership renewal rate ~~reflects the percentage of~~. Average 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 3% of our total membership base~~renewed as ~~of March 31, 2016.~~paid members.

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.

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.

Total service provider contract value backlog. Service provider contract value backlog consists of the portion of service provider contract value at the end of the period that is not yet recognized as revenue.

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 financial results below are not necessarily indicative of future results.


	Three Months Ended March 31,					Three Months Ended March 31,
	2016			2015		2017		2016

	(in thousands)					(in thousands)
Revenue
Membership	$	16,334		$	17,339	$	11,524	$	16,334
Service provider	67,522			66,204		61,608		67,522
Total revenue	83,856			83,543		73,132		83,856
Operating expenses
Operations and support ⁽¹⁾	12,209			13,998		8,287		12,209
Selling ⁽¹⁾	27,832			28,292		26,357		27,832
Marketing ⁽¹⁾	19,115			18,829		9,823		19,115
Product and technology ⁽¹⁾	10,034			8,416		14,313		10,034
General and administrative ⁽¹⁾	18,047			8,726		10,866		18,685
Operating income (loss)	(3,381		)	5,282		3,486		(4,019		)
Interest expense, net	616			912		1,496		616
Income (loss) before income taxes	(3,997		)	4,370		1,990		(4,635		)
Income tax expense	7			10		10		7
Net income (loss)	$	(4,004	)	$	4,360	$	1,980	$	(4,642	)


(1) Includes non-cash stock-based compensation expense as follows:
Operations and support	$	31	$	20	$	42	$	31
Selling	279		11		448		279
Marketing	106		61		52		106
Product and technology	309		196		569		309
General and administrative	2,302		1,968		2,145		2,940
Total non-cash stock-based compensation expense	$	3,027	$	2,256	$	3,256	$	3,665


	Three Months Ended March 31,				Three Months Ended March 31,
	2016		2015		2017		2016
Revenue
Membership	19	%	21	%	16	%	19	%
Service provider	81	%	79	%	84	%	81	%
Total revenue	100	%	100	%	100	%	100	%
Operating expenses
Operations and support	15	%	17	%	11	%	15	%
Selling	33	%	34	%	36	%	33	%
Marketing	23	%	23	%	13	%	23	%
Product and technology	12	%	10	%	20	%	12	%
General and administrative	21	%	10	%	15	%	22	%
Operating income (loss)	(4)	%	6	%	5	%	(5)	%
Interest expense, net	1	%	1	%	2	%	1	%
Income (loss) before income taxes	(5)	%	5	%	3	%	(6)	%
Income tax expense	—	%	—	%	—	%	—	%
Net income (loss)	(5)	%	5	%	3	%	(6)	%

Comparison of the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016

Revenue


	Three Months Ended March 31,								Three Months Ended March 31,
	2016			2015			% Change		2017			2016			% Change

	(dollars in thousands)								(dollars in thousands)
Revenue
Membership	$	16,334		$	17,339		(6)	%	$	11,524		$	16,334		(29)	%
Service provider	67,522			66,204			2	%	61,608			67,522			(9)	%
Total revenue	$	83,856		$	83,543		—	%	$	73,132		$	83,856		(13)	%

Percentage of revenue by type
Membership	19		%	21		%			16		%	19		%
Service provider	81		%	79		%			84		%	81		%
Total revenue	100		%	100		%			100		%	100		%

Total paid memberships (end of period)	3,309,166			3,103,367			7	%
Gross paid memberships added (in period)	188,242			229,987			(18)	%
Participating service providers (end of period)	54,864			54,341			1	%

Total revenue ~~increased $0.3~~decreased $10.7 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, ~~2015.~~2016.

Membership revenue decreased ~~$1.0~~$4.8 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, ~~2015,~~2016, primarily ~~due~~attributable to the combined impact of a ~~12% decrease in membership revenue per average paid membership period over period as well as an 18%~~94% decline in gross paid memberships added ~~during the quarter, partially offset by the impact associated with~~and a ~~7% increase~~9 percentage point decrease in the ~~total number of paid memberships over the same time period. The decrease in membership revenue per~~ average paid membership was largely the result of reductions in membership fees, on average, across all markets due to tiered membership pricing as members typically select the membership plan offering with the lowest price point.renewal rate. The ~~decline~~declines in gross paid memberships added ~~period over period was attributable to adjustments~~and our paid membership renewal rate were largely the result of our introduction of a free membership tier in all markets in June 2016 in connection with the removal of our ratings and reviews paywall. Our paid membership base is decreasing as new members are primarily joining via our free membership offering, and existing paid members are not renewing as paid members at rates consistent with our historical averages, thereby negatively impacting our membership revenue. Adjustments in the level of our advertising spend ~~as well as~~also factored into the ~~messaging associated with that~~year over year decline in membership revenue. Our advertising spend decreased $25.5 million in ~~the first quarter of~~ 2016 as compared to 2015 and decreased $9.2 million for the ~~first quarter of 2015. We decreased advertising spend quarter over quarter by $1.6 million while simultaneously continuing~~three months ended March 31, 2017 as compared to ~~shift our marketing focus away from solely driving member growth~~the three months ended March 31, 2016, further contributing to ~~also highlighting our new products and services, as well as our e-commerce offerings,~~the aforementioned declines in ~~an effort to generate traffic to and transactions on our platforms, thus negatively impacting~~ gross paid memberships added and ~~thereby~~our paid membership ~~revenue, period over period.~~renewal rate, and, accordingly, membership revenue. Membership revenue accounted for ~~19%~~16% and ~~21%~~19% of total revenue for the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, and we ~~generally~~ expect membership revenue as a percentage of total revenue to continue to decline in future periods due to downward pressure on ~~our~~ membership revenue associated with the evolution of our membership plan offerings and pricing, ~~including~~and in particular, the ~~forthcoming~~ introduction of a free membership tier ~~for consumers.~~ in 2016.

Service provider revenue ~~increased $1.3~~decreased $5.9 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, ~~2015, primarily as a result~~2016. Given the average duration of ~~modest quarter over quarter increases~~our advertising contracts, the transitional challenges we experienced in 2016 in connection with the migration to our new technology platform are continuing to negatively impact our service provider ~~revenue per average~~revenue. While we experienced a 1% increase in the number of participating service ~~provider,~~providers year over year, service provider contract value and contract value backlog decreased by $20.5 million and $10.9 million, respectively, over the ~~overall number~~same time period. Additionally, the average pricing of ~~participating~~ service ~~providers. Service~~ provider ~~revenue primarily consists of revenue from advertising~~ contracts ~~with~~has declined over the past year, further contributing to the year over year decrease in service ~~providers.~~provider revenue. 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~~generally only ~~increase~~adjust advertising rates at the time of contract renewal, and given the timing of revenue recognition, which spreads advertising revenue over the life of each service provider contract, growth in service provider revenue commonly trails increases in membership. Accordingly, if our membership continues to grow, the anticipated corresponding increases in service provider revenue, contract value and contract value backlog may not be immediate, or occur at all, as evidenced by the fact that the significant growth in our total membership base in recent periods has not yet produced such increases on a ~~given market may trail increases~~year over year basis. A year over year reduction in ~~market penetration. Revenue from our~~ e-commerce ~~offerings is~~unit sales also ~~included~~contributed to the decrease in service provider revenue ~~and will fluctuate from period to period~~during the first quarter of 2017 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~~compared to the ~~migration to our new technology platform contributed to a realization~~first quarter of ~~slower service provider revenue growth rates quarter over quarter.~~2016. Service provider revenue accounted for ~~81%~~84 % and ~~79%~~81% of total revenue for the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, and we ~~generally~~ expect service provider revenue as a percentage of total revenue to continue to increase in future periods as we evolve and enhance the value proposition we offer service providers and ~~leverage new service provider monetization strategies, subject to any near-term impacts associated~~as our membership revenue declines in connection with the ~~migration to~~removal of our ~~new technology platform.~~ratings and reviews paywall.

Operations and support


	Three Months Ended March 31,								Three Months Ended March 31,
	2016			2015			% Change		2017			2016			% Change

	(dollars in thousands)								(dollars in thousands)
Operations and support	$	12,209		$	13,998		(13)	%	$	8,287		$	12,209		(32)	%
Percentage of revenue	15		%	17		%			11		%	15		%
Non-cash stock-based compensation expense	$	31		$	20				$	42		$	31

Operations and support expense decreased ~~$1.8~~$3.9 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, ~~2015.~~2016. The most significant factors contributing to the year over year decline in operations and support expense ~~was largely the result of~~were a ~~quarter over quarter~~$1.7 million reduction in publication costs and a $1.3 million decrease in compensation and personnel-related expenditures. The reduction in publication costs was, in part, the result of ~~$1.2 million related~~our implementation of a digital content distribution strategy whereby we increased digital distribution, and reduced print copy distribution, of the Angie’s List Magazine as compared to the first quarter of 2016, generating a ~~25%~~year over year decline in the costs incurred to provide the magazine to our members. Additionally, as only paid members receive a print copy of the magazine, the year over year decline in our paid membership base also contributed to the decrease in publication costs during the first quarter. The decrease in compensation and personnel-related expenditures was driven by a 16% year over year reduction in operations and support ~~headcount year over year. Operations and support expense was also positively impacted by a period over period~~headcount. A decline in credit card processing fees of ~~$0.4~~$0.5 million, which was largely attributable to lower transaction volumes across our platforms in recent periods, also factored into the ~~quarter~~year over ~~quarter decline~~year decrease 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 decreased slightly as a percentage of revenue quarter over quarter, and we believe this trend will continue as we leverage identified operations and support ~~efficiencies over the course of 2016.~~expense.

Selling


	Three Months Ended March 31,								Three Months Ended March 31,
	2016			2015			% Change		2017			2016			% Change

	(dollars in thousands)								(dollars in thousands)
Selling	$	27,832		$	28,292		(2)	%	$	26,357		$	27,832		(5)	%
Percentage of revenue	33		%	34		%			36		%	33		%
Non-cash stock-based compensation expense	$	279		$	11				$	448		$	279

Selling expense decreased ~~$0.5~~$1.5 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, ~~2015. While selling expense generally correlates with fluctuations in service provider revenue, we experienced modest quarter~~2016. The year over ~~quarter leverage~~year decline in selling expense ~~as service provider revenue increased 2% for~~was primarily 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. Headcount was the most significant factor contributing to the period over period leverage in selling expense, as there wasresult of a 7% reduction in the total number of employees in our sales organization from March 31, 2015 to March 31, 2016, and when coupled with the impact of recent changes in our sales compensation structure, yielded a $0.5$1.1 million decrease in selling compensation and personnel-related costs for commissions, wages and other employee ~~benefits. Although selling expense~~benefits, which was attributable to changes in our sales compensation plans and organizational structure, including a 16% year over year decline in our sales organization headcount, as ~~a percentage~~well as the impact of ~~both total revenue and~~lower service provider ~~revenue declined~~contract value bookings in the first quarter of 2016 as compared to 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.recent periods.

Marketing


	Three Months Ended March 31,								Three Months Ended March 31,
	2016			2015			% Change		2017			2016			% Change

	(dollars in thousands)								(dollars in thousands)
Marketing	$	19,115		$	18,829		2	%	$	9,823		$	19,115		(49)	%
Percentage of revenue	23		%	23		%			13		%	23		%
Non-cash stock-based compensation expense	$	106		$	61				$	52		$	106

Marketing expense, which ~~now includes the marketing compensation~~is primarily comprised of costs incurred for national television, radio, print and ~~personnel-related costs and general marketing operating expenditures that were formerly classified as general and administrative expenses, increased $0.3~~online digital advertising, decreased $9.3 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, 2015. While we continue to make investments in increasing our membership base and expanding our market reach, in recent years we shifted our marketing focus from solely driving member growth to also highlighting our e-commerce offerings, as well as new products and services, and that strategy remained in place during the first quarter of 2016. ~~Accordingly, our~~Our marketing expense is ~~not only~~largely a reflection of the ~~cost incurred to obtain new members but also the marketing~~advertising dollars we are spending to attract new members and generate traffic to and ~~transactions~~engagement on our platforms. For the three months ended March 31, ~~2016,~~2017, the most significant ~~factors~~factor contributing to the ~~quarter~~year over ~~quarter increase~~year decrease in marketing expense ~~were~~was 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~~$9.2 million decline in advertising ~~expenses~~spend as we purposefully reduced such costs, while focusing on the efficiency and effectiveness of our ~~advertising~~ spend, induring 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~~ahead of ~~our~~a planned increase in advertising spend. Consistent with the seasonality that characterizes our business, we generally expect marketing expense to peak in either the second or third quarter of the year. In 2016, we are planning for this peak to occur in the third quarterspend in conjunction with the ~~launch of~~forthcoming busier spring and summer months during which consumers are most often seeking our ~~new long-term profitable growth plan and the removal of the ratings and reviews paywall.~~services.

Product and technology


	Three Months Ended March 31,								Three Months Ended March 31,
	2016			2015			% Change		2017			2016			% Change

	(dollars in thousands)								(dollars in thousands)
Product and technology	$	10,034		$	8,416		19	%	$	14,313		$	10,034		43	%
Percentage of revenue	12		%	10		%			20		%	12		%
Non-cash stock-based compensation expense	$	309		$	196				$	569		$	309

Product and technology expense increased ~~$1.6~~$4.3 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, ~~2015.~~2016. The increase in product and technology expense was largely the result of year over year increases in depreciation and amortization expense and compensation and personnel-related costs of $2.3 million and $1.9 million, respectively. The year over year increase in depreciation and amortization expense was due to our ~~product and~~new technology ~~headcount. Specifically,~~platform, which we placed in service as of the ~~number~~end of ~~product and technology personnel we employ increased 18% from March 31, 2015 to March 31,~~the first quarter of 2016, ~~yielding an additional $0.9 million~~while the year over year increase in compensation and personnel-related costs ~~quarter over quarter. Product~~was attributable to the combined impact of growth in our product and technology ~~expense was also negatively impacted by~~headcount from March 31, 2016 to March 31, 2017, year over year increases in average pay rates for product and technology personnel and a ~~$0.6 million increase~~reduction in ~~office and utilities expenditures~~capitalized internal labor costs during the first quarter of 2017 as ~~we continued~~compared to ~~incur costs around~~ the ~~maintenance and support~~first quarter of ~~our existing technology platform and infrastructure while development efforts associated with~~2016. As our new technology platform continued throughout the quarter. While product and technology expense increased slightly as a percentage of revenue period over period, we expect a more pronounced increase to product and technology expense,is now in both absolute dollars and as 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 platform. As depreciation of the related assets commences,service, certain ~~platform~~ expenditures, including internal labor, that do not represent qualifying upgrades, enhancements or new functionality ~~will shift from~~are no longer classified as capitalized website and software development costs ~~to operating expense on a go-forward basis.~~and are instead expensed as incurred.

General and administrative


	Three Months Ended March 31,								Three Months Ended March 31,
	2016			2015			% Change		2017			2016			% Change

	(dollars in thousands)								(dollars in thousands)
General and administrative	$	18,047		$	8,726		107	%	$	10,866		$	18,685		(42)	%
Percentage of revenue	21		%	10		%			15		%	22		%
Non-cash stock-based compensation expense	$	2,302		$	1,968				$	2,145		$	2,940

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 $9.3~~decreased $7.8 million for the three months ended March 31, ~~2016~~2017 as compared to the three months ended March 31, ~~2015.~~2016. The most significant driver of the ~~increase~~decline in general and administrative expense ~~period over period~~ was a ~~$4.4~~$3.6 million ~~increase~~decrease in outsourced service expenditures and professional fees ~~attributable~~due to a reduction in third-party consulting costs year over year. During the first quarter of 2016, we incurred ~~for, among other things,~~costs related to the development and execution of our ~~new~~ long-term profitable growth plan, optimization of our service provider go-to-market activities and activist activity in our ~~stock.~~stock that did not recur in the first quarter of 2017. Additionally, ~~general and administrative expense was negatively impacted by~~ a $3.5 million ~~one-time~~ contingent liability recorded during the first quarter of 2016 for the ~~pending~~ Moore litigation also did not recur in the first quarter of 2017, and ~~related cases. A $1.3~~we experienced a $1.0 million ~~increase~~decline in general and administrative compensation and personnel-related costs, ~~resulting from the 20% growth~~driven by a reduction in ~~our headquarters headcount from March 31, 2015 to March 31, 2016, also~~stock-based compensation expense, both of which contributed to the ~~quarter~~year over ~~quarter increase~~year decrease in general and administrative expense. The headquarters personnel added over the past year reflect hiring in strategic growth areas such as finance, human resources and project management as well as the addition of our new President and Chief Executive Officer. General and administrative expense as a percentage of revenue increased two-fold for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015, and, as a percentage of revenue, we expect period over period increases in general and administrative expense over the course of the year as a result of the impact of personnel added in 2015 as well as recent stock-based compensation awards.

Interest expense

Interest expense for the three months ended March 31, ~~2016~~2017 was ~~$0.6~~$1.5 million as compared to ~~$0.9~~$0.6 million for the three months ended March 31, ~~2015,~~2016, reflecting the impact of recurring monthly interest payments on our outstanding long-term debt and monthly interest charges for deferred financing fee and debt discount ~~amortization related~~amortization. The year over year increase in interest expense was primarily attributable to ~~the September 2014 debt financing transaction, partially offset by~~ capitalized interest as we ceased capitalizing interest on website and software ~~development.~~development as of the end of the first quarter of 2016 in connection with the migration to our new technology platform.

Liquidity and Capital Resources

General

At March 31, ~~2016,~~2017, we had ~~$35.4~~$28.8 million in cash and cash equivalents and ~~$23.7~~$12.2 million in short-term investments. Cash and cash equivalents consists of bank deposit accounts and money market funds, as well as any investments in certificates of deposit or 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 certificates of deposit and 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 approximate their fair values, and we have incurred no material loss in these accounts. We believe our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations for, at a minimum, the next twelve months.

In connection with the execution of the Merger Agreement with IAC on May 1, 2017, we agreed to various customary covenants, including, among others, covenants related to (i) the conduct of our business during the interim period between the execution of the Merger Agreement and the closing of the transaction, (ii) the amendment and restatement of organizational documents, (iii) the acquisition, disposition and transfer of assets, (iv) the entry into material contracts and (v) the issuance, sale, pledge or encumbrance of capital stock. We do not believe the restrictions resulting from these covenants will prevent us from sufficiently funding our operations, including satisfying our obligations and meeting general working capital needs, over the next twelve months.

The Merger Agreement provides certain termination rights for IAC and us. Upon termination of the Merger Agreement under specified circumstances, such as our acceptance of a superior proposal or our Board of Directors withdrawing its recommendation regarding the transaction, or failure to obtain the necessary approval from our stockholders, we may be required to pay IAC a termination fee of $20 million.

Summary cash flow information for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 is set forth below.


	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016

	(in thousands)						(in thousands)
Net cash provided by operating activities	$	9,201		$	21,246		$	4,192		$	9,201
Net cash (used in) investing activities	(6,266		)	(8,248		)
Net cash provided by (used in) investing activities							2,270			(6,266		)
Net cash (used in) financing activities	(182		)	(54		)	(75		)	(182		)

Net Cash Provided by Operating Activities

Cash provided by operating activities of $4.2 million for the three months ended March 31, 2017 was largely attributable to non-cash activity of $7.7 million during the quarter, including depreciation and amortization expense of $4.0 million and stock-based compensation expense of $3.3 million, as well as our net income of $2.0 million for the period. Additionally, we experienced a $0.6 million net decrease in accounts receivable and a $0.4 million net increase in accounts payable and accrued liabilities as compared to December 31, 2016, both of which contributed to our cash provided by operating activities for the quarter. The most significant uses of cash in operating activities during the three months ended March 31, 2017 related to prepaid expenses and other current assets, which increased $3.7 million, and total combined deferred revenue, which declined $2.8 million. The increase in prepaid expenses and other current assets was driven by certain technology, marketing and operations service agreements, while the decline in total combined deferred revenue was primarily the result of a decrease in deferred membership revenue due to the downward pressure on our membership revenue stream associated with the continued impact of the removal of our ratings and reviews paywall in June 2016.

Cash provided by operating activities for the three months ended March 31, 2016 of $9.2 million was generated despite a net loss ~~$4.0~~of $4.6 million incurred over the same time period, primarily attributable to a $14.1 million net increase in accounts payable and accrued liabilities ~~since~~from December 31, 2015 related to, among other things, accrued marketing expenses, accrued e-commerce, accrued compensation and the 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.~~litigation. Operating cash flow for the three months ended March 31, 2016 was also positively impacted by ~~$5.0~~$5.7 million of non-cash activity, ~~during the quarter,~~ including ~~$3.0~~$3.7 million in stock-based compensation expense and $1.7 million in depreciation and ~~amortization.~~amortization expense. Uses of cash ~~from~~in 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 realization of lower membership revenue per average member, as well as a $3.1 million net increase in prepaid expenses and other current assets attributable to an increase in prepaid compensation expense at March 31, 2016 as compared to December 31, 2015.

Net Cash Provided by (Used In) Investing Activities

Cash provided by ~~operating~~investing activities of $2.3 million for the three months ended March 31, ~~2015~~2017 was primarily the result of ~~$21.2~~sales, net of purchases, of short-term investments at maturity, amounting to $4.3 million, ~~which included~~during the 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, an increase in total combined deferred advertising revenue,2017, partially offset by 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$2.0 million in ~~stock-based compensation expense~~capital expenditures for property, equipment and ~~$1.6~~software during the period, consisting of $1.9 million in ~~depreciation~~capitalized website and ~~amortization, accounted~~software development costs related to our technology platform and $0.1 million 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~~facilities improvements and ~~other current assets associated with certain~~ technology hardware and ~~marketing service agreements and a $0.7 million increase in accounts receivable attributable to growth in service provider billings.~~software.

~~Net Cash (Used In) Investing Activities~~

Our use of cash in investing activities of $6.3 million for the three months ended March 31, 2016 was ~~primarily~~largely attributable to the total combined $6.4 million in capital expenditures for property, equipment and software during the period, consisting of $5.5 million in capitalized website and software development costs ~~as we continued~~related to ~~develop and scale~~ our ~~new~~ technology platform ~~as well as~~and $0.9 million for facilities improvements and technology hardware and software.

Net Cash (Used In) Financing Activities

Our use of cash in ~~investing~~financing activities of ~~$8.2~~$0.1 million for the three months ended March 31, ~~2015~~2017 was ~~largely attributable~~primarily due to the ~~total~~ combined ~~$7.9 million in~~impact of taxes paid for net share settlements associated with the vesting of restricted stock units, payments on our capital ~~expenditures for property, equipment~~lease obligation and ~~software~~purchases of treasury stock, partially offset by proceeds from stock option exercises during the quarter, consisting of $6.8 million for capitalized website and software development as well as $1.1 million for facilities improvements and upgrades and additions to technology hardware and software. quarter.

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

Net cash used in financing activities of $0.2 million for the three months ended March 31, 2016 was largely attributable to taxes paid for net share settlements associated with the vesting of restricted stock units ~~during the period, as well as payments on our capital lease obligation.~~

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

Debt Obligations

On September 26, 2014, we entered into ~~an $85.0 million~~a financing agreement ~~comprised of~~for a $60.0 million term loan and a $25.0 million delayed draw term loan.

On June 10, 2016, we entered into a first amendment to the financing agreement which, among other things, (i) extended the commencement of our quarterly repayment obligations under the term loan from September 30, 2016 to ~~provide increased~~September 30, 2017; (ii) revised the financial ~~flexibility~~covenant for ~~investments~~minimum consolidated EBITDA, as defined in ~~growth while simultaneously reducing our~~the financing agreement, for periods ending after June 30, 2016; (iii) revised the financial covenant related to minimum required liquidity; (iv) removed the financial covenant related to minimum membership revenue for periods ending after March 31, 2016; and (v) modified the basis for the calculation of the applicable interest rate. ~~Amounts~~

On November 1, 2016, we entered into a second amendment to the financing agreement which, among other things, (i) added a new financial covenant related to consolidated active service provider contract value beginning with the period ending December 31, 2016; (ii) revised the financial covenant for minimum consolidated EBITDA, as defined in the financing agreement and subsequently modified under the second amendment, for periods ending after September 30, 2016; (iii) revised the financial covenant related to minimum required liquidity; (iv) modified the basis for the calculation of the applicable interest rate; (v) modified the dates under which the prepayment premium is applicable; and (vi) modified certain terms related to the delayed draw term loan. Additionally, the second amendment set forth a fee to be paid by us to the lender, in three equal annual installments, in connection with the execution of the amendment, and this fee was capitalized along with the existing unamortized fees paid to lender contra liability and is being amortized to interest expense over the remaining term of the financing agreement.

The financing agreement requires monthly interest payments on the first business day of each month until maturity on any principal amounts outstanding under either debt facility. In accordance with the second amendment to the financing agreement, if our consolidated EBITDA for the trailing four consecutive fiscal quarters is less than $20.0 million or our qualified cash, as defined in the financing agreement, is less than $20.0 million as of the applicable period end, amounts outstanding under the financing agreement bear interest at a per annum rate, at our option, equal to (i) the LIBOR rate for the interest period in effect, subject to a floor of 0.5%, plus ~~6.75%~~9.5% 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%~~8.5%. ~~The financing agreement requires monthly~~If our qualified cash is greater than $20.0 million, and our consolidated EBITDA for the trailing four consecutive fiscal quarters is:

greater than $20.0 million but less than $25.0 million, the applicable LIBOR interest ~~payments on~~rate is 8.5%, and the ~~first business day of each month until maturity on any principal amounts outstanding under either debt facility.~~ applicable reference interest rate is 7.5%;

greater than $25.0 million but less than $30.0 million, the applicable LIBOR interest rate is 7.5%, and the applicable reference interest rate is 6.5%; or

greater than $30.0 million, the applicable LIBOR interest rate is 6.5%, and the applicable reference interest rate is 5.5%.

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,~~2017, 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. From the effective date of the financing agreement through September 26, 2017, we are also required to pay a commitment fee equal to 0.75% per annum of the unborrowed amounts of the delayed draw term loan.

We may prepay the amounts outstanding under the financing agreement 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 each fiscal year during the term of the financing agreement. As specified by the second amendment to the financing agreement, ~~commencing with~~we must pay a 1% premium on prepayments made on or before November 1, 2017, subject to certain exceptions set forth in the ~~year ended December 31, 2015.~~financing agreement. 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~~their 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, ~~2016,~~2017, we had ~~$57.8~~$57.9 million in outstanding borrowings under the term loan, net of unamortized deferred financing fees of ~~$1.4~~$1.0 million and unamortized fees paid to the lender of ~~$0.8~~$1.1 million, ~~under~~both of which are being amortized into interest expense over the term ~~loan~~of the financing agreement, 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.~~expenditures, other than upon satisfaction of the conditions set forth in the financing agreement. We are also required to comply with certain financial covenants, including minimum consolidated EBITDA, as defined in the financing agreement and subsequently modified under the second amendment, minimum liquidity, minimum consolidated active service provider contract value and maximum consolidated capital ~~expenditures and minimum membership revenue.~~expenditures. 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. We were in compliance with all financial and non-financial covenants at March 31, ~~2016.~~2017.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet activities, other than long-term ~~noncancellable~~ operating leases as described herein, nor do we maintain any off-balance sheet 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 2021 and long-term debt comprised of a $60.0 million term loan scheduled to mature on September 26, 2019. In March 2017, we provided notice of termination, effective May 1, 2018, of an operating lease for office space that was previously scheduled to conclude in April 2020, yielding a $3.5 million reduction in our future minimum lease payment obligations. There were no ~~material~~other significant changes in our contractual obligations during the three months ended March 31, 2017 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. Total combined future minimum payment obligations as of March 31, 2017 under long-term ~~noncancellable~~ operating leases amounted to approximately ~~$8.6~~$3.0 million, asincluding $1.6 million in 2017, $0.9 million in 2018, $0.4 million in 2019 and a total of ~~March 31, 2016,~~$0.1 million in 2020 and we2021 combined. We had ~~$57.8~~$57.9 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.~~

March 31, 2017.

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 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, ~~2015.~~2016.

Recent Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our condensed consolidated financial statements, see Note 1, “Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1.1 of Part I of this Form 10-Q.

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, ~~2015.~~2016. Please refer to Part II, Item ~~7A.~~7A “Quantitative and Qualitative Disclosures ~~about~~About Market Risk” included in our Annual Report on Form 10-K for ~~our fiscal~~the year ended December 31, ~~2015~~2016 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”), ~~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 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 first quarter of ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in ~~Part I, Item 1. “Condensed Financial Statements” —~~ Note 9,8, “Commitments and Contingencies,” in the Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I 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 risk factors discussed in Part I, Item ~~1A.~~1A, “Risk ~~Factors”~~Factors,” in our Annual Report on Form 10-K for ~~our fiscal~~the year ended December 31, ~~2015~~2016, as well as the risk ~~factor~~factors discussed below, ~~all~~each of which could materially affect our business, financial condition, ~~and~~operating results, cash flows or future ~~results. The~~prospects. These 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 may also ~~may~~ become important factors that ~~may~~ materially affect our business, financial condition ~~and~~or 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.~~investment as a result.

The announcement and pendency of the Merger Agreement with IAC could have an adverse effect on our business, financial condition or results of operations.

On May 1, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IAC/InterActiveCorp (“IAC”) pursuant to which we will be combined with IAC’s HomeAdvisor business into a new, publicly traded company, to be called ANGI Homeservices Inc. (“NewCo”). Under the terms of the Merger Agreement, we will merge with a subsidiary of NewCo (the “Merger”). Uncertainty about the impact of the Merger on our employees, members, service providers and vendors may materially impact our business and operations in an adverse manner. Our employees may experience uncertainty about their roles leading up to and following the Merger, and there can be no assurance we will be able to successfully attract and retain key employees. Any loss of, or distraction to, our employees could have a material adverse effect on our business and operations. In addition, we have diverted, and will continue to divert, significant management resources towards the completion of the Merger, which could materially adversely affect our business, financial condition or results of operations.

Our members and service providers may experience uncertainty associated with the Merger, including with respect to treatment of member and service provider data, concerns about possible changes to our technology platform, including our website and mobile applications, products, services or policies and current or future business ~~will suffer if we encounter significant problems migrating~~relationships with us. Such uncertainty may cause members or service providers to refrain from using our ~~new technology platform~~products and services, potentially yielding a reduction in traffic across our platforms, and vendors may seek to alter or ~~if the new platform does not meet expectations.~~terminate existing business relationships, all of which could negatively and materially impact our business, financial condition or results of operations.

InPursuant to the ~~fourth quarter~~terms of ~~2015,~~the Merger Agreement, we ~~began implementing~~are subject to certain covenants regarding the conduct of our ~~new technology platform, AL 4.0, in certain markets,~~business during the interim period between the execution of the Merger Agreement and the ~~rollout~~closing 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,~~transaction, including covenants related to our ~~new technology platform over time. We have limited experience migrating users~~ability to enter into material contracts and acquire or dispose of assets. These covenants may prevent us from ~~one platform~~taking actions with respect to ~~another,~~our business that we may consider advantageous and ~~given the complexity and significance of this transition, including the amount of data, tools, services and functionality within~~result in our ~~systems that is being migrated, our relationships, our reputation and our overall business performance,~~inability to respond effectively to competitive pressures or industry developments, among other things, which could thereby harm our business, financial condition or results of operations.

The failure to complete the Merger could harm our business, financial condition or results of operations.

Completion of the Merger with IAC’s HomeAdvisor is subject to a number of conditions beyond our control that may prevent, delay or otherwise impair its completion in a material way, including the approval of our stockholders, the expiration or termination of applicable waiting periods under antitrust and competition laws and similar competition approvals or consents that must be ~~severely damaged if~~obtained from regulatory entities. If the ~~migration~~Merger is not completed, our stock price may significantly decline, in particular to ~~AL 4.0 goes poorly. To~~ the extent ~~we encounter difficulties migrating~~ our ~~new technology platform,~~stock price reflects an assumption that the Merger will be completed.

Under circumstances specified in the Merger Agreement, we may be required to ~~incur additional costs,~~pay a termination fee of $20 million in the event the Merger is not consummated. Further, a failure to complete the Merger may result in negative publicity and a negative impression of us in the business community. Any disruption to our business resulting from the announcement and pendency of the Merger, including ~~research and development costs,~~any adverse changes in our relationships with our employees, members, service providers or vendors, could continue or accelerate in the event of a failure to ~~address issues identified during implementation.~~ complete the Merger. Accordingly, our business, financial condition or results of operations may be materially harmed as a result of any failure to complete the Merger.

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~~will continue to ~~AL 4.0, we may~~ incur, ~~such additional~~significant expenses for ~~a much longer period~~professional services and other transaction costs in connection with the Merger, and many of ~~time than originally expected, thereby harming our business and financial performance. Further, one~~those expenses are payable by us regardless of whether or not the ~~anticipated benefits of AL 4.0~~Merger 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.consummated.

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

~~None.~~The following table summarizes the purchases of common stock made by us during the three months ended March 31, 2017:



	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽¹⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs⁽¹⁾
January 2017	1,810	⁽²⁾	$	8.17	⁽²⁾	—	$	—
February 2017	—		—			—	—
March 2017	—		—			—	—
Total	1,810		$	8.17		—	$	—


(1)	We do not have any publicly announced share repurchase plans or programs.

(2)

On January 4, 2017, we repurchased 1,810 shares of common stock from Scott A. Durchslag, our President and Chief Executive Officer, at a price of $8.17 per share, which was the closing price of our common stock on the purchase date, amounting to a total cost of $14,787.70. The Compensation Committee of our board of directors approved the shares repurchased pursuant to an election made by Mr. Durchslag under our Amended and Restated Omnibus Incentive Plan, and the proceeds from such repurchase were paid to Mr. Durchslag to be applied to his tax obligation associated with the vesting of a combined 89,682 restricted stock units and performance awards of restricted stock units on December 8, 2016.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

  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



		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
2.01	Agreement and Plan of Merger by and among Angie’s List, Inc., IAC/InterActiveCorp, Halo TopCo, Inc. and Casa Merger Sub, Inc., dated as of May 1, 2017	8-K	001-35339	2.1	5/3/2017
3.01	Third 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
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, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 and (iv) Notes to Condensed Consolidated Financial Statements					X

* Furnished, not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~April 21, 2016.~~May 4, 2017.



	ANGIE’S LIST, INC.

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

EXHIBIT INDEX

  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



		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
2.01	Agreement and Plan of Merger by and among Angie’s List, Inc., IAC/InterActiveCorp, Halo TopCo, Inc. and Casa Merger Sub, Inc., dated as of May 1, 2017	8-K	001-35339	2.1	5/3/2017
3.01	Third 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
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, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 and (iv) Notes to Condensed Consolidated Financial Statements					X

* Furnished, not filed.

2932



		Page No.
PART I – FINANCIAL INFORMATION		2

ITEM 1.	Condensed Consolidated Financial Statements	2

ITEM 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	1416

ITEM 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	2527

ITEM 4.	Controls and Procedures	2527

PART II – OTHER INFORMATION		2628

ITEM 1.	Legal Proceedings	2628

ITEM 1A.	Risk Factors	2628

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2629

ITEM 3.	Defaults Upon Senior Securities	2629

ITEM 4.	Mine Safety Disclosures	2629

ITEM 5.	Other Information	2629

ITEM 6.	Exhibits	2730

	Signatures	2831



	Cost		Accumulated Amortization		Net Carrying Amount		Weighted-Average Remaining Amortization Period (in years)
March 31, 2016
Member list	$	1,670	$	742	$	928	3.3
Content	140		124		16		0.3
Core technology	110		98		12		0.3
Data acquisition costs	1,824		1,015		809		1.5
Other intangible assets	300		208		92		0.9
Total amortizable intangible assets	$	4,044	$	2,187	$	1,857



	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		%