As filed with the Securities and Exchange Commission on November 9, 2017
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
| | | | |
ý☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2023
Or
| | | | | |
For the Quarterly Period Ended September 30, 2017 |
Or |
¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from__________to__________ |
Commission File No. 0-20570
ANGI HOMESERVICES INC.Angi Inc.
(Exact name of registrantRegistrant as specified in its charter)
|
| | | | | | | |
Delaware (State
| | 82-1204801 |
| (State or other jurisdiction of
incorporation or organization)
| | 82-1204801
(I.R.S. Employer
Identification No.)
|
14023 Denver West Parkway, Building 64, Golden, CO 80401
(Address of registrant's principal executive offices)
|
(303) 963-7200
(Registrant's telephone number, including area code)
|
3601 Walnut Street, Denver, CO 80205
(Address of Registrant’s principal executive offices)
(303) 963-7200
(Registrant’s telephone number, including area code)
| | | | | | | | | | | | | | |
| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | | Trading Symbol | | Name of exchange on which registered |
| Class A Common Stock, par value $0.001 | | ANGI | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrantRegistrant (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 registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o☒ No ý☐
Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit and post such files). Yes ý☒ No o☐
Indicate by check mark whether the registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
|
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Large accelerated filero | ☒ | Accelerated filero | ☐ | Non-accelerated filero (Do not check if a smaller
reporting company)
| ☐ | Smaller reporting companyo | ☐ | Emerging growth companyý | ☐ |
If an emerging growth company, indicate by check mark if the registrantRegistrant 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 ý☐
Indicate by check mark whether the registrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No ý☒
As of November 3, 2017,2023, the following shares of the registrant'sRegistrant’s common stock were outstanding:
| | | | | |
| Class A Common Stock | 85,136,000 | |
| Class B Common Stock | 422,019,247 | |
| Class C Common Stock | — | |
| Total outstanding Common Stock | 507,155,247 | |
TABLE OF CONTENTS
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Class A Common Stock | 62,656,140 |
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Class B Common Stock | 414,753,615 |
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Class C Common Stock | — |
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Total outstanding Common Stock | 477,409,755 |
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The aggregate market value of the voting common stock held by non-affiliates of the registrant as of November 3, 2017 was $753,879,613. For the purpose of the foregoing calculation only, shares held by IAC/InterActiveCorp and all directors and executive officers of the registrant are assumed to be affiliates of the registrant.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Item 1. Consolidated and Combined Financial Statements
ANGI HOMESERVICES INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEET
(Unaudited)
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (In thousands, except par value amounts) |
| ASSETS | | | |
| Cash and cash equivalents | $ | 366,825 | | | $ | 321,155 | |
| | | |
| Accounts receivable, net | 77,269 | | | 93,880 | |
| Other current assets | 71,702 | | | 69,167 | |
| | | |
| Total current assets | 515,796 | | | 484,202 | |
| | | |
| Capitalized software, leasehold improvements and equipment, net | 121,244 | | | 153,855 | |
| Goodwill | 883,468 | | | 882,949 | |
| Intangible assets, net | 170,263 | | | 178,105 | |
| Deferred income taxes | 158,495 | | | 145,460 | |
| Other non-current assets, net | 56,493 | | | 63,207 | |
| | | |
| TOTAL ASSETS | $ | 1,905,759 | | | $ | 1,907,778 | |
| | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
| LIABILITIES: | | | |
| | | |
| Accounts payable | $ | 52,790 | | | $ | 30,862 | |
| Deferred revenue | 55,162 | | | 50,907 | |
| Accrued expenses and other current liabilities | 195,765 | | | 200,015 | |
| | | |
| Total current liabilities | 303,717 | | | 281,784 | |
| | | |
| Long-term debt, net | 495,853 | | | 495,284 | |
| Deferred income taxes | 2,923 | | | 2,906 | |
| Other long-term liabilities | 57,989 | | | 76,426 | |
| | | |
| | | |
| | | |
| | | |
| Commitments and contingencies | | | |
| | | |
| SHAREHOLDERS’ EQUITY: | | | |
| Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 106,026 and 102,811 shares, respectively, and outstanding 84,760 and 82,600, respectively | 106 | | | 103 | |
| Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 422,019 and 422,019 shares issued and outstanding | 422 | | | 422 | |
| Class C common stock, $0.001 par value; authorized 1,500,000 shares; no shares issued and outstanding | — | | | — | |
| Additional paid-in capital | 1,437,141 | | | 1,405,294 | |
| Accumulated deficit | (225,459) | | | (190,079) | |
| Accumulated other comprehensive loss | (937) | | | (1,172) | |
| Treasury stock, 21,266 and 20,211 shares, respectively | (169,581) | | | (166,184) | |
| Total Angi Inc. shareholders’ equity | 1,041,692 | | | 1,048,384 | |
| Noncontrolling interests | 3,585 | | | 2,994 | |
| Total shareholders’ equity | 1,045,277 | | | 1,051,378 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,905,759 | | | $ | 1,907,778 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | (In thousands, except par value amounts) |
| ASSETS | | | |
| Cash and cash equivalents | $ | 59,543 |
| | $ | 36,377 |
|
Accounts receivable, net of allowance and reserves of $9,839 at September 30, 2017 and $9,177 at December 31, 2016 | 30,684 |
| | 18,696 |
|
| Other current assets | 23,386 |
| | 8,739 |
|
| Total current assets | 113,613 |
| | 63,812 |
|
| Property and equipment, net of accumulated depreciation and amortization of $26,503 at September 30, 2017 and $18,077 at December 31, 2016 | 47,635 |
| | 23,645 |
|
| Goodwill | 774,191 |
| | 170,990 |
|
Intangible assets, net | 343,393 |
| | 10,792 |
|
| Other non-current assets | 72,918 |
| | 26,278 |
|
TOTAL ASSETS | $ | 1,351,750 |
| | $ | 295,517 |
|
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
| LIABILITIES: | | | |
| Current portion of long-term debt—related party | $ | — |
| | $ | 2,838 |
|
| Accounts payable | 50,041 |
| | 11,544 |
|
| Deferred revenue | 58,955 |
| | 18,828 |
|
| Accrued expenses and other current liabilities | 90,008 |
| | 34,438 |
|
| Total current liabilities | 199,004 |
| | 67,648 |
|
| Long-term debt—related party | 79,504 |
| | 47,000 |
|
| Deferred income taxes | 5,363 |
| | 2,228 |
|
| Other long-term liabilities | 4,942 |
| | 2,247 |
|
| | | | |
| Redeemable noncontrolling interests | 18,844 |
| | 13,781 |
|
| | | | |
| Commitments and contingencies | | | |
| | | | |
| SHAREHOLDERS' EQUITY: | | | |
Class A common stock, $0.001 par value; authorized 2,000,000 shares; 61,291 shares issued and outstanding | 61 |
| | — |
|
| Class B common stock, $0.001 par value; authorized 1,500,000 shares; 414,754 shares issued and outstanding | 415 |
| | — |
|
Class C common stock, $0.001 par value; authorized 1,500,000 shares; no shares issued and outstanding | — |
| | — |
|
| Additional paid-in capital | 1,094,046 |
| | — |
|
| Accumulated deficit | (63,540 | ) | | — |
|
| Invested capital | — |
| | 154,852 |
|
| Accumulated other comprehensive income (loss) | 3,348 |
| | (1,721 | ) |
| Total ANGI Homeservices Inc. shareholders' equity and invested capital, respectively | 1,034,330 |
| | 153,131 |
|
| Noncontrolling interests | 9,763 |
| | 9,482 |
|
| Total shareholders' equity | 1,044,093 |
| | 162,613 |
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,351,750 |
| | $ | 295,517 |
|
ANGI HOMESERVICES INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS
(Unaudited)
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2023 | | 2022 | | 2023 | | 2022 | |
| | (In thousands, except per share data) | | (In thousands, except per share data) |
| Revenue | $ | 181,717 |
| | $ | 133,560 |
| | $ | 513,173 |
| | $ | 375,222 |
| Revenue | $ | 371,837 | | | $ | 498,036 | | | $ | 1,139,312 | | | $ | 1,449,977 | | |
| Cost of revenue (exclusive of depreciation shown separately below) | | Cost of revenue (exclusive of depreciation shown separately below) | 28,737 | | | 109,057 | | | 102,440 | | | 335,826 | | |
| Gross profit | | Gross profit | 343,100 | | | 388,979 | | | 1,036,872 | | | 1,114,151 | | |
| Operating costs and expenses: | | | | | | | | Operating costs and expenses: | | | | | | | | |
| Cost of revenue (exclusive of depreciation shown separately below) | 7,999 |
| | 6,826 |
| | 22,391 |
| | 19,565 |
| |
| Selling and marketing expense | 130,866 |
| | 80,274 |
| | 337,654 |
| | 234,344 |
| Selling and marketing expense | 204,006 | | | 234,397 | | | 621,628 | | | 711,357 | | |
| General and administrative expense | 129,088 |
| | 29,509 |
| | 217,962 |
| | 80,234 |
| General and administrative expense | 102,476 | | | 128,260 | | | 301,979 | | | 357,541 | | |
| Product development expense | 20,010 |
| | 5,356 |
| | 32,529 |
| | 15,142 |
| Product development expense | 21,497 | | | 15,816 | | | 72,358 | | | 54,629 | | |
| Depreciation | 3,491 |
| | 2,026 |
| | 9,705 |
| | 5,824 |
| Depreciation | 22,596 | | | 17,759 | | | 70,210 | | | 45,112 | | |
| Amortization of intangibles | 2,768 |
| | 726 |
| | 6,885 |
| | 2,271 |
| Amortization of intangibles | 2,633 | | | 3,805 | | | 7,958 | | | 11,413 | | |
| Total operating costs and expenses | 294,222 |
| | 124,717 |
| | 627,126 |
| | 357,380 |
| Total operating costs and expenses | 353,208 | | | 400,037 | | | 1,074,133 | | | 1,180,052 | | |
| Operating (loss) income | (112,505 | ) | | 8,843 |
| | (113,953 | ) | | 17,842 |
| |
| Interest expense—related party | (1,864 | ) | | (156 | ) | | (5,538 | ) | | (240 | ) | |
| Other income (expense), net | 1,364 |
| | 195 |
| | 2,100 |
| | (304 | ) | |
| (Loss) earnings before income taxes | (113,005 | ) | | 8,882 |
| | (117,391 | ) | | 17,298 |
| |
| Income tax benefit (provision) | 40,847 |
| | (4,414 | ) | | 71,095 |
| | (8,723 | ) | |
| Net (loss) earnings | (72,158 | ) | | 4,468 |
| | (46,296 | ) | | 8,575 |
| |
| Net loss attributable to noncontrolling interests | 397 |
| | 607 |
| | 1,402 |
| | 1,833 |
| |
| Net (loss) earnings attributable to ANGI Homeservices Inc. shareholders | $ | (71,761 | ) | | $ | 5,075 |
| | $ | (44,894 | ) | | $ | 10,408 |
| |
| Operating loss | | Operating loss | (10,108) | | | (11,058) | | | (37,261) | | | (65,901) | | |
| Interest expense | | Interest expense | (5,037) | | | (5,030) | | | (15,100) | | | (15,078) | | |
| Other income (expense),net | | Other income (expense),net | 3,891 | | | (2,296) | | | 12,890 | | | (4,437) | | |
| Loss before income taxes | | Loss before income taxes | (11,254) | | | (18,384) | | | (39,471) | | | (85,416) | | |
| Income tax benefit | | Income tax benefit | 5,967 | | | 945 | | | 4,705 | | | 10,693 | | |
| | | | | | | | | |
| Net (loss) earnings per share attributable to ANGI Homeservices Inc. shareholders: | | | | | |
| Basic | $ | (0.17 | ) | | $ | 0.01 |
| | $ | (0.11 | ) | | $ | 0.03 |
| |
| Diluted | $ | (0.17 | ) | | $ | 0.01 |
| | $ | (0.11 | ) | | $ | 0.03 |
| |
| | Net loss | | Net loss | (5,287) | | | (17,439) | | | (34,766) | | | (74,723) | | |
| Net earnings attributable to noncontrolling interests | | Net earnings attributable to noncontrolling interests | (69) | | | (40) | | | (614) | | | (379) | | |
| Net loss attributable to Angi Inc. shareholders | | Net loss attributable to Angi Inc. shareholders | $ | (5,356) | | | $ | (17,479) | | | $ | (35,380) | | | $ | (75,102) | | |
| | | | Per share information attributable to Angi Inc. shareholders: | | Per share information attributable to Angi Inc. shareholders: | |
| Basic loss per share | | Basic loss per share | $ | (0.01) | | | $ | (0.03) | | | $ | (0.07) | | | $ | (0.15) | | |
| Diluted loss per share | | Diluted loss per share | $ | (0.01) | | | $ | (0.03) | | | $ | (0.07) | | | $ | (0.15) | | |
| | | | | | | | | | |
| Stock-based compensation expense by function: | | | | | | | | Stock-based compensation expense by function: | | |
| Cost of revenue | $ | 9 |
| | $ | — |
| | $ | 19 |
| | $ | — |
| |
| | Selling and marketing expense | 19,709 |
| | 225 |
| | 20,402 |
| | 630 |
| Selling and marketing expense | $ | 1,822 | | | $ | 1,544 | | | $ | 4,586 | | | $ | 4,674 | | |
| General and administrative expense | 71,732 |
| | 1,837 |
| | 86,650 |
| | 5,138 |
| General and administrative expense | 6,906 | | | 8,755 | | | 22,040 | | | 27,052 | | |
| Product development expense | 12,530 |
| | 329 |
| | 13,209 |
| | 917 |
| Product development expense | 2,013 | | | 2,077 | | | 7,122 | | | 7,052 | | |
| Total stock-based compensation expense | $ | 103,980 |
| | $ | 2,391 |
| | $ | 120,280 |
| | $ | 6,685 |
| Total stock-based compensation expense | $ | 10,741 | | | $ | 12,376 | | | $ | 33,748 | | | $ | 38,778 | | |
ANGI HOMESERVICES INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In thousands) |
| Net (loss) earnings | $ | (72,158 | ) | | $ | 4,468 |
| | $ | (46,296 | ) | | $ | 8,575 |
|
| Other comprehensive income: | | | | | | | |
| Change in foreign currency translation adjustment | 3,579 |
| | 32 |
| | 5,592 |
| | 610 |
|
| Total other comprehensive income | 3,579 |
| | 32 |
| | 5,592 |
| | 610 |
|
| Comprehensive (loss) income | (68,579 | ) | | 4,500 |
| | (40,704 | ) | | 9,185 |
|
| Comprehensive loss attributable to noncontrolling interests | 396 |
| | 607 |
| | 879 |
| | 1,833 |
|
| Comprehensive (loss) income attributable to ANGI Homeservices Inc. shareholders | $ | (68,183 | ) | | $ | 5,107 |
| | $ | (39,825 | ) | | $ | 11,018 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 | | |
| (in thousands) |
| Net loss | $ | (5,287) | | | $ | (17,439) | | | $ | (34,766) | | | $ | (74,723) | | | |
| Other comprehensive (loss) income: | | | | | | | | | |
| Change in foreign currency translation adjustment | (2,182) | | | (5,129) | | | 236 | | | (9,100) | | | |
| | | | | | | | | |
| Total other comprehensive (loss) income | (2,182) | | | (5,129) | | | 236 | | | (9,100) | | | |
| Comprehensive loss | (7,469) | | | (22,568) | | | (34,530) | | | (83,823) | | | |
| Components of comprehensive (income) loss attributable to noncontrolling interests: | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (69) | | | (40) | | | (614) | | | (379) | | | |
| Change in foreign currency translation adjustment attributable to noncontrolling interests | 123 | | | 310 | | | (1) | | | 579 | | | |
| Comprehensive loss (income) attributable to noncontrolling interests | 54 | | | 270 | | | (615) | | | 200 | | | |
| Comprehensive loss attributable to Angi Inc. shareholders | $ | (7,415) | | | $ | (22,298) | | | $ | (35,145) | | | $ | (83,623) | | | |
ANGI HOMESERVICES INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
Three and Nine months endedMonths Ended September 30, 20172023
(Unaudited)
|
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| | | | | ANGI Homeservices Inc. Shareholders' Equity and Invested Capital | | | | |
| | | | | Class A Common Stock $0.001 Par Value | | Class B Common Stock $0.001 Par Value | | Class C Common Stock $0.001 Par Value | | | | | | | | | | Total ANGI Homeservices Inc. Shareholders' Equity and Invested Capital | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated
Other Comprehensive (Loss) Income | | | | | Total Shareholders' Equity |
| | Redeemable
Noncontrolling Interests | | | | | | | | | | | | | | | Additional Paid-in Capital | | Accumulated Deficit | | Invested Capital | | | | Noncontrolling Interests | |
| | | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | | | |
| | | | (In thousands) | | |
Balance as of December 31, 2016 | $ | 13,781 |
| | | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | $ | — |
| | $ | 154,852 |
| | $ | (1,721 | ) | | $ | 153,131 |
| | $ | 9,482 |
| | $ | 162,613 |
|
| Net (loss) earnings | (1,256 | ) | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (63,540 | ) | | 18,646 |
| | — |
| | (44,894 | ) | | (146 | ) | | (45,040 | ) |
| Other comprehensive income | 280 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5,069 |
| | 5,069 |
| | 243 |
| | 5,312 |
|
| Stock-based compensation expense | 1,577 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 96,939 |
| | — |
| | — |
| | — |
| | 96,939 |
| | — |
| | 96,939 |
|
| Redeemable noncontrolling interests created in acquisitions | 14,692 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Purchase of redeemable noncontrolling interests | (11,991 | ) | | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Purchase of noncontrolling interests | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (633 | ) | | (633 | ) |
| Adjustment of redeemable noncontrolling interests to fair value | 1,725 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1,725 | ) | | — |
| | (1,725 | ) | | — |
| | (1,725 | ) |
| Net increase in IAC/InterActiveCorp’s investment in HomeAdvisor prior to the Combination | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 46,339 |
| | — |
| | 46,339 |
| | — |
| | 46,339 |
|
| Contribution of IAC/InterActiveCorp's HomeAdvisor business to ANGI Homeservices Inc. and Combination with Angie's List | — |
| | | 61 |
| | 61,291 |
| | 415 |
| | 414,754 |
| | — |
| | — |
| | 997,107 |
| | — |
| | (218,112 | ) | | — |
| | 779,471 |
| | — |
| | 779,471 |
|
| Other | 36 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 817 |
| | 817 |
|
| Balance as of September 30, 2017 | $ | 18,844 |
| | | $ | 61 |
| | 61,291 |
| | $ | 415 |
| | 414,754 |
| | $ | — |
| | — |
| | $ | 1,094,046 |
| | $ | (63,540 | ) | | $ | — |
| | $ | 3,348 |
| | $ | 1,034,330 |
| | $ | 9,763 |
| | $ | 1,044,093 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | Class A Common Stock $0.001 Par Value | | Class B Convertible Common Stock $0.001 Par Value | | Class C Common Stock $0.001 Par Value | | | | | | | | | | Total Angi Inc. Shareholders' Equity | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | Total
Shareholders'
Equity |
| | | | | | | | | | | | | | | | Additional Paid-in Capital | | Accumulated Deficit | | | Treasury
Stock | | | Noncontrolling
Interests | |
| | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | | | |
| | | | (In thousands) | | |
| Balance as of June 30, 2023 | | | | $ | 105 | | | 105,273 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,426,280 | | | $ | (220,103) | | | $ | 1,122 | | | $ | (169,581) | | | $ | 1,038,245 | | | $ | 3,639 | | | $ | 1,041,884 | |
| Net (loss) earnings | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,356) | | | — | | | — | | | (5,356) | | | 69 | | | (5,287) | |
| Other comprehensive loss | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,059) | | | — | | | (2,059) | | | (123) | | | (2,182) | |
| Stock-based compensation expense | | | | — | | | — | | | — | | | — | | | — | | | — | | | 12,104 | | | — | | | — | | | — | | | 12,104 | | | — | | | 12,104 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | | | | 1 | | | 753 | | | — | | | — | | | — | | | — | | | (1,243) | | | — | | | — | | | — | | | (1,242) | | | — | | | (1,242) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of September 30, 2023 | | | | $ | 106 | | | 106,026 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,437,141 | | | $ | (225,459) | | | $ | (937) | | | $ | (169,581) | | | $ | 1,041,692 | | | $ | 3,585 | | | $ | 1,045,277�� | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2022 | | | | $ | 103 | | | 102,811 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,405,294 | | | $ | (190,079) | | | $ | (1,172) | | | $ | (166,184) | | | $ | 1,048,384 | | | $ | 2,994 | | | $ | 1,051,378 | |
| Net (loss) earnings | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (35,380) | | | — | | | — | | | (35,380) | | | 614 | | | (34,766) | |
| Other comprehensive income | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 235 | | | — | | | 235 | | | 1 | | | 236 | |
| Stock-based compensation expense | | | | — | | | — | | | — | | | — | | | — | | | — | | | 37,242 | | | — | | | — | | | — | | | 37,242 | | | — | | | 37,242 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | | | | 3 | | | 3,215 | | | — | | | — | | | — | | | — | | | (5,358) | | | — | | | — | | | — | | | (5,355) | | | — | | | (5,355) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purchase of treasury stock | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (3,397) | | | (3,397) | | | — | | | (3,397) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | | | | — | | | — | | | — | | | — | | | — | | | — | | | (37) | | | — | | | — | | | — | | | (37) | | | (24) | | | (61) | |
| Balance as of September 30, 2023 | | | | $ | 106 | | | 106,026 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,437,141 | | | $ | (225,459) | | | $ | (937) | | | $ | (169,581) | | | $ | 1,041,692 | | | $ | 3,585 | | | $ | 1,045,277 | |
ANGI HOMESERVICES INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWSSHAREHOLDERS' EQUITY
Three and Nine Months Ended September 30, 2022
(Unaudited)
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | (In thousands) |
| Cash flows from operating activities: | | | |
| Net (loss) earnings | $ | (46,296 | ) | | $ | 8,575 |
|
| Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | | | |
| Bad debt expense | 20,625 |
| | 12,336 |
|
| Stock-based compensation expense | 120,280 |
| | 6,685 |
|
| Depreciation | 9,705 |
| | 5,824 |
|
| Amortization of intangibles | 6,885 |
| | 2,271 |
|
| Deferred income taxes | (71,446 | ) | | (2,742 | ) |
| Other adjustments, net | (1,328 | ) | | 488 |
|
| Changes in assets and liabilities, net of effects of acquisitions: | | | |
| Accounts receivable | (30,080 | ) | | (20,999 | ) |
| Other current assets | (5,972 | ) | | (925 | ) |
| Accounts payable and other current liabilities | 41,847 |
| | 18,278 |
|
| Income taxes payable | 22 |
| | 4,664 |
|
| Deferred revenue | 7,788 |
| | 6,171 |
|
Net cash provided by operating activities | 52,030 |
| | 40,626 |
|
| Cash flows from investing activities: | | | |
| Acquisitions, net of cash acquired | (66,378 | ) | | — |
|
| Capital expenditures | (16,278 | ) | | (13,742 | ) |
Net cash used in investing activities | (82,656 | ) | | (13,742 | ) |
| Cash flows from financing activities: | | | |
| Proceeds from the issuance of related party debt | 131,359 |
| | 446 |
|
| Funds returned from escrow for MyHammer tender offer | 10,604 |
| | — |
|
| Transfers from (to) IAC/InterActiveCorp | 30,216 |
| | (26,485 | ) |
| Purchase of noncontrolling interests | (12,574 | ) | | — |
|
| Principal payments on related party debt | (104,089 | ) | | — |
|
| Other | 34 |
| | — |
|
Net cash provided by (used in) financing activities | 55,550 |
| | (26,039 | ) |
| Total cash provided | 24,924 |
| | 845 |
|
| Effect of exchange rate changes on cash and cash equivalents | (1,758 | ) | | 65 |
|
Net increase in cash and cash equivalents | 23,166 |
| | 910 |
|
| Cash and cash equivalents at beginning of period | 36,377 |
| | 2,462 |
|
Cash and cash equivalents at end of period | $ | 59,543 |
| | $ | 3,372 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | Class A Common Stock $0.001 Par Value | | Class B Convertible Common Stock $0.001 Par Value | | Class C Common Stock $0.001 Par Value | | | | | | | | | | Total Angi Inc. Shareholders' Equity | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Accumulated Other Comprehensive (Loss) Income | | | | | | | Total
Shareholders'
Equity |
| | | | | | | | | | | | | | | | Additional Paid-in Capital | | Accumulated Deficit | | | Treasury
Stock | | | Noncontrolling
Interests | |
| | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | | | |
| | | | (In thousands) | | |
| Balance as of June 30, 2022 | | | | $ | 101 | | | 100,897 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,374,200 | | | $ | (119,251) | | | $ | (393) | | | $ | (166,184) | | | $ | 1,088,895 | | | $ | 10,977 | | | $ | 1,099,872 | |
| Net (loss) earnings | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (17,479) | | | — | | | — | | | (17,479) | | | 40 | | | (17,439) | |
| Other comprehensive loss | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,819) | | | — | | | (4,819) | | | (310) | | | (5,129) | |
| Stock-based compensation expense | | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,304 | | | — | | | — | | | — | | | 13,304 | | | — | | | 13,304 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | | | | 1 | | | 853 | | | — | | | — | | | — | | | — | | | (2,121) | | | — | | | — | | | — | | | (2,120) | | | — | | | (2,120) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjustment to noncontrolling interests resulting from the reorganization of a foreign subsidiary | | | | | | | | | | | | | | | | 7,835 | | | | | | | | | 7,835 | | | (7,835) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | | | | — | | | — | | | — | | | — | | | — | | | — | | | (4) | | | (1) | | | — | | | — | | | (5) | | | — | | | (5) | |
| Balance as of September 30, 2022 | | | | $ | 102 | | | 101,750 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,393,214 | | | $ | (136,731) | | | $ | (5,212) | | | $ | (166,184) | | | $ | 1,085,611 | | | $ | 2,872 | | | $ | 1,088,483 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2021 | | | | $ | 100 | | | 99,745 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,350,457 | | | $ | (61,629) | | | $ | 3,309 | | | $ | (158,040) | | | $ | 1,134,619 | | | $ | 10,908 | | | $ | 1,145,527 | |
| Net (loss) earnings | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (75,102) | | | — | | | — | | | (75,102) | | | 379 | | | (74,723) | |
| Other comprehensive loss | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,521) | | | — | | | (8,521) | | | (579) | | | (9,100) | |
| Stock-based compensation expense | | | | — | | | — | | | — | | | — | | | — | | | — | | | 40,971 | | | — | | | — | | | — | | | 40,971 | | | — | | | 40,971 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | | | | 2 | | | 2,005 | | | — | | | — | | | — | | | — | | | (6,045) | | | — | | | — | | | — | | | (6,043) | | | — | | | (6,043) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purchase of treasury stock | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,144) | | | (8,144) | | | — | | | (8,144) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjustment to noncontrolling interests resulting from the reorganization of a foreign subsidiary | | | | | | | | | | | | — | | | — | | | 7,835 | | | | | | | | | 7,835 | | | (7,835) | | | — | |
| Other | | | | — | | | — | | | — | | | — | | | — | | | — | | | (4) | | | — | | | — | | | — | | | (4) | | | (1) | | | (5) | |
| Balance as of September 30, 2022 | | | | $ | 102 | | | 101,750 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,393,214 | | | $ | (136,731) | | | $ | (5,212) | | | $ | (166,184) | | | $ | 1,085,611 | | | $ | 2,872 | | | $ | 1,088,483 | |
ANGI HOMESERVICESINC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 | | |
| (In thousands) |
| Cash flows from operating activities: | | | | | |
| Net loss | $ | (34,766) | | | $ | (74,723) | | | |
| | | | | |
| | | | | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | |
| Depreciation | 70,210 | | | 45,112 | | | |
| Provision for credit losses | 67,288 | | | 82,216 | | | |
| Stock-based compensation expense | 33,748 | | | 38,778 | | | |
| Non-cash lease expense (including impairment of right-of-use assets) | 9,571 | | | 11,535 | | | |
| Amortization of intangibles | 7,958 | | | 11,413 | | | |
| Deferred income taxes | (13,015) | | | (13,950) | | | |
| Foreign currency transaction (gain) loss | (510) | | | 6,520 | | | |
| | | | | |
| | | | | |
| | | | | |
| Other adjustments, net | (100) | | | (192) | | | |
| Changes in assets and liabilities, net of effects of acquisitions and dispositions: | | | | | |
| Accounts receivable | (50,669) | | | (102,411) | | | |
| Other assets | (6,068) | | | (10,014) | | | |
| Accounts payable and other liabilities | 13,450 | | | 26,692 | | | |
| Operating lease liabilities | (17,375) | | | (13,229) | | | |
| Income taxes payable and receivable | 4,856 | | | 2,014 | | | |
| Deferred revenue | 4,220 | | | 1,597 | | | |
| Net cash provided by operating activities | 88,798 | | | 11,358 | | | |
| | | | | |
| Cash flows from investing activities: | | | | | |
| | | | | |
| Capital expenditures | (36,105) | | | (95,521) | | | |
| Purchases of marketable debt securities | (12,362) | | | — | | | |
| Proceeds from maturities of marketable debt securities | 12,500 | | | — | | | |
| | | | | |
| Proceeds from sales of fixed assets | 336 | | | 224 | | | |
| | | | | |
| Net cash used in investing activities | (35,631) | | | (95,297) | | | |
| | | | | |
| Cash flows from financing activities: | | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Purchases of treasury stock | (3,397) | | | (8,144) | | | |
| | | | | |
| Withholding taxes paid on behalf of employees on net settled stock-based awards | (4,780) | | | (5,587) | | | |
| | | | | |
| | | | | |
| Other, net | (57) | | | — | | | |
| Net cash used in financing activities | (8,234) | | | (13,731) | | | |
| | | | | |
| Total cash provided (used) | 44,933 | | | (97,670) | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 127 | | | (2,079) | | | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | 45,060 | | | (99,749) | | | |
| Cash and cash equivalents and restricted cash at beginning of period | 322,136 | | | 429,485 | | | |
| Cash and cash equivalents and restricted cash at end of period | $ | 367,196 | | | $ | 329,736 | | | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ANGI Homeservices is creating the world's largest digital marketplace for home services, connecting millions
Nature of homeowners across the globe withOperations
Angi Inc. connects quality home service professionals. ANGI Homeservices operates 10professionals with consumers across more than 500 different categories, from repairing and remodeling homes to cleaning and landscaping. Over 202,000 transacting service professionals actively sought consumer matches, completed jobs, or advertised work through Angi Inc. platforms during the three months ended September 30, 2023. Additionally, consumers turned to at least one of our brands in eight countries, including HomeAdvisor®, Angie's List, mHelpDesk, HomeStars (Canada), Travaux.com (France), MyHammer (Germany), MyBuilder (UK), Werkspot (Netherlands) and Instapro (Italy).to find a service professional for approximately 25 million projects during the twelve months ended September 30, 2023.
All references to "ANGI Homeservices," the "Company," "we," "our" or "us" in this report are to ANGI Homeservices Inc.
The Company has twofour operating segments, North Americasegments: (i) Ads and Europe. North America includes HomeAdvisor's operationsLeads; (ii) Services; (iii) Roofing; and (iv) International (consisting of businesses in the United States, Angie's List, mHelpDeskEurope and HomeStars. Europe includes Travaux.com, MyHammer, MyBuilder, WerkspotCanada) and Instapro.operates under multiple brands including Angi, HomeAdvisor, Handy, Total Home Roofing, and Angi Roofing.
Organization
On September 29, 2017, IAC/InterActiveCorp ("IAC")Ads and Angie's List Inc. ("Angie's List") combined IAC's HomeAdvisor business and Angie's List under a new publicly traded company called ANGI Homeservices Inc. The merger agreement provided for the combination with Angie’s List by way of the merger of a direct wholly-owned subsidiary of ANGI Homeservices with and into Angie’s List (the "Combination"), with Angie’s List continuing as the surviving company in the Combination. Prior to the effective time of the Combination, IAC contributed its HomeAdvisor business, along with certain cash, to ANGI Homeservices in exchange for shares of ANGI Homeservices Class B common stock. Following the Combination, Angie’s List and the legal entity that holds the HomeAdvisor business are direct wholly-owned subsidiaries of ANGI Homeservices Inc. At September 30, 2017, IAC owned 87.1% and 98.5% of the economic and voting interest, respectively, of ANGI Homeservices. See "Note 3—Business Combinations" for additional information related to the Combination.Nature of operations
ANGI Homeservices is the operator of the largest global home services marketplace, connecting homeowners withLeads provides service professionals the capability to engage with potential customers, including quote and invoicing services, and provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals nationwide for home repair, maintenance and improvement projects. Services consumers can request household services directly through the Angi platform and Angi fulfills the request through the use of independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. The Company’s marketplace provides thematching and pre-priced booking services and related tools and resourcesdirectories are provided to allow homeowners to find local pre-screened service professionalsconsumers free of charge. Roofing provides roof replacement and instantly book appointments online orrepair services through its award-winning HomeAdvisor mobile application. The Company's marketplace also provides consumers with other home services-related resources, including access to average project costs using its HomeAdvisor True Cost Guide. Effective September 29, 2017, the Company also owns Angie's List, a nationwide marketplace for local services where consumers can research, hire, rate and review the providers of these services. Ratings and reviews assist members in identifying and hiring a provider for their local service needs. Angie's List's services are provided in markets located across the continental United States. In addition to its market-leading U.S. operations, ANGI Homeservices owns the leading home services online marketplaces in Canada (HomeStars), which was acquired on February 8, 2017, Germany (MyHammer), which was acquired on November 3, 2016, France (Travaux.com) and the Netherlands (Werkspot), as well as operations in Italy (Instapro) and the United Kingdom (MyBuilder), which was acquired on March 24, 2017. ANGI Homeservices also owns Felix, a pay-per-call advertising service, and mHelpDesk, a provider of cloud-based field service software for small to mid-size businesses.wholly-owned subsidiary Angi Roofing, LLC.
As ofused herein, “Angi,” the “Company,” “we,” “our,” “us,” and similar terms refer to Angi Inc. and its subsidiaries (unless the context requires otherwise).
At September 30, 2017,2023, IAC Inc. (“IAC”) owned 83.8% and 98.1% of the Company's networkeconomic and voting interests, respectively, of service professionals in the United States consisted of approximately 172,000 Marketplace Paying Service Professionals providing services in more than 500 categories ranging from simple home repairs to larger home remodeling projects in more than 400 discrete geographies. The Company generated approximately 13.9 million Marketplace Service Requests from homeowners in the United States during the nine months ended September 30, 2017. As of September 30, 2017, the Company also had 47,000 Angie's List service professionals under contract for advertising.Company.
Basis of presentationPresentation and consolidationConsolidation
The Company prepares its consolidated and combined financial statements (referred to herein as “financial statements”) in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). The Company's financial statements were prepared on a consolidated basis beginning September 29, 2017 and on a combined basis for periods prior thereto. The difference in presentation is due to the fact that the final steps of the legal reorganization through which IAC contributed the HomeAdvisor business and cash to fund the cash consideration paid in the Combination to ANGI Homeservices Inc. were not completed, as planned, until immediately prior to September 29, 2017. The preparation of the financial statements on a combined basis for periods prior thereto allows for the
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
financial statements to be presented on a consistent basis for all periods presented. The combined financial statements have been prepared on a standalone basis and are derived from the historical consolidated financial statements and accounting records of IAC through September 29, 2017. The combined financial statements reflect the historical financial position, results of operations and cash flows of the businesses comprising the HomeAdvisor business since their respective dates of acquisition by IAC. The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest.
The consolidated and combined financial statements reflect the allocation to ANGI Homeservices of certain IAC corporate expenses relating to the HomeAdvisor business based on the historical consolidated financial statements and accounting records of IAC through September 29, 2017. For the purpose of these financial statements, income taxes have been computed as if ANGI Homeservices filed on a standalone, separate tax return basis.
All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. All intercompany transactions between (i) ANGI Homeservices and (ii) IAC and its subsidiaries, with the exception of notes payable due to IAC and its subsidiaries, are considered to be effectively settled for cash at the time the transaction is recorded. The notes payable due to IAC and its subsidiaries are included in “Long-term debt—related party” in the accompanying consolidated and combined balance sheet. See "“Note 10—Related Party Transactions with IAC"” for additional information on transactions between ANGI HomeservicesAngi and IAC. The Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings. For the purpose of these financial statements, income taxes have been computed on an as if standalone, separate return basis. Any differences between taxes currently payable to or receivable from IAC under the tax sharing agreement between the Company and IAC and the current tax provision or benefit computed on an as if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital and as financing activities within the statement of cash flows.
In themanagement's opinion, of management, the assumptions underlying the historical consolidated and combined financial statements, including the basis on which the expenses have been allocated from IAC, are reasonable. However, the allocations may not reflect the expenses that we may have incurred as an independent, standalone public company for the periods presented.
The unaudited interim consolidated and combined financial statements have been prepared on the same basis as the annual combined financial statements and reflect in management's opinion, all adjustments, consisting of normal and recurring adjustments necessary for the fair presentation of ourthe Company's consolidated financial position, consolidated results of operations and consolidated cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim consolidated and combined financial statements should be read in conjunction with the annual audited combined financial statements of the HomeAdvisor business and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 included in2022.
Segment Changes
In the Company's Registration Statement on Form S-4 dated June 29, 2017fourth quarter of 2022, the Company’s segment presentation was changed and our financial information for all prior periods, including the amendments thereto.three and nine months ended September 30, 2022, has been recast to reflect the following operating segments: Ads and Leads, Services, Roofing, and International.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accounting estimatesEstimates
Management of the Company is required to make certain estimates, judgments, and assumptions during the preparation of its consolidated and combined financial statements in accordance with GAAP. These estimates, judgments, and assumptions impact the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.
On an ongoing basis, the Company evaluates its estimates and judgments, including those related to: the recoverabilityfair values of goodwillcash equivalents and indefinite-lived intangible assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment;marketable debt securities; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts;credit losses; the determination of revenue reserves; the liabilitiescustomer relationship period for uncertaincertain costs to obtain a contract with a customer; the recoverability of right-of-use assets (“ROU assets”); the useful lives and recoverability of definite-lived intangible assets and capitalized software, leasehold improvements, and equipment; the recoverability of goodwill and indefinite-lived intangible assets; unrecognized tax positions;benefits; the liability for potential refunds and customer credits; the valuation allowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets, and other factors that the Company considers relevant.
Recent accounting pronouncements
Accounting pronouncements not yet adopted byGeneral Revenue Recognition
The Company accounts for a contract with a customer when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers and in the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
In May 2014,From January 1, 2020 through December 31, 2022, Services recorded revenue on a gross basis. Effective January 1, 2023, we modified the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, RevenueServices terms and conditions so that the service professional, rather than Angi Inc., has the contractual relationship with the consumer to deliver the service and our performance obligation to the consumer is to connect them with the service professional. This change in contractual terms requires revenue be reported as the net amount of what is received from Contracts with Customers, which clarifies the principles for recognizing revenue and develops a common standardconsumer after deducting the amounts owed to the service professional providing the service effective for all industries. ASU No. 2014-09arrangements entered into after December 31, 2022. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition. For the three and nine months ended September 30, 2022, if Services revenue were recorded on a net basis, revenue would have been reduced by $64.8 million and $187.5 million, respectively.
Deferred Revenue
Deferred revenue consists of payments that are received or are contractually due in advance of the Company’s performance obligation. The Company’s deferred revenue is reported on a contract-by-contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the remaining term or expected completion of its performance obligation is one year or less. At December 31, 2022, the current and non-current deferred revenue balances were $50.9 million and $0.1 million, respectively, and during the nine months ended September 30, 2023, the Company recognized $47.0 million of revenue that was subsequently amendedincluded in the deferred revenue balance as of December 31, 2022. At December 31, 2021, the current and non-current deferred revenue balances were $53.8 million and $0.1 million, respectively, and during 2015, 2016the nine months ended September 30, 2022, the Company recognized $51.9 million of revenue that was included in the deferred revenue balance as of December 31, 2021.
The current and 2017; these amendments provide furthernon-current deferred revenue recognition guidance related to principal versus agent considerations, performance obligationsbalances at September 30, 2023 are $55.2 million and licensing, narrow-scope improvementsless than $0.1 million, respectively. Non-current deferred revenue is included in “Other long-term liabilities” in the accompanying consolidated balance sheet.
Practical Expedients and practical expedients.
Exemptions
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
For contracts that have an original duration of one year or less, the Company uses the practical expedient available under Accounting Standards Codification (“ASC”) ASC 606, applicable to such contracts and does not consider the time value of money.
ASU No. 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidanceIn addition, as permitted under GAAP. The new standard provides a single principles-based, five-step model to be applied to allthe practical expedient available under ASC 606, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with customers. This five-step model includes (1) identifying the contract(s)an original expected length of one year or less, (ii) contracts with the customer, (2) identifying thevariable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which the Company has the right to invoice for services performed.
Fair Value Measurements
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
•Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.
•Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company’s Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.
•Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the contract, (3) determiningcircumstances, about the transaction price, (4) allocatingassumptions market participants would use in pricing the transaction priceassets or liabilities.
The Company’s non-financial assets, such as goodwill, intangible assets, ROU assets, capitalized software, leasehold improvements and equipment are adjusted to the performance obligations in the contract and (5) recognizing revenuefair value only when each performance obligationan impairment is satisfied. More specifically, revenue will be recognized when promised goodsrecognized. Such fair value measurements are based predominantly on Level 3 inputs.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements adopted or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. ASU No. 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2016. Upon adoption, ASU No. 2014-09 may either be applied retrospectively to each prior period presented or using the modified retrospective approach with the cumulative effect recognized as of the date of initial application.
While the Company’s evaluation of the impact of the adoption of ASU No. 2014-09 on its consolidated and combined financial statements continues, it has progressed to the point where we have reached certain preliminary determinations. The Company will adopt ASU No. 2014-09 using the modified retrospective approach effective January 1, 2018. Therefore, the cumulative effect of adoption will be reflected as an adjustment to beginning retained earnings in the Form 10-Q for the period ending March 31, 2018. The effect onnot yet been adopted by the Company will be that sales commissions, which represent the incremental direct costs of obtaining a service professional contract, will be capitalized and amortized over the average life of a service professional. These costs are expensed as incurred currently. The cumulative effect of the adoption of ASU No. 2014-09 will be to establish an asset equal to the unamortized cost of the sales commissions paid to obtain a service professional and a related deferred tax liability with the net effect being recorded as an increase to retained earnings as of January 1, 2018. The ultimate amounts recorded will depend upon both the timing and amount of monthly sales commissions during the year ended December 31, 2016 and the year ending December 31, 2017 and the average life of a service professional as of January 1, 2018. The Company is in the initial stages of assessing the impact of ASU No. 2014-09 on Angie's List following the Combination. Prior to the Combination, Angie's List capitalized sales commissions and amortized the cost over the term of the applicable advertising contract. Following the Combination, Angie's List accounting policies will be conformed to the Company's accounting policies and these costs will be expensed as incurred. Following the adoption of ASU No. 2014-09, these costs will be capitalized and amortized over the average life of a service professional. Exclusive of the impact of the adoption of ASU No. 2014-09 on Angie's List, the Company estimates that the cumulative effect of adoption on the Company's combined financial position, if January 1, 2017 were the date of adoption, would have been less than 9% of total assets, less than 8% of total liabilities and less than 10% of shareholders' equity. The Company, subject to the completion of assessing Angie's List, does not expect the adoption of ASU No. 2014-09expected to have a material effect on its consolidated and combinedthe results of operations, financial condition, or cash flows.flows of the Company.
In February 2016,Reclassifications
Certain prior year amounts have been reclassified to conform to the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes pre-existing guidancecurrent year presentation.
NOTE 2—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Fair Value Measurements
Instruments measured at fair value on accounting for leases in "Leases (Topic 840)"a recurring basis
Cash and generally requires all leases to be recognizedcash equivalents are measured at fair value and classified within Level 1 and Level 2 in the statement offair value hierarchy, because we use quoted prices for identical assets in active markets.
The following tables present the Company’s financial position. The provisions of ASU No. 2016-02instruments that are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU No. 2016-02 are to be applied using a modified retrospective approach. The Company will adopt ASU No. 2016-02 effective January 1, 2019. The Company is currently evaluating the impact the adoption of this standard update will have on its consolidated and combined financial statements.
Accounting pronouncements adopted by the Company
In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about the changes to the terms and conditions of a share-based payment award that require an entity to apply modification accounting in "Stock Compensation (Topic 718)." The provisions of ASU No. 2017-09 are effective for reporting periods beginning after December 15, 2017; early adoption is permitted. The provisions of ASU No. 2017-09 are to be applied prospectively to an award modified on or after the adoption date. The Company early adopted the provisions of ASU No. 2017-09 during the third quarter of 2017 and the adoption of this standard update did not have a material impact on its consolidated and combined financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies how cash receipts and cash payments in certain transactions are presented and classified on the statement of cash flows. The provisions of ASU No. 2016-15 are effective for reporting periods beginning after December 15, 2017, including interim periods, and will require adoptionmeasured at fair value on a retrospective basis unless it is impracticable
recurring basis:
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 |
| Quoted Market Prices for Identical Assets in Active Markets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) | | Total
Fair Value
Measurements |
| (In thousands) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 196,679 | | | $ | — | | | $ | — | | | $ | 196,679 | |
| Treasury discount notes | — | | | 99,522 | | | — | | | 99,522 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total | $ | 196,679 | | | $ | 99,522 | | | $ | — | | | $ | 296,201 | |
to apply, in which case we would be required to apply the amendments prospectively as | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Quoted Market Prices for Identical Assets in Active Markets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) | | Total
Fair Value
Measurements |
| (In thousands) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 189,000 | | | $ | — | | | $ | — | | | $ | 189,000 | |
| Treasury discount notes | — | | | 24,961 | | | — | | | 24,961 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total | $ | 189,000 | | | $ | 24,961 | | | $ | — | | | $ | 213,961 | |
Financial instruments measured at fair value only for disclosure purposes
The total fair value of the earliest date practicable; early adoptionoutstanding long-term debt, including the current portion, is permitted. The Company early adoptedestimated using observable market prices or indices for similar liabilities, which are Level 2 inputs, and was approximately $390.0 million and $368.8 million at September 30, 2023 and December 31, 2022, respectively.
NOTE 3—LONG-TERM DEBT
Long-term debt consists of:
| | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| | (In thousands) |
| 3.875% ANGI Group Senior Notes due August 15, 2028 (“ANGI Group Senior Notes”); interest payable each February 15 and August 15 | $ | 500,000 | | | $ | 500,000 | |
| | | |
| | | |
| | | |
| Less: unamortized debt issuance costs | 4,147 | | | 4,716 | |
| Total long-term debt, net | $ | 495,853 | | | $ | 495,284 | |
ANGI Group, LLC (“ANGI Group”), a direct wholly-owned subsidiary of Angi Inc., issued the provisions of ASU No. 2016-15ANGI Group Senior Notes on January 1, 2017August 20, 2020. These notes may be redeemed at the redemption prices, plus accrued and the adoption of this standard update did not have a material impact on its consolidated and combined financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The Company adopted the provisions of ASU No. 2016-09 on January 1, 2017. Excess tax benefits or deficiencies related to equity awards to employees upon exercise of stock options and the vesting of restricted stock units after January 1, 2017 are (i) reflectedunpaid interest thereon, if any, as set forth in the consolidatedindenture governing the notes.
The indenture governing the ANGI Group Senior Notes contains a covenant that would limit ANGI Group’s ability to incur liens for borrowed money in the event a default has occurred or ANGI Group’s secured leverage ratio exceeds 3.75 to 1.0, provided that ANGI Group is permitted to incur such liens under certain permitted credit facilities indebtedness notwithstanding the ratio, all as defined in the indenture. At September 30, 2023, there were no limitations pursuant thereto.
NOTE 4—ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables present the components of accumulated other comprehensive (loss) income. There were no items reclassified out of accumulated other comprehensive (loss) income into earnings during both the three and combined statement of operations as a component of the provision for income taxes, rather than recognized in equity, and (ii) reflected as operating, rather than financing, cash flows in our consolidated and combined statement of cash flows. Excess tax benefits for the nine months ended September 30, 2017 were $35.6 million. Excess2023 and 2022.
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2023 | | 2022 |
| Foreign Currency
Translation Adjustment | | | | | | Foreign Currency
Translation Adjustment | | |
| (In thousands) |
| Balance at July 1 | $ | 1,122 | | | | | | | $ | (393) | | | |
| Other comprehensive loss | (2,059) | | | | | | | (4,819) | | | |
| Balance at September 30 | $ | (937) | | | | | | | $ | (5,212) | | | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| Foreign Currency
Translation Adjustment | | | | | | Foreign Currency
Translation Adjustment | | |
| (In thousands) |
| Balance at January 1 | $ | (1,172) | | | | | | | $ | 3,309 | | | |
| Other comprehensive income (loss) | 235 | | | | | | | (8,521) | | | |
| Balance at September 30 | $ | (937) | | | | | | | $ | (5,212) | | | |
At September 30, 2023 and 2022 there was no tax benefitsbenefit or provision on the accumulated other comprehensive loss.
NOTE 5—SEGMENT INFORMATION
The Company has determined its operating segments consistent with how the chief operating decision maker views the businesses. Additionally, the Company considers how the businesses are organized as to segment management and the focus of $7.6 millionthe businesses with regards to the types of services or products offered or the target market.
The following table presents revenue by reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2023 | | 2022 | | 2023 | | 2022 | | | | | | |
| (In thousands) |
| Revenue: | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | |
| Ads and Leads | $ | 291,993 | | | $ | 345,529 | | | $ | 877,986 | | | $ | 982,137 | | | | | | | |
| Services | 29,964 | | | 105,892 | | | 91,890 | | | 290,574 | | | | | | | |
| Roofing | 21,400 | | | 25,993 | | | 84,254 | | | 105,330 | | | | | | | |
Intersegment eliminations(a) | (794) | | | (2,825) | | | (3,257) | | | (6,452) | | | | | | | |
| Total Domestic | 342,563 | | | 474,589 | | | 1,050,873 | | | 1,371,589 | | | | | | | |
| International | 29,274 | | | 23,447 | | | 88,439 | | | 78,388 | | | | | | | |
| Total revenue | $ | 371,837 | | | $ | 498,036 | | | $ | 1,139,312 | | | $ | 1,449,977 | | | | | | | |
________________________
(a)Intersegment eliminations related to Ads and Leads revenue earned from sales to Roofing.
The following table presents the revenue of the Company’s segments disaggregated by type of service:
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2023 | | 2022 | | 2023 | | 2022 | | | | | | |
| (In thousands) |
| Domestic: | | | | | | | | | | | | | |
| Ads and Leads: | | | | | | | | | | | | | |
| Consumer connection revenue | $ | 203,579 | | | $ | 262,934 | | | $ | 625,527 | | | $ | 738,177 | | | | | | | |
| Advertising revenue | 75,074 | | | 67,165 | | | 212,302 | | | 196,256 | | | | | | | |
| Membership subscription revenue | 13,167 | | | 14,795 | | | 39,597 | | | 46,586 | | | | | | | |
| Other revenue | 173 | | | 635 | | | 560 | | | 1,118 | | | | | | | |
| Total Ads and Leads revenue | 291,993 | | | 345,529 | | | 877,986 | | | 982,137 | | | | | | | |
| Services revenue | 29,964 | | | 105,892 | | | 91,890 | | | 290,574 | | | | | | | |
| Roofing revenue | 21,400 | | | 25,993 | | | 84,254 | | | 105,330 | | | | | | | |
Intersegment eliminations(a) | (794) | | | (2,825) | | | (3,257) | | | (6,452) | | | | | | | |
| Total Domestic | 342,563 | | | 474,589 | | | 1,050,873 | | | 1,371,589 | | | | | | | |
| International: | | | | | | | | | | | | | |
| Consumer connection revenue | 23,144 | | | 15,567 | | | 71,260 | | | 54,311 | | | | | | | |
| Service professional membership subscription revenue | 6,023 | | | 7,597 | | | 16,834 | | | 23,211 | | | | | | | |
| Advertising and other revenue | 107 | | | 283 | | | 345 | | | 866 | | | | | | | |
| Total International | 29,274 | | | 23,447 | | | 88,439 | | | 78,388 | | | | | | | |
| Total revenue | $ | 371,837 | | | $ | 498,036 | | | $ | 1,139,312 | | | $ | 1,449,977 | | | | | | | |
________________________(a)Intersegment eliminations related to Ads and Leads revenue earned from sales to Roofing.
Geographic information about revenue and long-lived assets is presented below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2023 | | 2022 | | 2023 | | 2022 | | | | | | |
| (In thousands) |
| Revenue: | | | | | | | | | | | | | |
| United States | $ | 342,342 | | | $ | 473,835 | | | $ | 1,050,186 | | | $ | 1,369,392 | | | | | | | |
| All other countries | 29,495 | | | 24,201 | | | 89,126 | | | 80,585 | | | | | | | |
| Total | $ | 371,837 | | | $ | 498,036 | | | $ | 1,139,312 | | | $ | 1,449,977 | | | | | | | |
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
| (In thousands) |
| Long-lived assets (excluding goodwill, intangible assets, and ROU assets): | | | |
| United States | $ | 116,942 | | | $ | 147,322 | |
| All other countries | 4,302 | | | 6,533 | |
| Total | $ | 121,244 | | | $ | 153,855 | |
The following tables present operating income (loss) and Adjusted EBITDA by reportable segment:
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2023 | | 2022 | | 2023 | | 2022 | | | | | | |
| (In thousands) |
| Operating income (loss): | | | | | | | | | | | | | |
| Ads and Leads | $ | 8,115 | | | $ | 22,754 | | | $ | 26,386 | | | $ | 61,532 | | | | | | | |
| Services | (3,887) | | | (10,780) | | | (21,514) | | | (57,581) | | | | | | | |
| Roofing | (2,246) | | | (8,545) | | | (3,137) | | | (18,484) | | | | | | | |
| Corporate | (14,854) | | | (15,542) | | | (46,361) | | | (46,655) | | | | | | | |
| International | 2,764 | | | 1,055 | | | 7,365 | | | (4,713) | | | | | | | |
| Total | $ | (10,108) | | | $ | (11,058) | | | $ | (37,261) | | | $ | (65,901) | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2023 | | 2022 | | 2023 | | 2022 | | | | | | |
| (In thousands) |
Adjusted EBITDA(b): | | | | | | | | | | | | | |
| Ads and Leads | $ | 32,198 | | | $ | 43,344 | | | $ | 100,204 | | | $ | 119,833 | | | | | | | |
| Services | $ | 3,534 | | | $ | (1,942) | | | $ | 3,066 | | | $ | (34,422) | | | | | | | |
| Roofing | $ | (1,983) | | | $ | (7,871) | | | $ | (2,456) | | | $ | (15,987) | | | | | | | |
| Corporate | $ | (11,933) | | | $ | (12,550) | | | $ | (37,396) | | | $ | (38,102) | | | | | | | |
| International | $ | 4,046 | | | $ | 1,901 | | | $ | 11,237 | | | $ | (1,920) | | | | | | | |
(b) The Company’s primary financial measure and GAAP segment measure is Adjusted EBITDA, which is defined as operating income (loss) excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of amortization of intangible assets and impairments of goodwill and intangible assets, if applicable.
The following tables reconcile operating income (loss) for the nine months ended September 30, 2016 were reclassified in the combined statementCompany’s reportable segments and net loss attributable to Angi Inc. shareholders to Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2023 |
| Operating Income (Loss) | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted EBITDA(b) |
| (In thousands) |
| Ads and Leads | $ | 8,115 | | | $ | 6,082 | | | $ | 15,368 | | | $ | 2,633 | | | $ | 32,198 | |
| Services | (3,887) | | | $ | 1,096 | | | $ | 6,325 | | | $ | — | | | $ | 3,534 | |
| Roofing | (2,246) | | | $ | 160 | | | $ | 103 | | | $ | — | | | $ | (1,983) | |
| Corporate | (14,854) | | | $ | 2,921 | | | $ | — | | | $ | — | | | $ | (11,933) | |
| International | 2,764 | | | $ | 482 | | | $ | 800 | | | $ | — | | | $ | 4,046 | |
| Total | (10,108) | | | | | | | | | |
| Interest expense | (5,037) | | | | | | | | | |
| Other income, net | 3,891 | | | | | | | | | |
| Loss before income taxes | (11,254) | | | | | | | | | |
| Income tax benefit | 5,967 | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net loss | (5,287) | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (69) | | | | | | | | | |
| Net loss attributable to Angi Inc. shareholders | $ | (5,356) | | | | | | | | | |
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which is intended to simplify the accounting for goodwill impairment. The guidance eliminates the requirement to calculate the implied fair valueANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 |
| Operating Income (Loss) | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted EBITDA(b) |
| (In thousands) |
| Ads and Leads | $ | 22,754 | | | $ | 4,979 | | | $ | 12,948 | | | $ | 2,663 | | | $ | 43,344 | |
| Services | (10,780) | | | $ | 4,015 | | | $ | 3,848 | | | $ | 975 | | | $ | (1,942) | |
| Roofing | (8,545) | | | $ | 195 | | | $ | 312 | | | $ | 167 | | | $ | (7,871) | |
| Corporate | (15,542) | | | $ | 2,992 | | | $ | — | | | $ | — | | | $ | (12,550) | |
| International | 1,055 | | | $ | 195 | | | $ | 651 | | | $ | — | | | $ | 1,901 | |
| Total | (11,058) | | | | | | | | | |
| Interest expense | (5,030) | | | | | | | | | |
| Other expense, net | (2,296) | | | | | | | | | |
| Loss before income taxes | (18,384) | | | | | | | | | |
| Income tax benefit | 945 | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net loss | (17,439) | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (40) | | | | | | | | | |
| Net loss attributable to Angi Inc. shareholders | $ | (17,479) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2023 |
| Operating Income (Loss) | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | | | Adjusted EBITDA(b) |
| (In thousands) |
| Ads and Leads | $ | 26,386 | | | $ | 16,880 | | | $ | 48,980 | | | $ | 7,958 | | | | | $ | 100,204 | |
| Services | (21,514) | | | $ | 6,497 | | | $ | 18,083 | | | $ | — | | | | | $ | 3,066 | |
| Roofing | (3,137) | | | $ | 158 | | | $ | 523 | | | $ | — | | | | | $ | (2,456) | |
| Corporate | (46,361) | | | $ | 8,965 | | | $ | — | | | $ | — | | | | | $ | (37,396) | |
| International | 7,365 | | | $ | 1,248 | | | $ | 2,624 | | | $ | — | | | | | $ | 11,237 | |
| Operating loss | (37,261) | | | | | | | | | | | |
| Interest expense | (15,100) | | | | | | | | | | | |
| Other income, net | 12,890 | | | | | | | | | | | |
| Loss before income taxes | (39,471) | | | | | | | | | | | |
| Income tax benefit | 4,705 | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net loss | (34,766) | | | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (614) | | | | | | | | | | | |
| Net loss attributable to Angi Inc. shareholders | $ | (35,380) | | | | | | | | | | | |
ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Operating Income (Loss) | | Stock-Based
Compensation Expense | | Depreciation | | | | Amortization
of Intangibles | | Adjusted EBITDA(b) |
| (In thousands) |
| Ads and Leads | $ | 61,532 | | | $ | 15,303 | | | $ | 35,010 | | | | | $ | 7,988 | | | $ | 119,833 | |
| Services | (57,581) | | | $ | 13,068 | | | $ | 7,166 | | | | | $ | 2,925 | | | $ | (34,422) | |
| Roofing | (18,484) | | | $ | 1,410 | | | $ | 587 | | | | | $ | 500 | | | $ | (15,987) | |
| Corporate | (46,655) | | | $ | 8,553 | | | $ | — | | | | | $ | — | | | $ | (38,102) | |
| International | (4,713) | | | $ | 444 | | | $ | 2,349 | | | | | $ | — | | | $ | (1,920) | |
| Operating loss | (65,901) | | | | | | | | | | | |
| Interest expense | (15,078) | | | | | | | | | | | |
| Other expense, net | (4,437) | | | | | | | | | | | |
| Loss before income taxes | (85,416) | | | | | | | | | | | |
| Income tax benefit | 10,693 | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net loss | (74,723) | | | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (379) | | | | | | | | | | | |
| Net loss attributable to Angi Inc. shareholders | $ | (75,102) | | | | | | | | | | | |
NOTE 2—6—INCOME TAXES
ANGI Homeservices
The Company is included within IAC'sIAC’s tax group for purposes of federal and consolidated state income tax return filings. In all periods presented, current and deferredthe income taxes havetax benefit and/or provision has been computed for the entities comprising ANGI HomeservicesCompany on an as if standalone, separate return basis. The Company’sbasis and payments to and refunds from IAC for itsthe Company’s share of IAC’s consolidated federal and state income tax return liabilitiesliabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying consolidated statement of cash flows. The tax sharing agreement between the Company and combinedIAC governs the parties’ respective rights, responsibilities and obligations with respect to tax matters, including responsibility for taxes attributable to the Company, entitlement to refunds, allocation of tax attributes and other matters and, therefore, ultimately governs the amount payable to or receivable from IAC with respect to income taxes. Any differences between taxes currently payable to or receivable from IAC under the tax sharing agreement and the current tax provision or benefit computed on an as if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital in the consolidated statement of shareholders’ equity and financing activities within the consolidated statement of cash flows.
At the end of each interim period, the Company makes its best estimate ofestimates the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or incomeunrecognized tax contingenciesbenefits is recognized in the interim period in which the change occurs.
The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realizabilityrealization of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or ourthe Company’s tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision or benefit in the quarter in which the change occurs.
For Included in the three and nine months ended September 30, 2017, the Company recorded an income tax benefit of $40.8 million and $71.1 million, respectively. The income tax benefit for the three months ended September 30, 20172023 was a benefit of $3.9 million due to a higher estimated annual effective tax rate from that applied to the second quarter’s year-to-date ordinary loss from
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
continuing operations. The higher estimated annual effective tax rate was primarily due to reduced foreign income subject to tax in the U.S. and reduced state taxes.
For the three months ended September 30, 2023, the Company recorded an income tax benefit of $6.0 million, which represents an effective income tax rate of 36%,53%. The effective income tax rate is higher than the statutory rate of 35%21% due primarily to state taxes,benefits related to a change in the annual expected effective income tax rate, research credits, and a reconciliation of income tax provision accruals to tax returns, partially offset by unbenefited losses in separate jurisdictions. The income tax benefitshortfalls generated by the vesting for stock-based awards. For the nine months ended September 30, 20172023, the Company recorded an income tax benefit of $4.7 million, which represents an effective income tax rate of 12%. The effective income tax rate is lower than the statutory rate of 21% due primarily to tax shortfalls generated by the effect of adopting the provisions of ASU No. 2016-09 on January 1, 2017vesting and state taxes,exercise for stock-based awards and nondeductible stock-based compensation, partially offset by unbenefited losses in separate jurisdictions. Under ASU No. 2016-09, excess tax benefits generated by the settlement or exercise of stock-based awards of $35.6 million for the nine months ended September 30, 2017 are recognized as a reduction to the income tax provision rather than as an increase to additional paid-in capital.research credits. For the three and nine months ended September 30, 2016,2022, the Company recorded an income tax provisionbenefit of $4.4$0.9 million and $8.7$10.7 million, respectively, which represents an effective income tax rate of 50% in each period. The5% and 13%, respectively. For the three months ended September 30, 2022, the effective income tax rate is lower than the statutory rate of 21% due primarily to tax shortfalls generated by the vesting and exercise for stock-based awards and provisions related to a change in the three andannual expected effective income tax rate. For the nine months ended September 30, 20162022, the effective income tax rate is higher
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
lower than the statutory rate of 35%21% due primarily to unbenefited lossestax shortfalls generated by the vesting and exercise for stock-based awards and nondeductible stock-based compensation expense.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in separate jurisdictionsthe income tax provision. Accruals for interest are not material and statethere are currently no accruals for penalties.
The Company’s income taxes partially offset by research credits.
ANGI Homeservices isare routinely under audit by federal, state, local and foreign authorities in the area of income tax as a result of previously filed separate company and consolidated tax returns with IAC. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service is currently auditing IAC’sOn June 27, 2023 the Joint Committee of Taxation completed its review of the federal income tax returns for the years ended December 31, 20102013 through 2012,2019, which includes the operations of the HomeAdvisor business.Company, and approved the audit settlement previously agreed to with the Internal Revenue Service. The statutestatutes of limitations for the years 20102013 through 2013 has2019 have been extended to June 30, 2018.December 31, 2023. Returns filed in various other jurisdictions are open to examination for various tax years beginning with 2009.2013. Income taxes payable include reservesunrecognized tax benefits considered sufficient to pay assessments that may result from examination of prior year tax returns. Changes to reservesThe Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustment. Although management currently believes changes in unrecognized tax benefits from period to period and differences between amounts paid, if any, upon the resolution of issues raised in audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed bywill not have a material impact on liquidity, results of operations, or financial condition of the Company, these matters are recordedsubject to inherent uncertainties and management’s view of these matters may change in the period they become known.future.
The
At September 30, 2023 and December 31, 2022, the Company recognizes interest and, if applicable, penalties related tohas unrecognized tax benefits, in the income tax provision. At both September 30, 2017 and December 31, 2016, the Company has not accrued any amount for the paymentincluding interest, of either interest or penalties.
At September 30, 2017 and December 31, 2016, unrecognized tax benefits are $1.3$7.4 million and $0.6$6.2 million, respectively. Included in unrecognized tax benefits at September 30, 2017 and December 31, 2016, is $1.3 million and $0.6 million, respectively,respectively; all of which are for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at September 30, 20172023 are subsequently recognized, the income tax provision would be reduced by $1.3$7.0 million. The comparable amount as of December 31, 20162022 is $0.6$5.8 million. The Company believes it is reasonably possible that its unrecognized tax benefits could decrease by $0.2 million by September 30, 2024 due to settlements; $0.1 million of which would reduce the income tax provision.
The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, among other things,to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience, to the extent these items are applicable. As ofexperience. At September 30, 2017,2023, the Company has a U.S. gross deferred tax asset of $124.1$221.1 million that the Company expects to fully utilize on a more likely than not basis. However,Of this amount, $24.1 million will be utilized upon the future reversal of deferred tax sharing agreement between ANGI Homeservices and IAC governs the parties’ respective rights, responsibilities and obligations with respect to tax matters, including responsibility for taxes attributable to ANGI Homeservices, entitlement to refunds, allocation of tax attributes and other matters. Any differences between taxes currently due or receivable under the tax sharing agreementliabilities and the currentremaining net deferred tax provision computed on an as if standalone, separate return basis are reflected as adjustments to additional paid-in capital.
NOTE 3—BUSINESS COMBINATIONS
Angie's List Combination
Through the Combination, the Company acquired 100%asset of the common stock of Angie's List on September 29, 2017 for a total purchase price valued at $781.4 million.
The purchase price of $781.4$197.0 million was determinedwill be utilized based on the sumforecasts of (i) the fair valuefuture taxable income. The Company’s most significant net deferred tax asset relates to U.S. federal net operating loss (“NOL”) carryforwards of the 61.3$108.1 million. The Company expects to generate sufficient future taxable income of at least $514.7 million shares of Angie's List common stock outstanding immediately prior to the Combination based onexpiration of these NOLs, the closing stock pricemajority of Angie's List common stock on the NASDAQ on September 29, 2017 of $12.46 per share; (ii) the cash consideration of $1.9 million paid to holders of Angie's List common stock who elected to receive $8.50 in cash per share;which expire between 2032 and (iii) the fair value of vested equity awards (including the pro rata2037, and a portion of unvested awards attributablewhich never expire, to pre-combination services) outstanding under Angie's List stock plans on September 29, 2017. Each stock option to purchase shares of Angie's List common stock that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an option to purchase (i) that number of Class A shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List option immediately prior to the effective time of the Combination, (ii) at a per-share exercise price equal to the exercise price per share of Angie's List common stock at which such Angie's List option was exercisable immediately prior to the effective time of the Combination. Each award of Angie's List restricted stock units that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an ANGI Homeservices restricted stock unit award with respect to a number of Class A
fully realize this deferred tax asset.
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List restricted stock unit award immediately prior to the effective time of the Combination.
The table below summarizes the purchase price:
|
| | | |
| | Angie's List |
| | (In thousands) |
| Class A common stock | $ | 763,684 |
|
| Cash consideration for holders who elected to receive $8.50 in cash per share of Angie's List common stock | 1,913 |
|
| Fair value of vested and pro rata portion of unvested stock options attributable to pre-combination services | 11,749 |
|
| Fair value of the pro rata portion of unvested restricted stock units attributable to pre-combination services | 4,038 |
|
| Total purchase price | $ | 781,384 |
|
The financial results of Angie's List are included in the Company's consolidated and combined financial statements, within the North America segment, beginning September 29, 2017. For both the three and nine months ended September 30, 2017, the Company included $0.7 million of revenue and $19.5 million of net losses, respectively, in its consolidated and combined statement of operations related to Angie's List. The Company is in the process of completing its determination of the fair values of assets acquired and liabilities assumed and the preliminary fair values are subject to revision. These fair values are expected to be finalized in the fourth quarter of 2017.
The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of combination:
|
| | | |
| | Angie's List |
| | (In thousands) |
| Cash and cash equivalents | $ | 44,270 |
|
| Other current assets | 10,641 |
|
| Property and equipment | 16,341 |
|
| Goodwill | 546,851 |
|
| Intangible assets | 317,300 |
|
| Total assets | 935,403 |
|
| Deferred revenue | (32,130 | ) |
| Other current liabilities | (46,106 | ) |
| Long-term debt - related party | (61,498 | ) |
| Deferred income taxes | (12,933 | ) |
| Other long-term liabilities | (1,352 | ) |
| Net assets acquired | $ | 781,384 |
|
The purchase price was based on the expected financial performance of Angie's List, not on the value of the net identifiable assets at the time of combination. This resulted in a significant portion of the purchase price being attributed to goodwill because Angie's List is complementary and synergistic to the other North America businesses of ANGI Homeservices.
The preliminary estimated fair values of the identifiable intangible assets acquired at the date of combination are as follows:
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| | | | | |
| | Angie's List |
| | (In thousands) | | Weighted-average useful life (years) |
| Indefinite-lived trade names and trademarks | $ | 137,000 |
| | Indefinite |
| Service providers | 90,500 |
| | 3 |
| Developed technology | 63,900 |
| | 6 |
| Memberships | 15,900 |
| | 3 |
| User base | 10,000 |
| | 1 |
| Total identifiable intangible assets acquired | $ | 317,300 |
| | |
Other current assets, current liabilities and other long-term liabilities of Angie's List were reviewed and adjusted to their fair values at the date of combination, as necessary. The fair value of deferred revenue was determined using an income approach that utilized a cost to fulfill analysis. The fair values of trade names and trademarks were determined using an income approach that utilized the relief from royalty methodology. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The fair values of the service providers and memberships were determined using an income approach that utilized the excess earnings methodology. The valuations of deferred revenue and intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows, cost and profit margins related to deferred revenue and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
HomeStars Acquisition
The Company acquired a 90% voting interest in HomeStars Inc. ("HomeStars"), a leading home services platform in Canada, on February 8, 2017. The purchase price for HomeStars was $16.6 CAD million (or $12.7 million) in cash and is net of a $0.3 CAD million (or $0.2 million) working capital adjustment paid in full to the Company in the third quarter of 2017. In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 10% noncontrolling interest in HomeStars, which totaled $1.9 CAD million (or $1.4 million). The determination of the fair value of noncontrolling interest was calculated using the implied value of 100% of the enterprise value of the business using the purchase price.
The financial results of HomeStars are included in the Company's consolidated and combined financial statements, within the North America segment, beginning February 8, 2017. For the three and nine months ended September 30, 2017, the Company included $2.0 million and $4.2 million of revenue, respectively, and less than $0.1 million and $1.0 million of net losses, respectively, in its consolidated and combined statement of operations related to HomeStars.
The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
|
| | | |
| | HomeStars |
| | (In thousands) |
| Cash and cash equivalents | $ | 181 |
|
| Other current assets | 165 |
|
| Goodwill | 9,841 |
|
| Intangible assets | 6,414 |
|
| Total assets | 16,601 |
|
| Current liabilities | (649 | ) |
| Other long-term liabilities | (1,873 | ) |
| Net assets acquired | $ | 14,079 |
|
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The purchase price was based on the expected financial performance of HomeStars, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill because HomeStars is complementary and synergistic to the other North America businesses of ANGI Homeservices.
The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:
|
| | | | | |
| | HomeStars |
| | (In thousands) | | Weighted-average useful life (years) |
| Indefinite-lived trade name | $ | 2,358 |
| | Indefinite |
| Contractor relationships | 2,435 |
| | 2 |
| Developed technology | 1,522 |
| | 2 |
| User base | 99 |
| | 1 |
| Total identifiable intangible assets acquired | $ | 6,414 |
| | |
Other current assets, current liabilities and other long-term liabilities of HomeStars were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of the trade name and contractor relationships were determined using variations of the income approach; specifically, in respective order, the relief from royalty and excess earnings methodologies. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
MyBuilder Acquisition
The Company acquired a 75% voting interest in MyBuilder Limited ("MyBuilder"), a leading home services platform in the United Kingdom, on March 24, 2017. The purchase price was £32.6 million (or $40.7 million) in cash and includes a £0.6 million (or $0.8 million) working capital adjustment paid in full by the Company in the third quarter of 2017. In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 25% noncontrolling interest in MyBuilder, which totaled £10.7 million (or $13.3 million). The determination of the fair value of noncontrolling interest was calculated using the implied value of 100% of the enterprise value of the business using the purchase price.
The financial results of MyBuilder are included in the Company's consolidated and combined financial statements, within the Europe segment, beginning April 1, 2017. For the three and nine months ended September 30, 2017, the Company included $2.7 million and $5.4 million of revenue, respectively, and $0.7 million and $1.0 million of net losses, respectively, in its consolidated and combined statement of operations related to MyBuilder.
The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| | | |
| | MyBuilder |
| | (In thousands) |
| Cash and cash equivalents | $ | 6,004 |
|
| Other current assets | 344 |
|
| Goodwill | 38,521 |
|
| Intangible assets | 13,490 |
|
| Total assets | 58,359 |
|
| Current liabilities | (2,065 | ) |
| Other long-term liabilities | (2,296 | ) |
| Net assets acquired | $ | 53,998 |
|
The purchase price was based on the expected financial performance of MyBuilder, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill because MyBuilder is complementary and synergistic to the other European businesses of ANGI Homeservices.
The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:
|
| | | | | |
| | MyBuilder |
| | (In thousands) | | Weighted-average useful life (years) |
| Indefinite-lived trade name | $ | 6,245 |
| | Indefinite |
| Contractor relationships | 4,122 |
| | 2 |
| Developed technology | 1,499 |
| | 2 |
| User base | 1,624 |
| | 1 |
| Total identifiable intangible assets acquired | $ | 13,490 |
| | |
Other current assets, current liabilities and other long-term liabilities of MyBuilder were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of the trade name and contractor relationships were determined using variations of the income approach; specifically, in respective order, the relief from royalty and excess earnings methodologies. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
MyHammer Acquisition
On November 3, 2016, the Company acquired a 70% voting interest in MyHammer Holding AG ("MyHammer"), the leading home services marketplace in Germany. The purchase price was €17.7 million (or $19.7 million). In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 30% noncontrolling interest in MyHammer, which totaled €9.4 million (or $10.4 million). The determination of the fair value of noncontrolling interest was calculated using the MyHammer share price on the acquisition date.
The financial results of MyHammer are included in the Company's consolidated and combined financial statements, within the Europe segment, with effect from the date of acquisition. For the three and nine months ended September 30, 2017, the Company included $3.3 million and $9.2 million of revenue, respectively, and $0.2 million and $0.6 million of net losses, respectively, in its consolidated and combined statement of operations related to MyHammer.
The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| | | |
| | MyHammer |
| | (In thousands) |
| Cash and cash equivalents | $ | 4,041 |
|
| Other current assets | 790 |
|
| Goodwill | 22,277 |
|
| Intangible assets | 8,107 |
|
| Total assets | 35,215 |
|
| Current liabilities | (2,642 | ) |
| Other long-term liabilities | (2,447 | ) |
| Net assets acquired | $ | 30,126 |
|
The purchase price was based on the expected financial performance of MyHammer, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill because MyHammer is complementary and synergistic to the other European businesses of ANGI Homeservices.
The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:
|
| | | | | |
| | MyHammer |
| | (In thousands) | | Weighted-average useful life (years) |
| Indefinite-lived trade name | $ | 4,553 |
| | Indefinite |
| Contractor relationships | 1,444 |
| | 4 |
| Developed technology | 1,222 |
| | 3 |
| User base | 888 |
| | 1 |
| Total identifiable intangible assets acquired | $ | 8,107 |
| | |
Other current assets, current liabilities and other long-term liabilities of MyHammer were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of the trade name and contractor relationships were determined using variations of the income approach; specifically, in respective order, the relief from royalty and excess earnings methodologies. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.
Pro forma financial information
The unaudited pro forma financial information in the table below presents the combined results of the Company and Angie's List, HomeStars, MyBuilder and MyHammer as if these acquisitions had occurred on January 1, 2016. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisitions actually occurred on January 1, 2016. For the three and nine months ended September 30, 2017, pro forma adjustments include (i) reductions in stock-based compensation expense of $85.1 million and $52.9 million, respectively, and transaction related costs of $22.1 million and $26.8 million, respectively, because they are one-time in nature and will not have a continuing impact on operations; and (ii) an increase in amortization of intangibles of $11.3 million and $34.4 million, respectively. The stock-based compensation expense is primarily related to the modification of previously issued HomeAdvisor vested equity awards, which were converted into ANGI Homeservices' equity awards, and the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination. The transaction related costs include severance and retention costs of $12.0 million related to the Combination. For the three and nine months ended September 30, 2016, pro forma adjustments include a reduction in revenue of $5.1 million and $32.3 million, respectively, due to the write-off
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
of deferred revenue at the date of acquisition as well as increases in stock-based compensation expense of $19.7 million and $51.6 million, respectively, and amortization of intangibles of $16.0 million and $48.3 million, respectively.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In thousands, except per share data) |
| Revenue | $ | 251,995 |
| | $ | 214,212 |
| | $ | 731,920 |
| | $ | 607,802 |
|
| Net loss attributable to ANGI Homeservices Inc. shareholders | $ | (7,172 | ) | | $ | (25,159 | ) | | $ | (2,178 | ) | | $ | (68,345 | ) |
| Basic and diluted loss per share attributable to ANGI Homeservices Inc. shareholders | $ | (0.02 | ) | | $ | (0.06 | ) | | $ | (0.01 | ) | | $ | (0.16 | ) |
NOTE 4—GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets, net are as follows:
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | (In thousands) |
| Goodwill | $ | 774,191 |
| | $ | 170,990 |
|
| Intangible assets with indefinite lives | 151,735 |
| | 4,884 |
|
| Intangible assets with definite lives, net | 191,658 |
| | 5,908 |
|
| Total goodwill and intangible assets, net | $ | 1,117,584 |
| | $ | 181,782 |
|
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the nine months ended September 30, 2017:
|
| | | | | | | | | | | | | | | | | | | |
| | Balance at
December 31,
2016 | | Additions | | Deductions | | Foreign
exchange
translation | | Balance at September 30,
2017 |
| | (In thousands) |
| North America | $ | 140,930 |
| | $ | 556,692 |
| | $ | — |
| | $ | 640 |
| | $ | 698,262 |
|
| Europe | 30,060 |
| | 38,643 |
| | — |
| | 7,226 |
| | 75,929 |
|
| Total goodwill | $ | 170,990 |
| | $ | 595,335 |
| | $ | — |
| | $ | 7,866 |
| | $ | 774,191 |
|
Additions relate to the acquisitions of Angie's List and HomeStars (included in the North America segment) and MyBuilder (included in the Europe segment).
The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2016:
|
| | | | | | | | | | | | | | | | | | | |
| | Balance at
December 31,
2015 | | Additions | | (Deductions) | | Foreign
exchange
translation | | Balance at
December 31,
2016 |
| | (In thousands) |
| North America | $ | 140,930 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 140,930 |
|
| Europe | 9,700 |
| | 21,985 |
| | — |
| | (1,625 | ) | | 30,060 |
|
| Total goodwill | $ | 150,630 |
| | $ | 21,985 |
| | $ | — |
| | $ | (1,625 | ) | | $ | 170,990 |
|
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Additions relate to the acquisition of MyHammer (included in the Europe segment).
Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. At September 30, 2017 and December 31, 2016, intangible assets with definite lives are as follows:
|
| | | | | | | | | | | | | |
| | September 30, 2017 |
| | Gross
carrying
amount | | Accumulated
amortization | | Net | | Weighted-average useful life
(years) |
| | (Dollars in thousands) |
| Contractor and service provider relationships | $ | 99,628 |
| | $ | (2,989 | ) | | $ | 96,639 |
| | 3.0 |
| Technology | 78,761 |
| | (10,714 | ) | | 68,047 |
| | 5.6 |
| Memberships | 15,900 |
| | (15 | ) | | 15,885 |
| | 3.0 |
| Customer lists and user base | 13,911 |
| | (2,973 | ) | | 10,938 |
| | 1.1 |
| Trade names | 5,612 |
| | (5,463 | ) | | 149 |
| | 3.1 |
| Total | $ | 213,812 |
| | $ | (22,154 | ) | | $ | 191,658 |
| | 3.8 |
|
| | | | | | | | | | | | | |
| | December 31, 2016 |
| | Gross
carrying
amount | | Accumulated
amortization | | Net | | Weighted-average
useful life
(years) |
| | (Dollars in thousands) |
| Contractor relationships | $ | 1,830 |
| | $ | (495 | ) | | $ | 1,335 |
| | 4.0 |
| Technology | 11,377 |
| | (7,834 | ) | | 3,543 |
| | 4.3 |
| Customer lists and user base | 4,136 |
| | (3,432 | ) | | 704 |
| | 1.8 |
| Trade names | 5,260 |
| | (4,934 | ) | | 326 |
| | 2.9 |
| Total | $ | 22,603 |
| | $ | (16,695 | ) | | $ | 5,908 |
| | 3.5 |
At September 30, 2017, amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:
|
| | | | |
| Year Ending September 30, | (In thousands) |
| 2018 | $ | 64,155 |
|
| 2019 | 49,101 |
|
| 2020 | 46,446 |
|
| 2021 | 10,685 |
|
| 2022 | 10,650 |
|
| Thereafter | 10,621 |
|
| Total | $ | 191,658 |
|
NOTE 5—FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS
The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
Level 1: Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Level 2: Other inputs, which are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.
Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.
The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | Quoted market
prices in active
markets for
identical assets
(level 1) | | Significant
other
observable
inputs
(level 2) | | Significant
unobservable
inputs
(level 3) | | Total
fair value
measurements |
| | (In thousands) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 1,670 |
| | $ | — |
| | $ | — |
| | $ | 1,670 |
|
| Treasury discount notes | 1,199 |
| | — |
| | — |
| | 1,199 |
|
| Certificates of deposit | — |
| | 6,199 |
| | — |
| | 6,199 |
|
| Total | $ | 2,869 |
| | $ | 6,199 |
| | $ | — |
| | $ | 9,068 |
|
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Quoted market prices in active markets for identical assets
(level 1) | | Significant
other
observable
inputs
(level 2) | | Significant
unobservable
inputs
(level 3) | | Total
fair value
measurements |
| | (In thousands) |
| Assets: | | | | | | | |
| Cash equivalents: | | | | | | | |
| Money market funds | $ | 28,064 |
| | $ | — |
| | $ | — |
| | $ | 28,064 |
|
| Total | $ | 28,064 |
| | $ | — |
| | $ | — |
| | $ | 28,064 |
|
Assets measured at fair value on a nonrecurring basis
The Company’s non-financial assets, such as goodwill, intangible assets and property and equipment are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.
Financial instruments measured at fair value only for disclosure purposes
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Carrying
value | | Fair
value | | Carrying
value | | Fair
value |
| | (In thousands) |
| Current portion of long-term debt—related party | $ | — |
| | $ | — |
| | $ | (2,838 | ) | | $ | (2,776 | ) |
| Long-term debt—related party, net of current portion | (79,504 | ) | | (79,611 | ) | | (47,000 | ) | | (46,324 | ) |
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The fair value of the Company’s long-term debt—related party, including current portion, is based on Level 3 inputs and is estimated by discounting the future cash flows based on current market conditions.
NOTE 6—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables present the components of accumulated other comprehensive income (loss):
|
| | | | | | | |
| | Three Months Ended September 30, 2017 |
| | Foreign
currency
translation
adjustment | | Accumulated
other
comprehensive
(loss) income |
| | (In thousands) |
| Balance at July 1 | $ | (230 | ) | | $ | (230 | ) |
| Other comprehensive income | 3,578 |
| | 3,578 |
|
| Balance at September 30 | $ | 3,348 |
| | $ | 3,348 |
|
| | | | |
| | Three Months Ended September 30, 2016 |
| | Foreign
currency
translation
adjustment | | Accumulated
other
comprehensive
(loss) income |
| | (In thousands) |
| Balance at July 1 | $ | (486 | ) | | $ | (486 | ) |
| Other comprehensive income | 32 |
| | 32 |
|
| Balance at September 30 | $ | (454 | ) | | $ | (454 | ) |
|
| | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | Foreign
currency
translation
adjustment | | Accumulated
other
comprehensive
(loss) income |
| | (In thousands) |
| Balance at January 1 | $ | (1,721 | ) | | $ | (1,721 | ) |
| Other comprehensive income | 5,069 |
| | 5,069 |
|
| Balance at September 30 | $ | 3,348 |
| | $ | 3,348 |
|
| | | | |
| | Nine Months Ended September 30, 2016 |
| | Foreign
currency
translation
adjustment | | Accumulated
other
comprehensive
(loss) income |
| | (In thousands) |
| Balance at January 1 | $ | (1,064 | ) | | $ | (1,064 | ) |
| Other comprehensive income | 610 |
| | 610 |
|
| Balance at September 30 | $ | (454 | ) | | $ | (454 | ) |
At September 30, 2017 and 2016, there was no tax benefit or provision on the accumulated other comprehensive income (loss).
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 7—(LOSS) EARNINGSLOSS PER SHARE
The following table sets forth the computation of basic and diluted (loss) earningsloss per share attributable to ANGI HomeservicesAngi Inc. Class A and Class B Common Stock shareholders:
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | |
| Net (loss) earnings | $ | (72,158 | ) | | $ | (72,158 | ) | | $ | 4,468 |
| | $ | 4,468 |
|
| Net loss attributable to noncontrolling interests | 397 |
| | 397 |
| | 607 |
| | 607 |
|
| Net (loss) earnings attributable to ANGI Homeservices Inc. shareholders | $ | (71,761 | ) | | $ | (71,761 | ) | | $ | 5,075 |
| | $ | 5,075 |
|
| | | | | | | | |
| Denominator: | | | | | | | |
| Weighted average basic shares outstanding | 415,420 |
| | 415,420 |
| | 414,754 |
| | 414,754 |
|
Dilutive securities including stock appreciation rights, stock options, RSUs and subsidiary denominated equity awards (a) | — |
| | — |
| | — |
| | — |
|
Denominator for earnings per share—weighted average shares (b) | 415,420 |
| | 415,420 |
| | 414,754 |
| | 414,754 |
|
| | | | | | | | |
| (Loss) earnings per share attributable to ANGI Homeservices Inc. shareholders: | | | | |
| (Loss) earnings per share | $ | (0.17 | ) | | $ | (0.17 | ) | | $ | 0.01 |
| | $ | 0.01 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2023 | | 2022 |
| | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | |
| Net loss | $ | (5,287) | | | $ | (5,287) | | | $ | (17,439) | | | $ | (17,439) | |
| Net loss attributable to noncontrolling interests | (69) | | | (69) | | | (40) | | | (40) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net loss attributable to Angi Inc. Class A and Class B Common Stock shareholders | $ | (5,356) | | | $ | (5,356) | | | $ | (17,479) | | | $ | (17,479) | |
| | | | | | | |
| Denominator: | | | | | | | |
| Weighted average basic Class A and Class B common stock shares outstanding | 506,332 | | | 506,332 | | | 503,202 | | | 503,202 | |
Dilutive securities (a) (b) | — | | | — | | | — | | | — | |
| Denominator for loss per share—weighted average shares | 506,332 | | | 506,332 | | | 503,202 | | | 503,202 | |
| | | | | | | |
| Loss per share attributable to Angi Inc. Class A and Class B Common Stock shareholders: | |
| Loss per share | $ | (0.01) | | | $ | (0.01) | | | $ | (0.03) | | | $ | (0.03) | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2023 | | 2022 |
| | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | |
| Net loss | $ | (34,766) | | | $ | (34,766) | | | $ | (74,723) | | | $ | (74,723) | |
| Net loss attributable to noncontrolling interests | (614) | | | (614) | | | (379) | | | (379) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net loss attributable to Angi Inc. Class A and Class B Common Stock shareholders | $ | (35,380) | | | $ | (35,380) | | | $ | (75,102) | | | $ | (75,102) | |
| | | | | | | |
| Denominator: | | | | | | | |
| Weighted average basic Class A and Class B common stock shares outstanding | 505,822 | | | 505,822 | | | 502,558 | | | 502,558 | |
Dilutive securities (a) (b) | — | | | — | | | — | | | — | |
| Denominator for loss per share—weighted average shares | 505,822 | | | 505,822 | | | 502,558 | | | 502,558 | |
| | | | | | | |
| Loss per share attributable to Angi Inc. Class A and Class B Common Stock shareholders: | |
| Loss per share | $ | (0.07) | | | $ | (0.07) | | | $ | (0.15) | | | $ | (0.15) | |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | |
| Net (loss) earnings | $ | (46,296 | ) | | $ | (46,296 | ) | | $ | 8,575 |
| | $ | 8,575 |
|
| Net loss attributable to noncontrolling interests | 1,402 |
| | 1,402 |
| | 1,833 |
| | 1,833 |
|
| Net (loss) earnings attributable to ANGI Homeservices Inc. shareholders | $ | (44,894 | ) | | $ | (44,894 | ) | | $ | 10,408 |
| | $ | 10,408 |
|
| | | | | | | | |
| Denominator: | | | | | | | |
| Weighted average basic shares outstanding | 414,978 |
| | 414,978 |
| | 414,754 |
| | 414,754 |
|
Dilutive securities including stock appreciation rights, stock options, RSUs and subsidiary denominated equity awards (a) | — |
| | — |
| | — |
| | — |
|
Denominator for earnings per share—weighted average shares (b) | 414,978 |
| | 414,978 |
| | 414,754 |
| | 414,754 |
|
| | | | | | | | |
| (Loss) earnings per share attributable to ANGI Homeservices Inc. shareholders: | | | | |
| (Loss) earnings per share | $ | (0.11 | ) | | $ | (0.11 | ) | | $ | 0.03 |
| | $ | 0.03 |
|
________________________
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| |
(a)
| For the three and nine months ended September 30, 2017, the Company had a loss from operations and as a result, approximately 58.3 million potentially dilutive securities were excluded from computing dilutive earnings per share because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute diluted earnings per share amounts. |
| |
(b)
| The Company computed basic and diluted earnings per share for the three and nine months ended September 30, 2016 using the shares issued to IAC for the contribution of the HomeAdvisor business. |
NOTE 8—SEGMENT INFORMATION
The Company has two operating segments, North America(a) If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options and Europe, which are also the Company’s reportable segments. Each segment manager reports to the Company’s chief operating decision maker. The chief operating decision maker allocates resourcessubsidiary denominated equity and assesses performance at the segment level.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In thousands) |
| Revenue: | | | | | | | |
| North America | $ | 167,104 |
| | $ | 125,226 |
| | $ | 470,667 |
| | $ | 348,287 |
|
| Europe | 14,613 |
| | 8,334 |
| | 42,506 |
| | 26,935 |
|
| Total | $ | 181,717 |
| | $ | 133,560 |
| | $ | 513,173 |
| | $ | 375,222 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In thousands) |
| Operating (Loss) Income: | | | | | | | |
| North America | $ | (107,687 | ) | | $ | 11,573 |
| | $ | (99,479 | ) | | $ | 23,202 |
|
| Europe | (4,818 | ) | | (2,730 | ) | | (14,474 | ) | | (5,360 | ) |
| Total | $ | (112,505 | ) | | $ | 8,843 |
| | $ | (113,953 | ) | | $ | 17,842 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In thousands) |
Adjusted EBITDA(a): | | | | | | | |
| North America | $ | 60 |
| | $ | 16,119 |
| | $ | 31,356 |
| | $ | 35,990 |
|
| Europe | (2,326 | ) | | (2,133 | ) | | (8,439 | ) | | (3,368 | ) |
| Total | $ | (2,266 | ) | | $ | 13,986 |
| | $ | 22,917 |
| | $ | 32,622 |
|
___________________________
| |
(a)
| The Company’s primary financial measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of amortization of intangible assets and impairments of goodwill and intangible assets, if applicable. The Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and long-term related party debt is serviced. Adjusted EBITDA has certain limitations in that it does not take into account the impact to ANGI Homeservices Inc.'s statement of operations of certain expenses. |
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | (In thousands) |
| Capital expenditures: | | | |
| North America | $ | 14,472 |
| | $ | 12,238 |
|
| Europe | 1,806 |
| | 1,504 |
|
| Total | $ | 16,278 |
| | $ | 13,742 |
|
The following tables present revenue disaggregated by service for the Company's reportable segments:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | North America | | Europe | | Total | | North America | | Europe | | Total |
| | (In thousands) |
Consumer connection revenue (b) | $ | 141,055 |
| | $ | 10,001 |
| | $ | 151,056 |
| | $ | 104,427 |
| | $ | 6,447 |
| | $ | 110,874 |
|
| Membership subscription revenue | 17,826 |
| | 4,320 |
| | 22,146 |
| | 12,379 |
| | 1,704 |
| | 14,083 |
|
| Other revenue | 8,223 |
| | 292 |
| | 8,515 |
| | 8,420 |
| | 183 |
| | 8,603 |
|
| Total | $ | 167,104 |
| | $ | 14,613 |
| | $ | 181,717 |
| | $ | 125,226 |
| | $ | 8,334 |
| | $ | 133,560 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | North America | | Europe | | Total | | North America | | Europe | | Total |
| | (In thousands) |
Consumer connection revenue (b) | $ | 398,218 |
| | $ | 29,636 |
| | $ | 427,854 |
| | $ | 289,952 |
| | $ | 21,010 |
| | $ | 310,962 |
|
| Membership subscription revenue | 48,947 |
| | 12,198 |
| | 61,145 |
| | 34,774 |
| | 5,234 |
| | 40,008 |
|
| Other revenue | 23,502 |
| | 672 |
| | 24,174 |
| | 23,561 |
| | 691 |
| | 24,252 |
|
| Total | $ | 470,667 |
| | $ | 42,506 |
| | $ | 513,173 |
| | $ | 348,287 |
| | $ | 26,935 |
| | $ | 375,222 |
|
___________________________
| |
(b)
| Fees paid by services professionals for consumer matches. |
Geographic information about revenue and long-lived assets is presented below. Revenue by geography is based on where the customer is located.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In thousands) |
| Revenue | | | | | | | |
| United States | $ | 164,999 |
| | $ | 125,124 |
| | $ | 466,134 |
| | $ | 347,934 |
|
| All other countries | 16,718 |
| | 8,436 |
| | 47,039 |
| | 27,288 |
|
| Total | $ | 181,717 |
| | $ | 133,560 |
| | $ | 513,173 |
| | $ | 375,222 |
|
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The United States is the only country whose revenue is greater than 10%vesting of total revenue of the Company forrestricted stock units (“RSUs”). For the three and nine months ended September 30, 20172023 and 2016.2022, 27.4 million and 22.9 million of potentially dilutive securities, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute all earnings per share amounts.
(b) Market-based awards and performance-based stock units (“PSUs”) are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs is dilutive for the respective reporting periods. For the three and nine months ended September 30, 2023 and 2022, 0.6 million and 0.9 million underlying market-based awards and PSUs, respectively, were excluded from the calculation of diluted earnings per share because the market or performance condition(s) had not been met.
NOTE 8—CONSOLIDATED FINANCIAL STATEMENT DETAILS
|
| | | | | | | |
| | September 30, | | December 31, |
| | 2017 | | 2016 |
| | (In thousands) |
| Long-lived assets (excluding goodwill and intangible assets) | | | |
| United States | $ | 44,027 |
| | $ | 21,775 |
|
| All other countries | 3,608 |
| | 1,870 |
|
| Total | $ | 47,635 |
| | $ | 23,645 |
|
Cash and Cash Equivalents and Restricted Cash
The following tables reconcile operating (loss) incometable provides a reconciliation of cash and cash equivalents and restricted cash reported within the accompanying balance sheet to the total amounts shown in the accompanying statement of cash flows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 | | September 30, 2022 | | December 31, 2021 | | | | |
| (In thousands) |
| Cash and cash equivalents | $ | 366,825 | | | $ | 321,155 | | | $ | 328,795 | | | $ | 428,136 | | | | | |
| Restricted cash included in other current assets | — | | | 107 | | | 101 | | | 156 | | | | | |
| Restricted cash included in other non-current assets | 371 | | | 874 | | | 840 | | | 1,193 | | | | | |
| Total cash and cash equivalents, and restricted cash as shown on the consolidated statement of cash flows | $ | 367,196 | | | $ | 322,136 | | | $ | 329,736 | | | $ | 429,485 | | | | | |
Restricted cash included in “Other non-current assets” in the accompanying consolidated balance sheet at September 30, 2023 primarily consisted of cash reserved to fund consumer claims.
Restricted cash included in “Other current assets” in the accompanying consolidated balance sheets at December 31, 2022 and September 30, 2022 primarily consisted of cash reserved to fund insurance claims.
Restricted cash included in “Other current assets” in the accompanying consolidated balance sheet at December 31, 2021 primarily consisted of funds collected from service providers for disputed payments which were not settled as of the Company’s reportable segmentsperiod end, in addition to cash reserved to fund insurance claims.
Restricted cash included in “Other non-current assets” in the accompanying consolidated balance sheets for all periods presented above except September 30, 2023primarily consisted of deposits related to leases. Restricted cash included in “Other non-current assets” in the accompanying consolidated balance sheet at September 30, 2022 and net (loss) earnings attributableDecember 31, 2021 also included cash held related to ANGI Homeservices Inc. shareholders to Adjusted EBITDA:a check endorsement guarantee for Roofing.
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| | Operating
loss | | Stock-based
compensation | | Depreciation | | Amortization
of intangibles | | Adjusted EBITDA |
| | (In thousands) |
| North America | $ | (107,687 | ) | | $ | 103,565 |
| | $ | 3,085 |
| | $ | 1,097 |
| | $ | 60 |
|
| Europe | (4,818 | ) | | 415 |
| | 406 |
| | 1,671 |
| | (2,326 | ) |
| Total | (112,505 | ) | | $ | 103,980 |
| | $ | 3,491 |
| | $ | 2,768 |
| | $ | (2,266 | ) |
| Interest expense—related party | (1,864 | ) | | | | | | | | |
| Other income, net | 1,364 |
| | | | | | | | |
| Loss before income taxes | (113,005 | ) | | | | | | | | |
| Income tax benefit | 40,847 |
| | | | | | | | |
| Net loss | (72,158 | ) | | | | | | | | |
| Net loss attributable to noncontrolling interests | 397 |
| | | | | | | | |
| Net loss attributable to ANGI Homeservices Inc. shareholders | $ | (71,761 | ) | | | | | | | | |
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Credit Losses
The following table presents the changes in the allowance for credit losses for the nine months ended September 30, 2023 and 2022:
| | | | | | | | | | | | | |
| 2023 | | 2022 | | |
| (In thousands) |
| Balance at January 1 | $ | 43,160 | | | $ | 33,652 | | | |
| Current period provision for credit losses | 67,288 | | | 82,216 | | | |
| Write-offs charged against the allowance for credit losses | (78,680) | | | (72,212) | | | |
| Recoveries collected | 4,352 | | | 4,136 | | | |
| Balance at September 30 | $ | 36,120 | | | $ | 47,792 | | | |
Accumulated Amortization and Depreciation
The following table provides the accumulated amortization and depreciation within the consolidated balance sheet:
| | | | | | | | | | | | | | |
| Asset Category | | September 30, 2023 | | December 31, 2022 |
| | | (In thousands) |
| Right-of-use assets (included in “other non-current assets”) | | $ | 71,436 | | | $ | 61,818 | |
| Capitalized software, leasehold improvements, and equipment | | $ | 194,460 | | | $ | 146,608 | |
| Intangible assets | | $ | 179,362 | | | $ | 172,341 | |
Other income (expense), net
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| | Operating
income
(loss) | | Stock-based
compensation | | Depreciation | | Amortization
of intangibles | | Adjusted EBITDA |
| | (In thousands) |
| North America | $ | 11,573 |
| | $ | 1,977 |
| | $ | 1,944 |
| | $ | 625 |
| | $ | 16,119 |
|
| Europe | (2,730 | ) | | 414 |
| | 82 |
| | 101 |
| | (2,133 | ) |
| Total | 8,843 |
| | $ | 2,391 |
| | $ | 2,026 |
| | $ | 726 |
| | $ | 13,986 |
|
| Interest expense—related party | (156 | ) | | | | | | | | |
| Other income, net | 195 |
| | | | | | | | |
| Earnings before income taxes | 8,882 |
| | | | | | | | |
| Income tax provision | (4,414 | ) | | | | | | | | |
| Net earnings | 4,468 |
| | | | | | | | |
| Net loss attributable to noncontrolling interests | 607 |
| | | | | | | | |
| Net earnings attributable to ANGI Homeservices Inc. shareholders | $ | 5,075 |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | | | | | | | |
| Interest income | $ | 4,871 | | | $ | 1,556 | | | $ | 12,450 | | | $ | 2,135 | |
| | | | | | | |
| Foreign exchange (losses) gains | (993) | | | (3,852) | | | 433 | | | (6,572) | |
| | | | | | | |
| | | | | | | |
| Other | 13 | | | — | | | 7 | | | — | |
| Other income (expense), net | $ | 3,891 | | | $ | (2,296) | | | $ | 12,890 | | | $ | (4,437) | |
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | Operating
loss | | Stock-based
compensation | | Depreciation | | Amortization
of intangibles | | Adjusted EBITDA |
| | (In thousands) |
| North America | $ | (99,479 | ) | | $ | 118,961 |
| | $ | 8,862 |
| | $ | 3,012 |
| | $ | 31,356 |
|
| Europe | (14,474 | ) | | 1,319 |
| | 843 |
| | 3,873 |
| | (8,439 | ) |
| Total | (113,953 | ) | | $ | 120,280 |
| | $ | 9,705 |
| | $ | 6,885 |
| | $ | 22,917 |
|
| Interest expense—related party | (5,538 | ) | | | | | | | | |
| Other income, net | 2,100 |
| | | | | | | | |
| Loss before income taxes | (117,391 | ) | | | | | | | | |
| Income tax benefit | 71,095 |
| | | | | | | | |
| Net loss | (46,296 | ) | | | | | | | | |
| Net loss attributable to noncontrolling interests | 1,402 |
| | | | | | | | |
| Net loss attributable to ANGI Homeservices Inc. shareholders | $ | (44,894 | ) | | | | | | | | |
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | Operating
income
(loss) | | Stock-based
compensation | | Depreciation | | Amortization
of intangibles | | Adjusted EBITDA |
| | (In thousands) |
| North America | $ | 23,202 |
| | $ | 5,351 |
| | $ | 5,469 |
| | $ | 1,968 |
| | $ | 35,990 |
|
| Europe | (5,360 | ) | | 1,334 |
| | 355 |
| | 303 |
| | (3,368 | ) |
| Total | 17,842 |
| | $ | 6,685 |
| | $ | 5,824 |
| | $ | 2,271 |
| | $ | 32,622 |
|
| Interest expense—related party | (240 | ) | | | | | | | | |
| Other expense, net | (304 | ) | | | | | | | | |
| Earnings before income taxes | 17,298 |
| | | | | | | | |
| Income tax provision | (8,723 | ) | | | | | | | | |
| Net earnings | 8,575 |
| | | | | | | | |
| Net loss attributable to noncontrolling interests | 1,833 |
| | | | | | | | |
| Net earnings attributable to ANGI Homeservices Inc. shareholders | $ | 10,408 |
| | | | | | | | |
NOTE 9—CONTINGENCIES
In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reservesaccruals for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. The total accrual for legal matters is $5.3 million at September 30, 2023. Management has also identified certain other legal matters where we believeit believes an unfavorable outcome is not probable and, therefore, no reserveaccrual is established. Although management currently believes that resolving claims against us,the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. The Company also evaluates other contingent matters, including uncertain income tax positions and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company. See "“Note 2—6—Income Taxes"” for additional information related to uncertain income tax contingencies.positions. NOTE 10—RELATED PARTY TRANSACTIONS WITH IAC
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Allocation of CEO Compensation and Certain Expenses
Joseph Levin, CEO of IAC prior to the Combination
For periods prior to the Combination, the Company’s consolidated and combined statementChairman of operations includes allocationsAngi, was appointed CEO of general and administrative costs, including stock-based compensation expense, related to IAC’s accounting, treasury, legal, tax, corporate support and internal audit functions. These allocations were basedAngi on the HomeAdvisor business' revenue asOctober 10, 2022. As a percentage of IAC’s total revenue. Allocated general and administrative costs, inclusive of stock-based compensation expense, were $1.7 million and $4.8 millionresult, for the three and nine months ended September 30, 2017, respectively, and $1.12023, IAC allocated $2.6 million and $3.2$7.2 million, forrespectively, in costs to Angi (including salary, benefits, stock-based compensation and costs related to the three and nine months ended September 30, 2016, respectively, and are included in “General and administrative expense” in the accompanying consolidated and combined statement of operations. It is not practicable to determine the actual expenses that would have been incurred for these services had the HomeAdvisor business operated as a standalone entity during the periods presented.CEO’s office). These costs were allocated from IAC based upon time spent on Angi by Mr. Levin. Management considers the allocation method to be reasonable. The allocated costs also include costs directly attributable to the Company that were initially paid for by IAC and billed by IAC to the Company.
The following table summarizesCombination and Related Agreements
Additionally, in connection with the componentstransaction resulting in the formation of the net (increase) decreaseCompany in IAC’s investment in HomeAdvisor prior2017, which is referred to as the contribution of the HomeAdvisor business to ANGI Homeservices:
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| | | | | | | |
| | September 30, |
| | 2017 | | 2016 |
| | (In thousands) |
| Cash transfers (from) to IAC related to its centrally managed U.S. treasury management function, acquisitions and cash expenses paid by IAC on behalf of HomeAdvisor, net | $ | (80,368 | ) | | $ | 21,094 |
|
| Taxes | 38,162 |
| | (1,948 | ) |
Interest income(a) | 656 |
| | 170 |
|
| Allocation of general and administrative expense | (4,789 | ) | | (3,173 | ) |
| Net (increase) decrease in IAC’s investment in HomeAdvisor | $ | (46,339 | ) | | $ | 16,143 |
|
| |
(a)
| Interest expense on long-term debt—related party is not included. |
The related party notes described below were settled in full immediately prior to the Combination.
On October 14, 2016, the Company, through a foreign subsidiary, issued a promissory note due October 14, 2023 in the amount of $42.0 million to a foreign subsidiary of IAC that is not part of the HomeAdvisor business. The proceeds were used to finance the acquisition of MyHammer and refinance an $11.4 million loan that was previously outstanding. The promissory note bore interest at 11% per annum.
On March 20, 2017, the Company, through two foreign subsidiaries, issued promissory notes in the amount of £21.0 million due March 20, 2024 (“Note A”) and $15.5 million due March 20, 2047 (“Note B”), respectively, to two foreign subsidiaries of IAC that are not part of the HomeAdvisor business. The proceeds were used to finance the acquisition of MyBuilder. Note A and Note B bore interest at 6.5% and 7% per annum, respectively.
On February 7, 2017, the Company, through a foreign subsidiary, issued a promissory note due February 7, 2024 in the amount of £8.4 million to a foreign subsidiary of IAC that is not part of the HomeAdvisor business. The proceeds were used to finance the acquisition of HomeStars. The promissory note bore interest at 6.875% per annum.
On August 29, 2013, the Company, through a foreign subsidiary, issued a promissory note due August 29, 2018 in the amount of $5.0 million to a foreign subsidiary of IAC that is not part of the HomeAdvisor business. The proceeds were used to repay certain indebtedness. The promissory note bore interest at LIBOR plus 2.00%.
Interest expense related to the long-term debt is included in “Interest expense—related party” in the accompanying consolidated and combined statement of operations.
Guarantee of IAC Senior Notes and Revolving Credit Facility
Upon completion of the Combination, HomeAdvisor (US) and its wholly-owned domestic subsidiaries no longer guarantee any debt of IAC and the pledge of the stock of HomeAdvisor (US) and certain of its domestic and foreign entities that had secured the IAC revolving credit facility was released.
Intercompany Loans entered into in Connection with the Combination and Relationship with IAC following the Combination
On September 29, 2017, the Company“Combination,” Angi and IAC entered into two intercompany notes (collectively referred to as "Intercompany Notes") as follows: (i) a Payoff Intercompany Note, which provided the funds necessary to repay the outstanding balance under Angie's List's existing credit agreement, totaling approximately $61.5 million; and (ii) a Working Capital Intercompany Note, which provided ANGI Homeservices with $15 million for working capital purposes. These Intercompany Notes were repaid on November 1, 2017 with a portion of the proceeds from the Term Loan that were received on the same date. See "Note 12—Subsequent Event" for additional information.
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Additionally, immediately prior to the Combination, the Company, through a foreign subsidiary, sold a promissory note due December 31, 2019 in the amount of €2.4 million ($2.8 million at September 30, 2017) to a foreign subsidiary of IAC that is not part of the HomeAdvisor business.
In connection with the Combination, ANGI Homeservices and IAC entered into certain agreements to govern the relationship between them following the Combination. These agreements include: a contribution agreement; an investor rights agreement; a services agreement; a tax sharing agreement; and an employee matters agreement.
Contribution Agreement
The contribution agreement, sets forthwhich collectively govern the agreementsrelationship between IAC and Angi Inc.
The Company was charged by IAC $1.8 million and $4.8 million for the three and nine months ended September 30, 2023, respectively, and $0.8 million and $2.1 million for the three and nine months ended September 30, 2022 for services rendered pursuant to the services agreement. There were no outstanding payables pursuant to the services agreement at September 30, 2023 and $0.8 million in outstanding payables pursuant to the services agreement at December 31, 2022.
At September 30, 2023 and December 31, 2022, the Company regarding the principal transactions necessary forhad outstanding payables of $2.8 million and $1.4 million, respectively, due to IAC pursuant to separate the HomeAdvisor business from IAC's other businesses and cause the HomeAdvisor business to be transferred to ANGI Homeservices prior to the Combination, as well as governs certain aspects of our relationship with IAC following the Combination. Under the contribution agreement, the Company agrees to assume all of the assets and liabilities related to the HomeAdvisor business and agrees to indemnify IAC against any losses arising out of any breach by the Company of the contribution agreement or the other transaction related agreements described below. IAC also agrees to indemnify the Company against losses arising out of any breach by IAC of the contribution agreement or any of the other transaction related agreements described below.
Investor Rights Agreement
The investor rights agreement sets forth certain registration, anti-dilution and governance rights of IAC with respect to ANGI Homeservices, as well as certain governance rights for the benefit of ANGI Homeservices stockholders other than IAC, in each case following the Combination.
Services Agreement
The services agreement governs services that IAC provides to the Company including, among others: (i) assistance with certain legal, M&A, human resources, finance, risk management, internal audit and treasury functions, health and wellness, information security services, and insurance and tax affairs, including assistance with certain public company and unclaimed property reporting obligations; (ii) accounting, controllership and payroll processing services; (iii) investor relations services; (iv) tax compliance services; and (v) such other services as to which IAC and the Company may agree. The services agreement has an initial term of one year from the date of the Combination, and will automatically renew for additional one-year periods thereafter for so long as IAC continues to own a majority of the outstanding shares of the Company's common stock.
Tax Sharing Agreement
The tax sharing agreement governs the rights, responsibilities, and obligations of the Company and IAC with respect to tax liabilities and benefits, entitlements to refunds, preparation of tax returns, tax contests and other tax matters regarding U.S. federal, state, local and foreign income taxes. Under the tax sharing agreement, which are included in “Accrued expenses and other current liabilities,” in the accompanying consolidated balance sheet. There were no payments to or refunds from IAC pursuant to this agreement during the three and nine months ended September 30, 2023 and 2022.
Other Arrangements
Additionally, the Company is generally responsiblesubleases office space to IAC and requiredcharged rent pursuant to indemnifya lease agreement of less than $0.1 million and $0.6 million for the three and nine months ended September 30, 2023, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 30, 2022, respectively. IAC for: (i) all taxes imposed with respect to any consolidated, combined or unitary tax return of IAC or its subsidiaries that includes the Company or any of its subsidiaries to the extent attributablesubleases office space to the Company and charged rent pursuant to a lease agreement of $0.4 million and $1.0 million, respectively for both the three and nine months ended September 30, 2023 and 2022. At September 30, 2023, the Company has an outstanding receivable of $0.2 million due from IAC pursuant to the sublease agreements. This amount is included in “Other non-current assets” in the accompanying consolidated balance sheet. At December 31, 2022, there were no outstanding receivables or anypayables pursuant to the sublease agreements.
The Company incurred advertising expense of $1.5 million and $5.1 million for the three and nine months ended September 30, 2023, respectively, and $1.7 million and $5.2 million for the three and nine months ended September 30, 2022, respectively, related to advertising and audience targeted advertising purchased from another IAC owned business. At September 30, 2023 and December 31, 2022, there were related outstanding payables of $0.9 million and $1.1 million, respectively, included in “Accrued expenses and other current liabilities” in the accompanying consolidated balance sheet.
NOTE 11—SUBSEQUENT EVENTS
On November 1, 2023, Angi Inc. completed the sale of 100% of its subsidiaries, as determined underwholly-owned subsidiary Total Home Roofing, LLC (“THR”) to a non-public third-party. THR comprises the tax sharing agreement, and (ii) all taxes imposed with respect to anyentirety of the Company's or its subsidiaries’ consolidated, combined, unitary or separate tax returns.
Employee Matters Agreement
The employee matters agreement addresses certain compensation and benefit issuesRoofing segment. See “Note 5—Segment Information” for additional information related to the allocation of liabilities associated with: (i) employment or termination of employment, (ii) employee benefit plans and (iii) equity awards. Under the employee matters agreement, the Company's employees participate in IAC’s U.S. health and welfare plans, 401(k) plan and flexible benefits plan and the Company reimburses IAC for the costs of such participation. In the event IAC no longer retains shares representing at least 80% of the aggregate voting power of shares entitled to voteRoofing segment results included in the electionfinancial statements.
Subsequent to September 30, 2023, Angi Inc. management announced its intent to put in place a share repurchase plan with the intent of utilizing the Company’s Board of Directors, ANGI Homeservices will no longer participatefull 14.0 million shares remaining in IAC’s employee benefit plans, but will establish its own employee benefit plans that will be substantially similar to the plans sponsored by IAC prior to the Combination.
current stock repurchase authorization.
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The employee matters agreement also requires the Company to reimburse IAC for the cost of any IAC equity awards held by ANGI Homeservices’ employees and former employees, with IAC electing to receive payment either in cash or in the Company's Class B shares. With respect to former HomeAdvisor (US) stock appreciation rights that have been converted to Company stock appreciation rights and equity awards in the Company's subsidiaries, IAC may require those awards to be settled in either shares of IAC common stock or in Class A shares of the Company's common stock and, to the extent shares of IAC common stock are issued in settlement, the Company will reimburse IAC for the cost of those shares by issuing to IAC additional Class B shares of the Company's common stock.
Long-term debt—related party for periods prior and subsequent to the Combination
Long-term debt—related party
Long-term debt—related party consists of:
|
| | | | | | | |
| | September 30,
2017 | | December 31, 2016 |
| | (In thousands) |
| Long-term debt—related party | | | |
| Intercompany note due September 29, 2024 | $ | 61,498 |
| | $ | — |
|
| Intercompany note due September 29, 2024 | 15,000 |
| | — |
|
| Promissory note due October 14, 2023 | — |
| | 42,000 |
|
| Promissory note due August 29, 2018 | — |
| | 5,000 |
|
| Other | 3,006 |
| | 2,838 |
|
| Total long-term debt—related party | 79,504 |
| | 49,838 |
|
| Less: Current portion of long-term debt—related party | — |
| | 2,838 |
|
| Total long-term debt—related party, net of current portion | $ | 79,504 |
| | $ | 47,000 |
|
Long-term debt—related party maturities:
|
| | | |
| | (In thousands) |
| 2019 | $ | 3,006 |
|
| 2024 | 76,498 |
|
| Total long-term debt—related party, net of current portion | $ | 79,504 |
|
NOTE 11—CONSOLIDATED AND COMBINED FINANCIAL STATEMENT DETAILS
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | (In thousands) |
| Other current assets: | | | |
| Prepaid expenses | $ | 20,324 |
| | $ | 6,456 |
|
| Other | 3,062 |
| | 2,283 |
|
| Other current assets | $ | 23,386 |
| | $ | 8,739 |
|
ANGI HOMESERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | (In thousands) |
| Other non-current assets: | | | |
| Deferred income taxes | $ | 72,195 |
| | $ | 15,211 |
|
| Other | 723 |
| | 11,067 |
|
| Other non-current assets | $ | 72,918 |
| | $ | 26,278 |
|
NOTE 12—SUBSEQUENT EVENT
On November 1, 2017, ANGI Homeservices entered into a credit agreement which provides for a five-year term loan A facility of $275 million ("Term Loan"). The Term Loan is guaranteed by ANGI Homeservices' wholly-owned material domestic subsidiaries and is secured by substantially all assets of ANGI Homeservices and the guarantors, subject to certain exceptions. The Term Loan currently bears interest at LIBOR plus 200 basis points, which is subject to change based on ANGI Homeservices' consolidated net leverage ratio. Interest payments are due at least quarterly through the term of the loan. The Term Loan also requires quarterly amortization payments of 1.25% of the original principal amount thereof in the first three years, 2.5% in the fourth year and 3.75% thereafter. A portion of the proceeds of the loan were used to repay the Intercompany Notes outstanding to IAC and its subsidiaries and the remaining proceeds will be used for general corporate purposes. See "Note 10—Related Party Transactions with IAC" for further information on the Intercompany Notes outstanding between the Company and IAC.
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
General
Management Overview
ANGI HomeservicesAngi Inc. ("ANGI Homeservices,"(“Angi,” the "Company," "we," "our,"“Company,” “we,” “our,” or "us"“us”) is creating the world's largest digital marketplace for home services, connecting millions of homeowners across the globe withconnects quality home service professionals. ANGI Homeservices operates 10professionals with consumers across more than 500 different categories, from repairing and remodeling homes to cleaning and landscaping. Approximately 202,000 transacting service professionals actively sought consumer matches, completed jobs, or advertised work through Angi Inc. platforms during the three months ended September 30, 2023. Additionally, consumers turned to at least one of our brands in eight countries, including HomeAdvisor®, Angie's List, mHelpDesk, HomeStars (Canada), Travaux.com (France), MyHammer (Germany), MyBuilder (UK), Werkspot (Netherlands) and Instapro (Italy).to find a professional for approximately 25 million projects during the twelve months ended September 30, 2023.
The Company’s marketplaceCompany has four operating segments: (i) Ads and Leads; (ii) Services; (iii) Roofing; and (iv) International (consisting of businesses in Europe and Canada) and operates under multiple brands including Angi, HomeAdvisor, Handy, Total Home Roofing, and Angi Roofing.
Ads and Leads provides service professionals the capability to engage with potential customers, including quote and invoicing services, and provides consumers with tools and resources to allow homeowners tohelp them find local, pre-screened and customer-rated service professionals nationwide for home repair, maintenance and instantly book appointments online or through its award-winning HomeAdvisor mobile application. The Company’s marketplace also provides consumers with other home services-related resources, including access to average project costs using its HomeAdvisor True Cost Guide. Effective September 29, 2017, the Company also owns Angie's List, a nationwide marketplace for local services whereimprovement projects. Services consumers can research, hire, raterequest household services directly through the Angi platform and review providers of these services in markets located acrossAngi fulfills the continental United States. In addition to its market‑leading U.S. operations, ANGI Homeservices owns the leading home services online marketplaces in Canada (HomeStars), which was acquired on February 8, 2017, Germany (MyHammer), which was acquired on November 3, 2016, France (Travaux.com) and the Netherlands (Werkspot), as well as operations in Italy (Instapro) and the United Kingdom (MyBuilder), which was acquired on March 24, 2017. ANGI Homeservices also owns Felix, a pay-per-call advertising service, and mHelpDesk, a provider of cloud-based field service software for small to mid-size businesses.
As of September 30, 2017, the Company’s network of service professionals in the United States consisted of approximately 172,000 Marketplace Paying Service Professionals providing services in more than 500 categories ranging from simple home repairs to larger home remodeling projects in more than 400 discrete geographies. The Company generated approximately 13.9 million Marketplace Service Requests from homeowners in the United States during the nine months ended September 30, 2017. As of September 30, 2017, the Company also had 47,000 Angie's List service professionals under contract for advertising.
The Company has two operating segments: (i) North America, which includes HomeAdvisor's operations in the United States, Angie's List, mHelpDesk and HomeStars, and (ii) Europe, which includes Travaux.com, MyHammer, MyBuilder, Werkspot and Instapro.
The Company markets its services to homeowners through search engine marketing, television advertising and affiliate agreements with third parties. Pursuant to these affiliate agreements, third parties agree to advertise and promote on their websites HomeAdvisor’s services and those of service professionals that participate in the HomeAdvisor network, and in exchange HomeAdvisor agrees to pay these third parties a fixed fee when visitors from their websites click through to the HomeAdvisor website and submit a valid service request through the HomeAdvisor platform, use of independently established home services providers engaged in a trade, occupation and/or when visitors submit a valid service request on the affiliate websitebusinesses that customarily provides such services. The matching and the affiliate transmits the service request to HomeAdvisor, both on a cost‑per‑acquisition basis. The Company also markets itspre-priced booking services and related tools and directories are provided to consumers through emails, digital display advertisements, partnerships with other contextually related websitesfree of charge. Roofing provides roof replacement and to a lesser extent, through direct mail and radio advertising. The Company markets HomeAdvisor's subscription packages to service professionals primarilyrepair services through its sales force, as well as through search engine marketing, digital media advertising and direct relationships with trade associations and manufacturers. We have made, and expect to continue to make, substantial investments in online and offline advertising to homeowners to promote our services and drive traffic to our platform and to service professionals to expand our network.wholly-owned subsidiary Angi Roofing, LLC.
Factors Affecting the Comparability of Our Results
On September 29, 2017, IAC and Angie's List Inc. combined IAC's HomeAdvisor business and Angie's List underFor a new publicly traded company called ANGI Homeservices (the "Combination"). At September 30, 2017, IAC owned 87.1% and 98.5%more detailed description of the economicCompany’s operating businesses, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Unless otherwise indicated or as the
consolidated and combined financial statements included in "Item 1. Consolidated and Combined Financial Statements" for additional information related tocontext otherwise requires, certain terms, which include the Combination. During the three and nine months ended September 30, 2017, the Company incurred $26.0 million and $29.7 million, respectively, in costs related to this transaction (including severance, retention, transaction and integration related costs). The Company expects the aggregate amount of transaction-related expenses during 2017 and 2018 (including those previously recognized) to be less than $75 million. The Company also incurred $96.9 million
in stock-based compensation expense during the third quarter of 2017 related to the modification of previously issued HomeAdvisor vested equity awards, which were converted into ANGI Homeservices' equity awards, and the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination.
On March 24, 2017, the Company acquired a controlling interest in MyBuilder Limited (“MyBuilder”), a leading home services platform in the United Kingdom, which is included in our Europe segment.
On February 8, 2017, the Company acquired a controlling interest in HomeStars Inc. (“HomeStars”), a leading home services platform in Canada, which is included in our North America segment.
On November 3, 2016, the Company acquired a controlling interest in MyHammer Holding AG (“MyHammer”), the leading home services marketplace in Germany, which is included in our Europe segment.
Key Metrics
In connection with the management of our businesses we identify, measure and assess a variety of key metrics. The principal operating metrics we use in managing our business, are set forthdefined below:
•Ads and Leads Revenue primarily reflects domestic consumer connection revenue for consumer matches, revenue from service professionals under contract for advertising and membership subscription revenue from service professionals and consumers.
Marketplace (formerly Domestic)•Services Revenue primarily reflects domestic revenue from pre-priced offerings by which the domestic HomeAdvisor branded marketplaceconsumer requests services through a Company platform and the Company connects them with a service professional to perform the service. It excludes
•Roofing Revenue primarily reflects revenue from the other businessesroof replacement business offering by which the consumer purchases services directly from the Company and the Company engages a service professional to perform the service.
•International Revenue primarily reflects revenue generated within the North America segment.
International segment (consisting of businesses in Europe and Canada), including consumer connection revenue for consumer matches and membership subscription revenue from service professionals and consumers.•Corporate primarily reflects costs for corporate initiatives, shared costs, such as executive and public company costs, and other expenses not allocated to the operating segments.
Marketplace (formerly Domestic) •Service Requests are (i) fully completed and submitted domestic customer service requests.requests for connections with Ads and Leads service professionals, (ii) contacts to Ads and Leads service professionals generated via the service professional directory from unique users in unique categories (such that multiple contacts from the same user in the same category in the same day are counted as one Service Request) and (iii) requests to book Services jobs in the period.
•Monetized Transactions are (i) Service Requests that are matched to a paying Ads and Leads service professional in the period and (ii) completed and in-process Services jobs in the period; a single Service Request can result in multiple
monetized transactions.
Marketplace (formerly Domestic) Paying•Transacting Service Professionals (or “Marketplace Paying(“Transacting SPs”)are the number of domestic(i) Ads and Leads service professionals that had an active membership and/or paid for consumer matches inor advertising and (ii) Services service professionals that performed a Services job, during the last monthmost recent quarter.
•ANGI Group Senior Notes - On August 20, 2020, ANGI Group, LLC (“ANGI Group”), a direct wholly-owned subsidiary of the period.
Company, issued $500.0 million of its 3.875% Senior Notes due August 15, 2028, with interest payable February 15 and August 15 of each year.Key Components of Results of Operations
Sources of Revenue
Ads and Leads Revenue is primarily derived from (i) consumer connection revenue, which comprisesis comprised of fees paid by service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service), (ii) advertising revenue, which includes revenue from service professionals under contract for advertising, and (iii) membership subscription fees paid byrevenue from service professionals.professionals and consumers. Consumer connection revenue varies based upon certainseveral factors including the service requested, typeproduct experience offered, and geographic location of match (such as Instant Booking or Instant Connect)service. Services is primarily comprised of revenue from jobs sourced directly through the platform and where thethrough retail partnerships and completed by a service professional assigned by our platform. Roofing consists of revenue from roofing projects. International is provided.
The Company’sprimarily comprised of revenue from consumer connection revenue is generatedfor consumer matches and recognized when an in‑networkmembership subscription from service professional and consumers.
From January 1, 2020 through December 31, 2022, Services recorded revenue on a gross basis. Effective January 1, 2023, we modified the Services terms and conditions so that the service professional, rather than Angi Inc., has the contractual relationship with the consumer to deliver the service and our performance obligation to the consumer is deliveredto connect them with the service professional. This change in contractual terms requires revenue be reported as the net amount of what is received from the consumer after deducting the amounts owed to the service professional providing the service effective for all arrangements entered into after December 31, 2022. There is no impact to operating loss or Adjusted EBITDA from this change in revenue recognition. For the three and nine months ended September 30, 2022, if Services revenue were recorded on a consumer match. Membership subscriptionnet basis, revenue is generated through subscription sales to service professionals and is deferred and recognized over the term of the applicable membership. Membership agreements can be one month, three months, or one year. Deferred revenue is $60.1would have been reduced by $64.8 million and $18.8$187.5 million, at September 30, 2017 and December 31, 2016, respectively. The balance at September 30, 2017 includes the fair value of Angie's List deferred revenue at the date of Combination of $33.3 million related to (i) time-based sales of advertising to service providers and (ii) membership subscription fees from consumers. Service providers generally pay for advertisements, which carry an early termination penalty, in advance on a monthly or annual basis at the option of the service provider with the average advertising contract term being approximately one year. Angie's List revenue from the sale of website, mobile and call center advertising is recognized ratably over the time period in which the advertisements run. Revenue from the sale of advertising in the Angie’s ListMagazine publication is recognized in the period in which the publication, and therefore the advertisement, is published and distributed. Angie's List prepaid membership subscription fees are recognized as revenue ratably over the term of the associated subscription, which is typically one year.
Cost of revenueRevenue and Gross Profit
Cost of revenue, which excludes depreciation, consists primarily of traffic acquisition(i) roofing material costs associated with Roofing, (ii) payments made to independent third-party service professionals who perform work contracted under Services arrangements that were entered into prior to January 1, 2023 and the change to net revenue reporting or Roofing arrangements, (iii) credit card processing fees, and (iv) hosting fees. Traffic acquisition costs consist
Gross profit is revenue less cost of amounts based on revenue share arrangements.revenue. Gross margin is gross profit expressed as a percentage of revenue.
Operating Costs and Expenses:
•Selling and marketing expense
Selling and marketing expense - consists primarily of (i) advertising expenditures, which include marketing fees to promote the brand to consumers and compensation (including stock-based compensation expense) and other employee‑related costs for personnel engaged in selling and marketing, and sales support. Advertising and promotional expense includesservice professionals with (a) online marketing, including fees paid to search engines and other online marketing platforms, partners who direct traffic to our brands, and app platforms, (b) offline marketing, which is primarily television and radio advertising, (ii) compensation expense (including stock-based compensation expense) and partner-related payments to those who direct traffic toother employee-related costs for our brands.sales force and marketing personnel, (iii) service guarantee expense, (iv) software license and maintenance costs, and (v) outsourced personnel costs.
•General and administrative expense
General and administrative expense - consists primarily of (i) compensation expense (including stock‑basedstock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources and customer service functions, bad debt expense, facilities(ii) provision for credit losses, (iii) software license and maintenance costs, and(iv) outsourced personnel costs for personnel engaged in assisting in customer service functions, (v) fees for professional services.services, and (vi) facilities costs. Our customer service function includes personnel who provide support to our service professionals and consumers.
•Product development expense
Product development expense - consists primarily of (i) compensation expense (including stock‑basedstock-based compensation expense) and other employee-related costs that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and related technology.technology, (ii) outsourced personnel costs for personnel engaged in product development, and (iii) software license and maintenance costs.
Non-GAAP financial measure
ResultsEBITDA and a reconciliation of operationsnet loss attributable to Angi Inc. shareholders to operating loss to consolidated Adjusted EBITDA for the three and nine months ended September 30, 20172023 and 2022.
Results of Operations for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 20162022
Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Domestic | | | | | | | | | | | | | | | |
| Ads and Leads: | | | | | | | | | | | | | | | |
| Consumer connection revenue | $ | 203,579 | | | $ | (59,355) | | | (23)% | | $ | 262,934 | | | $ | 625,527 | | | $ | (112,650) | | | (15)% | | $ | 738,177 | |
| Advertising revenue | 75,074 | | | 7,909 | | | 12% | | 67,165 | | | 212,302 | | | 16,046 | | | 8% | | 196,256 | |
| Membership subscription revenue | 13,167 | | | (1,628) | | | (11)% | | 14,795 | | | 39,597 | | | (6,989) | | | (15)% | | 46,586 | |
| Other revenue | 173 | | | (462) | | | (73)% | | 635 | | | 560 | | | (558) | | | (50)% | | 1,118 | |
| Total Ads and Leads revenue | 291,993 | | | (53,536) | | | (15)% | | 345,529 | | | 877,986 | | | (104,151) | | | (11)% | | 982,137 | |
| Services revenue | 29,964 | | | (75,928) | | | (72)% | | 105,892 | | | 91,890 | | | (198,684) | | | (68)% | | 290,574 | |
| Roofing revenue | 21,400 | | | (4,593) | | | (18)% | | 25,993 | | | 84,254 | | | (21,076) | | | (20)% | | 105,330 | |
| Intersegment eliminations | (794) | | | 2,031 | | | 72% | | (2,825) | | | (3,257) | | | 3,195 | | | 50% | | (6,452) | |
| Total Domestic revenue | 342,563 | | | (132,026) | | | (28)% | | 474,589 | | | 1,050,873 | | | (320,716) | | | (23)% | | 1,371,589 | |
| International revenue | 29,274 | | | 5,827 | | | 25% | | 23,447 | | | 88,439 | | | 10,051 | | | 13% | | 78,388 | |
| Total revenue | $ | 371,837 | | | $ | (126,199) | | | (25)% | | $ | 498,036 | | | $ | 1,139,312 | | | $ | (310,665) | | | (21)% | | $ | 1,449,977 | |
| | | | | | | | | | | | | | | |
| Percentage of Total Revenue: | | | | | | | | | | | | | | | |
| Domestic | 92 | % | | | | | | 95 | % | | 92 | % | | | | | | 95 | % |
| International | 8 | % | | | | | | 5 | % | | 8 | % | | | | | | 5 | % |
| Total revenue | 100 | % | | | | | | 100 | % | | 100 | % | | | | | | 100 | % |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | Change | | % Change | | 2022 | | 2023 | | Change | | % Change | | 2022 |
| (In thousands, rounding differences may occur) |
| Operating metrics: | | | | | | | | | | | | | | | |
| Service Requests | 6,065 | | | (1,836) | | | (23)% | | 7,901 | | | 18,931 | | | (4,419) | | | (19)% | | 23,350 | |
| Monetized Transactions | 7,355 | | | (424) | | | (5)% | | 7,779 | | | 21,611 | | | (1,290) | | | (6)% | | 22,901 | |
| Transacting SPs | 202 | | | (43) | | | (17)% | | 245 | | | | | | | | | |
For the three months ended September 30, 2023 compared to the three months ended September 30, 2022
Ads and Leads revenue decreased $53.5 million, or 15%, due primarily to a decrease in consumer connection revenue of $59.4 million, or 23% and a decrease in membership subscription revenue of $1.6 million, or 11%, due to a decline in Monetized Transactions and a decline in service professionals in the Angi network, partially offset by an increase of $7.9 million, or 12%, in advertising revenue. The decrease in Monetized Transactions was a result of an effort to rationalize sales to service professionals that are unprofitable, as well as efforts to increase lead quality, including changes to certain demand channels, to enhance the user experience for both homeowners and service professionals. The increase in advertising revenue was primarily driven by continued growth in sales and improved retention.
Services revenue decreased $75.9 million, or 72%, due primarily to the change to net revenue reporting described above under “Sources of Revenue,” a decrease of $27.1 million due to the continued shift away from complex and less profitable offerings, and lower Service Requests.
Roofing revenue decreased $4.6 million, or 18%, due primarily to a decline in projects and a strategic shift of operations to select markets.
International revenue increased $5.8 million, or 25%, due primarily to a larger service professional network and higher revenue per service professional.
For the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 | | 2017 | | $ Change | | % Change | | 2016 |
| | (Amounts in thousands) |
| Revenue | | | | | | | | | | | | | | | |
| North America | $ | 167,104 |
| | $ | 41,878 |
| | 33 | % | | $ | 125,226 |
| | $ | 470,667 |
| | $ | 122,380 |
| | 35 | % | | $ | 348,287 |
|
| Europe | 14,613 |
| | 6,279 |
| | 75 | % | | 8,334 |
| | 42,506 |
| | 15,571 |
| | 58 | % | | 26,935 |
|
| Total Revenue | $ | 181,717 |
| | $ | 48,157 |
| | 36 | % | | $ | 133,560 |
| | $ | 513,173 |
| | $ | 137,951 |
| | 37 | % | | $ | 375,222 |
|
| | | | | | | | | | | | | | | | |
| Percentage of Total Revenue: | | | | | | | | | | | | | | |
| Revenue | | | | | | | | | | | | | | | |
| North America | 92 | % | | | | | | 94 | % | | 92 | % | | | | | | 93 | % |
| Europe | 8 | % | | | | | | 6 | % | | 8 | % | | | | | | 7 | % |
| Total Revenue | 100 | % | | | | | | 100 | % | | 100 | % | | | | | | 100 | % |
| | | | | | | | | | | | | | | | |
Key metrics:
| | | | | | | | | | | | | | | |
| Marketplace Revenue | $ | 156,595 |
| | $ | 40,120 |
| | 34 | % | | $ | 116,475 |
| | $ | 442,024 |
| | $ | 118,460 |
| | 37 | % | | $ | 323,564 |
|
| Marketplace Service Requests | 5,023 |
| | 1,339 |
| | 36 | % | | 3,684 |
| | 13,902 |
| | 3,791 |
| | 37 | % | | 10,111 |
|
| Marketplace Paying SPs | 172 |
| | 35 |
| | 25 | % | | 137 |
| | 172 |
| | 35 |
| | 25 | % | | 137 |
|
Services revenue decreased $198.7 million, or 68%, due primarily to the change to net revenue reporting described above under “Sources of Revenue,” a decrease of $69.6 million due to the continued shift away from complex and less profitable offerings, and lower Service Requests.
Roofing revenue decreased $21.1 million, or 20%, due primarily to factors described above in the three-month discussion.
International revenue increased $10.1 million, or 13%, due primarily to the factors described above in the three-month discussion.
Cost of revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Cost of revenue (exclusive of depreciation shown separately below) | $ | 28,737 | | | $ | (80,320) | | | (74)% | | $ | 109,057 | | | $ | 102,440 | | | $ | (233,386) | | | (69)% | | $ | 335,826 | |
| As a percentage of revenue | 8% | | | | | | 22% | | 9% | | | | | | 23% |
For the three months ended September 30, 20172023 compared to the three months ended September 30, 20162022
Revenue increased $48.2
Ads and Leads cost of revenue decreased $1.7 million, or 36%17%, in 2017 versus 2016.
North Americaand stayed consistent as a percentage of revenue, increased $41.9 million, or 33%, in 2017 versus 2016, due primarily to an increasethe decrease in revenue of $36.6$53.5 million.
Services cost of revenue decreased $72.8 million, or 35%94%, and decreased as a percentage of revenue, due primarily to a $66.2 million decrease in consumer connectionpayments to third-party professional service providers due primarily to the change to net revenue which was driven byreporting effective January 1, 2023, described above. Additionally, payments to third-party professional service providers decreased as a 25% increaseresult of the shift away from complex and less profitable offerings.
Roofing cost of revenue decreased $5.9 million, or 28%, and decreased as a percentage of revenue, due primarily to the reduction of revenue discussed above that resulted in Marketplace Paying SPs to 172,000a $2.3 million decrease in roofing material costs and a 36% increase$1.0 million decrease in Marketplace Service Requests to 5.0 million. North America revenue in 2017 includes $0.7 million from Angie's List.third-party professional service providers.
Europe revenue grew $6.3 million, or 75%, in 2017 versus 2016, driven by the acquisitions of controlling interests in MyHammer on November 3, 2016 and MyBuilder on March 24, 2017, as well as organic growth across other regions.
For the nine months ended September 30, 20172023 compared to the nine months ended September 30, 20162022
Revenue increased $138.0Ads and Leads cost of revenue decreased $4.6 million, or 37%16%, in 2017 versus 2016.
North Americaand stayed consistent as a percentage of revenue, increased $122.4 million, or 35%, in 2017 versus 2016, due primarily to an increasethe decrease in revenue of $108.3$104.2 million.
Services cost of revenue decreased $206.8 million, or 37%92%, and decreased as a percentage of revenue, due primarily to a $186.9 million decrease in consumer connectionpayments to third-party professional service providers due primarily to the change to net revenue which was driven byreporting effective January 1, 2023, described above. Additionally, payments to third-party professional service providers decreased as a 25% increaseresult of the shift away from complex and less profitable offerings.
Roofing cost of revenue decreased $22.4 million, or 28%, and decreased as a percentage of revenue, due primarily to the reduction of revenue discussed above that resulted in Marketplace Paying SPs to 172,000a $11.0 million decrease in roofing material costs and a 37% increase$6.0 million decrease in Marketplace Service Requests to 13.9 million. North America revenue in 2017 includes $0.7 million from Angie's List.third-party professional service providers.
Europe revenue grew $15.6 million, or 58%, in 2017 versus 2016, driven by the acquisitions
Cost of revenue (exclusive of depreciation)Gross profit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Revenue | $ | 371,837 | | | $ | (126,199) | | | (25)% | | $ | 498,036 | | | $ | 1,139,312 | | | $ | (310,665) | | | (21)% | | $ | 1,449,977 | |
| Cost of revenue (exclusive of depreciation shown separately below) | 28,737 | | | (80,320) | | | (74)% | | 109,057 | | | 102,440 | | | (233,386) | | | (69)% | | 335,826 | |
| Gross profit | $ | 343,100 | | | $ | (45,879) | | | (12)% | | $ | 388,979 | | | $ | 1,036,872 | | | $ | (77,279) | | | (7)% | | $ | 1,114,151 | |
| | | | | | | | | | | | | | | |
| Gross margin | 92% | | | | 14% | | 78% | | 91% | | | | 14% | | 77% |
For the three months ended September 30, 20172023 compared to the three months ended September 30, 20162022
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Cost of revenue | $7,999 | | $1,173 | | 17% | | $6,826 |
| Percentage of revenue | 4% | | | | | | 5% |
Cost of revenue increased $1.2Angi gross profit decreased $45.9 million, or 17%12%, due primarily to the decrease in 2017 versus 2016.revenue described in the revenue discussion above.
North America cost of revenue increased $0.4 million, or 5%, in 2017 versus 2016, driven by increases of $0.7 million in credit card processing fees due to higher revenue and $0.1 million in hosting fees, partially offset by a reduction in traffic acquisition costs of $0.6 million.
Europe cost of revenue increased $0.8 million, or 1395%, in 2017 versus 2016, driven by an increase of $0.6 million in hosting fees.
For the nine months ended September 30, 20172023 compared to the nine months ended September 30, 20162022
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Cost of revenue | $22,391 | | $2,826 | | 14% | | $19,565 |
| Percentage of revenue | 4% | | | | | | 5% |
Cost of revenue increased $2.8Angi gross profit decreased $77.3 million, or 14%7%, due primarily to the decrease in 2017 versus 2016.revenue described in the revenue discussion above.
North America cost of revenue increased $2.0 million, or 10%, in 2017 versus 2016, driven by increases of $2.1 million in credit card processing fees due to higher revenue and $0.6 million in hosting fees, partially offset by a reduction in traffic acquisition costs of $0.7 million.
Europe cost of revenue increased $0.8 million, or 388%, in 2017 versus 2016, driven by an increase of $0.6 million in hosting fees.
Selling and marketing expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Selling and marketing expense | $ | 204,006 | | | $ | (30,391) | | | (13)% | | $ | 234,397 | | | $ | 621,628 | | | $ | (89,729) | | | (13)% | | $ | 711,357 | |
| As a percentage of revenue | 55% | | | | | | 47% | | 55% | | | | | | 49% |
For the three months ended September 30, 20172023 compared to the three months ended September 30, 20162022
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Selling and marketing expense | $130,866 | | $50,592 | | 63% | | $80,274 |
| Percentage of revenue | 72% | | | | | | 60% |
SellingAds and marketing expense increased $50.6 million, or 63%, in 2017 versus 2016.
North AmericaLeads selling and marketing expense increased $46.0decreased $21.3 million, or 61%10%, driven by decreases in 2017 versus 2016,advertising expense of $18.4 million. The decrease in advertising expense was primarily due to a $32.8 million decrease in online advertising spend due to increased efficiency, partially offset by a $15.8 million increase in television spend due to efforts to build awareness of the Angi brand.
Services selling and marketing expense decreased $9.7 million, or 53%, driven by decreases of $5.6 million in professional fees and third-party wages, $5.1 million in compensation expense, and $2.3 million in advertising expense, partially offset by an increase of $28.6$4.1 million in service guarantee expense. The decrease in professional fees and third-party wages is primarily due to $1.8 million less in phone-based sales wages primarily resulting from increased reliance on more profitable digital conversion channels and $2.8 million less due to streamlined fulfillment operations, partially driven by fewer complex services. The decrease in compensation expense an increaseis primarily due to a reduction in online and offlineheadcount. The decrease in advertising expense is primarily due to a decrease in service professional marketing of $18.8 million, as well as $0.9 million of expense from the inclusion of HomeStars. Compensation expense increased due primarily to an increase of $19.5 million in stock-based compensation expense, an increase in sales force headcount and the inclusion of $4.1 million in severance and retention costs related to the Combination.spend. The increase in stock-based compensationservice guarantee expense wasis due to the modificationaforementioned change in contractual terms and conditions resulting in the change to net revenue reporting such that this expense is no longer a component of previously issued HomeAdvisor vested equity awards,cost of revenue, which were converted into ANGI Homeservices' equity awards, andis where the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination.expense was recorded prior to January 1, 2023.
EuropeRoofing selling and marketing expense increased $4.6decreased $2.7 million, or 99%37%, in 2017 versus 2016,primarily driven by organic growtha decrease of $1.3$1.4 million in online and offline marketing and $1.1 million in compensationadvertising expense as well as $2.1 milliona result of expense from the inclusion of MyHammerlower and MyBuilder.more efficient marketing spend.
For the nine months ended September 30, 20172023 compared to the nine months ended September 30, 20162022
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Selling and marketing expense | $337,654 | | $103,310 | | 44% | | $234,344 |
| Percentage of revenue | 66% | | | | | | 62% |
SellingAds and marketing expense increased $103.3 million, or 44%, in 2017 versus 2016.
North AmericaLeads selling and marketing expense increased $91.3decreased $49.5 million, or 42%8%, driven by decreases in 2017 versus 2016,advertising expense of $51.4 million and professional fees of $4.1 million, partially offset by an increase in compensation expense of $7.8 million. The decrease in advertising expense was primarily due to a $76.2 million decrease in online advertising spend due to increased efficiency, partially offset by a $24.6 million increase in television spend due to efforts to build awareness of the Angi brand. The decrease in professional fees is primarily due to a decrease in background checks, marketing and branding consultancy
fees. The increase in compensation expense is primarily due to increased sales commissions due to the immediate expensing of commissions for certain transactions beginning October 1, 2022.
Services selling and marketing expense decreased $26.5 million, or 46%, driven by decreases of $17.9 million in professional fees and third-party wages, $12.2 million in compensation expense, and $5.2 million in advertising expense, partially offset by an increase of $11.4 million in service guarantee expense. The decrease in professional fees and third-party wages is primarily due to $10.5 million less in phone-based sales wages primarily resulting from increased reliance on more profitable digital conversion channels and $5.2 million less due to streamlined fulfillment operations, partially driven by fewer complex services. The decrease in compensation expense is primarily due to a reduction in headcount. The decrease in advertising expense is primarily due to a decrease in service professional marketing spend. The increase in service guarantee expense is due to the aforementioned change in contractual terms and conditions such that this expense is no longer a component of cost of revenue, which is where the expense was recorded prior to January 1, 2023.
Roofing selling and marketing expense decreased $7.2 million, or 31%, primarily driven by a decrease of $3.3 million in compensation expense as a result of a reduction in headcount and a strategic shift of operations to select markets.
International selling and marketing expense decreased $7.0 million, or 20%, driven by a decrease of $10.3 million in advertising expense, partially offset by an increase in compensation expense of $2.7 million. The decrease in advertising expense is primarily due to improved online efficiency and a decrease in television advertising expense. The increase in compensation expense is primarily driven by an increase in online and offline marketing of $53.6 million, an increase of $37.9 million in compensation expense, as well as $2.2 million of expense from the inclusion of HomeStars. Compensation expense increased due primarily to an increase of $19.8 million in stock-based compensation expense, an increase in sales force headcount and the inclusion of $4.1 million in severance and retention costs related to the Combination. The increase in stock-based compensation expense was due to the modification and acceleration of equity awards as described above in the three-month discussion.headcount.
Europe selling and marketing expense increased $12.0 million, or 75%, in 2017 versus 2016, driven by organic growth of $4.6 million in online and offline marketing and $2.4 million in compensation expense, as well as $4.9 million of expense from the inclusion of MyHammer and MyBuilder.
General and administrative expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| General and administrative expense | $ | 102,476 | | | $ | (25,784) | | | (20)% | | $ | 128,260 | | | $ | 301,979 | | | $ | (55,562) | | | (16)% | | $ | 357,541 | |
| As a percentage of revenue | 28% | | | | | | 26% | | 27% | | | | | | 25% |
For the three months ended September 30, 20172023 compared to the three months ended September 30, 20162022
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| General and administrative expense | $129,088 | | $99,579 | | 337% | | $29,509 |
| Percentage of revenue | 71% | | | | | | 22% |
GeneralAds and administrative expense increased $99.6 million, or 337%, in 2017 versus 2016.
North AmericaLeads general and administrative expense increased $99.0decreased $22.8 million, or 411%27%, in 2017 versus 2016, due primarily to higher compensation expensedecreases of $78.9 million and $13.9$14.1 million in costs relatedthe provision for credit losses, $6.3 million in professional fees, $3.1 million in third-party wages, and $1.8 million in compensation expense. The decrease in the provision for credit losses is primarily due to the Angie's List transaction including transaction related costs of $9.5 millionlower revenue and integration related costs of $3.9 million.improved collection rates. The increasedecrease in professional fees is primarily due to a reduction in legal fees. The decrease in third-party wages is primarily due to a reduction in third-party providers. The decrease in compensation expense is due principally to an increase of $69.8 million in stock-based compensation expense and the inclusion of $7.7 million in severance and retention costs related to the Combination, and an increase in headcount from business growth. The increase in stock-based compensation expense was due principally to the modification of HomeAdvisor vested equity awards, which were converted into ANGI Homeservices' equity awards, and the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination. North America general and administrative expense also includes increases of $2.4 million in bad debt expenseprimarily due to higher revenue and $1.0 million in outsourced customer service expense, as well as $1.0 million of expense from the inclusion of HomeStars.
Europe general and administrative expense increased $0.6 million, or 10%, in 2017 versus 2016, due primarily to $1.9 million of expense from the inclusion of MyHammer and MyBuilder, partially offset by a reduction in transaction related costs of $1.2 million.headcount.
For the nine months ended September 30, 20172023 compared to the nine months ended September 30, 20162022
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| General and administrative expense | $217,962 | | $137,728 | | 172% | | $80,234 |
| Percentage of revenue | 42% | | | | | | 21% |
GeneralAds and administrative expense increased $137.7 million, or 172%, in 2017 versus 2016.
North AmericaLeads general and administrative expense increased $131.0decreased $44.8 million, or 195%20%, in 2017 versus 2016, due primarily to higherdecreases of $14.9 million in the provision for credit losses, $12.1 million in compensation expense, of $94.7 million and $17.6$8.5 million in costs relatedprofessional fees, and $6.5 million in third-party wages. The decrease in the provision for credit losses is primarily due to the Angie's List transaction including transaction related costs of $13.1 millionlower revenue and integration related costs of $4.0 million.improved collection rates. The increasedecrease in compensation expense is primarily due principally to an increase of $81.2 million in stock-based compensation expense, an increase in headcount from business growth and the inclusion of $7.7 million in severance and retention costs in 2017 related to the Combination. The increase in stock-based compensation expense was due principally to the modification and acceleration of equity awards as described above in the three-month discussion as well as a modification charge related to a HomeAdvisor equity award recordedreduction in the second quarter of 2017. North Americaheadcount. The decrease in professional fees is primarily due to a reduction in legal fees. The decrease in third-party wages is primarily due to a reduction in third-party providers.
Services general and administrative expense also includes increasesdecreased $8.9 million, or 20%, due primarily to decreases of $7.7$6.9 million in bad debtcompensation expense and $3.9 million in the provision for credit losses. The decrease in compensation expense is primarily due to higher revenue, $3.3 milliona reduction in outsourced customer service expenseheadcount. The decrease in the provision for credit losses is primarily due to improved collection rates and $1.6 million in software maintenance costs, as well as $2.2 million of expense from the inclusion of HomeStars.lower revenue.
EuropeRoofing general and administrative expense increased $6.8decreased $6.3 million, or 51%32%, in 2017 versus 2016, due primarily to $5.6 milliondriven by a decrease of expense from the inclusion of MyHammer and MyBuilder and an increase of $0.8$3.4 million in compensation expense due, in part, to increased headcount, partially offset byas a result of a reduction in transaction related costsheadcount and a strategic shift of $0.5 million.operations to select markets.
Product development expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Product development expense | $ | 21,497 | | | $ | 5,681 | | | 36% | | $ | 15,816 | | | $ | 72,358 | | | $ | 17,729 | | | 32% | | $ | 54,629 | |
| As a percentage of revenue | 6% | | | | | | 3% | | 6% | | | | | | 4% |
For the three months ended September 30, 20172023 compared to the three months ended September 30, 20162022
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Product development expense | $20,010 | | $14,654 | | 274% | | $5,356 |
| Percentage of revenue | 11% | | | | | | 4% |
Product development expense increased $14.7$5.7 million, or 274%36%. This contrasts with a $19.6 million, or 59%, decrease in 2017 versus 2016.
North Americacapital expenditures, which is primarily comprised of internally developed software. The increase in product development expense increased $14.2 million, or 305%,was driven by a decrease in 2017 versus 2016, due primarilythe percentage of internally developed software that was subject to an increase of $12.2 million in stock-based compensation expense due to the modification of HomeAdvisor vested equity awards in connection with the Combination. North America product development expense also includes an increase in compensation expense due, in part, to increased headcount, as well as $0.4 million of expense from the inclusion of HomeStars.capitalization.
Europe product development expense increased $0.5 million, or 66%, in 2017 versus 2016, due to $0.5 million of compensation expense from the inclusion of MyHammer and MyBuilder.
For the nine months ended September 30, 20172023 compared to the nine months ended September 30, 2016
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Product development expense | $32,529 | | $17,387 | | 115% | | $15,142 |
| Percentage of revenue | 6% | | | | | | 4% |
Product development expense increased $17.4$17.7 million, or 115%32%. This contrasts with a $59.4 million, or 62%, decrease in 2017 versus 2016.
North Americacapital expenditures, which is primarily comprised of internally developed software. The increase in product development expense increased $16.3 million, or 126%, in 2017 versus 2016, due primarily to an increase of $12.2 million in stock-based compensation expense due to the modification and acceleration of equity awards as described abovewas driven by a decrease in the three-month discussion. North America product development expense also includes an increase in compensation expense due, in part,percentage of internally developed software that was subject to increased headcount, as well as $0.9 million of expense from the inclusion of HomeStars.capitalization.
Europe product development expense increased $1.0 million, or 48%, in 2017 versus 2016, driven by $1.3 million of compensation expense from the inclusion of MyHammer and MyBuilder.
Depreciation
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Depreciation | $ | 22,596 | | | $ | 4,837 | | | 27% | | $ | 17,759 | | | $ | 70,210 | | | $ | 25,098 | | | 56% | | $ | 45,112 | |
| As a percentage of revenue | 6% | | | | | | 4% | | 6% | | | | | | 3% |
For the three months ended September 30, 2017 compared to the three months ended September 30, 2016
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Depreciation | $3,491 | | $1,465 | | 72% | | $2,026 |
| Percentage of revenue | 2% | | | | | | 2% |
Depreciation increased by $1.5 million, or 72%, in 2017 versus 2016.
North America depreciation increased $1.1 million, or 59%, in 2017 versus 2016, due primarily to the incremental depreciation related to continued corporate growth.
For theand nine months ended September 30, 20172023 compared to the three and nine months ended September 30, 2016
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Depreciation | $9,705 | | $3,881 | | 67% | | $5,824 |
| Percentage of revenue | 2% | | | | | | 2% |
Depreciation increased by $3.9 million, or 67%,due primarily to investments in 2017 versus 2016.capitalized software made in prior periods which are being depreciated over an average useful life of two years.
North America depreciation increased $3.4 million, or 62%, in 2017 versus 2016,
Operating income (loss)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Ads and Leads | $ | 8,115 | | | $ | (14,639) | | | (64)% | | $ | 22,754 | | | $ | 26,386 | | | $ | (35,146) | | | (57)% | | $ | 61,532 | |
| Services | (3,887) | | | 6,893 | | | 64% | | (10,780) | | | (21,514) | | | 36,067 | | | 63% | | (57,581) | |
| Roofing | (2,246) | | | 6,299 | | | 74% | | (8,545) | | | (3,137) | | | 15,347 | | | 83% | | (18,484) | |
| Corporate | (14,854) | | | 688 | | | 4% | | (15,542) | | | (46,361) | | | 294 | | | 1% | | (46,655) | |
| Total Domestic | (12,872) | | | (759) | | | (6)% | | (12,113) | | | (44,626) | | | 16,562 | | | 27% | | (61,188) | |
| International | 2,764 | | | 1,709 | | | 162% | | 1,055 | | | 7,365 | | | 12,078 | | | NM | | (4,713) | |
| Total | $ | (10,108) | | | $ | 950 | | | 9% | | $ | (11,058) | | | $ | (37,261) | | | $ | 28,640 | | | 43% | | $ | (65,901) | |
| | | | | | | | | | | | | | | |
| As a percentage of revenue | (3)% | | | | | | (2)% | | (3)% | | | | | | (5)% |
________________________
NM = Not meaningful
For the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022
Operating losses decreased for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 due primarily to the incrementalfactors described above in the revenue, cost of revenue, selling and marketing, general and administrative, product development, and depreciation related to continued corporate growth.expense discussions.
Operating (loss) income
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 | | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Operating (loss) income | $(112,505) | | $(121,348) | | NM | | $8,843 | | $(113,953) | | $(131,795) | | NM | | $17,842 |
| Percentage of revenue | (62)% | | | | | | 7% | | (22)% | | | | | | 5% |
For the three months ended September 30, 2017 compared to the three months ended September 30, 2016
Operating income decreased $121.3 million to an operating loss of $112.5 million in 2017 versus operating income of $8.8 million in 2016.
North America operating income decreased $119.3 million to an operating loss of $107.7 million in 2017 versus operating income of $11.6 million in 2016, primarily due to an increase of $101.6 million in stock-based compensation expense, a decrease of $16.1 million in Adjusted EBITDA described below, an increase of $1.1 million in depreciation and an increase of $0.5 million in amortization of intangibles. The increase in stock-based compensation expense was due primarily to modification and acceleration charges of $96.9 million related to the Angie's List transaction described above.
Europe operating loss increased $2.1 million, or 76%, in 2017 versus 2016, primarily due to an increase of $1.6 million in amortization of intangibles, an increase of $0.3 million in depreciation and an increase in Adjusted EBITDA loss of $0.2 million described below.
At September 30, 2017,2023, there was $215.4is $51.0 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.52.35 years.
Adjusted EBITDA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Ads and Leads | $ | 32,198 | | | $ | (11,146) | | | (26)% | | $ | 43,344 | | | $ | 100,204 | | | $ | (19,629) | | | (16)% | | $ | 119,833 | |
| Services | 3,534 | | | 5,476 | | | NM | | (1,942) | | | 3,066 | | | 37,488 | | | NM | | (34,422) | |
| Roofing | (1,983) | | | 5,888 | | | 75% | | (7,871) | | | (2,456) | | | 13,531 | | | 85% | | (15,987) | |
| Corporate | (11,933) | | | 617 | | | 5% | | (12,550) | | | (37,396) | | | 706 | | | 2% | | (38,102) | |
| Total Domestic | 21,816 | | | 835 | | | 4% | | 20,981 | | | 63,418 | | | 32,096 | | | 102% | | 31,322 | |
| International | 4,046 | | | 2,145 | | | 113% | | 1,901 | | | 11,237 | | | 13,157 | | | NM | | (1,920) | |
| Total | $ | 25,862 | | | $ | 2,980 | | | 13% | | $ | 22,882 | | | $ | 74,655 | | | $ | 45,253 | | | 154% | | $ | 29,402 | |
| | | | | | | | | | | | | | | |
| As a percentage of revenue | 7% | | | | | | 5% | | 7% | | | | | | 2% |
For the three months ended September 30, 2023 compared to the three months ended September 30, 2022
Ads and Leads Adjusted EBITDA decreased $11.1 million, or 26%, to $32.2 million, and decreased as a percentage of revenue, driven by lower gross profit due to a decrease in revenue, partially offset by lower general and administrative expense due to lower compensation costs and other operating expenses and lower selling and marketing expense due to improved marketing efficiency.
Services Adjusted EBITDA increased $5.5 million, from a loss of $1.9 million to income of $3.5 million, and increased as a percentage of revenue, driven by higher gross profit due to pricing and fulfillment optimization efforts over the past year and lower operating expenses due to a reduced overall cost base as a result of exiting complex and less profitable offerings.
Roofing Adjusted EBITDA loss decreased $5.9 million, or 75%, to $2.0 million, and decreased as a percentage of revenue, driven by a decrease in selling and marketing expense and general and administrative expense due to headcount rationalization and a strategic shift of operations to select markets.
International Adjusted EBITDA increased $2.1 million, or 113%, to $4.0 million, driven by an increase in revenue and lower selling and marketing expense due to more efficient marketing spend.
For the nine months ended September 30, 20172023 compared to the nine months ended September 30, 20162022
Operating incomeAds and Leads Adjusted EBITDA decreased $131.8$19.6 million, or 16%, to $100.2 million, and decreased as a percentage of revenue, driven by lower gross profit due to a decrease in revenue, partially offset by lower selling and marketing expense due to improved marketing efficiency and lower general and administrative expense due to lower compensation costs and other operating expenses.
Services Adjusted EBITDA increased $37.5 million, from a loss of $34.4 million to anincome of $3.1 million, and decreased as a percentage of revenue, driven by higher gross profit due to pricing and fulfillment optimization efforts over the past year and lower operating expenses due to a reduced overall cost base as a result of exiting complex and less profitable offerings.
Roofing Adjusted EBITDA loss decreased $13.5 million, or 85%, to $2.5 million, and decreased as a percentage of revenue, driven by a decrease in selling and marketing expense and general and administrative expense due to headcount rationalization and a strategic shift of operations to select markets.
International Adjusted EBITDA increased $13.2 million, from a loss of $114.0$1.9 million in 2017 versus operatingto income of $17.8$11.2 million, in 2016.
North America operating income decreased $122.7 million to an operating loss of $99.5 million in 2017 versus operating income of $23.2 million in 2016, primarily due to an increase of $113.6 million in stock-based compensation expense, a decrease of $4.6 million in Adjusted EBITDA described below, an increase of $3.4 million in depreciation and an increase of $1.0 million in amortization of intangibles. The increase in stock-based compensation expense was due primarily to modification and acceleration charges of $96.9 million related to the Angie's List transaction described above.
Europe operating loss increased $9.1 million, or 170%, in 2017 versus 2016, primarily due to an increase of $3.6 million in amortization of intangibles,driven by an increase in Adjusted EBITDA loss of $5.1 million described belowrevenue and an increase of $0.5 million in depreciation.lower selling and marketing expense due to more efficient marketing spend.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and is defined below inInterest expense
Interest expense relates to interest on the section entitled "ANGI Homeservices Inc.'s Principles of Financial Reporting." ANGI Group Senior Notes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (In thousands) |
| Interest expense | $ | 5,037 | | | $ | 7 | | | —% | | $ | 5,030 | | | $ | 15,100 | | | $ | 22 | | | —% | | $ | 15,078 | |
For the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022
Interest expense was flat compared to the three and nine months ended September 30, 2022.
Other income (expense), net
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 | | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Adjusted EBITDA | $(2,266) | | $(16,252) | | NM | | $13,986 | | $22,917 | | $(9,705) | | (30)% | | $32,622 |
| Percentage of revenue | (1)% | | | | | | 10% | | 4% | | | | | | 9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (In thousands) |
| Other income (expense), net | $ | 3,891 | | | $ | 6,187 | | | NM | | $ | (2,296) | | | $ | 12,890 | | | $ | 17,327 | | | NM | | $ | (4,437) | |
For the three months ended September 30, 20172023 and 2022
Other income (expense), net for the three months ended September 30, 2023 primarily includes interest income of $4.9 million, partially offset by a foreign currency exchange loss of $1.0 million.
Other income (expense), net for the three months ended September 30, 2022 primarily includes a foreign currency exchange loss of $3.9 million, partially offset by interest income of $1.6 million.
For the nine months ended September 30, 2023 and 2022
Other income (expense), net for the nine months ended September 30, 2023 primarily includes interest income of $12.4 million and a foreign currency exchange gain of $0.4 million.
Other income (expense), net for the nine months ended September 30, 2022 primarily includes foreign currency losses of $6.6 million, partially offset by interest income of $2.1 million.
Income tax benefit
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | $ Change | | % Change | | 2022 | | 2023 | | $ Change | | % Change | | 2022 |
| (Dollars in thousands) |
| Income tax benefit | $ | 5,967 | | | $ | 5,022 | | | 531% | | $ | 945 | | | $ | 4,705 | | | $ | (5,988) | | | (56)% | | $ | 10,693 | |
| Effective income tax rate | 53% | | | | | | 5% | | 12% | | | | | | 13% |
For the three months ended September 30, 2023 compared to the three months ended September 30, 20162022
Adjusted EBITDA decreased $16.3 million to an Adjusted EBITDA loss of $2.3 million in 2017 versus Adjusted EBITDA of $14.0 million in 2016.
North America Adjusted EBITDA declined $16.1 million, or 100%, in 2017 versus 2016, despite an increase of $41.9 million in revenue,In 2023, the Company recorded a benefit due primarily to the inclusion in 2017 of $26.0 million in costsbenefits related to a change in the Angie's List transaction (including severance, retention, transactionannual expected effective income tax rate, research credits, and integration related costs), as well as increased investment in online and offline marketinga reconciliation of $18.8 million, higher compensation expense due, in part,income tax provision accruals to increased headcount, and increasestax returns, partially offset by tax shortfalls generated by the vesting for stock-based awards.
In 2022, the effective income tax rate was lower than the statutory rate of $2.4 million in bad debt expense due to higher revenue and $1.0 million in outsourced customer service expense. Adjusted EBITDA was further impacted by a write-off of deferred revenue related to the acquisitions of HomeStars of $0.1 million and Angie's List of $0.1 million in 2017.
Europe Adjusted EBITDA loss increased $0.2 million, or 9%, in 2017 versus 2016, driven primarily by our European expansion strategy including increased investment in online and offline marketing of $3.1 million and higher compensation expense of $3.0 million21% due primarily to tax shortfalls generated by the inclusionvesting and exercise of MyHammerstock-based awards and MyBuilderprovisions related to a change in 2017 as well as increased headcount, partially offsetthe annual expected effective income tax rate driven by a reduction in transaction related costs of $1.2 million.unrecognized state tax losses.
For the nine months ended September 30, 20172023 compared to the nine months ended September 30, 20162022
Adjusted EBITDA decreased $9.7 million, or 30%, in 2017 versus 2016.
North America Adjusted EBITDA declined $4.6 million, or 13%, in 2017 versus 2016, despite an increase of $122.4 million in revenue, due primarily toIn 2023, the inclusion in 2017 of $29.7 million in costs related to the Angie's List transaction (including severance, retention, transaction and integration related costs), as well as increased investment in online and offline marketing of $53.6 million, higher compensation expense due, in part, to increased headcount, and increases of $7.7 million in bad debt expense due to higher revenue, $3.3 million in outsourced customer service expense and $1.6 million in software maintenance costs. Adjusted EBITDA was further impacted by a write-off of deferred revenue related to the acquisitions of HomeStars of $0.7 million and Angie's List of $0.1 million in 2017.
Europe Adjusted EBITDA loss increased $5.1 million, or 151%, in 2017 versus 2016, driven primarily by our European expansion strategy including increased investment in online and offline marketing of $8.7 million and higher compensation expense of $8.0 million due primarily to the inclusion of MyHammer and MyBuilder in 2017 as well as increased headcount, partially offset by a reduction in transaction related costs of $0.5 million.
Interest expense—related party
For the three months ended September 30, 2017 compared to the three months ended September 30, 2016
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Interest expense—related party | $1,864 | | $1,708 | | 1095% | | $156 |
For the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Interest expense—related party | $5,538 | | $5,298 | | 2208% | | $240 |
Other income (expense), net
For the three months ended September 30, 2017 compared to the three months ended September 30, 2016
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Other income, net | $1,364 | | $1,169 | | 599% | | $195 |
Other income, net in 2017 and 2016 principally include net foreign currency exchange gains.
For the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Other income (expense), net | $2,100 | | $2,404 | | NM | | $(304) |
Other income (expense), net in 2017 and 2016 principally include net foreign currency exchange gains and losses, respectively.
Income tax benefit (provision)
For the three months ended September 30, 2017 compared to the three months ended September 30, 2016
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Income tax benefit (provision) | $40,847 | | $45,261 | | NM | | $(4,414) |
| Effective income tax rate | 36% | | | | | | 50% |
The 2017 effective income tax rate on pre-tax losses is higherwas lower than the statutory rate of 35%21% due primarily to state taxes,tax shortfalls generated by the vesting and exercise for stock-based awards and nondeductible stock-based compensation, partially offset by unbenefited losses in separate jurisdictions.research credits.
The 2016In 2022, the effective income tax rate is higherwas lower than the statutory rate of 35%21% due primarily to unbenefited losses in separate jurisdictions and state taxes, partially offset by research credits.
For the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
| Income tax benefit (provision) | $71,095 | | $79,818 | | NM | | $(8,723) |
| Effective income tax rate | 61% | | | | | | 50% |
The 2017 income tax benefit was due primarily to the effect of adopting the provisions of the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, on January 1, 2017. Under ASU No. 2016-09, excess tax benefitsshortfalls generated by the settlement orvesting and exercise of stock-based awards of $35.6 million in the first nine months of 2017 are recognized as a reduction to the income tax provision rather than additional paid-in capital.
The 2016 effective income tax rate is higher than the statutory rate of 35% due primarily to the factors described above in the three-month discussion.
Net loss attributable to noncontrolling interests
Noncontrolling interests represent the noncontrolling holders’ percentage share of earnings or losses from the subsidiaries in which the Company holds a majority, but less than 100%, ownership interest and the results of which are included in our consolidated and combined financial statements.
For the three months ended September 30, 2017 compared to the three months ended September 30, 2016nondeductible stock-based compensation expense.
|
| | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
Net loss attributable to noncontrolling interests
| $397 | | $(210) | | (35)% | | $607 |
For the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | $ Change | | % Change | | 2016 |
| | (Dollars in thousands) |
Net loss attributable to noncontrolling interests
| $1,402 | | $(431) | | (24)% | | $1,833 |
Net loss attributable to noncontrolling interests in 2017 represents the net losses attributable to the noncontrolling interests in mHelpDesk, MyBuilder, MyHammer and HomeStars.
Net loss attributable to noncontrolling interests in 2016 represents the net losses attributable to the noncontrolling interests in mHelpDesk.
ANGI Homeservices Inc.'s Principles of Financial ReportingPRINCIPLES OF FINANCIAL REPORTING
We report Adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles ("GAAP"(“GAAP”). This measure is one of the primary metrics by which we evaluate the performance of our businesses, on whichand our internal budgets are based and by whichmay impact management is compensated.compensation. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. We endeavor to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure, which we discuss below.
Definition of ANGI Homeservices Inc.'s Non-GAAP Measure
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("(“Adjusted EBITDA"EBITDA”) is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of amortization of intangible assets and impairments of goodwill and intangible assets, if applicable. We believe this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and debt is serviced. Adjusted EBITDA has certain limitations in thatbecause it does not take into accountexcludes the impact of these expenses.
The following table reconciles net loss attributable to ourAngi Inc. shareholders to operating loss to consolidated and combined statement of operations of certain expenses.Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (In thousands) |
| Net loss attributable to Angi Inc. shareholders | $ | (5,356) | | | $ | (17,479) | | | $ | (35,380) | | | $ | (75,102) | |
| Add back: | | | | | | | |
| Net earnings attributable to noncontrolling interests | 69 | | | 40 | | | 614 | | | 379 | |
| | | | | | | |
| Income tax benefit | (5,967) | | | (945) | | | (4,705) | | | (10,693) | |
| Other (income) expense, net | (3,891) | | | 2,296 | | | (12,890) | | | 4,437 | |
| Interest expense | 5,037 | | | 5,030 | | | 15,100 | | | 15,078 | |
| Operating loss | (10,108) | | | (11,058) | | | (37,261) | | | (65,901) | |
| Add back: | | | | | | | |
| Stock-based compensation expense | 10,741 | | | 12,376 | | | 33,748 | | | 38,778 | |
| Depreciation | 22,596 | | | 17,759 | | | 70,210 | | | 45,112 | |
| Amortization of intangibles | 2,633 | | | 3,805 | | | 7,958 | | | 11,413 | |
| Adjusted EBITDA | $ | 25,862 | | | $ | 22,882 | | | $ | 74,655 | | | $ | 29,402 | |
For a reconciliation of operating income (loss) by reportable segment and net earnings attributable to ANGI Homeservices Inc. shareholders to Adjusted EBITDA for the three and nine months ended September 30, 2017 and 2016,Company’s reportable segments, see "“Note 8—5—Segment Information"” to the consolidated and combined financial statements included in "“Item 1. Consolidated and Combined Financial Statements."” Non-cash expenses that are excluded
Non-Cash Expenses That Are Excluded from ANGI Homeservices Inc.'sOur Non-GAAP Measure
Stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of stock options, stock appreciation rights, restricted stock units or(“RSUs”), stock options, performance-based RSUs (“PSUs”) and performance-based RSUs.market-based awards. These expenses are not paid in cash and we view the economic costs of stock-based awards to be the dilution to our share base; we also include the related shares in our fully diluted shares outstanding for GAAP earnings per share using the treasury stock method; however, performance-based RSUsmethod. PSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period). Upon the exercise of stock options, theThe Company is currently settling all stock-based awards are gross settled or net settled at the election of the award holder, and the exercise of stock appreciation rights and vesting of RSUs and performance-based RSUs, the awards are settled on a net basis with the Company remittingand remits the required tax-withholding amountamounts from its current funds.
Depreciation is a non-cash expense relating to our propertycapitalized software, leasehold improvements and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.
Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as contractor and service providerprofessional relationships, technology, memberships, customer lists and user base, and trade names, are valued and amortized over their estimated lives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment chargesimpairments of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.
FINANCIAL POSITION, LIQUIDITY, AND CAPITAL RESOURCES
Financial Position Liquidity and Capital Resources
| | | | | | | | | | | | | | |
| | September 30, 2023 | | December 31, 2022 |
| | (In thousands) |
| Cash and cash equivalents: | | | | |
| United States | | $ | 359,187 | | | $ | 311,422 | |
| All other countries | | 7,638 | | | 9,733 | |
| Total cash and cash equivalents | | 366,825 | | | 321,155 | |
| | | | |
| | | | |
| | | | |
| Long-term debt: | | | | |
| ANGI Group Senior Notes | | $ | 500,000 | | | $ | 500,000 | |
| | | | |
| | | | |
| | | | |
| Less: unamortized debt issuance costs | | 4,147 | | | 4,716 | |
| Total long-term debt, net | | $ | 495,853 | | | $ | 495,284 | |
At September 30, 2023, all of the Company’s international cash can be repatriated without significant consequences.
|
| | | | | | | | |
| | | September 30, 2017 | | December 31, 2016 |
| | | (In thousands) |
| Cash and cash equivalents: | | | | |
United States (a) | | $ | 55,507 |
| | $ | 4 |
|
All other countries (b) (c) | | 4,036 |
| | 36,373 |
|
| Total cash and cash equivalents | | $ | 59,543 |
| | $ | 36,377 |
|
| | | | | |
| Long-term debt—related party | | | | |
| Intercompany note due September 29, 2024 | | $ | 61,498 |
| | $ | — |
|
| Intercompany note due September 29, 2024 | | 15,000 |
| | — |
|
| Promissory note due October 14, 2023 | | — |
| | 42,000 |
|
| Promissory note due August 29, 2018 | | — |
| | 5,000 |
|
| Other | | 3,006 |
| | 2,838 |
|
| Total long-term debt—related party | | 79,504 |
| | 49,838 |
|
| Less: Current portion of long-term debt—related party | | — |
| | 2,838 |
|
| Total long-term debt—related party, net of current portion | | $ | 79,504 |
| | $ | 47,000 |
|
| |
(a)
| Domestically, cash equivalents primarily consist of certificates of deposit and treasury discount notes. Prior to the Combination, domestically, we participated in IAC’s centrally managed U.S. treasury management function in which IAC swept domestic cash of HomeAdvisor (US). |
| |
(b)
| Internationally, cash equivalents primarily consist of AAA rated government money market funds. |
| |
(c)
| If needed for our U.S. operations, most of the cash and cash equivalents held by the Company's foreign subsidiaries could be repatriated; however, under current law, would be subject to U.S. federal and state income taxes. We have not provided for any such tax because the Company currently does not anticipate a need to repatriate these funds to finance our U.S. operations and it is the Company's intent to indefinitely reinvest these funds outside of the U.S. |
Long-term Debt—related party
Cash flow informationFlow Information
In summary, the Company'sCompany’s cash flows are as follows:
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2023 | | 2022 |
| (In thousands) |
| Net cash provided by (used in): | | | |
| Operating activities | $ | 88,798 | | | $ | 11,358 | |
| Investing activities | $ | (35,631) | | | $ | (95,297) | |
| Financing activities | $ | (8,234) | | | $ | (13,731) | |
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | (In thousands) |
| Net cash provided by (used in): | | | |
| Operating activities | $ | 52,030 |
| | $ | 40,626 |
|
| Investing activities | (82,656 | ) | | (13,742 | ) |
| Financing activities | 55,550 |
| | (26,039 | ) |
Nine Months Ended September 30, 2017
Net cash provided by operating activities consists of a net loss of $46.3 million, adjustmentsearnings adjusted for non-cash items and the effect of $84.7changes in working capital. Non-cash adjustments include depreciation, provision for credit losses, stock-based compensation expense, non-cash lease expense (including impairment of right-of-use assets), amortization of intangibles, and deferred income taxes.
2023
Adjustments to net loss consist primarily of $70.2 million and an increase from working capital activities of $13.6 million. Adjustmentsdepreciation, $67.3 million of provision for non-cash items primarily consist of $120.3credit losses, $33.7 million of stock-based compensation expense, $71.4$9.6 million of deferred income taxes, $20.6 million of bad debtnon-cash lease expense, $9.7 million of depreciation and $6.9$8.0 million of amortization of intangibles. The deferred income tax benefit primarily relates to the modification charge for the conversion and acceleration of stock-based awards and the net operating loss created by both the exercise of HomeAdvisor stock-based awards primarilydecrease from changes in the first quarter of 2017 and one-time
charges related to the Combination. The changes from working capital activitiesconsists primarily consist of an increase of $41.8$50.7 million in accounts receivable, a decrease of $17.4 million in operating lease liabilities, and an increase of $13.5 million in accounts payable and other current liabilities and an increase in deferred revenue of $7.8 million, partially offset by anliabilities. The increase in accounts receivable is due primarily to timing of $30.1 million and an increasecash receipts. The decrease in other current assetsoperating lease liabilities is due to cash payments on leases net of $6.0 million.interest accretion. The increase in accounts payable and other current liabilities is due, to an increase in payables and accruals duepart, to increased advertising expenses and an increase in accrued severance and retention costs and accrued professional fees related to the Combination. The increase in deferred revenue is due to growth in subscription sales to service professionals. The increase in accounts receivable is primarily due to revenue growth at North America. The increase in other current assets is due to an increase in prepaid marketing.
Net cash used in investing activities includes $66.4 million of cash used for the acquisitions of Angie's List, MyBuilder and HomeStars, and capital expenditures of $16.3 million, primarily related to investments in internal development of software to support our products and services and computer hardware. The cash used for the acquisition of Angie's List includes $61.5 million that the Company lent to Angie's List to fund the repayment of Angie's List debt outstanding immediately prior to the Combination.
Net cash provided by financing activities includes proceeds from the borrowings of related party debt of $131.4 million, including $61.5 million in borrowings from IAC used by the Company to fund the repayment of Angie's List debt immediately prior to the Combination, cash transfers of $30.2 million from IAC pursuant to IAC's centrally managed U.S. treasury management function and funds returned from escrow for the MyHammer tender offer of $10.6 million, partially offset by principal payments on related party debt of $104.1 million and the purchase of noncontrolling interests of $12.6 million.
Nine Months Ended September 30, 2016
Net cash provided by operating activities consists of net earnings of $8.6 million, adjustments for non-cash items of $24.9 million and an increase from working capital activities of $7.2 million. Adjustments for non-cash items primarily consist of $12.3 million of bad debt expense, $6.7 million of stock-based compensation expense and $5.8 million of depreciation. The changes from working capital activities primarily consist of increases in accounts payable and other current liabilities of $18.3 million, deferred revenue of $6.2 million and income taxes payable of $4.7 million, partially offset by an increase in accounts receivable of $21.0 million. The increase in accounts payable and other current liabilities is primarily due to the timing of payments. The increase in deferred revenue is primarily due to growth in subscription sales to service professionals. The increase in income taxes payable is primarily due to current year income tax accruals in excess of current year income tax payments. The increase in accounts receivable is primarily due to revenue growth in North America.
Net cash used in investing activities includes capital expenditures of $13.7$36.1 million primarily related to an increaseinvestments in internally developed software.capitalized software to support the Company’s products and services and purchases of marketable debt securities of $12.4 million, partially offset by maturities of marketable debt securities of $12.5 million.
Net cash used in financing activities includes cash transfers of $26.5$4.8 million to IAC pursuant to IAC's centrally managed U.S. treasury management function.
Liquidity and capital resources
For periods prior to the Combination
Our principal sources of liquidity have historically been cash flows generated from operations and, in periods prior to the Combination, the funding we received from IAC, including loans from certain IAC foreign subsidiaries, which have been primarily used to fund acquisitions, as well as our cash and cash equivalents. These sources have been sufficient to enable us to fund our normal operating requirements, including capital expenditures, and our acquisitions.
In connection with the Combination
All outstanding long-term debt—related party amounts due between IAC and the HomeAdvisor business were settled prior to the completion of the Combination, with the exception of a promissory note sold to a foreign subsidiary of IAC that is not part of the HomeAdvisor business in the amount of €2.4 million ($2.8 million at September 30, 2017).
On September 29, 2017, the Company and IAC entered into two intercompany notes (collectively referred to as "Intercompany Notes") as follows: (i) a Payoff Intercompany Note, which provided the funds necessary to repay the outstanding balance under Angie's List's existing credit agreement, totaling approximately $61.5 million; and (ii) a Working Capital Intercompany Note, which provided the Company with $15 million for working capital purposes. On November 1, 2017, the Company entered into a credit agreement which provides for a five-year term loan A facility of $275 million ("Term
Loan"). The Term Loan is guaranteed by ANGI Homeservices' wholly-owned material domestic subsidiaries and is secured by substantially all assets of ANGI Homeservices and the guarantors, subject to certain exceptions. The Term Loan currently bears interest at LIBOR plus 200 basis points, which is subject to change based on ANGI Homeservices' consolidated net leverage ratio. Interest payments are due at least quarterly through the term of the loan. The Term Loan also requires quarterly amortization payments of 1.25% of the original principal amount thereof in the first three years, 2.5% in the fourth year and 3.75% thereafter. A portion of the proceeds of the loan were used to repay the Intercompany Notes outstanding to IAC and its subsidiaries and the remaining proceeds will be used for general corporate purposes.
The Company believes its existing cash and cash equivalents, including the proceeds of the Term Loan, will be sufficient to fund our normal operating requirements, including capital expenditures (which we expect to be approximately 100% higher in 2017 than 2016 due to our sales center and corporate headquarters expansion), debt service, the payment of withholding taxes on behalf of employees for net-settled stock-based awards that were net settled and investing$3.4 million for the repurchase of 1.1 million shares of Angi Inc. Class A common stock, on a settlement date basis, at an average price of $3.22 per share.
2022
Adjustments to net loss consist primarily of $82.2 million of provision for credit losses, $45.1 million of depreciation, $38.8 million of stock-based compensation expense, $11.5 million of non-cash lease expense (including impairment of right-of-use assets), and $11.4 million of amortization of intangibles, partially offset by deferred income taxes of $14.0 million. The decrease from changes in working capital consists primarily of an increase of $102.4 million in accounts receivable, an increase of $10.0 million in other assets, and a decrease of $13.2 million in operating lease liabilities, partially offset by increases of $26.7 million in accounts payable and other commitmentsliabilities. The increase in accounts receivable is due primarily to revenue growth, primarily attributable to Services. The increase in other assets is primarily due to an increase in capitalized sales commissions. The decrease in operating lease liabilities is due to cash payments on leases net of interest accretion. The increase in accounts payable and other liabilities is primarily due to increases in accrued expenses related to the 2021 brand integration initiative and accrued roofing material costs related to Roofing.
Net cash used in investing activities includes $95.5 million of capital expenditures, primarily related to investments in capitalized software to support the Company’s products and services.
Net cash used in financing activities includes $8.1 million for the foreseeable future.repurchase of 1.0 million shares of Angi Inc. Class A common stock, on a settlement date basis, at an average price of $7.80 per share and $5.6 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled.
Liquidity and Capital Resources
Share Repurchase Authorizations and Activity
During the nine months ended September 30, 2023, the Company repurchased 1.1 million shares, on a trade date basis, of its common stock at an average price of $3.22 per share, or $3.4 million in aggregate. The Company had 14.0 million shares remaining in its share repurchase authorization as of November 3, 2023. The Company may purchase its shares pursuant to its authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors the Company’s management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
As of the date of this filing, the Company intends to put in place a share repurchase plan with the intent of utilizing the full 14.0 million shares remaining in its stock repurchase authorization. The plan will be subject to price and volume limitations.
Outstanding Stock-based Awards
The Company may settle equity awards on a gross or a net basis depending upon factors deemed relevant at the time, and if settledon a net basis, Angi remits withholding taxes on behalf of the employee. At IAC’s option, certain Angi stock appreciation rights can be settled in either Class A shares of Angi or shares of IAC common stock. If settled in IAC common stock, the Company reimburses IAC in either cash or through the issuance of Class A shares to IAC. The Company currently settles all equity awards on a net basis.
Pursuant to the employee matters agreement, in the event of a distribution of Angi capital stock to IAC stockholders in a transaction intended to qualify as tax-free for U.S. federal income tax purposes, the Compensation Committee of the IAC Board of Directors has the exclusive authority to determine the treatment of outstanding IAC equity awards. Such authority includes (but is not limited to) the ability to convert all or part of IAC equity awards outstanding immediately prior to the distribution into equity awards denominated in shares of Angi Class A Common Stock for no compensation, which Angi would be obligated to assume and which would be dilutive to Angi’s stockholders.
The following table summarizes the aggregate intrinsic value of all awards outstanding as of November 3, 2023;assuming these awards were net settled on that date, the withholding taxes that would be paid by the Company on behalf of employees upon exercise or vesting that would be payable (assuming these equity awards are net settled with a 50% tax rate), and the shares that would have been issued are as follows:
| | | | | | | | | | | | | | | | | |
| Aggregate intrinsic value of awards outstanding | | Estimated withholding taxes payable | | Estimated shares to be issued |
| (In thousands) |
| | | | | |
| | | | | |
RSUs and other equity awards(a)(b) | 42,262 | | | 20,356 | | | 13,117 | |
| Total outstanding employee stock-based awards | $ | 42,262 | | | $ | 20,356 | | | 13,117 | |
_______________(a)Includes stock options and subsidiary denominated equity.
(b)The number of shares ultimately needed to settle subsidiary denominated equity awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant award at the time of exercise. In addition, the number of shares required to settle these awards will be impacted by movement in the Company’s stock price.
Contractual Obligations
At September 30, 2023, there have been no material changes outside the ordinary course of business to the Company's contractual obligations since the disclosures for the year ended December 31, 2022, included in the Company's Annual Report on Form 10-K.
Capital Expenditures
The Company’s 2023 capital expenditures are expected to be lower than 2022 capital expenditures of $116.4 million by approximately 55%, due primarily to decreased investment in capitalized software.
Liquidity Assessment
The Company’s liquidity could be negatively affected by a decrease in demand for ourits products and services. The Company’s indebtedness could limit our ability to: (i) obtain additional financingservices due to fund working capital needs, acquisitions, capital expenditures or debt serviceeconomic or other requirements; and (ii) use operating cash flow to make acquisitions, capital expenditures, invest in other areas, such as developing properties and exploiting business opportunities, in the event a default has occurred or in certain circumstances our leverage ratio (as defined in the ANGI Homeservices credit agreement) exceeds 4.50 to 1.0, and our interest coverage ratio is less than 2.5 to 1.0. factors.
At September 30, 2017,2023, IAC holdsheld all Class B shares of ANGI HomeservicesAngi Inc., which represents 87.1%represent 83.8% of the economic interest and 98.5%98.1% of the voting interest of ANGI Homeservices.the Company. As a result, IAC has the ability to control ANGI Homeservices’Angi’s financing activities, including the issuance of additional debt and equity securities by ANGI HomeservicesAngi or any of its subsidiaries, or the incurrence of other indebtedness generally. While ANGI HomeservicesAngi is expected to have the ability to access debt and equity markets if needed, such transactions may require the approval of IAC due to its control of the majority of the outstanding voting power of ANGI Homeservices’Angi’s capital stock and its representation on the ANGI HomeservicesAngi board of directors.
The Company believes its existing cash, cash equivalents, and expected positive cash flows generated from operations will be sufficient to fund its normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes paid on behalf of employees for net-settled stock-based awards, and investing and other commitments, for the next twelve months. We may elect to raise additional capital through the sale of additional equity or debt financing to fund business activities such as strategic acquisitions, share repurchases, or other purposes beyond the next twelve months.
Additional financing may not be available at all or on terms favorable to us.
Contractual Obligations
Our principal commitments consist of obligations under related party debtthe Company or at all, and operating leases for office space and equipment. The following table summarizes our contractual obligations as of September 30, 2017.may also be impacted by any disruptions in the financial markets. In addition, the Company’s existing indebtedness could limit its ability to obtain additional financing.
|
| | | | | | | | | | | | | | | | | | | |
| | Payments due by period |
| | Less than
1 year | | 1 to 3
years | | 3 to 5
years | | More than
5 years | | Total |
| | (in thousands) |
Long-term debt—related party(a) | $ | 3,475 |
| | $ | 10,345 |
| | $ | 6,953 |
| | $ | 83,460 |
| | $ | 104,233 |
|
Operating leases(b) | 9,786 |
| | 24,113 |
| | 17,734 |
| | 33,933 |
| | 85,566 |
|
Purchase obligations(c) | 509 |
| | 89 |
| | — |
| | — |
| | 598 |
|
Total contractual obligations(d) | $ | 13,770 |
| | $ | 34,547 |
| | $ | 24,687 |
| | $ | 117,393 |
| | $ | 190,397 |
|
| |
| Long-term debt—related party consists of intercompany notes issued to IAC which bear interest at both variable and fixed rates. Long-term debt—related party at September 30, 2017 consists of $76.7 million, which bear interest at variable rates, and $2.8 million, which bears interest at a fixed rate. The variable rate debt bears interest at LIBOR plus 3.25% per annum, or, in the case of amounts denominated in a foreign currency, the applicable foreign benchmark rate plus 3.25% per annum, or 4.48%, at September 30, 2017. The amount of interest ultimately paid on the variable rate debt may differ based on changes in interest rates. See "Note 10— Related Party Transactions with IAC" to the consolidated and combined financial statements included in "Item 1. Consolidated and Combined Financial Statements" for additional information on Long-term debt—related party. On November 1, 2017, ANGI Homeservices entered into a credit agreement which provides for a five-year term loan A facility of $275 million. The Term Loan currently bears interest at LIBOR plus 200 basis points. The Term Loan is sensitive to changes in interest rates. See "Note 12—Subsequent Event" to the consolidated and combined financial statements included in "Item 1. Consolidated and Combined Financial Statements" for additional information on this new long-term debt arrangement. |
| |
(b)
| We lease office space, data center facilities and equipment used in connection with our operations under various operating leases, the majority of which contain escalation clauses. In March 2017, we entered into a new 10.5 year lease for our call center in New York and a new 10.5 year lease for our corporate headquarters in Denver, Colorado. |
| |
(c)
| Purchase obligations primarily consist of advertising commitments. |
| |
(d)
| We have excluded $1.3 million in unrecognized tax benefits from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid. For additional information on income taxes, see "Note 2—Income Taxes" to the consolidated and combined financial statements included in "Item 1. Consolidated and Combined Financial Statements." |
Off-Balance Sheet Arrangements
Other than the items described above, we have no significant off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign currency exchange risk
We conduct business in certain foreign markets, principally in the European Union. For both the three and nine months ended September 30, 2017, international revenue accounted for 9% of revenue. For the three and nine months ended September 30, 2016, international revenue accounted for 6% and 7%, respectively, of revenue. Our primary exposure to foreign currency exchange risk relates to investments in foreign subsidiaries that transact business in a functional currency other than the U.S. dollar, primarily the Euro. As foreign currency exchange rates change, translation of the statement of operations of our international businesses into U.S. dollars affects year-over-year comparability of operating results. The U.S. dollar depreciated against the Euro by approximately 5% on average duringDuring the nine months ended September 30, 2017 compared2023, there have been no material changes to the nine months ended September 30, 2016.
Historically, we have not hedged any foreign currency exposures. Our continued international expansion increases our exposure to exchange rate fluctuations and as a result such fluctuations could have a significant impact on our future results of operations.
Interest rate risk
On November 1, 2017, ANGI Homeservices entered into a credit agreement which provides for a five-year term loan A facility of $275 million. The Term Loan currently bears interest at LIBOR plus 200 basis points. The Term Loan isCompany’s instruments or positions that are sensitive to changesmarket risk since the disclosure in interest rates. See "Note 12—Subsequent Event" toour Annual Report on Form 10-K for the consolidated and combined financial statements included in "Item 1. Consolidated and Combined Financial Statements" for additional information on this new long-term debt arrangement.year ended December 31, 2022.
Item 4. Controls and Procedures
The Company monitors and evaluates on an ongoing basis its disclosure controls and procedures and internal control over financial reporting in order to improve itstheir overall effectiveness. InDuring the course of these evaluations, the Company modifies and refines its internal processes as conditions warrant.
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), the Company’s management, including our principal executive and principal financial officers, or persons performing similar functions, evaluated the effectiveness of the Company'sCompany’s disclosure controls and procedures as defined by Rule 13a-15(e) under the Exchange Act. Based on this evaluation, management has concluded that the Company'sCompany’s disclosure controls and procedures were effective as of the end of the period covered by this report in providing reasonable assurance that information we are required to disclose in our filings with the Securities and Exchange Commission (the “Commission:) under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission'sCommission’s rules and Forms,forms, and include controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
On September 29, 2017, the Company completed its combination with Angie's List. In making our assessment of changes in internal control over financial reporting as of September 30, 2017, the Company’s management has excluded the operations and certain assets of Angie’s List. The revenue and the total assets of Angie’s List that were not integrated into our existing internal control environment are 0.4% and 0.1% of our consolidated revenue for the three and nine months ended September 30, 2017, respectively, and 5.3% of our consolidated total assets as of September 30, 2017. We are in the process of integrating Angie’s List into our internal control over financial reporting processes; the integration is expected to be completed in fiscal year 2018.
With the exception of the acquisition of Angie’s List, thereThere were no changes to the Company'sCompany’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Overview
In the ordinary course of business, the Company and its subsidiaries are (or may become) parties to litigationclaims, suits, regulatory and government investigations, and other proceedings involving property, personal injury, contract, intellectual property, privacy, tax, labor and employment, competition, commercial disputes, consumer protection and other claims, as well as stockholder derivative actions, class action lawsuits and other matters. Such claims, suits, regulatory and government investigations, and other proceedings could result in fines, civil or criminal penalties, or other adverse consequences. The amounts that may be recovered in such matters may be subject to insurance coverage. Although the results of legal proceedings and claims cannot be predicted with certainty, neither the Company nor any of its subsidiaries is currently a party to any legal proceedings the outcome of which, we believe, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition or results of operations. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.
Rules of the Securities and Exchange Commission require the description of material pending legal proceedings (other than ordinary, routine litigation incident to the registrant’s business) and advise that proceedings ordinarily need not be described if they primarily involve damages claims for amounts (exclusive of interest and costs) not exceeding 10% of the current assets of the registrant and its subsidiaries on a consolidated basis. In the judgment of Company management, none of the pending litigation matters which we are defending, including those described below, involves or is likely to involve amounts of that magnitude. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these mattersthey may be material to our financial position or operations based upon the standard set forth in the rules of the Securities and Exchange Commission.
Service Professional Class Action Litigation against HomeAdvisor
In July 2016, a putative class action, Airquip, Inc. et al. v. HomeAdvisor, Inc. et al., No. l:1:16-cv-1849, was filed in the U.S. District Court for the District of Colorado. The complaint, as amended allegesin November 2016, alleged that HomeAdvisor engages in certain deceptive practices affecting the service professionalsSPs who join its network, including charging them for substandard customer leads orand failing to disclose certain charges. The complaint seekssought certification of a nationwide class consisting of all HomeAdvisor service professionalsSPs since October 2012, assertsasserted claims offor fraud, breach of implied contract, unjust enrichment and violation of the federal RICO statute and the Colorado Consumer Protection Act, ("CCPA") and the federal RICO statute and seekssought injunctive relief and damages in an unspecified amount.
In July 2018, plaintiffs’ counsel filed a separate putative class action in the U.S. District Court for the District of Colorado, Costello et al. v. HomeAdvisor, Inc. et al., No. 1:18-cv-1802, on behalf of the nine SPs also proposed as new plaintiffs in the Airquip case, naming as defendants HomeAdvisor, Angi and IAC (as well as an unrelated company), and asserting 45 claims largely duplicative of those asserted in a proposed second amended complaint in the Airquip case. In November 2018, the judge presiding over the Airquip case issued an order consolidating the two cases to proceed before him under the caption In re HomeAdvisor, Inc. Litigation.
In September 2019, the court granted the plaintiffs’ motion for leave to file a consolidated second amended complaint, naming as defendants, in addition to HomeAdvisor, Angi and IAC, CraftJack, Inc. (a wholly-owned subsidiary of the Company) and two unrelated entities. In October and December 2016,2019, the four defendants affiliated with HomeAdvisor filed a motionmotions to dismiss certain claims in the RICO and CCPA claims.amended complaint. In September 2017,2020, the court issued an order granting in part and denying in part the defendants’ motions to dismiss; the court’s dismissal of the RICO claim was with prejudice as to all the defendants. In May 2022, the plaintiffs filed a motion for class certification. In June 2022, the Company opposed the motion, and dismissing those claims. In October 2017, HomeAdvisor filed an answer denying the material allegations of the remaining claims in the complaint. Discovery is under way, and the issue of class certificationwhich remains to be litigated. pending.
The Company believes that the allegations in this lawsuit are without merit and will continue to defend vigorously against themthem.
Securities Class Action Litigation Challenging HomeAdvisor’s Combination with Angie’s List
On July 18, 2017, a purported shareholder class action was filed in federal court in Indianapolis against Angie’s List, the members of its board of directors, IAC/InterActiveCorp ("IAC") and two related corporate entities, asserting violations of the federal securities laws based upon alleged material omissions from the registration statement related to the proposed combination of the HomeAdvisor and Angie’s List businesses into a single, publicly traded company. See Parshall v. Angie’s List, Inc. et al., No. 1:17-cv-2418 (U.S. District Court, Southern District of Indiana). On July 20, 2017, a second, substantially similar purported shareholder class action was filed in the same court. See Pill v. Angie’s List, Inc. et al., No. 1:17-cv-2461 (U.S. District Court, Southern District of Indiana). On September 11, 2017, a third, substantially similar purported shareholder class action was filed in the same court. See Chojar v. Angie’s List, Inc. et al., No. 1:17-cv-3208 (U.S. District Court, Southern District of Indiana). The gravamen of the complaints in these lawsuits is that the registration statement was materially misleading to shareholders of Angie’s List because it omitted: (i) certain financial projections, assumptions and other information relied upon by Angie’s List’s financial advisors in rendering their fairness opinions with respect to the proposed combination, (ii) certain information about Angie’s List’s board members’ potential conflicts of interest and (iii) certain information about the background of the transaction. The complaints asserted violations of Sections 14-a and 20-a of the Securities Exchange Act of 1934 and sought to enjoin the transaction, require the issuance of a revised registration statement and rescind the transaction and obtain damages should it go forward. On September 19, 2017: (i) the parties in these three lawsuits entered into a memorandum of understanding in which the plaintiffs agreed to dismiss their claims in exchange for the filing by Angie’s List of agreed-upon supplemental disclosures to the registration statement, with the court in Parshall case to retain jurisdiction for purposes of adjudicating the anticipated application by plaintiffs’ counsel for a mootness fee award, and
(ii) Angie’s List filed the agreed-upon supplemental disclosures on a Form 8-K. In accordance with the parties’ memorandum of understanding, the plaintiffs filed notices of dismissal with prejudice in the Parshall, Pill, and Chojar cases on September 29, October 2, and September 29, 2017, respectively.
Item 1A. Risk Factors
This quarterly report on Form 10-Q contains "forward-looking statements"“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "anticipates," "estimates," "expects," "plans"“anticipates,” “estimates,” “expects,” “plans,” “intends,” “will continue,” “may”, “could” and "believes,"“believes,” among others,similar expressions, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to: (i) theto our future business, financial condition, results of operations and financial performance, of ANGI Homeservices, (ii) theour business prospects and strategy, trends and prospects of ANGI Homeservices, (iii) trends in the home services industry (iv) expected synergies and other benefits to be realized by ANGI Homeservices following the Combination and (v) other similar matters. These forward-looking statements are based on Company management's current expectations and assumptions
about future events as of the date of this report, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Actual results could differ materially from those contained in these forward-looking statements for a variety of reasons, including, among others: (i) the possibility that the anticipated cost savings and other benefits of the Combination are not realized when expected or at all (including as a result of the impact of, or problems arising from, the integration of HomeAdvisor and Angie’s List, or as a result of changes in the economy and competitive factors in the areas in which they do business), (ii) diversion of management’s attention from ongoing business operations and opportunities as a result of the Combination, (iii) potential adverse reactions or changes to business or employee relationships (including those resulting from the Combination), (iv) thecontinued migration of the home services market online, (ii) our ability to market our various products and services in a successful and cost-effective manner, (iii) the continued display of links to websites offering our products and services in a prominent manner in search results, (iv) our ability to successfully implement our brand initiative and expand Services (our pre-priced offerings), while balancing the overall mix of service requests and directory services on Angi platforms, (v) our ability to establish and maintain relationships with quality and trustworthy service professionals, (vi) our continued ability to develop and monetize versions of our products and services for mobile and other digital devices, (vii) our ability to access, share and use personal data about consumers, (viii) our continued ability to communicate with consumers and service professionals via e-mail (or other sufficient means), (xix) any challenge to the contractor classification or employment status of our service professionals, (x) our ability to compete, (xi) adverse economic events or trends (particularly those that impact consumer confidence and spending behavior), (xii) our ability to build, maintain andand/or enhance our various brands, (vii)(xiii) the adverse impact of COVID-19 and other similar outbreaks on our ability to attract and convert visitors to our various websites into users and customers, (viii) our ability to offer new or alternative products and services in a cost-effective manner and consumer and service professional acceptance of these products and services, (ix)businesses, (xiv) our ability to protect our systems, technology and infrastructure from cyberattacks and to protect personal and confidential user information (x)(including credit card information), as well as the impact of cyberattacks experienced by third parties, (xv) the occurrence of data security breaches and/or fraud, (xvi) increased liabilities and costs related to the processing, storage, use and disclosure of personal and confidential user information, (xvii) the integrity, quality, efficiency and scalability of our systems, technology and infrastructures (and those of third parties with whom we do business), (xviii) changes in key personnel, (xix) various risks related to our relationship with IAC, (xx) our ability to expand successfully into international markets, (xi) the abilitygenerate sufficient cash to retain key personnel, (xii) the potential liability for a failureservice our indebtedness and (xxi) certain risks related to meet regulatory requirements and (xiii) regulatory changes. ownership of our Class A common stock.
Certain of these and other risks and uncertainties are set forth and discussed under the caption "Risk Factors" in the proxy statement/prospectus dated August 30, 2017 filed by the Companyour filings with the SEC, pursuant to Rule 424(b)(3)including in Part I-Item 1A-Risk Factors of our Annual Report on Form 10-K for the Securities Act of 1933, as amended (the "Combination Prospectus").
fiscal year ended December 31, 2022. Other unknown or unpredictable factors that could also adversely affect the Company'sour business, financial condition and operating results may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this quarterly report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of Company management as of the date of this quarterly report. ANGI Homeservices doesWe do not undertake to update these forward-looking statements.
Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors set forth and discussed under the caption "Risk Factors" in the Combination Prospectus, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
On September 29, 2017, in connection with (and prior to the completion of) the Combination, theThe Company issued 414,753,515did not issue or sell any shares of its Class B Common Stock to IAC in exchange for the contribution to the Company of the HomeAdvisor business and approximately $1.9 million in cash to fund the aggregate cash consideration payable to shareholders of Angie's List in the Combination. Such issuance was exempt from registrationcommon stock or any other equity securities pursuant to Section 4(a)(2) ofunregistered transactions during the Securities Act of 1933, as amended.quarter ended September 30, 2023.
Issuer Purchases of Equity Securities
The Company did not purchase any shares of its common stock during the quarter ended September 30, 2017.2023. As of that date, 13,971,371 shares of Angi Class A common stock remained available for repurchase under the Company's previously announced March 2020 repurchase authorization. The Company may repurchase shares pursuant to this repurchase authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
As of the date of this filing, the Company intends to put in place a share repurchase plan with the intent of utilizing the full 13,971,371 shares remaining in its stock repurchase authorization. The plan will be subject to price and volume limitations.
Item 5. Other Information
Rule 10b5-1 Trading Plans
On August 15, 2023, Kulesh Shanmugasundaram, an officer of the Company (Chief Technology Officer), adopted a Rule 10b5-1 trading plan that provides for the sale of up to 48,000 shares of Angi Class A common stock and all of the net shares of Angi Class A common stock acquired upon the vesting of up to 200,000 restricted stock units scheduled to vest on March 1, 2024, subject to continued service (the “Plan”). Sales pursuant to the Plan are scheduled to occur (assuming the satisfaction of the applicable price and other conditions set forth in the Plan) during the period commencing on November 14, 2023 and ending on August 30, 2024, absent the earlier amendment or termination of the Plan in accordance with its terms. The Plan is intended to qualify for the affirmative defense of Rule 10b5-1.
No other director or officer of the Company adopted or terminated a Rule 10b5-1 trading plan or non-Rule 10b5-1 trading arrangement (as such term is defined in Item 408(a) of Regulation S-K) during the quarter ended September 30, 2023.
Item 6. Exhibits
The documents set forth below, numbered in accordance with Item 601 of Regulation S-K, are filed herewith, incorporated by reference herein by reference to the location indicated or furnished herewith.
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| Exhibit Number | | | Description | | Location |
2.13.1 |
| | | Agreement and Plan of Merger, dated as of May 1, 2017, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of August 26, 2017, by and among Angie's List, Inc., IAC/InterActiveCorp, ANGI Homeservices Inc. and Casa Merger Sub, Inc. | | |
3.1 |
| | | Amended and Restated Certificate of Incorporation of ANGI Homeservices Inc. | | |
| 3.2 | | | | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Angi Inc.
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3.23.3 |
| | | Amended and Restated Bylaws of ANGI HomeservicesAngi Inc. | |
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4.1 |
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10.1 |
| | | Contribution Agreement, dated as of September 29, 2017, by and between ANGI Homeservices Inc. and IAC/InterActiveCorp.(1) | |
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10.2 |
| | | Services Agreement, dated as of September 29, 2017, by and between ANGI Homeservices Inc. and IAC/InterActiveCorp.(1)
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10.3 |
| | | Tax Sharing Agreement, dated as of September 29, 2017, by and between ANGI Homeservices Inc. and IAC/InterActiveCorp. | |
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10.4 |
| | | Employee Matters Agreement, dated as of September 29, 2017, by and between ANGI Homeservices Inc. and IAC/InterActiveCorp. (1)
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10.5 |
| | | Intercompany Note, dated as of September 29, 2017, by and between ANGI Homeservices Inc. and IAC Group, LLC. (1) | |
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10.6 |
| | | Intercompany Note, dated as of September 29, 2017, by and between ANGI Homeservices Inc. and IAC Group, LLC. (1)
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10.7 |
| | | ANGI Homeservices Inc. 2017 Stock and Annual Incentive Plan. (2) | |
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| | | Form of Notice and Terms and Conditions for Restricted Stock Units granted under the ANGI Homeservices Inc. 2017 Stock and Annual Incentive Plan. (2)(3) | |
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| | | Form of Notice and Terms and Conditions for Stock Options granted under the ANGI Homeservices Inc. 2017 Stock and Annual Incentive Plan. (2)(3) | | |
10.10 |
| | | Form of Terms and Conditions for Stock Appreciation Rights granted under the ANGI Homeservices Inc. 2017 Stock and Annual Incentive Plan. (2)
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10.11 |
| | | Employment Agreement between Chris Terrill and ANGI Homeservices Inc., dated as of September 28, 2017. (2) | |
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10.12 |
| | | Employment Agreement between William B. Ridenour and ANGI Homeservices Inc., dated as of August 24, 2017. (2)
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10.13 |
| | | Employment Agreement between Craig Smith and ANGI Homeservices Inc., dated as of August 24, 2017. (2)
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10.14 |
| | | Employment Agreement between Allison Lowrie and ANGI Homeservices Inc., dated as of August 24, 2017. (2)
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| | | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (3)(1) | | |
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| | | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (3)(1) | | |
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| | | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4)(2) | | |
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| | | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4)(2) | | |
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(1)101.INS | Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted attachment to | | Inline XBRL Instance (the instance document does not appear in the SEC on a confidential basis upon request.Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
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(2)101.SCH | Reflects management contracts and management and director compensatory plans. |
| Inline XBRL Taxonomy Extension Schema(1) | | |
(3)101.CAL | Filed herewith. |
| Inline XBRL Taxonomy Extension Calculation(1) | | |
(4)101.DEF | Furnished herewith. | | Inline XBRL Taxonomy Extension Definition(1) | | |
| 101.LAB | | | Inline XBRL Taxonomy Extension Labels(1) | | |
| 101.PRE | | | Inline XBRL Taxonomy Extension Presentation(1) | | |
| 104 | | | Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101) | | |
(1)Filed herewith.
(2)Furnished herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| Dated: | November 7, 2023 | | | |
| | Angi Inc. |
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Dated: | November 9, 2017 | By: | | |
| | ANGI Homeservices Inc. |
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| | By: | | /s/ GLENN H. SCHIFFMAN |
| | | | Glenn H. Schiffman |
| | | | Chief Financial Officer |
| ANDREW RUSSAKOFF |
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| | | Andrew Russakoff |
Signature | Title | | Date |
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/s/ GLENN H. SCHIFFMAN | Chief Financial Officer | | November 9, 2017 |
Glenn H. Schiffman | | | |
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| Signature | Title | Date |
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| /s/ ANDREW RUSSAKOFF | Chief Financial Officer | November 7, 2023 |
| Andrew Russakoff |
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