As filed with the Securities and Exchange Commission on May 7,August 6, 2021
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31,June 30, 2021
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. 001-38220
Angi Inc.
(Exact name of Registrant as specified in its charter) | | | | | | | | |
| Delaware | | 82-1204801 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
3601 Walnut Street, Denver, CO 80205
(Address of Registrant’s principal executive offices)
(303) 963-7200
(Registrant’s telephone number, including area code)
ANGI Homeservices Inc.
(Former name or former address, if changed since last report)
| | | | | | | | | | | | | | |
| 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 Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant 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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of AprilJuly 30, 2021, the following shares of the Registrant’s common stock were outstanding:
| | | | | |
| Class A Common Stock | 82,445,01182,217,972 | |
| Class B Common Stock | 421,958,021421,977,004 | |
| Class C Common Stock | 0 | |
| Total outstanding Common Stock | 504,403,032504,194,976 | |
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited) | | | March 31, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 |
| | (In thousands, except par value amounts) | | (In thousands, except par value amounts) |
| ASSETS | ASSETS | | ASSETS | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 777,041 | | | $ | 812,705 | | Cash and cash equivalents | $ | 584,260 | | | $ | 812,705 | |
| Marketable debt securities | Marketable debt securities | — | | | 49,995 | | Marketable debt securities | 0 | | | 49,995 | |
| Accounts receivable, net of reserves of $28,908 and $27,839, respectively | 56,915 | | | 43,148 | | |
| Accounts receivable, net of reserves of $35,862 and $27,839, respectively | | Accounts receivable, net of reserves of $35,862 and $27,839, respectively | 62,052 | | | 43,148 | |
| Other current assets | Other current assets | 74,037 | | | 71,958 | | Other current assets | 67,787 | | | 71,958 | |
| Total current assets | Total current assets | 907,993 | | | 977,806 | | Total current assets | 714,099 | | | 977,806 | |
| | Capitalized software, leasehold improvements and equipment, net | Capitalized software, leasehold improvements and equipment, net | 111,431 | | | 108,842 | | Capitalized software, leasehold improvements and equipment, net | 111,054 | | | 108,842 | |
| Goodwill | Goodwill | 891,286 | | | 891,797 | | Goodwill | 892,616 | | | 891,797 | |
| Intangible assets, net | Intangible assets, net | 204,626 | | | 209,717 | | Intangible assets, net | 201,166 | | | 209,717 | |
| | Other non-current assets | 186,253 | | | 180,020 | | |
| Other non-current assets, net | | Other non-current assets, net | 187,793 | | | 180,020 | |
| TOTAL ASSETS | TOTAL ASSETS | $ | 2,301,589 | | | $ | 2,368,182 | | TOTAL ASSETS | $ | 2,106,728 | | | $ | 2,368,182 | |
| | LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| LIABILITIES: | LIABILITIES: | | LIABILITIES: | |
| | Accounts payable | Accounts payable | 35,251 | | | 30,805 | | Accounts payable | $ | 53,230 | | | $ | 30,805 | |
| Deferred revenue | Deferred revenue | 57,675 | | | 54,654 | | Deferred revenue | 60,053 | | | 54,654 | |
| Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 154,394 | | | 148,219 | | Accrued expenses and other current liabilities | 178,629 | | | 148,219 | |
| Total current liabilities | Total current liabilities | 247,320 | | | 233,678 | | Total current liabilities | 291,912 | | | 233,678 | |
| | Long-term debt, net | Long-term debt, net | 705,987 | | | 712,277 | | Long-term debt, net | 494,195 | | | 712,277 | |
| Deferred income taxes | Deferred income taxes | 1,315 | | | 1,296 | | Deferred income taxes | 1,662 | | | 1,296 | |
| Other long-term liabilities | Other long-term liabilities | 108,416 | | | 111,710 | | Other long-term liabilities | 104,998 | | | 111,710 | |
| | Redeemable noncontrolling interests | Redeemable noncontrolling interests | 4,608 | | | 26,364 | | Redeemable noncontrolling interests | 4,536 | | | 26,364 | |
| | Commitments and contingencies | Commitments and contingencies | 0 | | 0 | Commitments and contingencies | 0 | | 0 |
| | SHAREHOLDERS’ EQUITY: | SHAREHOLDERS’ EQUITY: | | SHAREHOLDERS’ EQUITY: | |
| Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 98,408 and 94,283 shares, respectively, and outstanding 82,088 and 78,333, respectively | 98 | | | 94 | | |
| Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 421,958 and 421,862 shares issued and outstanding | 422 | | | 422 | | |
| Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 99,111 and 94,238 shares, respectively, and outstanding 82,731 and 78,333, respectively | | Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 99,111 and 94,238 shares, respectively, and outstanding 82,731 and 78,333, respectively | 99 | | | 94 | |
| Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 421,977 and 421,862 shares issued and outstanding | | Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 421,977 and 421,862 shares issued and outstanding | 422 | | | 422 | |
| Class C common stock, $0.001 par value; authorized 1,500,000 shares; 0 shares issued and outstanding | Class C common stock, $0.001 par value; authorized 1,500,000 shares; 0 shares issued and outstanding | 0 | | | 0 | | Class C common stock, $0.001 par value; authorized 1,500,000 shares; 0 shares issued and outstanding | 0 | | | 0 | |
| Additional paid-in capital | Additional paid-in capital | 1,333,294 | | | 1,379,469 | | Additional paid-in capital | 1,338,208 | | | 1,379,469 | |
| Retained earnings | 11,680 | | | 9,749 | | |
| (Accumulated deficit) retained earnings | | (Accumulated deficit) retained earnings | (18,613) | | | 9,749 | |
| Accumulated other comprehensive income | Accumulated other comprehensive income | 4,623 | | | 4,637 | | Accumulated other comprehensive income | 5,973 | | | 4,637 | |
| Treasury stock, 16,320 and 15,905 shares, respectively | (126,997) | | | (122,081) | | |
| Treasury stock, 16,380 and 15,905 shares, respectively | | Treasury stock, 16,380 and 15,905 shares, respectively | (127,718) | | | (122,081) | |
| Total Angi Inc. shareholders’ equity | Total Angi Inc. shareholders’ equity | 1,223,120 | | | 1,272,290 | | Total Angi Inc. shareholders’ equity | 1,198,371 | | | 1,272,290 | |
| Noncontrolling interests | Noncontrolling interests | 10,823 | | | 10,567 | | Noncontrolling interests | 11,054 | | | 10,567 | |
| Total shareholders’ equity | Total shareholders’ equity | 1,233,943 | | | 1,282,857 | | Total shareholders’ equity | 1,209,425 | | | 1,282,857 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 2,301,589 | | | $ | 2,368,182 | | TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 2,106,728 | | | $ | 2,368,182 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | (In thousands, except per share data) | | (In thousands, except per share data) |
| Revenue | Revenue | $ | 387,029 | | | $ | 343,650 | | Revenue | $ | 420,988 | | | $ | 375,061 | | | $ | 808,017 | | | $ | 718,711 | |
| Operating costs and expenses: | Operating costs and expenses: | | Operating costs and expenses: | |
| Cost of revenue (exclusive of depreciation shown separately below) | Cost of revenue (exclusive of depreciation shown separately below) | 53,828 | | | 33,229 | | Cost of revenue (exclusive of depreciation shown separately below) | 69,704 | | | 41,042 | | | 123,532 | | | 74,271 | |
| Selling and marketing expense | Selling and marketing expense | 205,840 | | | 189,959 | | Selling and marketing expense | 239,031 | | | 189,984 | | | 444,871 | | | 379,943 | |
| General and administrative expense | General and administrative expense | 88,162 | | | 94,556 | | General and administrative expense | 107,486 | | | 85,451 | | | 195,648 | | | 180,007 | |
| Product development expense | Product development expense | 18,047 | | | 17,084 | | Product development expense | 18,752 | | | 15,407 | | | 36,799 | | | 32,491 | |
| Depreciation | Depreciation | 15,969 | | | 12,138 | | Depreciation | 15,058 | | | 12,555 | | | 31,027 | | | 24,693 | |
| Amortization of intangibles | Amortization of intangibles | 5,074 | | | 12,980 | | Amortization of intangibles | 3,688 | | | 12,978 | | | 8,762 | | | 25,958 | |
| Total operating costs and expenses | Total operating costs and expenses | 386,920 | | | 359,946 | | Total operating costs and expenses | 453,719 | | | 357,417 | | | 840,639 | | | 717,363 | |
| Operating income (loss) | 109 | | | (16,296) | | |
| Operating (loss) income | | Operating (loss) income | (32,731) | | | 17,644 | | | (32,622) | | | 1,348 | |
| Interest expense | Interest expense | (6,617) | | | (2,274) | | Interest expense | (5,814) | | | (1,620) | | | (12,431) | | | (3,894) | |
| Other (expense) income, net | Other (expense) income, net | (767) | | | 421 | | Other (expense) income, net | (636) | | | 212 | | | (1,403) | | | 633 | |
| Loss before income taxes | (7,275) | | | (18,149) | | |
| Income tax benefit | 9,289 | | | 8,965 | | |
| Net earnings (loss) | 2,014 | | | (9,184) | | |
| Net (earnings) loss attributable to noncontrolling interests | (83) | | | 226 | | |
| Net earnings (loss) attributable to Angi Inc. shareholders | $ | 1,931 | | | $ | (8,958) | | |
| (Loss) earnings before income taxes | | (Loss) earnings before income taxes | (39,181) | | | 16,236 | | | (46,456) | | | (1,913) | |
| Income tax benefit (provision) | | Income tax benefit (provision) | 9,129 | | | (3,025) | | | 18,418 | | | 5,940 | |
| Net (loss) earnings | | Net (loss) earnings | (30,052) | | | 13,211 | | | (28,038) | | | 4,027 | |
| Net earnings attributable to noncontrolling interests | | Net earnings attributable to noncontrolling interests | (241) | | | (544) | | | (324) | | | (318) | |
| Net (loss) earnings attributable to Angi Inc. shareholders | | Net (loss) earnings attributable to Angi Inc. shareholders | $ | (30,293) | | | $ | 12,667 | | | $ | (28,362) | | | $ | 3,709 | |
| | Per share information attributable to Angi Inc. shareholders: | Per share information attributable to Angi Inc. shareholders: | Per share information attributable to Angi Inc. shareholders: |
| Basic earnings (loss) per share | $ | 0.00 | | | $ | (0.02) | | |
| Diluted earnings (loss) per share | $ | 0.00 | | | $ | (0.02) | | |
| Basic (loss) earnings per share | | Basic (loss) earnings per share | $ | (0.06) | | | $ | 0.03 | | | $ | (0.06) | | | $ | 0.01 | |
| Diluted (loss) earnings per share | | Diluted (loss) earnings per share | $ | (0.06) | | | $ | 0.02 | | | $ | (0.06) | | | $ | 0.01 | |
| | Stock-based compensation expense by function: | Stock-based compensation expense by function: | | Stock-based compensation expense by function: | | |
| | Selling and marketing expense | Selling and marketing expense | $ | 1,017 | | | $ | 1,003 | | Selling and marketing expense | $ | 865 | | | $ | 720 | | | $ | 1,882 | | | $ | 1,723 | |
| General and administrative expense | General and administrative expense | 84 | | | 22,980 | | General and administrative expense | 7,410 | | | 13,131 | | | 7,494 | | | 36,111 | |
| Product development expense | Product development expense | 933 | | | 1,592 | | Product development expense | 1,268 | | | 908 | | | 2,201 | | | 2,500 | |
| Total stock-based compensation expense | Total stock-based compensation expense | $ | 2,034 | | | $ | 25,575 | | Total stock-based compensation expense | $ | 9,543 | | | $ | 14,759 | | | $ | 11,577 | | | $ | 40,334 | |
| |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | | (in thousands) |
| Net earnings (loss) | $ | 2,014 | | | $ | (9,184) | | |
| Net (loss) earnings | | Net (loss) earnings | $ | (30,052) | | | $ | 13,211 | | | $ | (28,038) | | | $ | 4,027 | |
| Other comprehensive income (loss): | Other comprehensive income (loss): | | Other comprehensive income (loss): | |
| Change in foreign currency translation adjustment | Change in foreign currency translation adjustment | 679 | | | (6,568) | | Change in foreign currency translation adjustment | 1,395 | | | 4,486 | | | 2,075 | | | (2,082) | |
| | Comprehensive income (loss) | 2,693 | | | (15,752) | | |
| Comprehensive (loss) income | | Comprehensive (loss) income | (28,657) | | | 17,697 | | | (25,963) | | | 1,945 | |
| Components of comprehensive (income) loss attributable to noncontrolling interests: | Components of comprehensive (income) loss attributable to noncontrolling interests: | | Components of comprehensive (income) loss attributable to noncontrolling interests: | |
| Net (earnings) loss attributable to noncontrolling interests | (83) | | | 226 | | |
| Net earnings attributable to noncontrolling interests | | Net earnings attributable to noncontrolling interests | (241) | | | (544) | | | (324) | | | (318) | |
| Change in foreign currency translation adjustment attributable to noncontrolling interests | Change in foreign currency translation adjustment attributable to noncontrolling interests | (693) | | | (46) | | Change in foreign currency translation adjustment attributable to noncontrolling interests | (45) | | | 767 | | | (739) | | | 721 | |
| Comprehensive (income) loss attributable to noncontrolling interests | Comprehensive (income) loss attributable to noncontrolling interests | (776) | | | 180 | | Comprehensive (income) loss attributable to noncontrolling interests | (286) | | | 223 | | | (1,063) | | | 403 | |
| Comprehensive income (loss) attributable to Angi Inc. shareholders | $ | 1,917 | | | $ | (15,572) | | |
| Comprehensive (loss) income attributable to Angi Inc. shareholders | | Comprehensive (loss) income attributable to Angi Inc. shareholders | $ | (28,943) | | | $ | 17,920 | | | $ | (27,026) | | | $ | 2,348 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three and Six Months Ended March 31,June 30, 2021
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Angi Inc. Shareholders’ Equity | | | | |
| | | | 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 | | | | | | | Total
Shareholders'
Equity |
| Redeemable
Noncontrolling
Interests | | | | | | | | | | | | | | | Additional Paid-in Capital | | (Accumulated Deficit) Retained Earnings | | | Treasury
Stock | | | Noncontrolling
Interests | |
| | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | | | |
| | | (In thousands) | | |
| Balance as of March 31, 2021 | $ | 4,608 | | | | $ | 98 | | | 98,408 | | | $ | 422 | | | 421,958 | | | $ | — | | | — | | | $ | 1,333,294 | | | $ | 11,680 | | | $ | 4,623 | | | $ | (126,997) | | | $ | 1,223,120 | | | $ | 10,823 | | | $ | 1,233,943 | |
| Net earnings (loss) | 48 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (30,293) | | | — | | | — | | | (30,293) | | | 194 | | | (30,099) | |
| Other comprehensive income | 8 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,350 | | | — | | | 1,350 | | | 37 | | | 1,387 | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 11,477 | | | — | | | — | | | — | | | 11,477 | | | — | | | 11,477 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 1 | | | 697 | | | — | | | — | | | — | | | — | | | (6,691) | | | — | | | — | | | — | | | (6,690) | | | — | | | (6,690) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | — | | | 6 | | | — | | | 19 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (721) | | | (721) | | | — | | | (721) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjustment of redeemable noncontrolling interests to fair value | (128) | | | | — | | | — | | | — | | | — | | | — | | | | | 128 | | | — | | | — | | | — | | | 128 | | | — | | | 128 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of June 30, 2021 | $ | 4,536 | | | | $ | 99 | | | 99,111 | | | $ | 422 | | | 421,977 | | | $ | — | | | — | | | $ | 1,338,208 | | | $ | (18,613) | | | $ | 5,973 | | | $ | (127,718) | | | $ | 1,198,371 | | | $ | 11,054 | | | $ | 1,209,425 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2020 | $ | 26,364 | | | | $ | 94 | | | 94,238 | | | $ | 422 | | | 421,862 | | | $ | — | | | — | | | $ | 1,379,469 | | | $ | 9,749 | | | $ | 4,637 | | | $ | (122,081) | | | $ | 1,272,290 | | | $ | 10,567 | | | $ | 1,282,857 | |
| Net (loss) earnings | (12) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (28,362) | | | — | | | — | | | (28,362) | | | 336 | | | (28,026) | |
| Other comprehensive income | 588 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,336 | | | — | | | 1,336 | | | 151 | | | 1,487 | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 14,019 | | | — | | | — | | | — | | | 14,019 | | | — | | | 14,019 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 2 | | | 2,288 | | | — | | | — | | | — | | | — | | | (54,743) | | | — | | | — | | | — | | | (54,741) | | | — | | | (54,741) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | 3 | | | 2,585 | | | — | | | 115 | | | — | | | — | | | (3) | | | — | | | — | | | — | | | — | | | — | | | 0 | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,637) | | | (5,637) | | | — | | | (5,637) | |
| Purchase of redeemable noncontrolling interests | (22,938) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Adjustment of redeemable noncontrolling interests to fair value | 534 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (534) | | | — | | | — | | | — | | | (534) | | | — | | | (534) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of June 30, 2021 | $ | 4,536 | | | | $ | 99 | | | 99,111 | | | $ | 422 | | | 421,977 | | | $ | — | | | — | | | $ | 1,338,208 | | | $ | (18,613) | | | $ | 5,973 | | | $ | (127,718) | | | $ | 1,198,371 | | | $ | 11,054 | | | $ | 1,209,425 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three and Six Months Ended June 30, 2020
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Angi Inc. Shareholders’ Equity | | | | |
| | | | 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 |
| Redeemable
Noncontrolling
Interests | | | | | | | | | | | | | | | Additional Paid-in Capital | | Retained Earnings | | | Treasury
Stock | | | Noncontrolling
Interests | |
| | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | | | |
| | | (In thousands) | | |
| Balance as of March 31, 2020 | $ | 23,813 | | | | $ | 88 | | | 87,624 | | | $ | 422 | | | 421,757 | | | $ | — | | | — | | | $ | 1,379,079 | | | $ | 7,074 | | | $ | (7,993) | | | $ | (96,920) | | | $ | 1,281,750 | | | $ | 9,260 | | | $ | 1,291,010 | |
| Net earnings | 220 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 12,667 | | | — | | | — | | | 12,667 | | | 324 | | | 12,991 | |
| Other comprehensive (loss) income | (786) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,253 | | | — | | | 5,253 | | | 19 | | | 5,272 | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 18,607 | | | — | | | — | | | — | | | 18,607 | | | — | | | 18,607 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 1 | | | 1,452 | | | — | | | — | | | — | | | — | | | (8,220) | | | — | | | — | | | — | | | (8,219) | | | — | | | (8,219) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (15,888) | | | (15,888) | | | — | | | (15,888) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjustment of redeemable noncontrolling interests to fair value | 1,846 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,846) | | | — | | | — | | | — | | | (1,846) | | | — | | | (1,846) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | — | | | — | | | — | | | (2) | | | 1 | | | (1) | |
| Balance as of June 30, 2020 | $ | 25,093 | | | | $ | 89 | | | 89,076 | | | $ | 422 | | | 421,757 | | | $ | — | | | — | | | $ | 1,387,618 | | | $ | 19,741 | | | $ | (2,740) | | | $ | (112,808) | | | $ | 1,292,322 | | | $ | 9,604 | | | $ | 1,301,926 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2019 | $ | 26,663 | | | | $ | 87 | | | 87,007 | | | $ | 422 | | | 421,570 | | | $ | — | | | — | | | $ | 1,357,075 | | | $ | 16,032 | | | $ | (1,379) | | | $ | (57,949) | | | $ | 1,314,288 | | | $ | 9,264 | | | $ | 1,323,552 | |
| Net (loss) earnings | (55) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,709 | | | — | | | — | | | 3,709 | | | 373 | | | 4,082 | |
| Other comprehensive loss | (687) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,361) | | | — | | | (1,361) | | | (34) | | | (1,395) | |
| Stock-based compensation expense | 15 | | | | — | | | — | | | — | | | — | | | — | | | — | | | 40,818 | | | — | | | — | | | — | | | 40,818 | | | — | | | 40,818 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 2 | | | 2,069 | | | — | | | — | | | — | | | — | | | (10,773) | | | — | | | — | | | — | | | (10,771) | | | — | | | (10,771) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | — | | | — | | | — | | | 187 | | | — | | | — | | | (791) | | | — | | | — | | | — | | | (791) | | | — | | | (791) | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (54,859) | | | (54,859) | | | — | | | (54,859) | |
| Purchase of redeemable noncontrolling interests | (3,165) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Adjustment of redeemable noncontrolling interests to fair value | 2,322 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,322) | | | — | | | — | | | — | | | (2,322) | | | — | | | (2,322) | |
| Adjustment pursuant to the tax sharing agreement | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,613 | | | — | | | — | | | — | | | 3,613 | | | — | | | 3,613 | |
| Other | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (2) | | | — | | | — | | | — | | | (2) | | | 1 | | | (1) | |
| Balance as of June 30, 2020 | $ | 25,093 | | | | $ | 89 | | | 89,076 | | | $ | 422 | | | 421,757 | | | $ | — | | | — | | | $ | 1,387,618 | | | $ | 19,741 | | | $ | (2,740) | | | $ | (112,808) | | | $ | 1,292,322 | | | $ | 9,604 | | | $ | 1,301,926 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Angi Inc. Shareholders’ Equity | | | | |
| | | | 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 |
| Redeemable
Noncontrolling
Interests | | | | | | | | | | | | | | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | | Treasury
Stock | | | Noncontrolling
Interests | |
| | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | | | |
| | | (In thousands) | | |
| Balance as of December 31, 2020 | $ | 26,364 | | | | $ | 94 | | | 94,238 | | | $ | 422 | | | 421,862 | | | $ | — | | | — | | | $ | 1,379,469 | | | $ | 9,749 | | | $ | 4,637 | | | $ | (122,081) | | | $ | 1,272,290 | | | $ | 10,567 | | | $ | 1,282,857 | |
| Net (loss) earnings | (60) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,931 | | | — | | | — | | | 1,931 | | | 143 | | | 2,074 | |
| Other comprehensive income (loss) | 580 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (14) | | | — | | | (14) | | | 113 | | | 99 | |
| Stock-based compensation expense | 0 | | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,542 | | | — | | | — | | | — | | | 2,542 | | | — | | | 2,542 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 1 | | | 1,591 | | | — | | | — | | | — | | | — | | | (48,052) | | | — | | | — | | | — | | | (48,051) | | | — | | | (48,051) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | 3 | | | 2,579 | | | — | | | 96 | | | — | | | — | | | (3) | | | — | | | — | | | — | | | — | | | — | | | 0 | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,916) | | | (4,916) | | | — | | | (4,916) | |
| Purchase of redeemable noncontrolling interests | (22,938) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Adjustment of redeemable noncontrolling interests to fair value | 662 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (662) | | | — | | | — | | | — | | | (662) | | | — | | | (662) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of March 31, 2021 | $ | 4,608 | | | | $ | 98 | | | 98,408 | | | $ | 422 | | | 421,958 | | | $ | — | | | — | | | $ | 1,333,294 | | | $ | 11,680 | | | $ | 4,623 | | | $ | (126,997) | | | $ | 1,223,120 | | | $ | 10,823 | | | $ | 1,233,943 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2019 | $ | 26,663 | | | | $ | 87 | | | 87,007 | | | $ | 422 | | | 421,570 | | | $ | — | | | — | | | $ | 1,357,075 | | | $ | 16,032 | | | $ | (1,379) | | | $ | (57,949) | | | $ | 1,314,288 | | | $ | 9,264 | | | $ | 1,323,552 | |
| Net (loss) earnings | (275) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,958) | | | — | | | — | | | (8,958) | | | 49 | | | (8,909) | |
| Other comprehensive income (loss) | 99 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (6,614) | | | — | | | (6,614) | | | (53) | | | (6,667) | |
| Stock-based compensation expense | 15 | | | | — | | | — | | | — | | | — | | | — | | | — | | | 22,211 | | | — | | | — | | | — | | | 22,211 | | | — | | | 22,211 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 1 | | | 617 | | | — | | | — | | | — | | | — | | | (2,553) | | | — | | | — | | | — | | | (2,552) | | | — | | | (2,552) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | — | | | — | | | — | | | 187 | | | — | | | — | | | (791) | | | — | | | — | | | — | | | (791) | | | — | | | (791) | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (38,971) | | | (38,971) | | | — | | | (38,971) | |
| Purchase of redeemable noncontrolling interests | (3,165) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Adjustment of redeemable noncontrolling interests to fair value | 476 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (476) | | | — | | | — | | | — | | | (476) | | | — | | | (476) | |
| Adjustment pursuant to the tax sharing agreement | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,613 | | | — | | | — | | | — | | | 3,613 | | | — | | | 3,613 | |
| Balance as of March 31, 2020 | $ | 23,813 | | | | $ | 88 | | | 87,624 | | | $ | 422 | | | 421,757 | | | $ | — | | | — | | | $ | 1,379,079 | | | $ | 7,074 | | | $ | (7,993) | | | $ | (96,920) | | | $ | 1,281,750 | | | $ | 9,260 | | | $ | 1,291,010 | |
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
| (In thousands) |
| Cash flows from operating activities: | | | |
| Net (loss) earnings | $ | (28,038) | | | $ | 4,027 | |
| Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | | | |
| Provision for credit losses | 42,731 | | | 39,338 | |
| Stock-based compensation expense | 11,577 | | | 40,334 | |
| Depreciation | 31,027 | | | 24,693 | |
| Amortization of intangibles | 8,762 | | | 25,958 | |
| Deferred income taxes | (20,344) | | | (6,290) | |
| | | |
| Impairment of long-lived and right-of-use assets | 12,280 | | | 188 | |
| Revenue reserves | 4,667 | | | 4,070 | |
| Other adjustments, net | 2,592 | | | 1,266 | |
| Changes in assets and liabilities, net of effects of acquisitions and dispositions: | | | |
| Accounts receivable | (63,192) | | | (48,222) | |
| Other assets | 8,376 | | | 7,132 | |
| Accounts payable and other liabilities | 43,199 | | | 35,930 | |
| Income taxes payable and receivable | 315 | | | (502) | |
| Deferred revenue | 5,301 | | | (125) | |
| Net cash provided by operating activities | 59,253 | | | 127,797 | |
| Cash flows from investing activities: | | | |
| | | |
| Capital expenditures | (35,713) | | | (24,665) | |
| | | |
| Proceeds from maturities of marketable debt securities | 50,000 | | | 0 | |
| Net proceeds from the sale of a business | 750 | | | 731 | |
| | | |
| | | |
| Net cash provided by (used in) investing activities | 15,037 | | | (23,934) | |
| Cash flows from financing activities: | | | |
| | | |
| Principal payments on Term Loan | (220,000) | | | (6,875) | |
| | | |
| | | |
| Purchase of treasury stock | (5,637) | | | (54,400) | |
| | | |
| Withholding taxes paid on behalf of employees on net settled stock-based awards | (54,596) | | | (11,494) | |
| Distribution from IAC pursuant to the tax sharing agreement | 0 | | | 3,071 | |
| Purchase of noncontrolling interests | (22,938) | | | (3,165) | |
| | | |
| Net cash used in financing activities | (303,171) | | | (72,863) | |
| Total cash (used) provided | (228,881) | | | 31,000 | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 546 | | | (702) | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | (228,335) | | | 30,298 | |
| Cash and cash equivalents and restricted cash at beginning of period | 813,561 | | | 391,478 | |
| Cash and cash equivalents and restricted cash at end of period | $ | 585,226 | | | $ | 421,776 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
| (In thousands) |
| Cash flows from operating activities: | | | |
| Net earnings (loss) | $ | 2,014 | | | $ | (9,184) | |
| Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | | | |
| Stock-based compensation expense | 2,034 | | | 25,575 | |
| Amortization of intangibles | 5,074 | | | 12,980 | |
| Provision for credit losses | 19,118 | | | 17,807 | |
| Depreciation | 15,969 | | | 12,138 | |
| Deferred income taxes | (10,268) | | | (8,348) | |
| | | |
| Impairment of long-lived assets | 1,854 | | | 0 | |
| Revenue reserves | 2,910 | | | 2,140 | |
| Other adjustments, net | 2,235 | | | 1,076 | |
| Changes in assets and liabilities, net of effects of acquisitions and dispositions: | | | |
| Accounts receivable | (34,638) | | | (21,226) | |
| Other assets | 573 | | | 3,043 | |
| Accounts payable and other liabilities | 4,539 | | | 21,008 | |
| Income taxes payable and receivable | 938 | | | (873) | |
| Deferred revenue | 2,993 | | | (230) | |
| Net cash provided by operating activities | 15,345 | | | 55,906 | |
| Cash flows from investing activities: | | | |
| | | |
| Capital expenditures | (18,743) | | | (13,236) | |
| | | |
| Proceeds from maturities of marketable debt securities | 50,000 | | | — | |
| Net proceeds from the sale of a business | 0 | | | 767 | |
| | | |
| | | |
| Net cash provided by (used in) investing activities | 31,257 | | | (12,469) | |
| Cash flows from financing activities: | | | |
| | | |
| Principal payments on Term Loan | (6,875) | | | (3,438) | |
| | | |
| | | |
| Purchase of treasury stock | (4,916) | | | (38,512) | |
| | | |
| Withholding taxes paid on behalf of employees on net settled stock-based awards | (48,168) | | | (3,222) | |
| | | |
| Purchase of noncontrolling interests | (22,938) | | | (3,165) | |
| | | |
| Net cash used in financing activities | (82,897) | | | (48,337) | |
| Total cash used | (36,295) | | | (4,900) | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 384 | | | (1,327) | |
| Net decrease in cash and cash equivalents and restricted cash | (35,911) | | | (6,227) | |
| Cash and cash equivalents and restricted cash at beginning of period | 813,561 | | | 391,478 | |
| Cash and cash equivalents and restricted cash at end of period | $ | 777,650 | | | $ | 385,251 | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Angi Inc. (the “Company”), formerly ANGI Homeservices Inc., connects quality home service professionals with consumers across 500 different categories, from repairing and remodeling homes to cleaning and landscaping. Over 250,000260,000 domestic service professionals actively sought consumer matches, completed jobs, or advertised work through Angi Inc. platforms; andplatforms during the three months ended June 30, 2021. Additionally, consumers turned to at least one of our brands to find a professional for approximately 34 million projects during the twelve months ended March 31,June 30, 2021.
The Company has 2 operating segments (i) North America (United States and Canada), which includes HomeAdvisor, Angi (formerly Angie’s List), Handy,HomeAdvisor Powered by Angi, and HomeStars;Handy; and (ii) Europe, which includes Travaux, MyHammer, MyBuilder, Werkspot, and Instapro.
As used herein, “Angi Inc.,” the “Company,” “we,” “our,” “us,” and similar terms refer to Angi Inc. and its subsidiaries (unless the context requires otherwise).
At March 31,June 30, 2021, IAC/InterActiveCorp (“IAC”) owned 84.2%84.1% and 98.2%98.1% of the economic interest and voting interest, respectively, of the Company.
Basis of Presentation and Consolidation
The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). 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. All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. All intercompany transactions between (i) Angi Inc. and (ii) IAC and its subsidiaries, with the exception of a promissory note payable to a foreign subsidiary of IAC, are considered to be effectively settled for cash at the time the transaction is recorded. See “Note 10—Related Party Transactions with IAC” for additional information on transactions between Angi Inc. 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 as if Angi Inc. filed tax returns on a standalone, separate tax 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 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 management's opinion, theThe accompanying unaudited interim consolidated financial statements have been prepared onin accordance with GAAP for interim financial information and with the same basis asrules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for complete annual consolidatedfinancial statements. In the opinion of management, the accompanying unaudited financial statements and reflectinclude all adjustments consisting(consisting of normal and recurring adjustments,accruals) considered necessary for thea fair presentation of the Company's consolidated financial position, consolidated results of operations and consolidated cash flows for the periods presented.presentation. Interim results are not necessarily indicative of the results that may be expected for the full year.The accompanying unaudited interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
COVID-19 Update
The impact on the Company from the COVID-19 outbreak, which has been declared a “pandemic” bypandemic and the World Health Organization,measures designed to contain its spread has been varied and volatile.
As previously disclosed, the initial impact of COVID-19 on the Company resulted in a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While we have experienced a rebound in service requests in the second half of 2020 and the first half of 2021, many service professionals’ businesses had been adversely impacted by labor and material constraints and many service professionals had limited capacity to take on new business, which negatively impacted our ability to monetize this increased level of service requests through the first quarter of 2021. Although our ability to monetize service requests rebounded modestly in the second
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
quarter of 2021, we are still not back to levels we experienced pre-COVID-19. No assurances can be provided that we will continue to be able to improve monetization, or that service professionals’ businesses will not be adversely impacted in the future.
The extent to which developments related to the COVID-19 outbreakpandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the continuing spread of COVID-19, the developmentseverity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and implementation of effective preventative measures (including the global distribution of vaccines)attitudes toward receiving them, materials and possible treatments,supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services (including those provided by certain of our service professionals) and other activity, and public reactions to these developments. For example, these developments and measures have resulted in rapid and adverse changes to
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
the operating environment in which we do business, as well as significant uncertainty concerning the near and long term economic ramifications of the COVID-19 outbreak, which have adversely impacted our ability to forecast our results and respond in a timely and effective manner to trends related to the COVID-19 outbreak. The longer the global outbreak and measures designed to curb the spread of the virus continue to adversely affect levels of consumer confidence, discretionary spending and the willingness of consumers to interact with other consumers, vendors and service providers face-to-face (and in turn, adversely affect demand for the Company’s various products and services), the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations and the more limited will be the Company’s ability to try and make up for delayed or lost revenues. Additionally, many service professionals’ businesses have been adversely impacted by labor and material constraints and many service professionals have limited capacity to take on new business, which has negatively impacted the Company’s ability to monetize on increased levels of service requests.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments, and assumptions during the preparation of its consolidated 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 fair values of cash equivalents and marketable debt securities; the carrying value of accounts receivable, including the determination of the allowance for credit losses and the determination of revenue reserves; the determination of the customer relationship period for certain costs to obtain a contract with a customer; the carrying value 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 benefits; 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.
General Revenue Recognition
Revenue is recognized when control of the promised services or goods 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 services or goods.
Deferred Revenue
Deferred revenue consists of payments that are received or are contractually due in advance of the Company’s performance. 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 of the applicable subscription period or expected completion of the Company’sits performance obligation is one year or less. TheAt December 31, 2020, the current and non-current deferred revenue balances at December 31, 2020 were $54.7 million and $0.2 million, respectively. Duringrespectively, and during the threesix months ended March 31,June 30, 2021, the Company recognized $34.4$46.0 million of revenue that was included in the deferred revenue balance as of December 31, 2020. DuringAt December 31, 2019, the threecurrent and non-current deferred revenue balances were $58.2 million and $0.2 million, respectively, and during the six months ended March 31,June 30, 2020, the Company recognized $37.1$49.5 million of revenue that was included in the deferred revenue balance as of December 31, 2019.
The current and non-current deferred revenue balances at March 31,June 30, 2021 are $57.7$60.1 million and $0.1 million, respectively. Non-current deferred revenue is included in “Other long-term liabilities” in the accompanying consolidated balance sheet.
Practical Expedients and Exemptions
As permitted under the practical expedient available under ASC 606ASU No. 2014-09 Revenue from Contracts with Customers,, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Commissions Paid to Employees Pursuant to Sales Incentive Programs
The Company has determined that commissions paid to employees pursuant to certain sales incentive programs meet the requirements to be capitalized as the incremental costs to obtain a contract with a customer. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods.Capitalized commissions paid to employees pursuant to these sales incentive programs are amortized over the estimated customer relationship period. The Company calculates the anticipated customer relationship period as the average customer life, which is based on historical data.
For sales incentive programs where the anticipated customer relationship period is one year or less, the Company has elected the practical expedient to expense the costs as incurred.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The amountCompany uses a portfolio approach to assess the accounting treatment of the incremental costs to obtain a contract with a customer. The Company recognizes an asset for these costs if we expect to recover those costs. To the extent that these costs are capitalized, sales commissions where the initial customer relationship periodresultant asset is greater than one year isamortized on a systematic basis consistent with the pattern of the transfer of the services to which the asset relates. The current contract assets are $44.9 million and $49.2 million at June 30, 2021 and $49.6December 31, 2020, respectively. The non-current assets are $1.3 million and $0.4 million at March 31,June 30, 2021 and December 31, 2020, respectively. The current and non-current capitalized sales commissions balancescosts to obtain a contract with a customer are included in “Other"Other current assets”assets" and “Other"Other non-current assets”assets" in the accompanying consolidated balance sheet and are $48.7 million and $49.2 million, and $0.5 million and $0.4 million at March 31, 2021 and December 31, 2020, respectively.sheet.
Recent Accounting Pronouncements
There are no recently issued accounting pronouncements that have not yet been adopted that are expected to have a material effect on the results of operations, financial condition or cash flows of the Company.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2—INCOME TAXES
The Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings. In all periods presented, the income tax benefit and/or provision has been computed for the Company on an as if standalone, separate return basis and payments to and refunds from IAC for the Company’s share of IAC’s consolidated federal and state tax return liabilities/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 IAC 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 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.
At the end of each interim period, the Company estimates 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 unrecognized tax benefits is recognized in the interim period in which the change occurs.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 realization 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 the 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 income tax benefit for the three months ended March 31,June 30, 2021 is a benefit of $2.3 million due to a higher estimated annual effective tax rate from that applied to the first quarter’s ordinary loss from continuing operations. The higher estimated annual effective tax rate was primarily due to the increased impact of forecasted nondeductible items had on the increase in forecasted ordinary pre-tax losses.
For the three and six months ended June 30, 2021, the Company recorded an income tax benefit of $9.3$9.1 million and $18.4 million, which represents an effective income tax rate of 23% and 40%, respectively.For the three months ended June 30, 2021, the effective income tax rate is higher than the statutory rate of 21% due primarily to benefits related to a change in the annual expected effective income tax rate, partially offset by nondeductible share based compensation expense.For the six months ended June 30, 2021, the effective income tax rate is higher than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting for stock-based awards. For the three months ended March 31,June 30, 2020, the Company recorded an income tax provision of $3.0 million, which represents an effective income tax rate of 19%. The effective income tax rate is lower than the statutory rate of 21% due primarily to the impact of benefiting previously unbenefited foreign net operating loss carryforwards. For the six months ended June 30, 2020, the Company recorded an income tax benefit of $9.0$5.9 million which represents an effective income tax rate of 49% and is higher than the statutory rate of 21% due primarily to a $5.7 million reduction to deferred taxes due to the true-up of the state tax rate for an indefinite-lived intangible asset partially offset byand the impact of benefiting previously unbenefited foreign losses.net operating loss carryforwards.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. There are currently no accruals for interest and penalties.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company is 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 (“IRS”) has substantially completed its audit of IAC’s federal income tax returns for the years ended December 31, 20102013 through 2017, which includes the operations of the Company. The statutes of limitations for the years 2010 through 2012 and for the years 2013 through 2017 have been extended to May 31, 2021 and June 30, 2022, respectively.2022. Returns filed in various other jurisdictions are open to examination for various tax years beginning with 2009. Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from examination of prior year tax returns. The 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 resolution of issues raised in audits and amounts previously provided will not have a material impact on 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.
At March 31,June 30, 2021 and December 31, 2020, the Company has unrecognized tax benefits of $5.6$5.5 million and $5.3 million, respectively; all of which are for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at March 31,June 30, 2021 are subsequently recognized, the income tax provision would be reduced by $5.4$5.2 million. The comparable amount as of December 31, 2020 is $5.1 million.
The Company believes it is reasonably possible that its unrecognizedregularly assesses the realizability of deferred tax benefits could decrease by $0.5 million by March 31, 2022 dueassets considering all available evidence including, to settlements, allthe 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. The Company’s most significant net deferred tax asset relates to U.S. federal net operating loss ("NOL") carryforwards. The Company expects to generate sufficient future taxable income to fully realize this deferred tax asset prior to the expiration of these NOLs, the majority of which would reduce the income tax provision.expire between 2030 and 2037, and a portion of which never expire.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 3—FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Marketable Debt Securities
The Company did not0t hold any available-for-sale marketable debt securities at March 31,June 30, 2021.
At December 31, 2020, current available-for-sale marketable debt securities were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| (In thousands) |
| Treasury discount notes | $ | 49,995 | | | $ | 0 | | | $ | 0 | | | $ | 49,995 | |
| Total available-for-sale marketable debt securities | $ | 49,995 | | | $ | 0 | | | $ | 0 | | | $ | 49,995 | |
The contractual maturities of debt securities classified as current available-for-sale at December 31, 2020 were within one year.
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.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
•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:
| | | March 31, 2021 | | June 30, 2021 |
| | 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 | | 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) | | (In thousands) |
| Assets: | Assets: | | Assets: | |
| Cash equivalents: | Cash equivalents: | | Cash equivalents: | |
| Money market funds | Money market funds | $ | 552,024 | | | $ | 0 | | | $ | 0 | | | $ | 552,024 | | Money market funds | $ | 449,028 | | | $ | 0 | | | $ | 0 | | | $ | 449,028 | |
| Treasury discount notes | 0 | | | 100,000 | | | 0 | | | 100,000 | | |
| | Time deposits | Time deposits | 0 | | | 1,586 | | | 0 | | | 1,586 | | Time deposits | 0 | | | 407 | | | 0 | | | 407 | |
| Marketable debt securities: | | |
| Treasury discount notes | 0 | | | 0 | | | 0 | | | 0 | | |
| | Total | Total | $ | 552,024 | | | $ | 101,586 | | | $ | 0 | | | $ | 653,610 | | Total | $ | 449,028 | | | $ | 407 | | | $ | 0 | | | $ | 449,435 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| 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 | $ | 374,014 | | | $ | 0 | | | $ | 0 | | | $ | 374,014 | |
| Treasury discount notes | 0 | | | 324,995 | | | 0 | | | 324,995 | |
| Time deposits | 0 | | | 2,721 | | | 0 | | | 2,721 | |
| Marketable debt securities: | | | | | | | |
| Treasury discount notes | 0 | | | 49,995 | | | 0 | | | 49,995 | |
| Total | $ | 374,014 | | | $ | 377,711 | | | $ | 0 | | | $ | 751,725 | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| 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 | $ | 374,014 | | | $ | 0 | | | $ | 0 | | | $ | 374,014 | |
| Treasury discount notes | 0 | | | 324,995 | | | 0 | | | 324,995 | |
| Time deposits | 0 | | | 2,721 | | | 0 | | | 2,721 | |
| Marketable debt securities: | | | | | | | |
| Treasury discount notes | 0 | | | 49,995 | | | 0 | | | 49,995 | |
| Total | $ | 374,014 | | | $ | 377,711 | | | $ | 0 | | | $ | 751,725 | |
Assets measured at fair value on a nonrecurring basis
The Company’s non-financial assets, such as goodwill, intangible assets, ROU assets, capitalized software, leasehold improvements and equipment are adjusted to fair value only when an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)the Company reducing its real estate footprint. Impairment expense was determined by comparing the carrying value of each asset group related to each office space vacated to the estimated fair market value of cash inflows directly associated with each office space. Based on this analysis, if the carrying amount of the asset group is greater than the estimated future undiscounted cash flows, an impairment charge is recognized, measured as the amount by which the carrying amount exceeds the fair value of the asset.
Financial instruments measured at fair value only for disclosure purposes
The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| Carrying value | | Fair value | | Carrying value | | Fair value |
| (In thousands) |
| | | | | | | |
Long-term debt, net (a) | $ | (705,987) | | | $ | (710,692) | | | $ | (712,277) | | | $ | (725,700) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| (In thousands) |
| | | | | | | |
Long-term debt, net (a) | $ | (494,195) | | | $ | (495,600) | | | $ | (712,277) | | | $ | (725,700) | |
________________________
(a) At March 31,June 30, 2021 and December 31, 2020, the carrying value of long-term debt, net includes unamortized debt issuance costs of $7.1$5.8 million and $7.7 million, respectively.
The fair value of long-term debt is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4—LONG-TERM DEBT
Long-term debt consists of:
| | | | March 31, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 |
| | | (In thousands) | | (In thousands) |
| 3.875% ANGI Group Senior Notes due August 15, 2028 (“Senior Notes”); interest payable each February 15 and August 15, commencing February 15, 2021 | $ | 500,000 | | | $ | 500,000 | | |
| ANGI Group Term Loan due November 5, 2023 | 213,125 | | | 220,000 | | |
| 3.875% ANGI Group Senior Notes due August 15, 2028 (“ANGI Group Senior Notes”); interest payable each February 15 and August 15, commencing February 15, 2021 | | 3.875% ANGI Group Senior Notes due August 15, 2028 (“ANGI Group Senior Notes”); interest payable each February 15 and August 15, commencing February 15, 2021 | $ | 500,000 | | | $ | 500,000 | |
| ANGI Group Term Loan due November 5, 2023 (“ANGI Group Term Loan”) | | ANGI Group Term Loan due November 5, 2023 (“ANGI Group Term Loan”) | 0 | | | 220,000 | |
| Total long-term debt | Total long-term debt | 713,125 | | | 720,000 | | Total long-term debt | 500,000 | | | 720,000 | |
| | Less: unamortized debt issuance costs | Less: unamortized debt issuance costs | 7,138 | | | 7,723 | | Less: unamortized debt issuance costs | 5,805 | | | 7,723 | |
| Total long-term debt, net | Total long-term debt, net | $ | 705,987 | | | $ | 712,277 | | Total long-term debt, net | $ | 494,195 | | | $ | 712,277 | |
ANGI Group Senior Notes
The ANGI Group Senior Notes were issued on August 20, 2020. 2020, the proceeds of which are intended for general corporate purposes, including potential future acquisitions and return of capital.At any time prior to August 15, 2023, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium.Thereafter, these notes may be redeemed at the redemption prices set forth in the indenture governing the notes, plus accrued and unpaid interest thereon, if any, to the applicable redemption date.
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 (as defined in the indenture) exceeds 3.75 to 1.0. At March 31,June 30, 2021, there were no limitations pursuant thereto.
ANGI Group Term Loan andRevolving Facility
The $250.0 million ANGI Group Revolving Facility, which otherwise would have expired on November 5, 2023, was terminated effective August 3, 2021.No amounts were ever drawn under the ANGI Group Revolving Facility prior to its termination.
ANGI Group Term Loan
As of May 6, 2021, the outstanding balance of the ANGI Group Term Loan was repaid in its entirety. The outstanding balance of the ANGI Group Term Loan was $213.1 million and $220.0 million at March 31, 2021 and December 31, 2020 respectively. During the three months ended March 31, 2021, ANGI Group prepaid $6.9was $220.0 million that was otherwise due in the first quarter of 2022, and as of May 6, 2021, the outstanding balance was repaid in its entirety. The Term Loan bore interest at LIBOR plus 2.00%, or 2.10% and 2.16% at March 31, 2021 and December 31, 2020, respectively.
The ANGI Group Credit Agreement requires ANGI Group to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0. The ANGI Group Credit Agreement also contains covenants that would limit ANGI Group’s ability to pay dividends, or make distributions in the event a default has occurred or ANGI Group’s consolidated net leverage ratio exceeds 4.25 to 1.0. At March 31, 2021, there were no limitations pursuant thereto.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The $250.0 million ANGI Group Revolving Facility expires on November 5, 2023. At March 31, 2021 and December 31, 2020, there were 0 outstanding borrowings under the ANGI Group Revolving Facility. The commitment fee, which is based on ANGI Group's consolidated net leverage ratio most recently reported and the average daily dollar amount of the available revolving commitments, was 35 basis points at both March 31, 2021 and December 31, 2020. Any future borrowings under the ANGI Group Revolving Facility would bear interest, at ANGI Group’s option, at either a base rate or LIBOR, in each case plus an applicable margin, which is based on ANGI Group’s consolidated net leverage ratio. The financial and other covenants are the same as those for the ANGI Group Term Loan.
The ANGI Group Senior Notes and the ANGI Group Credit Agreement. are guaranteed by certain of ANGI Group’s wholly-owned material domestic subsidiaries and ANGI Group’s obligations under the ANGI Group Credit Agreement are secured by substantially all assets of ANGI Group and the guarantors, subject to certain exceptions. Outstanding borrowings under the ANGI Group Revolving Facility have priority over the ANGI Group Senior Notes to the extent of the value of the assets securing the borrowings under the ANGI Group Credit Agreement.
Long-term Debt Maturities:
Long-term debt maturities as of March 31, 2021 are summarized in the table below:
| | | | | | | | |
| Years Ending December 31, | | (In thousands) |
| | |
| 2022 | | $ | 20,625 | |
| 2023 | | 192,500 | |
| 2028 | | 500,000 | |
| Total | | 713,125 | |
| Less: unamortized debt issuance costs | | 7,138 | |
| Total long-term debt, net | | $ | 705,987 | |
NOTE 5—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following tables present the components of accumulated other comprehensive income (loss):
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
| Foreign
Currency
Translation
Adjustment | | Accumulated Other Comprehensive Income |
| (In thousands) |
| Balance at January 1 | $ | 4,637 | | | $ | 4,637 | |
| Other comprehensive loss | (14) | | | (14) | |
| Balance at March 31 | $ | 4,623 | | | $ | 4,623 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2021 | | 2020 |
| Foreign
Currency
Translation
Adjustment | | Accumulated Other Comprehensive Income | | Foreign
Currency
Translation
Adjustment | | Accumulated Other Comprehensive Loss |
| (In thousands) |
| Balance at April 1 | $ | 4,623 | | | $ | 4,623 | | | $ | (7,993) | | | $ | (7,993) | |
| Other comprehensive income | 1,350 | | | 1,350 | | | 5,253 | | | 5,253 | |
| Balance at June 30 | $ | 5,973 | | | $ | 5,973 | | | $ | (2,740) | | | $ | (2,740) | |
| | | | | | | | | | | |
| Three Months Ended March 31, 2020 |
| Foreign
Currency
Translation
Adjustment | | Accumulated Other Comprehensive Loss |
| (In thousands) |
| Balance at January 1 | $ | (1,379) | | | $ | (1,379) | |
| Other comprehensive loss | (6,614) | | | (6,614) | |
| Balance at March 31 | $ | (7,993) | | | $ | (7,993) | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
| Foreign
Currency
Translation
Adjustment | | Accumulated Other Comprehensive Income | | Foreign
Currency
Translation
Adjustment | | Accumulated Other Comprehensive Loss |
| (In thousands) |
| Balance at January 1 | $ | 4,637 | | | $ | 4,637 | | | $ | (1,379) | | | $ | (1,379) | |
| Other comprehensive income (loss) | 1,336 | | | 1,336 | | | (1,361) | | | (1,361) | |
| Balance at June 30 | $ | 5,973 | | | $ | 5,973 | | | $ | (2,740) | | | $ | (2,740) | |
At both March 31,June 30, 2021 and 2020, there was 0 tax benefit or provision on the accumulated other comprehensive income (loss).
NOTE 6—(LOSS) EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted (loss) earnings (loss) per share attributable to Angi Inc. Class A and Class B Common Stock shareholders:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2021 | | 2020 |
| | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | |
| Net earnings (loss) | $ | 2,014 | | | $ | 2,014 | | | $ | (9,184) | | | $ | (9,184) | |
| Net (earnings) loss attributable to noncontrolling interests | (83) | | | (83) | | | 226 | | | 226 | |
| Net earnings (loss) attributable to Angi Inc. Class A and Class B Common Stock shareholders | $ | 1,931 | | | $ | 1,931 | | | $ | (8,958) | | | $ | (8,958) | |
| | | | | | | |
| Denominator: | | | | | | | |
| Weighted average basic Class A and Class B common stock shares outstanding | 500,663 | | | 500,663 | | | 499,454 | | | 499,454 | |
Dilutive securities (a) (b) (c) | — | | | 9,990 | | | — | | | 0 | |
| Denominator for earnings (loss) per share—weighted average shares | 500,663 | | | 510,653 | | | 499,454 | | | 499,454 | |
| | | | | | | |
| Earnings (loss) per share attributable to Angi Inc. Class A and Class B Common Stock shareholders: | |
| Earnings (loss) per share | $ | 0.00 | | | $ | 0.00 | | | $ | (0.02) | | | $ | (0.02) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, |
| | 2021 | | 2020 |
| | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | |
| Net (loss) earnings | $ | (30,052) | | | $ | (30,052) | | | $ | 13,211 | | | $ | 13,211 | |
| Net earnings attributable to noncontrolling interests | (241) | | | (241) | | | (544) | | | (544) | |
| Net (loss) earnings attributable to Angi Inc. Class A and Class B Common Stock shareholders | $ | (30,293) | | | $ | (30,293) | | | $ | 12,667 | | | $ | 12,667 | |
| | | | | | | |
| Denominator: | | | | | | | |
| Weighted average basic Class A and Class B common stock shares outstanding | 504,469 | | | 504,469 | | | 495,769 | | | 495,769 | |
Dilutive securities (a) (b) (c) | — | | | 0 | | | — | | | 14,765 | |
| Denominator for (loss) earnings per share—weighted average shares | 504,469 | | | 504,469 | | | 495,769 | | | 510,534 | |
| | | | | | | |
| (Loss) earnings per share attributable to Angi Inc. Class A and Class B Common Stock shareholders: | |
| (Loss) earnings per share | $ | (0.06) | | | $ | (0.06) | | | $ | 0.03 | | | $ | 0.02 | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2021 | | 2020 |
| | Basic | | Diluted | | Basic | | Diluted |
| | (In thousands, except per share data) |
| Numerator: | | | | | | | |
| Net (loss) earnings | $ | (28,038) | | | $ | (28,038) | | | $ | 4,027 | | | $ | 4,027 | |
| Net earnings attributable to noncontrolling interests | (324) | | | (324) | | | (318) | | | (318) | |
| Net (loss) earnings attributable to Angi Inc. Class A and Class B Common Stock shareholders | $ | (28,362) | | | $ | (28,362) | | | $ | 3,709 | | | $ | 3,709 | |
| | | | | | | |
| Denominator: | | | | | | | |
| Weighted average basic Class A and Class B common stock shares outstanding | 502,577 | | | 502,577 | | | 497,611 | | | 497,611 | |
Dilutive securities (a) (b) (c) | — | | | 0 | | | — | | | 11,136 | |
| Denominator for (loss) earnings per share—weighted average shares | 502,577 | | | 502,577 | | | 497,611 | | | 508,747 | |
| | | | | | | |
| (Loss) earnings per share attributable to Angi Inc. Class A and Class B Common Stock shareholders: | |
| (Loss) Earnings per share | $ | (0.06) | | | $ | (0.06) | | | $ | 0.01 | | | $ | 0.01 | |
________________________
(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 appreciation rights, stock options and subsidiary denominated equity and vesting of restricted stock units (“RSUs”). For the three and six months ended March 31,June 30, 2021, 5.2 million potentially dilutive securities are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
(b) Market-based awards and performance-based stock units are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards and performance-based stock units are included in the denominator for earnings per share if (i) the applicable performance or market condition(s) has been met and (ii) the inclusion of the market-based award and performance-based stock units is dilutive for the respective reporting periods. For the three months ended March 31, 2021, 1.4 million shares underlying market-based awards and performance-based stock awards were excluded from the calculation of diluted earnings per share because the performance or market condition(s) had not been met.
(c) For the three months ended March 31, 2020, the Company had a loss from operations and as a result, approximately 38.014.5 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 all earnings per share amounts.
(b) 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 subsidiary denominated equity and vesting of restricted stock units (“RSUs”). For the three and six months ended June 30, 2020, 4.9 million and 5.4 million, respectively, of potentially dilutive securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
(c) 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 both the three and six months ended June 30, 2020, 3.4 million shares underlying market-based awards and PSUs were excluded from the calculation of diluted earnings per share because the market or performance condition(s) had not been met.
NOTE 7—SEGMENT INFORMATION
The overall concept that the Company employs in determining its operating segments is to present the financial information in a manner consistent with how the chief operating decision maker views the businesses. In addition, we consider how the businesses are organized as to segment management;management and the focus of the 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 June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (In thousands) |
| Revenue: | | | | | | | |
| North America | $ | 399,945 | | | $ | 357,417 | | | $ | 760,986 | | | $ | 681,549 | |
| Europe | 21,043 | | | 17,644 | | | 47,031 | | | 37,162 | |
| Total | $ | 420,988 | | | $ | 375,061 | | | $ | 808,017 | | | $ | 718,711 | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents revenue by reportable segment:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | | (In thousands) |
| Revenue: | | | | | | | |
| North America | | | | | $ | 361,041 | | | $ | 324,132 | |
| Europe | | | | | 25,988 | | | 19,518 | |
| Total | | | | | $ | 387,029 | | | $ | 343,650 | |
The following table presents the revenue of the Company’s segments disaggregated by type of service:
| | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | (In thousands) | | (In thousands) |
| North America | North America | | | North America | |
| Marketplace: | Marketplace: | | | Marketplace: | |
Consumer connection revenue(a) | Consumer connection revenue(a) | | $ | 272,353 | | | $ | 239,830 | | Consumer connection revenue(a) | $ | 240,016 | | | $ | 242,015 | | | $ | 461,447 | | | $ | 450,619 | |
| Angi Services revenue(b) | | Angi Services revenue(b) | 72,819 | | | 32,095 | | | 127,505 | | | 64,956 | |
| Service professional membership subscription revenue | Service professional membership subscription revenue | | 11,952 | | | 13,777 | | Service professional membership subscription revenue | 12,390 | | | 13,017 | | | 24,342 | | | 26,794 | |
| Other revenue | Other revenue | | 6,745 | | | 5,169 | | Other revenue | 2,372 | | | 6,046 | | | 5,353 | | | 9,580 | |
| Total Marketplace revenue | Total Marketplace revenue | | 291,050 | | | 258,776 | | Total Marketplace revenue | 327,597 | | | 293,173 | | | 618,647 | | | 551,949 | |
Advertising and other revenue(b) | | 69,991 | | | 65,356 | | |
Advertising and Other revenue(c) | | Advertising and Other revenue(c) | 72,348 | | | 64,244 | | | 142,339 | | | 129,600 | |
| Total North America revenue | Total North America revenue | | 361,041 | | | 324,132 | | Total North America revenue | 399,945 | | | 357,417 | | | 760,986 | | | 681,549 | |
| Europe | Europe | | | | | Europe | | | | | | | |
Consumer connection revenue(c)(d) | Consumer connection revenue(c)(d) | | 22,351 | | | 15,689 | | Consumer connection revenue(c)(d) | 17,345 | | | 13,945 | | | 39,696 | | | 29,634 | |
| Service professional membership subscription revenue | Service professional membership subscription revenue | | 3,328 | | | 3,299 | | Service professional membership subscription revenue | 3,331 | | | 3,215 | | | 6,659 | | | 6,514 | |
| Advertising and other revenue | Advertising and other revenue | | 309 | | | 530 | | Advertising and other revenue | 367 | | | 484 | | | 676 | | | 1,014 | |
| Total Europe revenue | Total Europe revenue | | 25,988 | | | 19,518 | | Total Europe revenue | 21,043 | | | 17,644 | | | 47,031 | | | 37,162 | |
| Total revenue | Total revenue | | $ | 387,029 | | | $ | 343,650 | | Total revenue | $ | 420,988 | | | $ | 375,061 | | | $ | 808,017 | | | $ | 718,711 | |
________________________
(a) Includes fees paid by service professionals for consumer matches and revenue from Angi Services sourced through the marketplace platforms.
(b)Includes revenue from pre-priced offerings sourced through the marketplace platforms.
(c) Includes Angi revenue from service professionals under contract for advertising and Angi membership subscription fees from consumers, as well as revenue from HomeStars.
(c)(d) Includes fees paid by service professionals for consumer matches.
Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below.
| | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | (In thousands) | | (In thousands) |
| Revenue | Revenue | | | Revenue | |
| United States | United States | | $ | 356,444 | | | $ | 319,821 | | United States | $ | 394,538 | | | $ | 354,000 | | | $ | 750,982 | | | $ | 673,821 | |
| All other countries | All other countries | | 30,585 | | | 23,829 | | All other countries | 26,450 | | | 21,061 | | | 57,035 | | | 44,890 | |
| Total | Total | | $ | 387,029 | | | $ | 343,650 | | Total | $ | 420,988 | | | $ | 375,061 | | | $ | 808,017 | | | $ | 718,711 | |
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| (In thousands) |
| Long-lived assets (excluding goodwill and intangible assets): | | | |
| United States | $ | 101,605 | | | $ | 97,841 | |
| All other countries | 9,449 | | | 11,001 | |
| Total | $ | 111,054 | | | $ | 108,842 | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| (In thousands) |
| Long-lived assets (excluding goodwill and intangible assets): | | | |
| United States | $ | 101,151 | | | $ | 97,841 | |
| All other countries | 10,280 | | | 11,001 | |
| Total | $ | 111,431 | | | $ | 108,842 | |
The following tables present operating (loss) income (loss) and Adjusted EBITDA by reportable segment:
| | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | (In thousands) | | (In thousands) |
| Operating income (loss): | | | |
| Operating (loss) income: | | Operating (loss) income: | |
| North America | North America | | $ | 9,577 | | | $ | (8,108) | | North America | $ | (32,127) | | | $ | 16,190 | | | $ | (22,550) | | | $ | 8,082 | |
| Europe | Europe | | (9,468) | | | (8,188) | | Europe | (604) | | | 1,454 | | | (10,072) | | | (6,734) | |
| Total | Total | | $ | 109 | | | $ | (16,296) | | Total | $ | (32,731) | | | $ | 17,644 | | | $ | (32,622) | | | $ | 1,348 | |
| | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | (In thousands) | | (In thousands) |
Adjusted EBITDA(d): | | | |
Adjusted EBITDA(e): | | Adjusted EBITDA(e): | |
| North America | North America | | $ | 31,165 | | | $ | 41,391 | | North America | $ | (5,302) | | | $ | 55,041 | | | $ | 25,863 | | | $ | 96,432 | |
| Europe | Europe | | $ | (7,979) | | | $ | (6,994) | | Europe | $ | 860 | | | $ | 2,895 | | | $ | (7,119) | | | $ | (4,099) | |
________________________
(d)(e) The Company’s primary financial measure is Adjusted EBITDA, which is defined as operating (loss) 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 Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between the Company’s performance and that of its competitors. The above items are excluded from the Company’s Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.
The following tables reconcile operating (loss) income for the Company’s reportable segments and net (loss) earnings attributable to Angi Inc. shareholders to Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 |
| Operating Loss | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted
EBITDA |
| (In thousands) |
| North America | $ | (32,127) | | | $ | 9,455 | | | $ | 13,682 | | | $ | 3,688 | | | $ | (5,302) | |
| Europe | (604) | | | $ | 88 | | | $ | 1,376 | | | $ | 0 | | | $ | 860 | |
| Operating loss | (32,731) | | | | | | | | | |
| Interest expense | (5,814) | | | | | | | | | |
| Other expense, net | (636) | | | | | | | | | |
| Loss before income taxes | (39,181) | | | | | | | | | |
| Income tax benefit | 9,129 | | | | | | | | | |
| Net loss | (30,052) | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (241) | | | | | | | | | |
| Net loss attributable to Angi Inc. shareholders | $ | (30,293) | | | | | | | | | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 |
| Operating Income | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted
EBITDA |
| (In thousands) |
| North America | $ | 16,190 | | | $ | 14,495 | | | $ | 11,467 | | | $ | 12,889 | | | $ | 55,041 | |
| Europe | 1,454 | | | $ | 264 | | | $ | 1,088 | | | $ | 89 | | | $ | 2,895 | |
| Operating income | 17,644 | | | | | | | | | |
| Interest expense | (1,620) | | | | | | | | | |
| Other income, net | 212 | | | | | | | | | |
| Earnings before income taxes | 16,236 | | | | | | | | | |
| Income tax provision | (3,025) | | | | | | | | | |
| Net earnings | 13,211 | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (544) | | | | | | | | | |
| Net earnings attributable to Angi Inc. shareholders | $ | 12,667 | | | | | | | | | |
The following tables reconcile operating income (loss) for the Company’s reportable segments and net earnings (loss) attributable to Angi Inc. shareholders to Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
| Operating Income (Loss) | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted
EBITDA |
| (In thousands) |
| North America | $ | 9,577 | | | $ | 1,936 | | | $ | 14,578 | | | $ | 5,074 | | | $ | 31,165 | |
| Europe | (9,468) | | | $ | 98 | | | $ | 1,391 | | | $ | 0 | | | $ | (7,979) | |
| Operating income (loss) | 109 | | | | | | | | | |
| Interest expense | (6,617) | | | | | | | | | |
| Other loss, net | (767) | | | | | | | | | |
| Loss before income taxes | (7,275) | | | | | | | | | |
| Income tax benefit | 9,289 | | | | | | | | | |
| Net earnings | 2,014 | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (83) | | | | | | | | | |
| Net earnings attributable to Angi Inc. shareholders | $ | 1,931 | | | | | | | | | |
| | | Three Months Ended March 31, 2020 | | Six Months Ended June 30, 2021 |
| | Operating Loss | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted
EBITDA | | Operating Loss | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted
EBITDA |
| | (In thousands) | | (In thousands) |
| North America | North America | $ | (8,108) | | | $ | 25,312 | | | $ | 11,297 | | | $ | 12,890 | | | $ | 41,391 | | North America | $ | (22,550) | | | $ | 11,391 | | | $ | 28,260 | | | $ | 8,762 | | | $ | 25,863 | |
| Europe | Europe | (8,188) | | | $ | 263 | | | $ | 841 | | | $ | 90 | | | $ | (6,994) | | Europe | (10,072) | | | $ | 186 | | | $ | 2,767 | | | $ | 0 | | | $ | (7,119) | |
| Operating loss | Operating loss | (16,296) | | | Operating loss | (32,622) | | |
| Interest expense | Interest expense | (2,274) | | | Interest expense | (12,431) | | |
| Other income, net | 421 | | | |
| Other expense, net | | Other expense, net | (1,403) | | |
| Loss before income taxes | Loss before income taxes | (18,149) | | | Loss before income taxes | (46,456) | | |
| Income tax benefit | Income tax benefit | 8,965 | | | Income tax benefit | 18,418 | | |
| Net loss | Net loss | (9,184) | | | Net loss | (28,038) | | |
| Net loss attributable to noncontrolling interests | 226 | | | |
| Net earnings attributable to noncontrolling interests | | Net earnings attributable to noncontrolling interests | (324) | | |
| Net loss attributable to Angi Inc. shareholders | Net loss attributable to Angi Inc. shareholders | $ | (8,958) | | | Net loss attributable to Angi Inc. shareholders | $ | (28,362) | | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2020 |
| Operating Income (Loss) | | Stock-Based
Compensation Expense | | Depreciation | | Amortization
of Intangibles | | Adjusted
EBITDA |
| (In thousands) |
| North America | $ | 8,082 | | | $ | 39,807 | | | $ | 22,764 | | | $ | 25,779 | | | $ | 96,432 | |
| Europe | (6,734) | | | $ | 527 | | | $ | 1,929 | | | $ | 179 | | | $ | (4,099) | |
| Operating income | 1,348 | | | | | | | | | |
| Interest expense | (3,894) | | | | | | | | | |
| Other income, net | 633 | | | | | | | | | |
| Loss before income taxes | (1,913) | | | | | | | | | |
| Income tax benefit | 5,940 | | | | | | | | | |
| Net earnings | 4,027 | | | | | | | | | |
| Net earnings attributable to noncontrolling interests | (318) | | | | | | | | | |
| Net earnings attributable to Angi Inc. shareholders | $ | 3,709 | | | | | | | | | |
NOTE 8—CONSOLIDATED FINANCIAL STATEMENT DETAILS
Cash and Cash Equivalents and Restricted Cash:Cash
The following table 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:
| | | March 31, 2021 | | December 31, 2020 | | March 31, 2020 | | December 31, 2019 | | June 30, 2021 | | December 31, 2020 | | June 30, 2020 | | December 31, 2019 |
| | (In thousands) | | (In thousands) |
| Cash and cash equivalents | Cash and cash equivalents | $ | 777,041 | | | $ | 812,705 | | | $ | 384,230 | | | $ | 390,565 | | Cash and cash equivalents | $ | 584,260 | | | $ | 812,705 | | | $ | 420,985 | | | $ | 390,565 | |
| Restricted cash included in other current assets | Restricted cash included in other current assets | 176 | | | 407 | | | 623 | | | 504 | | Restricted cash included in other current assets | 236 | | | 407 | | | 379 | | | 504 | |
| Restricted cash included in other non-current assets | Restricted cash included in other non-current assets | 433 | | | 449 | | | 398 | | | 409 | | Restricted cash included in other non-current assets | 730 | | | 449 | | | 412 | | | 409 | |
| Total cash and cash equivalents, and restricted cash as shown on the consolidated statement of cash flows | Total cash and cash equivalents, and restricted cash as shown on the consolidated statement of cash flows | $ | 777,650 | | | $ | 813,561 | | | $ | 385,251 | | | $ | 391,478 | | Total cash and cash equivalents, and restricted cash as shown on the consolidated statement of cash flows | $ | 585,226 | | | $ | 813,561 | | | $ | 421,776 | | | $ | 391,478 | |
Restricted cash included in other current assets at March 31,June 30, 2021 and December 31, 2020 consisted of cash reserved to fund insurance claims and cash received from customers through the marketplace platforms, representing funds collected for payments to service providers which were not settled as of the period end.end, and cash reserved to fund insurance claims.
Restricted cash included in other current assets at March 31,June 30, 2020 primarily consisted of a deposit related to corporate credit cards and cash reserved to fund insurance claims at Angi Inc.
Restricted cash included in other current assets at December 31, 2019 primarily consisted of a deposit related to corporate credit cards.
Restricted cash included in other non-current assets at March 31, 2021 and 2020for all periods presented above consisted of deposits related to leases.
Credit Losses and Revenue Reserve
The following table presents the changes in the credit loss reserve for the three months ended March 31, 2021 and 2020:
| | | | | | | | | | | |
| 2021 | | 2020 |
| (In thousands) |
| Balance at January 1 | $ | 26,046 | | | $ | 19,066 | |
| Current period provision for credit losses | 19,118 | | | 17,070 | |
| Write-offs charged against the credit loss reserve | (20,570) | | | (16,298) | |
| Recoveries collected | 758 | | | 737 | |
| Balance at March 31 | $ | 25,352 | | | $ | 20,575 | |
The revenue reserve was $3.5 million and $1.8 million at March 31, 2021 and 2020, respectively. The total allowance for credit losses and revenue reserve was $28.9 million and $22.4 million as of March 31, 2021 and 2020, respectively.
Accumulated Amortization and Depreciation
The following table provides the accumulated amortization and depreciation within the consolidated balance sheet: | | | | | | | | | | | | | | |
| Asset Category | | March 31, 2021 | | December 31, 2020 |
| | | (In thousands) |
| Right-of-use assets (included in “other non-current assets”) | | $ | 46,446 | | | $ | 40,800 | |
| Capitalized software, leasehold improvements, and equipment | | $ | 80,052 | | | $ | 95,438 | |
| Intangible assets, net | | $ | 148,319 | | | $ | 162,627 | |
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the changes in the credit loss reserve for the six months ended June 30, 2021 and 2020:
| | | | | | | | | | | |
| 2021 | | 2020 |
| (In thousands) |
| Balance at January 1 | $ | 26,046 | | | $ | 19,066 | |
| Current period provision for credit losses | 42,731 | | | 39,338 | |
| Write-offs charged against the credit loss reserve | (37,051) | | | (33,700) | |
| Recoveries collected | 1,351 | | | 1,283 | |
| Balance at June 30 | $ | 33,077 | | | $ | 25,987 | |
The revenue reserve was $2.8 million and $2.0 million at June 30, 2021 and 2020, respectively. The total allowance for credit losses and revenue reserve was $35.9 million and $28.0 million as of June 30, 2021 and 2020, respectively.
Accumulated Amortization and Depreciation
The following table provides the accumulated amortization and depreciation within the consolidated balance sheet:
| | | | | | | | | | | | | | |
| Asset Category | | June 30, 2021 | | December 31, 2020 |
| | | (In thousands) |
| Right-of-use assets (included in “other non-current assets”) | | $ | 50,345 | | | $ | 40,800 | |
| Capitalized software, leasehold improvements, and equipment | | $ | 87,347 | | | $ | 95,438 | |
| Intangible assets | | $ | 152,134 | | | $ | 162,627 | |
Other (expense) income, net
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | (In thousands) | | | | (In thousands) |
| Interest income | Interest income | $ | 97 | | | $ | 1,271 | | Interest income | $ | 50 | | | $ | 161 | | | $ | 147 | | | $ | 1,432 | |
| | Foreign exchange losses | (860) | | | (423) | | |
| | Loss from acquisition/sale of a business | (4) | | | (427) | | |
| Foreign exchange gains (losses) | | Foreign exchange gains (losses) | 407 | | | 78 | | | (453) | | | (345) | |
Loss on extinguishment of debt(a) | | Loss on extinguishment of debt(a) | (1,110) | | | 0 | | | (1,110) | | | 0 | |
Gain (loss) from acquisition/sale of a business(b) | | Gain (loss) from acquisition/sale of a business(b) | 17 | | | (27) | | | 13 | | | (454) | |
| Other (expense) income, net | Other (expense) income, net | $ | (767) | | | $ | 421 | | Other (expense) income, net | $ | (636) | | | $ | 212 | | | $ | (1,403) | | | $ | 633 | |
________________________
(a)Represents the write-off of deferred debt issuance costs related to the ANGI Group Term Loan, which was repaid in its entirety during the second quarter of 2021.
(b)Loss from acquisition/sale of a business for the threesix months ended March 31,June 30, 2020 includes a $0.2 million mark-to-market charge for an indemnification claimcharge related to the Handy acquisition that was settled in Angi Inc. shares during the first quarter of 2020 and a $0.2$0.3 million charge related to the final earn-out settlement related to the sale of Felix.Felix
NOTE 9—CONTINGENCIES
In the ordinary course of business, the Company is a party to various lawsuits. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has not identified certain other legal matters where we believe an unfavorable outcome is probable and estimable; therefore, 0 reserve is established. Although management currently believes that resolving claims against us, 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
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
of these matters may change in the future. The Company also evaluates other contingent matters, including income 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—Income Taxes” for additional information related to income tax contingencies. NOTE 10—RELATED PARTY TRANSACTIONS WITH IAC
Angi Inc. and IAC have entered into certain agreements to govern their relationship. These agreements include: a contribution agreement; an investor rights agreement; a services agreement; a tax sharing agreement; and an employee matters agreement.
For the three and six months ended March 31,June 30, 2021 and 2020, the companyCompany was charged $1.1$1.2 million and $2.3 million, and $1.2 million and $2.4 million, respectively, by IAC for services rendered pursuant to the services agreement. At March 31, 2021, the Company had outstanding payables of less than $0.1 million due to IAC, pursuant to the services agreement. There were 0 outstanding receivables or payables pursuant to the services agreement as ofat June 30, 2021 or December 31, 2020.
Separately,Additionally, the Company subleases office space to IAC and charged IAC $0.4 million and $0.8 million, and $0.4 million and $0.9 million of rent for both the three and six months ended March 31,June 30, 2021 and 2020.2020, respectively. At March 31,June 30, 2021, there were 0 outstanding receivables pursuant to the sublease agreements. At December 31, 2020 there was an outstanding receivable of less than $0.1 million due from IAC pursuant to the sublease agreements, which was subsequently paid in full in the first quarter of 2021.
At both March 31,June 30, 2021 and December 31, 2020, the Company had outstanding payables of $1.5 million and $0.9 million, respectively, due to IAC pursuant to the tax sharing agreement, which are included in “Accrued expenses and other current liabilities,” in the accompanying consolidated balance sheet. There were 0 payments to or refunds from IAC pursuant to this agreement during the three and six months ended March 31, 2021June 30, 2021. There were $3.1 million of refunds received from IAC pursuant to this agreement during the three and six months ended June 30, 2020.
For the three and six months ended March 31,June 30, 2021, and 2020,less than 0.1 million and 0.20.1 million shares, respectively, of Angi Inc. Class B common stock were issued to IAC pursuant to the employee matters agreement as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by Angi Inc. employees. For the six months ended June 30, 2020, 0.2 million shares of Angi Inc. Class B common stock were issued to IAC pursuant to the employee matters agreement. There were 0 shares issued to IAC pursuant to the employee matters agreement for the three months ended March 31,June 30, 2020. For the three and six months ended June 30, 2021, less than 0.1 million and 2.6 million shares, respectively, of Angi Inc. Class A common stock were issued to IAC pursuant to the
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
employee matters agreement as reimbursement for IAC common stock issued in connection with the exercise and settlement of certain Angi Inc. stock appreciation rights. There were 0 shares of Angi Inc. Class A common stock issued to IAC during the three and six months ended March 31,June 30, 2020.
NOTE 11—SUBSEQUENT EVENTS
AsOn July 1, 2021, Angi Inc. acquired certain assets and assumed certain liabilities of May 6, 2021,Total Home Roofing, Inc., a leading residential roofing company, to accelerate the Company paid offAngi Services roofing category.
The $250.0 million ANGI Group Revolving Facility, which otherwise would have expired on November 5, 2023, was terminated effective August 3, 2021.No amounts were ever drawn under the outstanding balance of the Term Loan of $213.1 million.ANGI Group Revolving Facility prior to its termination.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
GENERAL
Management Overview
Angi Inc., formerly ANGI Homeservices, Inc., (“Angi Inc.,” the “Company,” “we,” “our,” or “us”) connects quality home service professionals with consumers across 500 different categories, from repairing and remodeling homes to cleaning and landscaping. Over 250,000260,000 domestic service professionals actively sought consumer matches, completed jobs, or advertised work through Angi Inc. platforms; andplatforms during the three months ended June 30, 2021. Additionally, consumers turned to at least one of our brands to find a professional for approximately 34 million projects during the twelve months ended March 31,June 30, 2021.
The Company has two operating segments (i) North America (United States and Canada), which includes HomeAdvisor, Angi (formerly Angie’s List), Handy,HomeAdvisor Powered by Angi, and HomeStars;Handy; and (ii) Europe, which includes Travaux, MyHammer, MyBuilder, Werkspot, and Instapro.
For a more detailed description of the Company’s operating businesses, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Defined Terms and Operating Metrics:
Unless otherwise indicated or as the context otherwise requires otherwise certain terms, which include the principal operating metrics we use in managing our business, used in this quarterly report are defined below:
•Marketplace Revenue primarily reflects domestic marketplace revenues, including consumer connection revenue for consumer matches, revenue from Angi Services (pre-priced) offerings sourced through marketplace platforms, and membership subscription revenue from service professionals.
•Advertising and Other Revenue primarily includes revenue from service professionals under contract for advertising and membership subscription fees from consumers.
•Angi Services are the Company’s pre-priced offerings by which the consumer purchases services directly from the Company and the Company engages a service professional to perform the service. This will include the Total Home Roofing acquisition, which closed on July 1, 2021.
•Marketplace Service Requests are fully completed and submitted domestic customer service requests and includes Angi Services requests sourced through the marketplace platforms in the period.
•Marketplace Monetized Transactions are fully completed and submitted domestic customer service requests that were matched to and paid for by a service professional and includes completed and in-process Angi Services jobs sourced through the marketplace platforms in the period.
•Marketplace Transacting Service Professionals (“Marketplace Transacting SPs”) are the number of marketplace service professionals that paid for consumer matches or performed an Angi Services job sourced through the marketplace platforms in the quarter.
•Advertising Service Professionals (“Advertising SPs”) are the total number of service professionals under contract for advertising at the end of the period.
•Senior Notes - On August 20, 2020, ANGI Group, LLC (“ANGI Group”), a direct wholly-owned subsidiary of the 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, commencing February 15, 2021.
•ANGI Group Term Loan - due November 5, 2023. The outstanding balance of the Term Loan as of March 31, 2021 was $213.1 million and bore interest at LIBOR plus 2.00%, or 2.10%. As of May 6, 2021, the outstanding balance of the Term Loan was repaid in its entirety.
•ANGI Group Revolving Facility - Thethe $250.0 million ANGI Group $250.0 million revolving credit facility, expireswhich otherwise would have expired on November 5, 2023. At March 31, 2021 and December 31, 2020, there2023, was terminated effective August 3, 2021.No amounts were no outstanding borrowingsever drawn under the ANGI Group Revolving Facility. The ANGI Group Revolving Facility and ANGI Group Term Loan are collectively referredprior to as the ANGI Group Credit Agreement.its termination.
Components of Results of Operations
Sources of Revenue
Marketplace 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) and, (ii) Angi Services, which is comprised of revenue from completed jobs sourced through the marketplace platforms, and (ii)(iii) service professional membership subscription fees. Consumer connection revenue varies based upon several factors, including the service requested, product experience offered, and geographic location of service. Advertising and Other Revenue is primarily derived from (i) sales of time-based website, mobile, and call center advertising to service professionals, and (ii) membership subscription fees from consumers.
Operating Costs and Expenses:
•Cost of revenue - consists primarily of payments made to independent service professionals who perform work contracted under pre-pricedAngi Services arrangements through the marketplace platforms, credit card processing fees, and hosting fees.
•Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including fees paid to search engines, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to our brands, compensation expense (including stock-based compensation expense) and other employee-related costs for our sales force and marketing personnel, and facilities costs.
•General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources and customer service functions, fees for professional services (including transaction-related costs related to acquisitions), provision for credit losses, software license and maintenance costs, and facilities costs. Our customer service function includes personnel who provide support to our service professionals and consumers.
•Product development expense - consists primarily of compensation expense (including stock-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, software license and maintenance costs, and facilities costs.
Non-GAAP financial measure
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is a non-GAAP financial measure. See “Principles of Financial Reporting” for the definition of Adjusted EBITDA and a reconciliation of net (loss) earnings (loss) attributable to Angi Inc. shareholders to operating (loss) income (loss) to consolidated Adjusted EBITDA for the three and six months ended March 31,June 30, 2021 and 2020. Brand Integration Initiative
On March 17, 2021, ourthe Company updated one of its leading websites and brands, Angie’s List, to Angi, and began the process of consolidating under a single brand. Going forward we will concentrate ourconcentrated its marketing investment in the Angi brand in order to focus ourits marketing, sales, and branding efforts on a single brand.
Our Company reliesWe rely heavily on free, or organic, search results from search engine optimization, and paid search engine marketing efforts to drive traffic to our properties, which has been adversely affected by this initiative. Specifically, ourplatforms. Our brand initiative has adversely affected the placement and ranking of Angi Inc. websites, particularly Angi.com, in organic search results as Angi does not have the same domain history as Angie’s List. In addition, we shifted marketing to support Angi, away from HomeAdvisor, which has negatively affected the efficiency of our search engine marketing efforts.
TheseDuring the second quarter of 2021, these efforts have had a pronounced negative impact on Marketplace Service Requests from organic search results and reduced monetization via our mobile applications, which in turn has resulted in relatively more Marketplace Service Requests fromincreased paid search engine marketing.marketing to generate Marketplace Service Requests. The combined effect of this during the three months ended June 30, 2021, has reduced revenue and increased marketing spend, which we expect to result in lower profitsmaterially more than expected at the launch of the brand initiative in the first quarter ending June 30,of 2021 and more significantly than our forecasts at the beginning of May 2021. We expect this trendthe pronounced negative impact to
organic search results, the increased paid search engine marketing costs and the reduced monetization from our mobile applications to continue until such time as the new brand establishes search engine optimization ranking and consumer awareness is established.
Angi Services Investment
Angi Services was launched in August 2019 and for the three and six months ended June 30, 2021 revenue grew 127% and 96%, respectively, versus the comparable prior year periods. We expect the reductionhave invested significantly in revenue,
increased marketing expense,Angi Services and lower profitsexpect to continue forto do so going forward. In the remaindersecond half of 2021, we expect significant revenue growth as we expand the business, refine the overall experience, and potentially into 2022, with the most significant impactincrease penetration in the second quarter of 2021. The Company has alsocertain geographies. This increased its investment in Angi Services our pre-priced product offering, which will reducehas contributed to lower profitability for the Company for the three and six months ended June 30, 2021 and is expected to continue to negatively impact profits more than planned duringthrough the remainder of 2021.
COVID-19 Update
COVID-19 Update
The impact on the Company from the COVID-19 outbreak, which has been declared a “pandemic” bypandemic and the World Health Organization,measures designed to contain its spread has been varied and volatile.
As previously disclosed, the initial impact of COVID-19 on the Company resulted in a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While we have experienced a rebound in service requests in the second half of 2020 and the first half of 2021, many service professionals’ businesses had been adversely impacted by labor and material constraints and many service professionals had limited capacity to take on new business, which negatively impacted our ability to monetize this increased level of service requests through the first quarter of 2021. Although our ability to monetize service requests rebounded modestly in the second quarter of 2021, we are still not back to levels we experienced pre-COVID-19. No assurances can be provided that we will continue to be able to improve monetization, or that service professionals’ businesses will not be adversely impacted in the future.
The extent to which developments related to the COVID-19 outbreakpandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the continuing spread of COVID-19, the developmentseverity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and implementation of effective preventative measures (including the global distribution of vaccines)attitudes toward receiving them, materials and possible treatments,supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services (including those provided by certain of our service professionals) and other activity, and public reactions to these developments. For example, these developments and measures have resulted in rapid and adverse changes to the operating environment in which we do business, as well as significant uncertainty concerning the near and long term economic ramifications of the COVID-19 outbreak, which have adversely impacted our ability to forecast our results and respond in a timely and effective manner to trends related to the COVID-19 outbreak. The longer the global outbreak and measures designed to curb the spread of the virus continue to adversely affect levels of consumer confidence, discretionary spending and the willingness of consumers to interact with other consumers, vendors and service providers face-to-face (and in turn, adversely affect demand for the Company’s various products and services), the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations and the more limited will be the Company’s ability to try and make up for delayed or lost revenues.
When COVID-19 first impacted us in March 2020, we experienced a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). During the second quarter of 2020, we experienced a rebound in service requests, exceeding pre-COVID-19 growth levels, driven by increased demand from homeowners who spent more time at home due to measures taken to reduce the spread of COVID-19. The Company continued to experience strong demand for home services in the second half of 2020 and the first quarter of 2021. However, many service professionals’ businesses have been adversely impacted by labor and material constraints and many service professionals have limited capacity to take on new business, which has negatively impacted our ability to monetize this increased level of service requests.
Results of Operations for the three and six months ended March 31,June 30, 2021 compared to the three and six months ended June 30, 2020
Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| (Dollars in thousands) |
| Revenue: | | | | | | | | | | | | | | | |
| Marketplace: | | | | | | | | | | | | | | | |
| Consumer connection revenue | $ | 240,016 | | | $ | (1,999) | | | (1)% | | $ | 242,015 | | | $ | 461,447 | | | $ | 10,828 | | | 2% | | $ | 450,619 | |
| Angi Services revenue | 72,819 | | | 40,724 | | | 127% | | 32,095 | | | 127,505 | | | 62,549 | | | 96% | | 64,956 | |
| Service professional membership subscription revenue | 12,390 | | | (627) | | | (5)% | | 13,017 | | | 24,342 | | | (2,452) | | | (9)% | | 26,794 | |
| Other revenue | 2,372 | | | (3,674) | | | (61)% | | 6,046 | | | 5,353 | | | (4,227) | | | (44)% | | 9,580 | |
| Total Marketplace Revenue | 327,597 | | | 34,424 | | | 12% | | 293,173 | | | 618,647 | | | 66,698 | | | 12% | | 551,949 | |
| Advertising and Other revenue | 72,348 | | | 8,104 | | | 13% | | 64,244 | | | 142,339 | | | 12,739 | | | 10% | | 129,600 | |
| North America | 399,945 | | | 42,528 | | | 12% | | 357,417 | | | 760,986 | | | 79,437 | | | 12% | | 681,549 | |
| Europe | 21,043 | | | 3,399 | | | 19% | | 17,644 | | | 47,031 | | | 9,869 | | | 27% | | 37,162 | |
| Total revenue | $ | 420,988 | | | $ | 45,927 | | | 12% | | $ | 375,061 | | | $ | 808,017 | | | $ | 89,306 | | | 12% | | $ | 718,711 | |
| | | | | | | | | | | | | | | |
| Percentage of Total Revenue: | | | | | | | | | | | | | | | |
| North America | 95 | % | | | | | | 95 | % | | 94 | % | | | | | | 95 | % |
| Europe | 5 | % | | | | | | 5 | % | | 6 | % | | | | | | 5 | % |
| Total revenue | 100 | % | | | | | | 100 | % | | 100 | % | | | | | | 100 | % |
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | Change | | % Change | | 2020 | | 2021 | | Change | | % Change | | 2020 |
| (In thousands, rounding differences may occur) |
| Operating metrics: | | | | | | | | | | | | | | | |
| Marketplace Service Requests | 9,419 | | | 38 | | | —% | | 9,381 | | | 17,128 | | | 1,779 | | | 12% | | 15,349 | |
| Marketplace Monetized Transactions | 5,006 | | | 492 | | | 11% | | 4,514 | | | 9,199 | | | 1,095 | | | 14% | | 8,104 | |
| Marketplace Transacting SPs | 225 | | | 31 | | | 16% | | 194 | | | | | | | | | |
| Advertising SPs | 40 | | | 3 | | | 6% | | 37 | | | | | | | | | |
For the three months ended June 30, 2021 compared to the three months ended March 31,June 30, 2020
Revenue
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | $ Change | | % Change | | 2020 |
| |
| Revenue: | | | | | | | |
| Marketplace: | | | | | | | |
| Consumer connection revenue | $ | 272,353 | | | $ | 32,523 | | | 14% | | $ | 239,830 | |
| | | | | | | |
| Service professional membership subscription revenue | 11,952 | | | (1,825) | | | (13)% | | 13,777 | |
| Other revenue | 6,745 | | | 1,576 | | | 30% | | 5,169 | |
| Total Marketplace Revenue | 291,050 | | | 32,274 | | | 12% | | 258,776 | |
| Advertising and Other Revenue | 69,991 | | | 4,635 | | | 7% | | 65,356 | |
| North America | 361,041 | | | 36,909 | | | 11% | | 324,132 | |
| Europe | 25,988 | | | 6,470 | | | 33% | | 19,518 | |
| Total Revenue | $ | 387,029 | | | $ | 43,379 | | | 13% | | $ | 343,650 | |
| | | | | | | |
| Percentage of Total Revenue: | | | | | | | |
| North America | 93 | % | | | | | | 94 | % |
| Europe | 7 | % | | | | | | 6 | % |
| Total Revenue | 100 | % | | | | | | 100 | % |
| | | | | | | |
| Three Months Ended March 31, |
| 2021 | | $ Change | | % Change | | 2020 |
| |
| Operating metrics: | | | | | | | |
| Marketplace Service Requests | 7,709 | | | 1,741 | | | 29% | | 5,968 | |
| Marketplace Monetized Transactions | 4,193 | | | 603 | | | 17% | | 3,590 | |
| Marketplace Transacting SPs | 212 | | | 21 | | | 11% | | 191 | |
| Advertising SPs | 40 | | | 3 | | | 8% | | 37 | |
North America revenue increased $36.9$42.5 million, or 11%12%, driven by increases in Marketplace Revenue of $32.3$34.4 million, or 12%, and Advertising and Other Revenuerevenue of $4.6$8.1 million, or 7%13%. The increase in Marketplace Revenue is due to an increase in consumer connectionAngi Services revenue of $32.5$40.7 million, or 14%127%, due primarily to an increase of 29% in Marketplace Service Requests to 7.7 million, resulting in a 17%11% increase in Marketplace Monetized Transactions to 4.2 million.5.0 million, despite Marketplace Service Requests being flat. The increase in Advertising and Other Revenue is due primarily to an increase in Angi revenue driven by a 8%6% increase in Advertising SPs.
Europe revenue increased $6.5$3.4 million, or 33%19%, due to strong growth in its largest markets due to increased consumer demand and the favorable impact of the weakening of the U.S dollar relative to the Euro and the British Pound.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
North America revenue increased $79.4 million, or 12%, driven by increases in Marketplace Revenue of $66.7 million, or 12%, and Advertising and Other revenue of $12.7 million, or 10%. The increase in Marketplace Revenue is due to an increase in Angi Services revenue of $62.5 million, or 96%, and an increase in consumer connection revenue of $10.8 million, or 2%, due primarily to an increase of 12% in Marketplace Service Requests to 17.1 million, resulting in a 14% increase in Marketplace Monetized Transactions to 9.2 million, slightly outpacing the increase in Marketplace Service Requests. The increase in Advertising and Other Revenue is due primarily to the factors described above in the three-month section.
Europe revenue increased $9.9 million, or 27%, due to strong growth across its markets due to increased consumer demand and the favorable impact of the weakening of the U.S dollar relative to the Euro and the British Pound.
Cost of revenue
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| | | | (Dollars in thousands) |
| Cost of revenue (exclusive of depreciation shown separately below) | Cost of revenue (exclusive of depreciation shown separately below) | $ | 53,828 | | | $ | 20,599 | | | 62% | | $ | 33,229 | | Cost of revenue (exclusive of depreciation shown separately below) | $ | 69,704 | | | $ | 28,662 | | | 70% | | $ | 41,042 | | | $ | 123,532 | | | $ | 49,261 | | | 66% | | $ | 74,271 | |
| As a percentage of revenue | As a percentage of revenue | 14% | | 10% | As a percentage of revenue | 17% | | 11% | | 15% | | 10% |
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
North America cost of revenue increased $20.7$28.6 million, or 63%70%, due primarily to the growth of Angi Services, resulting in higher payments made to independent third-party service professionals who perform work contracted under Angi Services arrangements to complete service requests from consumers.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
North America cost of revenue increased $49.3 million, or 67%, and increased as a percentage of revenue, due primarily to growth of Angi Services (the pre-priced product offering) which has lower margins than other sources of North America revenue.
factors described above in the three-month discussion. Selling and marketing expense
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| | | | (Dollars in thousands) |
| Selling and marketing expense | Selling and marketing expense | $ | 205,840 | | | $ | 15,881 | | | 8% | | $ | 189,959 | | Selling and marketing expense | $ | 239,031 | | | $ | 49,047 | | | 26% | | $ | 189,984 | | | $ | 444,871 | | | $ | 64,928 | | | 17% | | $ | 379,943 | |
| As a percentage of revenue | As a percentage of revenue | 53% | | 55% | As a percentage of revenue | 57% | | 51% | | 55% | | 53% |
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
On a consolidated basis, selling and marketing expense increased to 57% of revenue from 51% of revenue due primarily to the increase in selling and marketing expense at North America.
North America selling and marketing expense increased $16.7$47.7 million, or 10%26%, driven by increases in advertising expense of $29.0 million, compensation expense of $9.0$14.2 million, advertising expense of $6.0 million, and outsourced personnel and consulting costs of $2.5$4.2 million. The increase in advertising expense was due primarily to increases of $21.9 million in online marketing and $6.8 million in television spend. The increase in online marketing spend was attributable to the brand integration initiative described above under “Brand Integration Initiative”. The increase in television spend in 2021 reflects the return to historical spending amounts as compared to the cost cutting initiatives experienced during the second quarter of 2020 due to the impact of COVID-19. The increase in compensation expense was due primarily to increased commission expense, in addition to an increase in sales force headcount. The increase in consulting costs was due primarily to various sales initiatives at Angi Services.
Europe selling and marketing expense increased $1.3 million, or 21%, driven by an increase in advertising expense of $1.9 million, partially offset by a decrease in compensation expense of $0.5 million from lower headcount.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
On a consolidated basis, selling and marketing expense increased to 55% of revenue from 53% of revenue due primarily to the increase in selling and marketing expense at North America.
North America selling and marketing expense increased $64.4 million, or 18%, driven by increases in advertising expense of $35.0 million, compensation expense of $23.2 million, and outsourced personnel and consulting costs of $7.1 million. The increase in advertising expense was due primarily to an increase in online marketing spend, partially offset by a decrease in television spend. The increase in online marketing spend was due primarily to the “Brand Integration Initiative,” described above. The decrease in television spend was due primarily to reduced spend in the first quarter of 2021 compared to the prior
year period in anticipation of the aforementioned “Brand Integration Initiative,” described above. The increase in compensation expense was due primarily to the factors described above in the three-month discussion. The increase in outsourced personnel and consulting costs waswere due primarily to various sales initiatives inat Angi Services.
Europe selling and marketing expense decreased $0.8increased $0.5 million, or 6%2%, driven by an increase in advertising expense of $1.7 million, partially offset by a decrease in compensation expense of $0.6$1.1 million from lower headcount and a decrease in advertising of $0.1 million.headcount.
General and administrative expense
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| | | | (Dollars in thousands) |
| General and administrative expense | General and administrative expense | $ | 88,162 | | | $ | (6,394) | | | (7)% | | $ | 94,556 | | General and administrative expense | $ | 107,486 | | | $ | 22,035 | | | 26% | | $ | 85,451 | | | $ | 195,648 | | | $ | 15,641 | | | 9% | | $ | 180,007 | |
| As a percentage of revenue | As a percentage of revenue | 23% | | 28% | As a percentage of revenue | 26% | | 23% | | 24% | | 25% |
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
North America general and administrative expense decreased $13.2increased $20.1 million, or 15%25%, due primarily to $9.6 million in one-time costs as a result of the Company reducing its real estate footprint, an $8.4 million increase in professional fees, and a $1.9 million increase in the provision for credit losses. The real estate related costs are the result of impairments of right-of-use lease assets, leasehold improvements and furniture and equipment associated with office space we are vacating. The increase in professional fees is due primarily to an increase in outsourced personnel costs, legal fees, and recruiting fees. The increase in outsourced personnel costs is due primarily to an increase in call volume related to our customer service function. The increase in the provision for credit losses is driven by higher Marketplace Revenue.
Europe general and administrative expense increased $2.0 million, or 34%, due primarily to a $0.9 million increase in professional fees related to corporate restructuring activities and a $0.5 million increase in compensation expense.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
North America general and administrative expense increased $6.9 million, or 4%, due primarily to an increase of $11.4 million in professional fees, $9.6 million in one-time costs related to the Company reducing its real estate footprint described above in the three-month discussion, a $3.2 million increase in the provision for credit losses, and a $2.3 million increase in software license and maintenance costs, partially offset by a decrease of $22.0 million in compensation expense. The increase in professional fees and provision for credit losses were due primarily to the factors described above in the three-month discussion. The increase in software license and maintenance expense was due primarily to increased investment in software to support our customer service function. The decrease in compensation expense was due primarily to a decrease of $20.0 million instock-based compensation expense partially offset by increases in professional fees of $3.0$28.2 million, provision for credit loss of $1.3 million, and software license and maintenance costs of $0.8 million. The decrease in compensation expense is due to a decrease of $22.7 million in stock-based compensation expense, partially offset by an increase of $2.8$5.5 million in wage related expenses resulting primarily resulting from annual wage increases. The decrease in stock-based compensation expense for the first quarter of 2021 iswas due primarily to $11.9$17.3 million forin stock appreciation rights expense recognized in the first quarterhalf of 2020, which werewas not incurred in 2021 as the awards became fully vested in 2020, and a net decrease of $7.7 million due to the reversal of previously recognized expense related to unvested awards that were forfeited due to management departures in the first quarter of 2021, partially offset by the issuance of new equity awards since 2020. The increase in professional fees is due primarily to an increase in outsourced personnel costs and legal fees. The increase in outsourced personnel costs is due primarily to an increase in call volume related to our customer service function. The increase in provision for credit loss is driven by higher Marketplace Revenue.
Europe general and administrative expense increased $6.8$8.8 million, or 88%65%, due primarily to a charge of $6.0 million related to the acquisition of an additional 21% interest in our MyBuilder business at a premium to fair value, and a $0.6$1.4 million increase in professional fees related to the platform migrationrestructuring in France.Germany.
Product development expense
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| | | | (Dollars in thousands) |
| Product development expense | Product development expense | $ | 18,047 | | | $ | 963 | | | 6% | | $ | 17,084 | | Product development expense | $ | 18,752 | | | $ | 3,345 | | | 22% | | $ | 15,407 | | | $ | 36,799 | | | $ | 4,308 | | | 13% | | $ | 32,491 | |
| As a percentage of revenue | As a percentage of revenue | 5% | | 5% | As a percentage of revenue | 4% | | 4% | | 5% | | 5% |
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
North America product development expense decreased $0.5increased $1.5 million, or 3%11%, due primarily to decreasesincreases in compensation expense of $0.8 million, and travel related expensessoftware license and maintenance expense of $0.2 million,$0.4 million. The increase in compensation expense is driven by higher salary expense, due, in part, to increased headcount, partially offset by capitalized internally developed software expenses.
Europe product and development expense increased $1.9 million, or 75%, due to an increase in compensation expense of $1.6 million as a result of fewer projects being capitalized.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
North America product development expense increased $1.0 million, or 4%, due primarily to increases in outsourced personnel and consulting costs of $0.5$0.7 million and software license and maintenance expense of $0.4 million. The increase in outsourced personnel and consulting costs were in support of projects for the Angi brand change.
Europe product and development expense increased $1.5$3.3 million, or 51%63%, due to an increase in compensation expense of $1.5$3.1 million as a result of fewer internally developed software expenses being capitalized.due primarily to factors described above in the three-month discussion.
Depreciation
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| | | | (Dollars in thousands) |
| Depreciation | Depreciation | $ | 15,969 | | | $ | 3,831 | | | 32% | | $ | 12,138 | | Depreciation | $ | 15,058 | | | $ | 2,503 | | | 20% | | $ | 12,555 | | | $ | 31,027 | | | $ | 6,334 | | | 26% | | $ | 24,693 | |
| As a percentage of revenue | As a percentage of revenue | 4% | | 4% | As a percentage of revenue | 4% | | 3% | | 4% | | 3% |
For the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020
North America and Europe depreciation in 2021 increased $3.3 million, or 29%,from 2020 due primarily to investments in capitalized software to support our products and services.
EuropeOperating (loss) income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| (Dollars in thousands) |
| North America | $ | (32,127) | | | $ | (48,317) | | | NM | | $ | 16,190 | | | $ | (22,550) | | | $ | (30,632) | | | NM | | $ | 8,082 | |
| Europe | (604) | | | (2,058) | | | NM | | 1,454 | | | (10,072) | | | (3,338) | | | (50)% | | (6,734) | |
| Total | $ | (32,731) | | | $ | (50,375) | | | NM | | $ | 17,644 | | | $ | (32,622) | | | $ | (33,970) | | | NM | | $ | 1,348 | |
| | | | | | | | | | | | | | | |
| As a percentage of revenue | (8)% | | | | | | 5% | | (4)% | | | | | | —% |
________________________
NM = Not meaningful
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
North America operating income decreased $48.3 million to a loss of $32.1 million due to a decrease in Adjusted EBITDA of $60.3 million, described below, and an increase of $2.2 million in depreciation, increased $0.5partially offset by decreases of $9.2 million or 65%,in amortization of intangibles and $5.0 million in stock-based compensation expense. The increase in depreciation was due primarily to the continued development ofinvestments in capitalized software to support our products and services.
Operating income (loss)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | $ Change | | % Change | | 2020 |
| |
| North America | $ | 9,577 | | | $ | 17,685 | | | NM | | $ | (8,108) | |
| Europe | (9,468) | | | (1,280) | | | (16)% | | (8,188) | |
| Total | $ | 109 | | | $ | 16,405 | | | NM | | $ | (16,296) | |
| | | | | | | |
| As a percentage of revenue | —% | | | | | | (5)% |
________________________
NM = Not meaningful
North America operating income was $9.6 million for the three months ended March 31, 2021, an increase of $17.7 million compared to the three months ended March 31, 2020, despite a decrease in Adjusted EBITDA of $10.2 million, described below, due primarily to decreases of $23.4 million in stock-based compensation expense and $7.9 million in amortization of intangibles, partially offset by an increase of $3.8 million in depreciation. The decrease in stock-based compensation expense was due primarily to the factors discussed$5.6 million for stock appreciation rights and options expense recognized in the general and administrative expense section above.second quarter of 2020 which were not incurred in 2021 as the awards became fully vested. The decrease in the amortization of intangibles was due primarily to certain intangible assets becoming fully amortized during 2020. The increase in depreciation was due primarily to the development
Europe operating income decreased $2.1 million to a loss increased $1.3of $0.6 million or 16%, due primarily to an increase in Adjusted EBITDA loss of $1.0$2.0 million, described below, and an increase of $0.2 million in stock-based compensation expense, partially offset by a decrease of $0.1 million in amortization of intangibles.
At March 31,June 30, 2021, there is $89.5$74.3 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 2.7 years.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
27North America operating income decreased $30.6 million to a loss of $22.5 million due to a decrease in Adjusted EBITDA of $70.6 million, described below, and an increase of $5.5 million in depreciation, partially offset by decreases of $28.4 million in stock-based compensation expense and $17.0 million in amortization of intangibles. The increase in depreciation and decrease in stock-based compensation expense was due primarily to the factors discussed in the general and administrative expense section above. The decrease in amortization of intangibles was due primarily to the factors described above in the three-month discussion.
Europe operating loss increased $3.3 million, or 50%, due primarily to an increase in Adjusted EBITDA loss of Contents
$3.0 million, described below, and an increase of $0.3 million in stock-based compensation expense, partially offset by a decrease of $0.2 million in amortization of intangibles.Adjusted EBITDA
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| | | | (Dollars in thousands) |
| North America | North America | $ | 31,165 | | | $ | (10,226) | | | (25)% | | $ | 41,391 | | North America | $ | (5,302) | | | $ | (60,343) | | | NM | | $ | 55,041 | | | $ | 25,863 | | | $ | (70,569) | | | (73)% | | $ | 96,432 | |
| Europe | Europe | (7,979) | | | (985) | | | (14)% | | (6,994) | | Europe | 860 | | | (2,035) | | | (70)% | | 2,895 | | | (7,119) | | | (3,020) | | | (74)% | | (4,099) | |
| Total | Total | $ | 23,186 | | | $ | (11,211) | | | (33)% | | $ | 34,397 | | Total | $ | (4,442) | | | $ | (62,378) | | | NM | | $ | 57,936 | | | $ | 18,744 | | | $ | (73,589) | | | (80)% | | $ | 92,333 | |
| | As a percentage of revenue | As a percentage of revenue | 6% | | 10% | As a percentage of revenue | (1)% | | 15% | | 2% | | 13% |
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
North America Adjusted EBITDA decreased $10.2$60.3 million or 25%, to $31.2a loss of $5.3 million, despite higher revenue of $45.9 million, due primarily to an increase of $20.6 million in cost of revenue and an increase of $15.9 millionincreases in selling and marketing expense bothof $47.7 million, cost of revenue of $28.6 million, and general and administrative expense of $25.6 million (excluding stock-based compensation expense); each of which are described above. This
Europe Adjusted EBITDA decreased $2.0 million, or 70%, as higher revenue of $3.4 million was also impactedmore than offset by the increases in general and administrative expense of $2.2 million (excluding stock-based compensation expense), product development expense of $1.9 million and selling and marketing expense of $1.3 million; each of which are described above.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
North America Adjusted EBITDA decreased $70.6 million, or 73%, to $25.9 million, despite higher revenue of $89.3 million, due primarily to increases in selling and marketing expense $64.4 million, cost of revenue $49.3 million, and general and administrative expense (excluding stock-based compensation expense) of $35.1 million; each of which are described above. Included in these increases are $4.0 million in expense related to impairments inat the Fixd Services business and from management changes atin the Company.first quarter of 2021, and an increase of $3.2 million in provision for credit losses due to higher Marketplace Revenue.
Europe Adjusted EBITDA loss increased $1.0$3.0 million, or 14%74%, due primarily to the increase in general and administrative expense of $9.1 million (excluding stock-based compensation expense), including a charge of $6.0 million related to the
acquisition of an additional 21% interest in MyBuilder at a premium to fair value, and the increase in product development expense of $1.5$3.3 million, partially offset by an increase of $6.5$9.9 million in revenue.
Interest expense
Interest expense relates to interest on the ANGI Group Senior Notes and ANGI Group Term Loan and commitment fees on the undrawn ANGI Group Revolving Facility.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | $ Change | | % Change | | 2020 |
| |
| Interest expense | $ | 6,617 | | | $ | 4,343 | | | NM | | $ | 2,274 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| (In thousands) |
| Interest expense | $ | 5,814 | | | $ | 4,194 | | | NM | | $ | 1,620 | | | $ | 12,431 | | | $ | 8,537 | | | NM | | $ | 3,894 | |
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
Interest expense increased due primarily to the issuance of the ANGI Group Senior Notes in August 2020, partially offset by a decrease in interest expense due to the repayment of the ANGI Group Term Loan during the second quarter of 2021.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
Interest expense increased due primarily to the issuance of the Senior Notes in August 2020, partially offset by a decrease in interest expense of the ANGI Group Term Loan due primarily to lower interest rates due to lower interest rates and the decrease in the average outstanding balance compared to the prior year period.
Other (expense) income, net
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | $ Change | | % Change | | 2020 |
| |
| Other (expense) income, net | $ | (767) | | | $ | (1,188) | | | NM | | $ | 421 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| (In thousands) |
| Other (expense) income, net | $ | (636) | | | $ | (848) | | | NM | | $ | 212 | | | $ | (1,403) | | | $ | (2,036) | | | NM | | $ | 633 | |
For the three months ended June 30, 2021 and 2020
Other expense, net in 2021 principallyprimarily includes the write-off of $1.1 million of deferred debt issuance costs related to the ANGI Group Term Loan which was repaid in its entirety during the second quarter of 2021, partially offset by a net foreign currency exchange lossesgain of $0.9$0.4 million partially offset byand interest income of $0.1 million.
Other income, net in 2020 principally includes interest income of $1.3$0.2 million.
For the six months ended June 30, 2021 and 2020
Other expense, net in 2021 primarily includes the write-off of $1.1 million of deferred debt issuance costs related to the ANGI Group Term Loan which was repaid in its entirety during the second quarter of 2021 and net foreign currency exchange losses of $0.5 million, partially offset by interest income of $0.1 million.
Other income, net in 2020 primarily includes interest income of $1.4 million, partially offset by net foreign currency exchange losses of $0.4$0.3 million, and a $0.2 million mark-to-market charge for an indemnification claim related to the Handy acquisition that was settled in Angi Inc. shares during the first quarter of 2020.
Income tax benefit (provision)
| | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 | | 2021 | | $ Change | | % Change | | 2020 |
| | | | (Dollars in thousands) |
| Income tax benefit | $ | 9,289 | | | $ | 324 | | | 4% | | $ | 8,965 | | |
| Income tax benefit (provision) | | Income tax benefit (provision) | $ | 9,129 | | | $ | 12,154 | | | NM | | $ | (3,025) | | | $ | 18,418 | | | $ | 12,478 | | | 210% | | $ | 5,940 | |
| Effective income tax rate | Effective income tax rate | NM | | 49% | Effective income tax rate | 23% | | 19% | | 40% | | NM |
For the three months ended June 30, 2021 compared to the three months ended June 30, 2020
In 2021, the effective income tax rate was higher than the statutory rate of 21% due primarily to the benefit of the change in the annual expected effective income tax rate, partially offset by nondeductible stock-based compensation expense.
In 2020, the effective income tax rate was lower than the statutory rate of 21% due primarily to benefiting previously unbenefited foreign net operating loss carryforwards.
For the six months ended June 30, 2021 compared to the six months ended June 30, 2020
In 2021, the effective income tax rate was higher than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting forof stock-based awards.
In 2020, the Company recorded an income tax benefit of $9.0 million, which represented an effective tax rate of 49%.$5.9 million. The effective income tax ratebenefit was higher than the statutory rate of 21% due primarily to a $5.7 million reduction to deferred taxes due to the true-up of the state tax rate of an indefinite-lived intangible asset partially offset byand benefiting previously unbenefited foreign losses.net operating loss carryforwards.
PRINCIPLES OF FINANCIAL REPORTING
We report Adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles (“GAAP”). This measure is one of the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated. 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 Non-GAAP Measure
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted 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. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.
The following table reconciles net (loss) earnings (loss) attributable to Angi Inc. shareholders to operating (loss) income (loss) to consolidated Adjusted EBITDA:
| | | | | Three Months Ended March 31, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | | (In thousands) | | (In thousands) |
| Net earnings (loss) attributable to Angi Inc. shareholders | | $ | 1,931 | | | $ | (8,958) | | |
| Net (loss) earnings attributable to Angi Inc. shareholders | | Net (loss) earnings attributable to Angi Inc. shareholders | $ | (30,293) | | | $ | 12,667 | | | $ | (28,362) | | | $ | 3,709 | |
| Add back: | Add back: | | | Add back: | |
| Net earnings (loss) attributable to noncontrolling interests | | 83 | | | (226) | | |
| Income tax benefit | | (9,289) | | | (8,965) | | |
| Net earnings attributable to noncontrolling interests | | Net earnings attributable to noncontrolling interests | 241 | | | 544 | | | 324 | | | 318 | |
| Income tax (benefit) provision | | Income tax (benefit) provision | (9,129) | | | 3,025 | | | (18,418) | | | (5,940) | |
| Other expense (income), net | Other expense (income), net | | 767 | | | (421) | | Other expense (income), net | 636 | | | (212) | | | 1,403 | | | (633) | |
| Interest expense | Interest expense | | 6,617 | | | 2,274 | | Interest expense | 5,814 | | | 1,620 | | | 12,431 | | | 3,894 | |
| Operating income (loss) | | 109 | | | (16,296) | | |
| Operating (loss) income | | Operating (loss) income | (32,731) | | | 17,644 | | | (32,622) | | | 1,348 | |
| Add back: | | Add back: | |
| Stock-based compensation expense | Stock-based compensation expense | | 2,034 | | | 25,575 | | Stock-based compensation expense | 9,543 | | | 14,759 | | | 11,577 | | | 40,334 | |
| Depreciation | Depreciation | | 15,969 | | | 12,138 | | Depreciation | 15,058 | | | 12,555 | | | 31,027 | | | 24,693 | |
| Amortization of intangibles | Amortization of intangibles | | 5,074 | | | 12,980 | | Amortization of intangibles | 3,688 | | | 12,978 | | | 8,762 | | | 25,958 | |
| Adjusted EBITDA | Adjusted EBITDA | | $ | 23,186 | | | $ | 34,397 | | Adjusted EBITDA | $ | (4,442) | | | $ | 57,936 | | | $ | 18,744 | | | $ | 92,333 | |
Non-Cash Expenses That Are Excluded from Our Non-GAAP Measure
Stock-based compensation expense consists of expense associated with the grants, including unvested grants assumed in acquisitions, of stock appreciation rights, restricted stock units (“RSUs”), stock options, performance-based RSUs (“PSUs”) and 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. 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). The Company is currently settling all stock-based awards on a net basis and remits the required tax-withholding amounts from its current funds.
Depreciation is a non-cash expense relating to our capitalized 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 service professional 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 impairments of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Financial Position
| | | March 31, 2021 | | December 31, 2020 | | June 30, 2021 | | December 31, 2020 |
| | (In thousands) | | (In thousands) |
| Cash and cash equivalents and marketable debt securities: | Cash and cash equivalents and marketable debt securities: | | Cash and cash equivalents and marketable debt securities: | |
| United States | United States | | $ | 756,860 | | | $ | 793,679 | | United States | | $ | 563,024 | | | $ | 793,679 | |
| All other countries | All other countries | | 20,181 | | | 19,026 | | All other countries | | 21,236 | | | 19,026 | |
| Total cash and cash equivalents | Total cash and cash equivalents | | 777,041 | | | 812,705 | | Total cash and cash equivalents | | 584,260 | | | 812,705 | |
| Marketable debt securities (United States) | Marketable debt securities (United States) | | — | | | 49,995 | | Marketable debt securities (United States) | | — | | | 49,995 | |
| Total cash and cash equivalents and marketable debt securities | Total cash and cash equivalents and marketable debt securities | | $ | 777,041 | | | $ | 862,700 | | Total cash and cash equivalents and marketable debt securities | | $ | 584,260 | | | $ | 862,700 | |
| | Long-term debt: | Long-term debt: | | Long-term debt: | |
| Senior Notes | Senior Notes | | $ | 500,000 | | | $ | 500,000 | | Senior Notes | | $ | 500,000 | | | $ | 500,000 | |
| Term Loan | Term Loan | | 213,125 | | | 220,000 | | Term Loan | | — | | | 220,000 | |
| Total long-term debt | Total long-term debt | | 713,125 | | | 720,000 | | Total long-term debt | | 500,000 | | | 720,000 | |
| | Less: unamortized debt issuance costs | Less: unamortized debt issuance costs | | 7,138 | | | 7,723 | | Less: unamortized debt issuance costs | | 5,805 | | | 7,723 | |
| Total long-term debt, net | Total long-term debt, net | | $ | 705,987 | | | $ | 712,277 | | Total long-term debt, net | | $ | 494,195 | | | $ | 712,277 | |
The Company’s international cash can be repatriated without significant tax consequences.
Cash Flow Information
In summary, the Company’s cash flows are as follows:
| | | Three Months Ended March 31, | | Six Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| | (In thousands) | | (In thousands) |
| Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
| Operating activities | Operating activities | $ | 15,345 | | | $ | 55,906 | | Operating activities | $ | 59,253 | | | $ | 127,797 | |
| Investing activities | Investing activities | 31,257 | | | (12,469) | | Investing activities | $ | 15,037 | | | $ | (23,934) | |
| Financing activities | Financing activities | (82,897) | | | (48,337) | | Financing activities | $ | (303,171) | | | $ | (72,863) | |
Net cash provided by operating activities consists of earnings adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense, provision for credit losses, amortization of intangibles, depreciation, impairment of long-lived and right-of-use assets, and deferred income taxes.
2021
Adjustments to earnings consist primarily of $19.1$42.7 million of provision for credit losses, $16.0$31.0 million of depreciation, $5.1$12.3 million of impairment charges on long-lived and right-of-use assets, $11.6 million of stock-based compensation expense, $8.8 million of amortization of intangibles, $2.9and $4.7 million of revenue reserves, and $2.0 million of stock-based compensation expense, partially offset by $10.3$20.3 million of deferred income taxes. The decrease from changes in working capital consists primarily of increasesan increase of $63.2 million in accounts receivable of $34.6 million, partially offset by increases of $43.2 million in accounts payable and other liabilities and $5.3 million of $4.5 million and deferred revenue. The increase in accounts receivable is due primarily to revenue of $3.0 million.growth in North America. The increase in accounts payable and other liabilities is due primarily to an increase in accrued advertising and related payables. The increase in deferred revenue is driven primarily by increases in memberships. The increase in accounts receivable is due primarily to revenue growth in North America.membership payments.
Net cash provided by investing activities includes proceeds of $50.0 million from the maturities of marketable debt securities, netpartially offset by $35.7 million of capital expenditures, of $18.7 million, primarily related to investments in the development of capitalized software to support the Company’s products and services.
Net cash used in financing activities includes $48.2$220.0 million for the prepayment of the ANGI Group Term Loan, which otherwise would have matured on November 5, 2023, $54.6 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $22.9 million for the purchase of redeemable noncontrolling interests, $6.9 million for the prepayment on the Term Loan required quarterly payments that was otherwise due in the first quarter of 2022, and $4.9$5.6 million for the repurchase of 0.40.5 million shares of Angi Inc. Class A common stock, on a settlement and trade date basis, at an average price of $11.85$11.87 per share.
2020
Adjustments to earnings consist primarily of $25.6$40.3 million of stock-based compensation expense, $17.8$39.3 million of bad debtprovision for credit losses expense, $13.0$26.0 million of amortization of intangibles, and $12.1$24.7 million of depreciation, partially offset by $8.3$6.3 million of deferred income taxes. The deferred income tax benefit primarily relates to an adjustment to deferred taxes resulting from a true-up of the state tax rate. The increasedecrease from changes in working capital consists primarily of an increase in accounts payable and other liabilitiesreceivable of $21.0$48.2 million, partially offset by an increase in accounts payable and other liabilities of $35.9 million. The increase in accounts receivable of $21.2 million.is due primarily to revenue growth in North America. The increase in accounts payable and other liabilities is due primarily due to an increase in accrued advertising and related payables. The increase in accounts receivable is primarily due to revenue growth in North America.
Net cash provided by investing activities includes capital expenditures of $13.2$24.7 million, primarily related to investments in the development of capitalized software to support the Company's products and services and leasehold improvements.
Net cash used in financing activities includes $38.5$54.4 million for the repurchase of 5.27.7 million shares of Angi Inc. Class AANGI common stock, on a settlement date basis, at an average price of $7.43$7.02 per share, $3.4 million for the principal payment on the Term Loan, $3.2$11.5 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $6.9 million for the principal payments on the ANGI Group Term Loan, and $3.2 million for the purchase of redeemable noncontrolling interests.interests, partially offset by a $3.1 million payment from IAC pursuant to the tax sharing agreement.
Liquidity and Capital Resources
Financing Arrangements
The outstanding balanceANGI Group Senior Notes were issued on August 20, 2020, the proceeds of the Term Loan aswhich are intended for general corporate purposes, including potential future acquisitions and return of March 31, 2021 was $213.1 million and bore interest at LIBOR plus 2.00%, or 2.10%. capital.
As of May 6, 2021, the outstanding balance of the ANGI Group Term Loan was repaid in its entirety.
On August 20, 2020,The outstanding balance of the ANGI Group issued $500.0Term Loan at December 31, 2020 was $220.0 million of its Senior Notes due August 15, 2028, withand bore interest payable February 15 and August 15 of each year, commencing February 15, 2021. at 2.16%.
The proceeds from the offering are being used for general corporate purposes,$250.0 million ANGI Group Revolving Facility, which may include potential future acquisitions and return of capital.
The Credit Facility of $250 million expiresotherwise would have expired on November 5, 2023. At March 31, 2021 and December 31, 2020, there2023, was terminated effective August 3, 2021.No amounts were no outstanding borrowings under the Credit Facility. The commitment fee, which is based on ANGI Group's consolidated net leverage ratio most recently reported and the average daily dollar amount of the available revolving commitments, was 35 basis points at both March 31, 2021 and December 31, 2020. Borrowings under the Credit Facility bear interest, at ANGI Group’s option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined based on ANGI Group’s consolidated net leverage ratio. Any borrowingsever drawn under the ANGI Group CreditRevolving Facility are guaranteed by ANGI Group's wholly-owned material domestic subsidiaries and are secured by substantially all assets of ANGI Group and the guarantors, subjectprior to certain exceptions.its termination.
The terms of the Credit Facility require Angi Inc. to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0. There are additional covenants under the Credit Facility that limit the ability of ANGI Group and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions.
Share Repurchase Authorizations and Activity
DuringDuring the quartersix months ended March 31,June 30, 2021, the Company repurchased 0.40.5 million shares, on a settlement and trade date basis, of its common stock at an average price of $11.85$11.87 per share. The Company had 18.9share, or $5.6 million in aggregate. From July 1, 2021 through August 3, 2021, Angi Inc. repurchased an additional 0.7 million shares at an average price of $11.68 per share, or $7.7 million in aggregate. Angi Inc. has 18.1 million shares remaining in its share repurchase authorization as of March 31,August 3, 2021. The Company may purchase shares over an indefinite period of time
on the open market and in privately negotiated transactions, depending on those factors Angi Inc. management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
Outstanding Stock-based Awards
The Company may settle equity awards on a gross or a net basis upon factors deemed relevant at the time.time, and if settled Certain Angi stock appreciation rights are settleable, at the Company’s option, on a net basis, with Angi remittingremits withholding taxes on behalf of the employee or on a gross basis with the Company issuing a sufficient number of Class A shares to cover the withholding taxes. In addition, atAt IAC/InterActiveCorp’s (“IAC”) option, these awardscertain 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 AprilJuly 30, 2021; 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 | | Aggregate intrinsic value of awards outstanding | | Estimated withholding taxes payable | | Estimated shares to be issued |
| | (In thousands) | | (Shares in thousands) | | (In thousands) |
| Stock appreciation rights | Stock appreciation rights | $ | 15,283 | | | $ | 7,642 | | | 477 | | Stock appreciation rights | $ | 8,455 | | | $ | 4,228 | | | 367 | |
Other equity awards(a)(b) | Other equity awards(a)(b) | 167,304 | | | 82,432 | | | 5,301 | | Other equity awards(a)(b) | 164,636 | | | 69,216 | | | 6,157 | |
| Total outstanding employee stock-based awards | Total outstanding employee stock-based awards | $ | 182,587 | | | $ | 90,074 | | | 5,778 | | Total outstanding employee stock-based awards | $ | 173,091 | | | $ | 73,444 | | | 6,524 | |
(a)Includes stock options, RSUs, 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.
Capital Expenditures
The Company’s 2021 capital expenditures are expected to be higher than 2020 capital expenditures of $52.5 million by approximately 50%35% to 60%40%, due primarily to increased investment in capitalized software to support the development of our products and services.
Liquidity Assessment
The Company’s liquidity could be negatively affected by a decrease in demand for its products and services due to COVID-19 or other factors. As described in the “COVID-19 Update” section above, to date, the COVID-19 outbreak and measures designed to curb its spread have adversely impacted the Company’s business. The longer the global outbreak and measures designed to curb the spread of the COVID-19 outbreak have adverse impacts on economic conditions generally, the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations. The Company believes it has ample access to capital to navigate current and coming economic pressures.
The Company’s indebtedness could limit its ability to: (i) obtain additional financing to fund working capital needs, acquisitions, capital expenditures or debt service or other requirements; and (ii) use operating cash flow to make certain acquisitions or investments, in the event a default has occurred or, in certain circumstances, if its leverage ratio (as defined in the Credit Facility and Term Loan) exceeds the ratios set forth in the Term Loan. There were no such limitations at March 31,
2021. The Company’s ability to obtain additional financing may also be impacted by any disruptions in the financial markets caused by COVID-19 or otherwise.
The Company believes its existing cash, cash equivalents, available borrowings under the Credit Facility 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 foreseeable future.
At March 31,June 30, 2021, IAC held all Class B shares of Angi Inc., which represent 84.2%84.1% of the economic interest and 98.2%98.1% of the voting interest of the Company. As a result, IAC has the ability to control Angi Inc.’s financing activities, including the issuance of additional debt and equity securities by Angi Inc. or any of its subsidiaries, or the incurrence of other indebtedness generally. While Angi Inc. 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 Inc.’s capital stock and its representation on the Angi Inc. board of directors. Additional financing may not be available on terms favorable to the Company or at all. In addition, the Company’s existing indebtedness could limit its ability to obtain additional financing.
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 foreseeable future.
CONTRACTUAL OBLIGATIONS
During the threesix months ended March 31,June 30, 2021, other than the repayment of the outstanding balance of the ANGI Group Term Loan of $220.0 million, there have been no material changes to the Company’s contractual obligations since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
During the threesix months ended March 31,June 30, 2021, there have been no material changes to the Company’s instruments or positions that are sensitive to market risk since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2020.2020, other than the repayment of the outstanding balance of the ANGI Group term loan of $220.0 million, which bore interest at a variable rate, reducing the Company’s exposure risk related to changes in interest rates.
Item 4. Controls and Procedures
Evaluation of Disclosure 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 their overall effectiveness. In the course of these evaluations, the Company modifies and refines its internal processes as conditions warrant.
Changes in Internal Control Over Financial Reporting
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “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’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’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 under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and 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.
There were no changes to the Company’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 litigation involving property, personal injury, contract, intellectual property and other claims, as well as stockholder derivative actions, class action lawsuits and other matters. 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.
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 the one described below, involves or is likely to involve amounts of that magnitude. The litigation matter and the investigation described below involves issues or claims that may be of particular interest to our stockholders, regardless of whether this matter may be material to our financial position or operations based upon the standard set forth in the rules of the Securities and Exchange Commission.
FTC Investigation of Certain HomeAdvisor Business Practices
On April 19, 2021, the staff of the Federal Trade Commission (“FTC”) informed HomeAdvisor that upon investigation it believes that certain of the company’s business practices relating to leads provided to service professionals and its mHelpDesk product are unfair or deceptive in violation of the FTC Act. The staff proposed to resolve its potential claims via a consent judgment mandating certain business practice changes (and an unspecified payment amount) and invited the company to engage in settlement discussions to resolve the matter. While HomeAdvisor believes that any such claims would be without merit and is prepared to defend vigorously against any enforcement proceeding, the company has openedis continuing a dialogue with the staffFTC to discuss the matter.matter and cannot currently predict the outcome of this investigation and related discussions.
Service Professional Class Action Litigation against HomeAdvisor
This purported class action pending in Colorado is described in detail on page 27 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. See Airquip, Inc. et al. v. HomeAdvisor, Inc. et al., No. l:16-cv-1849 and Costello et al. v. HomeAdvisor, Inc. et al., No. 1:18-cv-1802, both filed in U.S. District Court in Colorado and consolidated under the caption In re HomeAdvisor, Inc. Litigation. This lawsuit alleges that our HomeAdvisor business engages in certain deceptive practices affecting the service professionals who join its network, including charging them for substandard customer leads or failing to disclose certain charges. There have been no material or otherwise noteworthy developments in this case since the filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The Company believes that the allegations in this lawsuit are without merit and will continue to defend vigorously against them.
Item 1A. Risk Factors
This quarterly report on Form 10-Q contains “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” and “believes,” among others, generally identify forward-looking statements. These forward-looking statements include, among others, statements relating to the Company’s future financial performance, business prospects and strategy, anticipated trends and prospects in home services industry and other similar matters. These forward-looking statements are based on Company management's current expectations and assumptions about future events, 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 impact of the COVID-19 outbreak on our businesses, (ii) our ability to compete, (iii) the failure or delay of the home services market to migrate online, (iv) adverse economic events or trends (particularly those that adversely
impact consumer confidence and spending behavior), (v) our ability to establish and maintain relationships with quality service professionals, (vi) our ability to build, maintain and/or enhance our various brands, (vii) our ability to market our various products and services in a successful and cost-effective manner, (viii) the continued display of links to websites offering our products and services in a prominent manner in search results, (ix) our continued ability to communicate with consumers and service professionals via e-mail (or other sufficient means), (x) our ability to access, share and use personal data about consumers, (xi) our ability to develop and monetize versions of our products and services for mobile and other digital devices, (xii) any challenge to the contractor classification or employment status of our Handy service professionals, (xiii) our ability to protect our systems, technology and infrastructure from cyberattacks and to protect personal and confidential user information, (xiv) the occurrence of data security breaches, fraud and/or additional regulation involving or impacting credit card payments, (xv) the integrity, efficiency and scalability of our technology systems and infrastructures (and those of third parties with whom we do business), (xvi) operational and financial risks relating to acquisitions and the integration of suitable targets, (xvii) our ability to operate (and expand into) international markets successfully, (xviii) our ability to adequately protect our intellectual property rights and not infringe the intellectual property rights of third parties, (xix) changes in key personnel, (xx) various risks related to our relationship with IAC and (xxi) various risks related to our outstanding indebtedness.
Certain of these and other risks and uncertainties are discussed in our filings with the SEC, including in Part I-Item 1A-Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Other unknown or unpredictable factors that could also adversely affect our 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. We do not undertake to update these forward-looking statements.
Risk Factors
OurRecent changes in our executive management may not result in growth of our business or enhance stockholder value, and our management transition tomay not be successful.
During 2021, we announced the appointment of a new Chief Executive Officer, and search for a permanent Chief Financial Officer and Chief Marketing Officer may not be successful.
On December 9, 2020, the Company announced the resignation of Jamie Cohen,new Chief Financial Officer and the appointment of Glenn H. Schiffman as Interim Chief Financial Officer, while the Company initiated a national search for a permanent replacement. Craig Smith’s resignation from the Board and as Chief Operating Officer became effective on December 18, 2020. On February 24, 2021, the Company announced the appointment of Oisin Hanrahan as Chief Executive Officer, following the resignation of William B. Ridenour and Allison Lowrie,new Chief Marketing Officer. Our executive management team is critical to the overall management of the Company and also plays a key role in maintaining our culture and setting our strategic direction. In connection with these executive management changes, we have experienced, and may continue to experience, employee and management turnover in certain areas. These recent changes in our executive management and composition of the Board, may also cause or result in: disruption of our business and operations; difficulty recruiting, hiring, motivating and retaining talented and skilled personnel; further departures of other members of management; increased stock price volatility; and difficulty in establishing, maintaining or negotiating business or strategic relationships or transactions. Furthermore, the transition to a new Chief Executive Officer and permanent Chief Financial Officer and Chief Marketing Officerthese transitions could be a distraction to our executive management, business operations, service professionals and customers. The search could also result in significant recruiting and relocation costs. If we fail to successfullydo not succeed in attracting well-qualified employees, retaining and timely attractmotivating existing employees or integrating new executives and appoint executive officers with the appropriate level of expertise, we could experience adverse impacts onemployees, our business could be materially and results of operations.adversely affected.
Our Angi brand integration initiative may involve substantial costs, including as a result of a continued negative impact on our organic search placement, and may not be favorably received by customers and service professionals.
On March 17, 2021, ourthe Company updated one of its leading websites and brands, Angie’s List, to Angi, and began concentratingconcentrated its marketing investment in the Angi brand in order to focus ourits marketing, sales, and branding efforts on a single brand.
We have incurred and may continue to incur substantial costs as a result of our brand integration initiative and may not be able to achieve or maintain brand name recognition or status that is comparable to the recognition and status previously enjoyed by Angie’s List, and our customers and service professionals may be confused as we transition and focus on the Angi brand as against our other brands.brand. Our Company relies heavily on free and paid search engine marketing efforts to drive traffic to our properties, which has been adversely affected by this initiative. Specifically, ourplatforms. Our brand initiative has adversely affected the placement and ranking of Angi Inc. websites, particularly Angi.com, in organic search results as Angi does not have the same domain history as Angie’s List. In addition, we shifted marketing to support the Angi brand, away from the HomeAdvisor brand, which has negatively affected the efficiency of our search engine marketing efforts.
During the second quarter of 2021, these efforts had a pronounced negative impact on Marketplace Service Requests from organic search results and via our mobile applications, which in turn has resulted in increased paid search engine marketing to generate Marketplace Service Requests. The combined effect of this during the three months ended June 30, 2021, has reduced revenue and increased marketing spend, that ismaterially more than expected to resultat the launch of the brand initiative in lower profits for the first quarter ending June 30, 2021. This trend is expected to continue for the remainder of 2021 (and potentially into 2022), withand more significantly than our forecasts at the most significantbeginning of May 2021. We expect the pronounced negative impact expected into organic search results, increased paid search engine marketing and reduced monetization from our mobile applicationswill continue until such time as the second quarternew brand establishes search engine optimization ranking and consumer awareness is
established. Any or all of these impacts could continue to increase our marketing costs (particularly if free traffic is replaced with paid traffic) and adversely affect the effectiveness of our marketing efforts overall. Finally, as we align and focus the organization around a single brand, we could experience financial and operational challenges including a distracted salesforce and reduced service professional participation across our various product lines. Depending on market acceptance, our brand integration initiative could adversely affect our ability to attract and retain customers and service professionals, which could cause us not to realize some or all of the anticipated benefits contemplated by the brand integration initiative.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
The employee matters agreement dated as of September 29, 2017, by and between us and IAC, provides, among other things, that we will reimburse IAC for the cost of certain equity awards held by our current and former employees and that IAC may elect to receive payment either in cash or shares of our Class B commoncapital stock.
Pursuant to the employee matters agreement, 2,579,2645,931 shares of Class A common stock and 96,03118,983 shares of Class B common stock were issued to IAC on March 31,June 30, 2021 as reimbursement for shares of IAC common stock issued in connection with the settlement of certain equity awards held by our employees during the quarterthree months ended March 31,June 30, 2021. This issuance did not involve any underwriters or public offerings and we believe that such issuance was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof.
Issuer Purchases of Equity Securities
The following table sets forth purchases by the Company of its Class A common stock during the quarterthree months ended March 31,June 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | (a)
Total Number of Shares Purchased | | (b)
Average Price Paid Per Share | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | | (d) Maximum Number of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs(2) |
| January 2021 | 414,720 | | | $ | 11.85 | | | 414,720 | | | 18,856,841 | |
| February 2021 | — | | | $ | — | | | — | | | 18,856,841 | |
| March 2021 | — | | | $ | — | | | — | | | 18,856,841 | |
| Total | 414,720 | | | $ | 11.85 | | | 414,720 | | | 18,856,841 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | (a)
Total Number of Shares Purchased | | (b)
Average Price Paid Per Share | | (c)
Total Number of Shares Purchased as Part of
Publicly
Announced
Plans or
Programs(1) | | (d)
Maximum Number of Shares that May Yet Be Purchased Under Publicly
Announced
Plans or
Programs(2) |
| April 2021 | — | | | $ | — | | | — | | | 18,856,841 | |
| May 2021 | 60,055 | | | $ | 12.00 | | | 60,055 | | | 18,796,786 | |
| June 2021 | — | | | $ | — | | | — | | | 18,796,786 | |
| Total | 60,055 | | | $ | — | | | 60,055 | | | 18,796,786 | |
(1)Reflects repurchases made pursuant to the share repurchase authorizations previously announced in March 2020 and February 2019.
(2)Represents the total number of shares of Class A common stock that remained available for repurchase as of March 31,June 30, 2021 pursuant to the March 2020 and February 2019 share repurchase authorizations. From July 1, 2021 through August 3, 2021, the Company repurchased an additional 656,207 shares at an average price of $11.68 per share. The Company may repurchase shares pursuant to this share repurchase authorization over an indefinite period of time in the open market and in privately negotiated transactions, depending on those factors Company management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.
Item 6. Exhibits
The documents set forth below, numbered in accordance with Item 601 of Regulation S-K, are filed herewith, incorporated by reference to the location indicated or furnished herewith. | | | | | | | | | | | | | | |
| Exhibit Number | | Description | | Location |
| 3.1 | | | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Angi Inc. | |
|
| 3.2 | | | Amended and Restated Bylaws of Angi Inc. | |
|
| | Form of Angi Inc. Common Stock Certificate. (1)
| |
|
| 10.1 | | | Employment Agreement between Oisin HanrahanJeff Pedersen and ANGI HomeservicesAngi Inc., dated as of February 24,June 18, 2021.(3) (2)
| |
|
| | Employment Agreement between Kulesh Shanmugasundaram and Angi Inc., dated as of March 25, 2021. (1) (3)
| | |
| | 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. (1)
| | |
| | Certification of the Interim 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. (1) | | |
| | 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. (2)(3) | | |
| | Certification of the Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)(3) | | |
| 101.INS | | Inline XBRL Instance (1) | | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
|
| 101.SCH | | Inline XBRL Taxonomy Extension Schema (1) | | |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation (1) | | |
| 101.DEF | | 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.
(3)Reflects management contracts and management and director compensatory plans.
(3)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.
| | | | | | | | | | | | | | |
| Dated: | May 7,August 6, 2021 | | | |
| | Angi Inc. |
| | | | |
| | By: | | /s/ GLENN H. SCHIFFMANJEFFREY W. PEDERSEN |
| | | | Glenn H. SchiffmanJeffrey W. Pedersen |
| | | | Interim Chief Financial Officer |
| | | | | | | | | | | |
| | | |
| Signature | Title | | Date |
| | | | |
/s/ GLENN H. SCHIFFMANJEFFREY W. PEDERSEN | Interim Chief Financial Officer | | May 7,August 6, 2021 |
Glenn H. SchiffmanJeffrey W. Pedersen | | | |
