- Gross member additions of approximately 350,000 at an average cost per acquisition of $64
- Revenue of $81.3 million, representing a 24% increase over the prior year
- Cash provided by operations of $8.0 million for the nine month period ended September 30, 2014
INDIANAPOLIS, Oct. 22, 2014 (GLOBE NEWSWIRE) -- Angie's List, Inc. (Nasdaq:ANGI) announced today financial results for the quarter ended September 30, 2014.
"We continue to add new members and grow revenue while we transition our business to a marketplace model," said Angie's List CEO Bill Oesterle. "Margins improved significantly as we reduced our marketing spend and improved operating efficiency. While we made strides executing on our marketplace, we see opportunity for further improvement."
Key Operating Metrics
| Three months ended | 9/30/14 | 9/30/13 | Change |
| Total paid memberships (end of period) | 2,983,439 | 2,378,867 | 25% |
| Gross paid memberships added (in period) | 350,376 | 371,318 | (6)% |
| Marketing cost per paid membership acquisition (in period) | $ 64 | $ 76 | (16)% |
| First-year membership renewal rate (in period) | 74% | 75% | (1.0) pts |
| Average membership renewal rate (in period) | 77% | 78% | (1.0) pts |
| Participating service providers (end of period) | 51,997 | 44,876 | 16% |
| Total service provider contract value (end of period, in thousands) | $ 236,303 | $ 181,975 | 30% |
| Nine months ended | 9/30/14 | 9/30/13 | Change |
| Gross paid memberships added (in period) | 1,035,814 | 993,556 | 4% |
| Marketing cost per paid membership acquisition (in period) | $ 79 | $ 76 | 4% |
| First-year membership renewal rate (in period) | 74% | 75% | (1.0) pts |
| Average membership renewal rate (in period) | 77% | 78% | (1.0) pts |
Market Cohort Analysis
"Penetration rates in each of our cohorts and total average revenue per member continue to grow, reflecting the strength and stability of the model," continued Oesterle. "Combined with improved operating margins, these strong results provide the foundation for investment in new growth."
| Service | Average | Annual | ||||||
| Average | Membership | Provider | Marketing | Estimated | Membership | |||
| # of | Revenue/ | Revenue/Paid | Revenue/Paid | Expense/ | Total Paid | Penetration | Growth | |
| Cohort | Markets | Market | Membership | Membership | Market | Memberships | Rate* | Rate |
| Pre-2003 | 10 | $ 7,258,018 | $ 34.01 | $ 108.50 | $ 1,416,968 | 564,568 | 14.9% | 24% |
| 2003-2007 | 35 | 5,416,899 | 30.35 | 99.70 | 1,486,922 | 1,622,252 | 11.7% | 25% |
| 2008-2010 | 103 | 341,123 | 16.35 | 41.03 | 204,621 | 674,337 | 12.0% | 23% |
| Post 2010 | 105 | 39,230 | 12.05 | 28.46 | 59,383 | 122,282 | 7.3% | 51% |
| Total | 253 | 2,983,439 |
Cohort table presents financial and operational data for the twelve months ended September 30, 2014.
* Demographic information used in penetration rate calculations is based on a third-party study we commissioned in September 2014. According to the study, the number of U.S. households in our target demographic was 28 million.
Third Quarter Results
Total revenue for the third quarter of 2014 was $81.3 million, an increase of 24 percent compared to the prior year period. Membership revenue in the third quarter of 2014 was $18.3 million, an increase of 7 percent compared to the prior year period. Service provider revenue remains the largest and fastest growing component of total revenue at $63.0 million for the quarter, representing a 30 percent growth rate year over year. Service provider revenue includes revenue from advertising contracts and fees from e-commerce transactions. Advertising revenue was $56.0 million in the third quarter of 2014, an increase of 33 percent compared to the prior year period, and e-commerce revenue was $7.0 million, an increase of approximately 9 percent year over year.
Marketing expense decreased 20 percent, or $5.7 million, compared to the prior year period. Net loss for the quarter was $5.2 million, with selling expense of $32.1 million and marketing expense of $22.5 million, compared to a net loss of $13.5 million, with selling expense of $24.0 million and marketing expense of $28.2 million, in the prior year period. Adjusted EBITDA loss, a non-GAAP financial measure, was $1.3 million for the period as compared to a loss of $11.3 million in the prior year period.
Cash used in operations for the third quarter was approximately $9.6 million. At September 30, 2014, the balance of cash, cash equivalents and investments was $79.1 million.
Business Outlook
The Company's financial and operating expectations for the fourth quarter of 2014 are as follows:
- Total revenue of $80 million to $82 million.
- Marketing expense of approximately $5 million.
The Company expects to generate positive adjusted EBITDA for the full year 2014.
| Angie's List, Inc. | ||
| Condensed Consolidated Balance Sheets | ||
| (in thousands) | ||
|
September 30, 2014 |
December 31, 2013 |
|
| (Unaudited) | ||
| Assets | ||
| Cash and cash equivalents | $ 62,319 | $ 34,803 |
| Restricted cash | 50 | 50 |
| Short-term investments | 16,739 | 21,055 |
| Accounts receivable, net | 14,250 | 12,385 |
| Prepaid expenses and other current assets | 18,196 | 13,651 |
| Total current assets | 111,554 | 81,944 |
| Property, equipment and software, net | 43,443 | 18,657 |
| Goodwill | 1,145 | 1,145 |
| Amortizable intangible assets, net | 3,031 | 3,500 |
| Other assets, noncurrent | 1,874 | 397 |
| Total assets | $ 161,047 | $ 105,643 |
| Liabilities and stockholders' deficit | ||
| Accounts payable | $ 16,309 | $ 6,838 |
| Accrued liabilities | 32,010 | 21,770 |
| Deferred membership revenue | 38,114 | 35,560 |
| Deferred advertising revenue | 47,638 | 39,448 |
| Current portion of obligations under leases | 217 | — |
| Total current liabilities | 134,288 | 103,616 |
| Long-term debt, net | 58,793 | 14,918 |
| Deferred membership revenue, noncurrent | 5,058 | 4,909 |
| Deferred advertising revenue, noncurrent | 605 | 521 |
| Obligations under leases | 351 | — |
| Other liabilities, noncurrent | 1,342 | 169 |
| Total liabilities | 200,437 | 124,133 |
| Stockholders' deficit: | ||
| Common stock | 67 | 67 |
| Additional paid-in-capital | 263,951 | 257,505 |
| Treasury stock | (23,719) | (23,719) |
| Accumulated deficit | (279,689) | (252,343) |
| Total stockholders' deficit | (39,390) | (18,490) |
| Total liabilities and stockholders' deficit | $ 161,047 | $ 105,643 |
| Angie's List, Inc. | ||||
| Condensed Consolidated Statements of Operations | ||||
| (in thousands, except per share data) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (Unaudited) | (Unaudited) | |||
| Revenue | ||||
| Membership | $ 18,279 | $ 17,050 | $ 55,095 | $ 47,598 |
| Service provider | 63,027 | 48,450 | 177,764 | 129,288 |
| Total revenue | 81,306 | 65,500 | 232,859 | 176,886 |
| Operating expenses | ||||
| Operations and support | 14,119 | 11,016 | 39,413 | 29,418 |
| Selling | 32,078 | 23,960 | 88,478 | 65,582 |
| Marketing | 22,508 | 28,189 | 81,909 | 75,870 |
| Product and technology | 8,696 | 7,565 | 24,243 | 20,064 |
| General and administrative | 8,639 | 7,798 | 25,080 | 20,304 |
| Total operating expenses | 86,040 | 78,528 | 259,123 | 211,238 |
| Operating loss | (4,734) | (13,028) | (26,264) | (34,352) |
| Interest expense, net | — | 468 | 579 | 1,395 |
| Loss on debt extinguishment | 458 | — | 458 | — |
| Loss before income taxes | (5,192) | (13,496) | (27,301) | (35,747) |
| Income tax expense | 15 | 15 | 45 | 45 |
| Net loss | $ (5,207) | $ (13,511) | $ (27,346) | $ (35,792) |
| Net loss per common share — basic and diluted | $ (0.09) | $ (0.23) | $ (0.47) | $ (0.62) |
| Weighted average common shares outstanding — basic and diluted | 58,517 | 58,389 | 58,508 | 58,164 |
| Non-cash stock-based compensation | ||||
| Operations and support | $ 20 | $ 19 | $ 45 | $ 52 |
| Selling | 109 | 50 | 292 | 101 |
| Product and technology | 387 | (408) | 838 | (45) |
| General and administrative | 1,901 | 1,015 | 4,770 | 2,558 |
| Total non-cash stock-based compensation | $ 2,417 | $ 676 | $ 5,945 | $ 2,666 |
| Reconciliation of net loss (unaudited) to adjusted EBITDA (loss) | ||||
| Net loss | $ (5,207) | $ (13,511) | $ (27,346) | $ (35,792) |
| Income tax expense | 15 | 15 | 45 | 45 |
| Interest expense, net | — | 468 | 579 | 1,395 |
| Depreciation and amortization | 1,450 | 1,050 | 4,018 | 2,874 |
| Non-cash stock-based compensation | 2,417 | 676 | 5,945 | 2,666 |
| Loss on debt extinguishment | 458 | — | 458 | — |
| Litigation settlement accrual adjustment | (450) | — | (450) | — |
| Adjusted EBITDA (loss) | $ (1,317) | $ (11,302) | $ (16,751) | $ (28,812) |
| Angie's List, Inc. | ||
| Condensed Consolidated Statements of Cash Flows | ||
| (in thousands) | ||
|
Nine Months Ended September 30, |
||
| 2014 | 2013 | |
| (Unaudited) | ||
| Operating activities | ||
| Net loss | $ (27,346) | $ (35,792) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||
| Depreciation and amortization | 4,018 | 2,874 |
| Amortization of debt discount, deferred financing fees and bond premium | 301 | 420 |
| Non-cash loss on debt extinguishment | 266 | — |
| Non-cash compensation expense | 5,945 | 2,666 |
| Changes in certain assets: | ||
| Accounts receivable | (1,865) | (2,849) |
| Prepaid expenses and other current assets | (4,545) | 4,810 |
| Changes in certain liabilities: | ||
| Accounts payable | 7,546 | (3,175) |
| Accrued liabilities | 12,653 | 21,423 |
| Deferred advertising revenue | 8,274 | 12,577 |
| Deferred membership revenue | 2,703 | 10,494 |
| Net cash provided by operating activities | 7,950 | 13,448 |
| Investing activities | ||
| Purchase of investments | (13,164) | (27,572) |
| Sale of investments | 17,400 | 16,855 |
| Acquisition of business assets | — | (2,150) |
| Property, equipment and software | (12,904) | (5,685) |
| Capitalized website and software development costs | (12,785) | — |
| Intangible assets | (841) | (701) |
| Net cash used in investing activities | (22,294) | (19,253) |
| Financing activities | ||
| Proceeds from exercise of stock options | 501 | 4,776 |
| Principal payments on long-term debt | (15,000) | — |
| Proceeds from long-term debt issuance | 60,000 | — |
| Fees paid to lender | (1,210) | — |
| Cash paid for financing fees | (1,879) | — |
| Payment of contingent consideration from acquisition of business assets | (500) | — |
| Payments on capital lease obligations | (52) | — |
| Net cash provided by financing activities | 41,860 | 4,776 |
| Net increase (decrease) in cash and cash equivalents | $ 27,516 | $ (1,029) |
| Cash and cash equivalents, beginning of period | 34,803 | 42,638 |
| Cash and cash equivalents, end of period | $ 62,319 | $ 41,609 |
Conference Call Information
The Company will host a conference call on October 22, 2014 at approximately 8:30 AM (ET) / 5:30 AM (PT) to discuss the quarterly financial results with the investment community. A live webcast of the event will be available on the Angie's List Investor Relations website at http://investor.angieslist.com/.
A live domestic dial-in is available at (877) 380-5664 or (253) 237-1143 internationally. An audio replay will be available at (855) 859-2056 domestically or (404) 537-3406 internationally, using Conference ID 13194470 through October 28, 2014.
Live audio webcast of the presentation will be available on the Angie's List Investor Relations website at http://investor.angieslist.com/.
About Angie's List
Angie's List helps facilitate happy transactions between nearly 3.0 million consumers nationwide and its collection of highly-rated service providers in 720 categories of service, ranging from home improvement to health care. Built on a foundation of authentic reviews of local service, Angie's List connects consumers directly to its online marketplace of services from member-reviewed providers, and offers unique tools and support designed to improve the local service experience for both consumers and service professionals.
Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States (GAAP), Angie's List has disclosed in this press release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP Adjusted EBITDA, which Angie's List defines as earnings before interest, income taxes, depreciation, amortization, loss on debt extinguishment, non-cash stock-based compensation and the legal settlement accrual adjustment. Angie's List uses Adjusted EBITDA internally in analyzing its financial results and has determined to disclose this measure to investors because it believes it will be useful to them, as a supplement to GAAP measures, in evaluating Angie's List's operating performance relative to its industry sector and competitors. Angie's List believes that the use of Adjusted EBITDA provides additional insight for investors to use in evaluation of ongoing operating results and trends. However, non-GAAP financial measures such as Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Angie's List has significant uses of cash flows, including capital expenditures and other contractual commitments, interest payments and income taxes that are not reflected in adjusted EBITDA. Adjusted EBITDA does not consider the potentially dilutive impact of issuing non-cash stock-based compensation to Angie's List's management and other employees. It should also be noted that other companies, including companies in the same industry, may calculate Adjusted EBITDA in a different manner than Angie's List. Angie's List has provided a reconciliation of the Adjusted EBITDA measure to the most directly comparable GAAP financial measure.
Forward-Looking and Cautionary Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expected revenue, future marketing expense and growth opportunities. These forward-looking statements are based on Angie's List's current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: our ability to accurately measure and predict revenue per paid membership, membership acquisition costs or costs associated with servicing our members; our ability to protect our brand and maintain our reputation among consumers and local service providers; our ability to attract and retain local service providers to advertise on our service; our ability to increase our pricing on memberships and service provider contracts as we increase our market penetration; our ability to replicate our business model in our less penetrated markets; our success in converting consumers and local service providers into paid memberships and participating service providers; competitive factors; our ability to stay abreast of modified or new laws and regulations applying to our business, including those regarding sales or transaction taxes and privacy regulation; our ability to adequately protect our intellectual property; our ability to manage our growth; and general economic conditions worldwide.
Further information on these factors and other risks that may affect our business is included in filings we make with the Securities and Exchange Commission from time to time, including Angie's List's Annual Report on Form 10-K and its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
These documents are or will be available online from the SEC or on the SEC Filings section of the Investor Relations section of our website at http://investor.angieslist.com. Information on our website is not part of this release. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events.