Angie’s List Reports Fourth Quarter and Full Year 2015 Results

  • First profitable year in Company history with net income of $10.2
    million for the full year 2015 and $14.2 million for the fourth
    quarter of 2015; full year growth represents a positive swing of $22.3
    million in net income
  • Revenue of $344.1 million for the full year 2015 and $86.3
    million for the fourth quarter of 2015
  • Adjusted EBITDA1 of $28.0 million for the
    full year 2015 and $19.6 million for the fourth quarter of 2015
  • Growth in total paid memberships, participating service providers
    and total contract value for the full year and fourth quarter
  • Gross member additions of 1,033,222 for the full year 2015 and
    214,447 in the fourth quarter of 2015

INDIANAPOLIS–(BUSINESS WIRE)–Angie’s List, Inc. (NASDAQ:ANGI) today announced financial results for
the quarter and year ended December 31, 2015. Angie’s List achieved the
financial guidance provided on the previous quarter’s earnings call.

“Angie’s List marked a number of major milestones in 2015. We achieved
the first profitable year in our history, with net income of $10 million
– a $22 million positive swing from the prior year,” said Scott
Durchslag, Angie’s List President and Chief Executive Officer. “Since
1995, the Company has set the bar for delivering excellent outcomes
between our members and service providers. We’ve accumulated more than
ten million verified reviews, built a base of more than three million
members, created the iconic brand in home services, and today, attract
10-12 million unique visitors per month to our website. However, we can
do more to capitalize on this strong foundation.”

“Since I joined Angie’s List just six months ago, we’ve launched change
across the Company to strengthen customer loyalty, improve operating
efficiency, and enhance our product, technology and marketing
capabilities. New products, including LeadFeed, Angie’s Fair Price
Guarantee and Angie’s Service Quality Guarantee, as well as the initial
rollout of our new Angie’s List 4.0 technology platform are just a few
examples. We are executing smarter, faster and with more discipline
based on data driven decisions than ever before.”

“For the full year, we increased the number of participating service
providers and grew service provider revenue by 14%. While member revenue
declined from a year ago, we grew total members by 8% to 3.3 million.”

“In the fourth quarter, we generated $19.6 million in adjusted EBITDA1
as we grew revenue and delivered leverage in key expense line items. We
improved member renewal rates, formally baselined our Net Promoter Score
and grew the number of unique visitors to our site.”

“While we expect to share details on our Profitable Growth Plan and our
priorities for 2016 at our upcoming investor day on March 3, given the
progress we are making, I have great confidence in the growth and value
creation opportunities that lie ahead.”

1 Adjusted EBITDA is a non-GAAP financial
measure.

 

Key Operating Metrics

 
Three months ended      

December 31,
2015

   

December 31,
2014

    Change
Total paid memberships (end of period) 3,297,395 3,041,651 8 %
Gross paid memberships added (in period) 214,447 206,671 4 %
Marketing cost per paid membership acquisition (in period) $ 29 $ 27 7 %
First-year membership renewal rate (in period) 73 % 70 % 3.0 pts
Average membership renewal rate (in period) 76 % 74 % 2.0 pts
Participating service providers (end of period)* 54,402 54,240 %
Total service provider contract value (end of period, in thousands) $ 270,841 $ 249,045 9 %
Total service provider contract value backlog (end of period, in
thousands)
$ 162,478 $ 153,137 6 %
 

Twelve months ended

December 31,
2015

December 31,
2014

Change

Gross paid memberships added (in period) 1,033,222 1,242,485 (17 )%
Marketing cost per paid membership acquisition (in period) $ 69 $ 70 (1 )%
First-year membership renewal rate (in period) 74 % 73 % 1.0 pts
Average membership renewal rate (in period) 77 % 77 % flat
 

* We include in participating service providers the total number of
service providers under contract for advertising, e-commerce or both at
the end of the period.

Market Cohort Analysis

    Pre-2003   2003-2007   Post-2007   Total
December 31, 2015   December 31, 2015   December 31, 2015   December 31, 2015
2015   2014   2015   2014   2015   2014   2015   2014
Number of Markets 10   10   35   35   208   208   253   253
Average Revenue/Market $ 8,028,688 $ 7,485,052 $ 6,190,457 $ 5,653,860 $ 225,912 $ 202,317 $ 1,359,457 $ 1,244,338
Average Marketing Expense/Market $ 1,082,897 $ 1,327,562 $ 1,139,388 $ 1,388,742 $ 100,129 $ 122,617 $ 282,744 $ 345,399
 
Membership Revenue/Paid Member $ 25.37 $ 32.81 $ 23.41 $ 29.41 $ 14.52 $ 15.92 $ 21.45 $ 26.46
Service Provider Revenue/Paid Member   107.12       110.14       101.68       102.16       41.99       41.32       87.06       87.48
Total Revenue/Paid Member $ 132.49 $ 142.95 $ 125.09 $ 131.57 $ 56.51 $ 57.24 $ 108.51 $ 113.94
 
Total Paid Memberships 635,015 576,980 1,806,226 1,657,882 856,154 806,789 3,297,395 3,041,651
Estimated Penetration Rate* 17% 16% 13% 12% 12% 11% 14% 13%
Annual Membership Growth Rate 10%   23%   9%   23%   6%   22%   8%   22%

Cohort table presents financial and operational data for the twelve
months ended December 31, 2015 and 2014.

* Demographic information used in penetration rate calculations is
based on third-party studies we commissioned in December 2015 and
December 2014. According to these studies, the number of U.S. households
in our target demographic was 27 million for each of the periods ended
December 31, 2015 and 2014.

Fourth Quarter Results

Revenue

Total revenue for the fourth quarter of 2015 was $86.3 million, an
increase of 5% compared to the prior year period, driven by higher
service provider revenue, which increased 9% to $69.7 million, offset by
a decline in membership revenue of 8% to $16.6 million from a year ago.

The growth in service provider revenue, which includes both advertising
and e-commerce revenue, quarter over quarter was largely the result of
an 8% increase in service provider revenue per participating service
provider as well as a 9% quarter over quarter increase in service
provider contract value. These gains were partially offset by the impact
on service provider revenue associated with lower average e-commerce
take rates on higher unit sales compared to the year ago period.

The decline in membership revenue quarter over quarter is primarily the
result of a 15% decrease in membership revenue per paid member
attributable to tiered pricing, which has reduced average membership
fees across all markets, partially offset by the impact on membership
revenue associated with the 8% increase in the total number of paid
memberships and a 4% increase in gross paid memberships added over the
same time period.

Operating Expenses

Operations and support expense was $12.6 million, representing a $0.7
million decrease from the same period in the prior year, attributable to
quarter over quarter reductions in compensation and personnel-related
costs and publication expenditures, partially offset by an increase in
operations and support outsourced services expenditures over the same
time period.

Selling expense was $27.9 million, a decline of $0.8 million quarter
over quarter, due to lower headcount and increased efficiency. Total
sales personnel declined 11% year over year, resulting in reduced
selling compensation and personnel-related costs for commissions, wages
and other employee benefits.

Marketing expense was $6.3 million, an increase of $0.8 million period
over period, attributable to the planned timing and trajectory of our
marketing spend in the current year. We plan our quarterly marketing
spend based on expectations of consumer spending and manage to marginal
cost per acquisition in doing so.

Product and technology expense was $9.7 million, a decrease of $0.1
million from the year ago period, due to the impact of long-lived asset
impairment charges recorded in the fourth quarter of each of the last
two years, amounting to $1.8 million and $0.9 million in 2014 and 2015,
respectively, partially offset by an increase in technology-related
outsourced services associated with the maintenance and support of our
legacy technology platform as we prepare to launch and transition to our
new technology platform in 2016.

General and administrative expense was $15.0 million, representing an
increase of $6.1 million quarter over quarter, driven by increases in
compensation and personnel-related and professional services fees.

Adjusted EBITDA1

Adjusted EBITDA1 was $19.6 million for the period as compared
to adjusted EBITDA1 of $20.9 million in the year-ago period,
a decline of $1.3 million.

Cash

Cash provided by operations for the fourth quarter was approximately
$5.3 million. At December 31, 2015, the balance of cash, cash
equivalents and investments was $56.6 million.

1 Adjusted EBITDA is a non-GAAP financial
measure.

Full Year 2015 Results

Revenue

Full year 2015 revenue was $344.1 million, an increase of 9% compared to
the prior year, driven by higher service provider revenue, which
increased 14% to $276.1 million, offset by a decline in membership
revenue of 7% to $68.0 million from the prior year.

The growth in service provider revenue, which includes both advertising
and e-commerce revenue, year over year was largely the result of a 14%
increase in service provider revenue per participating service provider
as well as a 9% year over year increase in service provider contract
value. These gains were partially offset by the impact on service
provider revenue associated with lower average e-commerce take rates on
higher unit sales compared to the prior year.

The decline in membership revenue year over year is primarily the result
of a 19% decrease in membership revenue per paid member attributable to
tiered pricing, which has reduced average membership fees across all
markets, as well as a 17% decrease in gross paid memberships added,
partially offset by the 8% increase in the total number of paid
memberships over the same time period.

Operating Expenses

Operations and support expense was $56.1 million, representing a $3.3
million increase from the prior year, attributable to year over year
increases in publication costs, associated with the circulation of the Angie’s
List Magazine
, and credit card processing fees, attributable to the
growing volume of service provider transactions and membership
enrollments on our platforms, partially offset by a decrease in
operations and support outsourced services expenditures over the same
time period.

Selling expense was $117.4 million, an increase of $0.2 million year
over year, primarily due to costs we incurred to host a three-day
service provider conference in May, partially offset by the impact on
selling expense associated with lower headcount and increased
efficiency. Total sales personnel declined 11% year over year, resulting
in reduced selling compensation and personnel-related costs for
commissions, wages and other employee benefits.

Marketing expense was $71.5 million, a decrease of $15.9 million year
over year. While we continued to make significant investments in
increasing our paid membership base and expanding our market reach via
national offline and online advertising, we purposefully reduced our
marketing spend in 2015 as compared to 2014 as we focused on the
efficiency and effectiveness of our spend while making strategic
investments in other areas of the business.

Product and technology expense was $36.7 million, an increase of $2.6
million from the prior year, largely attributable to an increase in
technology-related outsourced services associated with the maintenance
and support of our legacy technology platform as we prepare to launch
and transition to our new technology platform in 2016.

General and administrative expense was $49.2 million, representing an
increase of $15.2 million year over year, driven by increases in
compensation, personnel-related costs, professional services fees, and
costs incurred to identify and hire our President and Chief Executive
Officer.

Adjusted EBITDA1

Adjusted EBITDA1 was $28.0 million for the year as compared
to adjusted EBITDA1 of $4.2 million in the prior year, an
improvement of $23.8 million.

Cash

Cash provided by operations for the year was approximately $26.7
million. At December 31, 2015, the balance of cash, cash equivalents and
investments was $56.6 million

1 Adjusted EBITDA is a non-GAAP financial
measure.

Business Outlook

The Company expects to provide revenue and adjusted EBITDA1
guidance for 2016 and its long-term outlook as part of its Investor Day
on March 3, 2016.

1 Adjusted EBITDA is a non-GAAP financial
measure.

 

Angie’s List, Inc.
Condensed Consolidated Balance
Sheets

(in thousands)

 
     

December 31,
2015

 

December 31,
2014

 
(Unaudited)
Assets
Cash and cash equivalents $ 32,599 $ 39,991
Short-term investments 23,976 24,268
Accounts receivable, net 17,019 15,141
Prepaid expenses and other current assets 19,026   18,120  
Total current assets 92,620 97,520
Property, equipment and software, net 77,635 51,264
Goodwill 1,145 1,145
Amortizable intangible assets, net 2,011 2,755
Other assets, noncurrent 1,462   1,854  
Total assets $ 174,873   $ 154,538  
 
Liabilities and stockholders’ deficit
Accounts payable $ 10,525 $ 5,490
Accrued liabilities 20,287 23,189
Deferred membership revenue 32,702 33,767
Deferred advertising revenue 48,930 48,399
Current maturities of long-term debt 1,500    
Total current liabilities 113,944 110,845
Long-term debt, net 57,596 58,854
Deferred membership revenue, noncurrent 3,742 4,744
Deferred advertising revenue, noncurrent 640 669
Other liabilities, noncurrent 1,332   1,600  
Total liabilities 177,254 176,712
Stockholders’ deficit:
Common stock 67 67
Additional paid-in-capital 275,445 265,895
Treasury stock (23,719 ) (23,719 )
Accumulated deficit (254,174 ) (264,417 )
Total stockholders’ deficit (2,381 ) (22,174 )
Total liabilities and stockholders’ deficit $ 174,873   $ 154,538  
 
 

Angie’s List, Inc.
Condensed Consolidated
Statements of Operations

(in thousands, except per
share data)

 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2015   2014 2015   2014
 
(Unaudited) (Unaudited)
Revenue
Membership $ 16,565 $ 18,018 $ 67,992 $ 73,113
Service provider 69,690   64,134   276,133   241,898  
Total revenue 86,255 82,152 344,125 315,011
Operating expenses
Operations and support 12,598 13,347 56,074 52,760
Selling 27,923 28,698 117,390 117,176
Marketing 6,289 5,477 71,534 87,386
Product and technology 9,684 9,796 36,661 34,039
General and administrative 15,004   8,932   49,208   34,012  
Total operating expenses 71,498 66,250 330,867 325,373
Operating income (loss) 14,757 15,902 13,258 (10,362 )
Interest expense, net 591 624 2,971 1,203
Loss on debt extinguishment       458  
Income (loss) before income taxes 14,166 15,278 10,287 (12,023 )
Income tax expense 16   6   44   51  
Net income (loss) $ 14,150   $ 15,272   $ 10,243   $ (12,074 )
 
Net income (loss) per common share — basic $ 0.24 $ 0.26 $ 0.18 $ (0.21 )
Net income (loss) per common share — diluted $ 0.24 $ 0.26 $ 0.17 $ (0.21 )
 
Weighted-average common shares outstanding — basic 58,532 58,517 58,521 58,510
Weighted-average common shares outstanding — diluted 59,722 58,517 58,783 58,510
 
Non-cash stock-based compensation expense
Operations and support $ 31 $ 20 $ 109 $ 65
Selling 145 105 488 397
Product and technology 253 18 931 856
General and administrative 2,197   1,801   7,347   6,571  
Total non-cash stock-based compensation expense $ 2,626   $ 1,944   $ 8,875   $ 7,889  
 
Reconciliation of net income (loss) to Adjusted EBITDA
Net income (loss) $ 14,150 $ 15,272 $ 10,243 $ (12,074 )
Income tax expense 16 6 44 51
Interest expense, net 591 624 2,971 1,203
Depreciation and amortization 1,611 1,558 6,402 5,576
Non-cash stock-based compensation expense 2,626 1,944 8,875 7,889
Loss on debt extinguishment 458
Litigation settlement adjustment (272 ) (252 ) (2,113 ) (702 )
Non-cash long-lived asset impairment charge 892   1,778   1,578   1,778  
Adjusted EBITDA $ 19,614   $ 20,930   $ 28,000   $ 4,179  
 
 

Angie’s List, Inc.
Condensed Consolidated
Statements of Cash Flows

(in thousands)

 
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2015   2014 2015   2014
 
(Unaudited) (Unaudited)
Operating activities
Net income (loss) $ 14,150 $ 15,272 $ 10,243 $ (12,074 )
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,611 1,558 6,402 5,576
Amortization of debt discount, deferred financing fees and bond
premium
171 177 697 478
Non-cash stock-based compensation 2,626 1,944 8,875 7,889
Non-cash loss on debt extinguishment 266
Non-cash long-lived asset impairment charge 892 1,778 1,578 1,778
Non-cash loss on disposal of long-lived assets 21 300
Deferred income taxes 17 11 17 11
Changes in certain assets:
Accounts receivable (804 ) (891 ) (1,878 ) (2,756 )
Prepaid expenses and other current assets 2,142 126 (906 ) (4,419 )
Changes in certain liabilities:
Accounts payable (2,579 ) (10,498 ) 5,467 (2,952 )
Accrued liabilities (9,877 ) (8,962 ) (2,539 ) 3,691
Deferred advertising revenue (1 ) 825 502 9,099
Deferred membership revenue   (3,119 ) (4,661 ) (2,067 ) (1,958 )
Net cash provided by (used in) operating activities 5,250 (3,321 ) 26,691 4,629
 
Investing activities
Purchases of investments (10,857 ) (13,507 ) (24,537 ) (26,671 )
Sales of investments 11,411 5,960 24,766 23,360
Property, equipment and software (2,602 ) (3,831 ) (9,075 ) (16,735 )
Capitalized website and software development costs (4,764 ) (7,337 ) (25,193 ) (20,122 )
Intangible assets   (119 ) (143 ) (498 ) (984 )
Net cash (used in) investing activities (6,931 ) (18,858 ) (34,537 ) (41,152 )
 
Financing activities
Proceeds from exercise of stock options 675 675 501
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 (78 ) (1,957 )
Payment of contingent consideration from acquisition of assets (500 )
Payments on capital lease obligation (57 ) (71 ) (221 ) (123 )
Net cash provided by (used in) financing activities   618   (149 ) 454   41,711  
Net (decrease) increase in cash and cash equivalents $ (1,063 ) $ (22,328 ) $ (7,392 ) $ 5,188
Cash and cash equivalents, beginning of period   33,662   62,319   39,991   34,803  
Cash and cash equivalents, end of period   $ 32,599   $ 39,991   $ 32,599   $ 39,991  
 

Conference Call Information

The Company will host a conference call today, February 23, 2016,
at approximately 8:30 AM (ET) to discuss the financial results with the
investment community. A live audio 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
31672542 through February 28, 2016.

About Angie’s List

Angie’s List helps facilitate happy transactions between more than three
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 10 million verified 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”), we
disclose in this press release financial information that was not
prepared in accordance with GAAP. This information includes non-GAAP
Adjusted EBITDA, which we define as earnings before interest, income
taxes, depreciation, amortization, non-cash stock-based compensation,
loss on debt extinguishment, the litigation settlement adjustment and
non-cash long-lived asset impairment charges. We use Adjusted EBITDA
internally in analyzing our financial results and determined to disclose
this measure to investors as we believe it will be useful to them, as a
supplement to GAAP measures, in evaluating our operating performance
relative to our industry sector and competitors. We believe 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. We have 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 our 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 we do. We provided a reconciliation of the
Adjusted EBITDA measure to the most directly comparable GAAP financial
measure herein.

Forward-Looking and Cautionary Statements

This press release contains statements that constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, each as amended. All
statements other than statements of historical fact, including
statements regarding market and industry prospects and future results of
operations or financial position, made in this press release are
forward-looking. In many cases, you can identify forward-looking
statements by terminology, such as “may”, “should”, “will”, “expects”,
“intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential” or “continue” or the negative of such terms and other
comparable terminology. The forward-looking information may include,
among other information, statements concerning our estimated and
projected earnings, revenues, costs, expenditures, cash flows, growth
rates, financial results, our plans and objectives for future
operations, changes to our business model, growth initiatives or
strategies (including, but not limited to, merger and acquisition
activity) or the expected outcome or impact of pending or threatened
litigation. There may also be other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. Risks and
uncertainties may affect the accuracy of forward-looking statements.

For a discussion of these factors and other risks and uncertainties that
may affect our business or cause actual results to differ materially
from those contained in our forward-looking statements, please refer to
the filings we make with the Securities and Exchange Commission from
time to time, including our Annual Report on Form 10-K and 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, whether as a result of new
information, future events or otherwise.

Contacts

Angie’s List
Investor Relations:
Leslie Arena,
317-808-4527
lesliea@angieslist.com
or
Public
Relations:

Debra DeCourcy, APR, 317-713-0479
debra.decourcy@angieslist.com

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