Angi Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; filed August 8, 2023. Angi connects consumers with home-service professionals across more than 500 categories. It reported approximately 207,000 transacting service professionals during the quarter and about 27 million projects referred to its brands over the preceding 12 months. IAC held 83.9% of Angi’s economic interest and 98.1% of its voting interest.
Financial results and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $375.1 million | $515.8 million | $767.5 million | $951.9 million |
| Gross profit | $343.4 million | $388.0 million | $693.8 million | $725.2 million |
| Operating loss | $16.7 million | $20.9 million | $27.2 million | $54.8 million |
| Net loss attributable to Angi shareholders | $14.7 million | $24.2 million | $30.0 million | $57.6 million |
| Adjusted EBITDA | $18.3 million | $9.7 million | $48.8 million | $6.5 million |
| Basic and diluted loss per share | $0.03 | $0.05 | $0.06 | $0.11 |
Margins: Reported gross margin was 92% in Q2 versus 75% a year earlier, and 90% for the first half versus 76%. These comparisons are substantially affected by a change in Services revenue presentation; they should not be read as equivalent-basis margin improvement. Operating loss was 4% of revenue in both Q2 periods and 4% for the first half of 2023 versus 6% in 2022.
Cash flow: First-half operating cash flow was $77.8 million, compared with $7.1 million in 2022. Investing activities used $21.9 million, including $22.3 million of capital expenditures; financing activities used $7.6 million. Cash and cash equivalents were $370.6 million at June 30, 2023, up from $321.2 million at year-end. The filing provides six-month, not standalone quarterly, cash-flow figures.
Debt and liquidity: Long-term debt, net, was $495.7 million, consisting of $500 million of 3.875% senior notes due August 2028, less unamortized issuance costs. Management said existing cash and expected positive operating cash flows should fund normal operating needs, capital expenditures and debt service for the next 12 months. The company noted additional financing may be unavailable or unfavorable and could require IAC’s approval.
Material changes and management commentary
- Revenue fell 27% year over year in Q2 and 19% in the first half. Effective January 1, 2023, Services revenue shifted from gross to net presentation because service professionals, rather than Angi, contract with consumers to deliver services. The change has no impact on operating loss or Adjusted EBITDA. On a net-presentation basis, 2022 Services revenue would have been lower by $71.1 million for Q2 and $122.8 million for the first half.
- On a reported basis, Q2 Ads and Leads revenue declined 14%, Services declined 72%, and Roofing declined 43%; International revenue grew 17%. Management attributed declines to fewer monetized transactions and professionals, a shift away from complex, less-profitable Services offerings, and a strategic move to select Roofing markets. Ads and Leads advertising revenue increased 7%, supported by sales growth and improved retention.
- Service Requests fell 21% and Monetized Transactions fell 6% in Q2 year over year; transacting professionals declined from 264,000 to 207,000. Angi said it was reducing unprofitable sales and changing demand channels to improve lead quality and user experience.
- Q2 Adjusted EBITDA improved notably in Services, Roofing, Corporate and International, while Ads and Leads EBITDA declined 33% to $28.2 million, reflecting lower revenue and gross profit, partly offset by lower marketing and administrative costs. Consolidated Adjusted EBITDA is a non-GAAP measure; the filing cautions it is not a substitute for GAAP results.
- Management expects 2023 capital expenditures to be approximately 60% below 2022’s $116.4 million, primarily due to lower capitalized-software investment. No specific revenue or earnings guidance was provided.
Risks, contingencies and unusual items
- Demand may be affected by economic conditions and consumer confidence. Other cited risks include competition, cost-effective marketing and search visibility, maintaining a quality professional network, privacy and cybersecurity, contractor classification, and Angi’s relationship with IAC.
- Legal accruals totaled $9.8 million at June 30. A California false-advertising case was resolved by a consent judgment approved May 18, 2023; Angi agreed to certain restrictions on representations about its background-check program and a $6.82 million civil penalty. Management said current proceedings were not expected to have a material adverse effect, while acknowledging outcomes are uncertain.
- First-half income tax expense was $1.3 million despite a pretax loss, primarily due to nondeductible stock compensation and foreign income taxed at different rates. Unrecognized tax benefits, including interest, were $7.0 million. The company’s federal returns for 2013–2019 were covered by an IRS audit settlement approved in June 2023.
- Other notable items: first-half credit-loss provision was $46.9 million; Q2 other income included $4.2 million of interest income and a $1.0 million foreign-exchange gain. The company repurchased 1.1 million shares for $3.4 million in the first half, at an average $3.22 per share. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
Important facts for investors to verify
- How much of reported revenue contraction reflects the Services gross-to-net accounting change versus underlying demand and mix; compare Services economics and margins on a consistent basis.
- Whether lower Service Requests, Monetized Transactions and professional counts stabilize, and whether lead-quality initiatives improve retention and monetization.
- Whether Adjusted EBITDA gains convert into sustained operating cash flow, given significant credit-loss provisions and working-capital movements.
- Cash needs and flexibility under the $500 million 2028 notes, including any financing constraints or dependence on IAC’s approval.
- Progress on Services and Roofing restructuring, the expected capital-expenditure reduction, and any further impacts from legal, tax or other contingencies.