Angi Inc. 2022 Q1 Form 10-Q Summary
Reporting period: Three months ended March 31, 2022; filed May 10, 2022. Angi connects consumers with home-service professionals across more than 500 categories. It reports North America and Europe segments. IAC held 84.5% of Angi’s economic interest and 98.2% of its voting interest.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $436.2 million | $387.0 million |
| Operating income (loss) | $(34.0) million | $0.1 million |
| Net income (loss) | $(33.3) million | $2.0 million |
| Net income (loss) attributable to Angi shareholders | $(33.4) million | $1.9 million |
| Diluted earnings (loss) per share | $(0.07) | $0.00 |
| Adjusted EBITDA | $(3.2) million | $23.2 million |
| Cash flow from operations | $(0.7) million | $15.3 million |
| Capital expenditures | $26.9 million | $18.7 million |
Revenue increased 13%. North America revenue grew 14% to $411.2 million, while Europe revenue declined 4% to $25.0 million. Angi Services revenue more than doubled to $113.1 million, primarily reflecting the Angi Roofing acquisition and, to a lesser extent, organic growth. Angi Ads and Leads revenue fell 3% to $298.0 million. Cost of revenue rose 84% to $99.0 million, or 23% of revenue versus 14% a year earlier. Selling and marketing was $225.8 million (52% of revenue); general and administrative expense was $109.7 million (25%).
Cash and cash equivalents were $391.3 million at quarter-end, down from $428.1 million at December 31, 2021. Long-term debt, net, was $494.7 million, representing $500 million of 3.875% senior notes due August 2028. The former $250 million revolving facility was terminated in 2021; no amounts had been drawn. The company reported total current assets of $559.0 million and current liabilities of $306.3 million.
Material changes and management commentary
- Service requests fell 13% to 6.7 million; monetized transactions declined 7% to 3.9 million. Transacting service professionals decreased 4% and advertising professionals decreased 11% year over year.
- Despite North America’s revenue growth, its Adjusted EBITDA fell to $0.3 million from $31.2 million. Higher service delivery costs, G&A, and marketing expenses offset revenue growth. Consolidated Adjusted EBITDA turned negative.
- Management attributed weaker service requests partly to the 2021 brand integration and the Omicron surge. Angi said the brand change reduced organic search placement, prompting increased paid marketing and contributing to lower revenue and monetization. It expected these effects to persist until brand awareness and search rankings improve.
- Labor and materials constraints limited service professionals’ capacity and Angi’s ability to monetize demand. Monetization had improved modestly but had not returned to pre-COVID-19 levels.
- Angi expects 2022 capital expenditures to be approximately 20%–25% above 2021’s $70.2 million, mainly for software investment. The company said investment in Angi Services, which contributed to current-period losses, is expected to continue through at least 2023.
- Management believes existing cash and expected operating cash flows will cover normal operating needs, capital expenditures, debt service, and commitments for the next 12 months. Additional financing may be needed for activities beyond that period; availability and terms are not assured.
Risks, contingencies, and unusual items
- The FTC filed an administrative complaint in March 2022 alleging certain HomeAdvisor practices concerning service-professional leads and mHelpDesk were unfair or deceptive. HomeAdvisor disputes the allegations; the outcome is uncertain.
- The company recorded a $4 million legal reserve. It also faces ongoing service-professional litigation and tax audits; management said outcomes are uncertain and could adversely affect results, liquidity, or financial condition.
- Stock-based compensation expense increased to $13.0 million from $2.0 million, primarily reflecting new awards and the prior-year reversal of compensation expense associated with forfeited awards after management departures.
- The company repurchased approximately 1.0 million shares for $8.1 million during the quarter. IAC’s control of voting power may affect Angi’s financing decisions, and certain outstanding equity awards could dilute shareholders.
- Management reported disclosure controls were effective at quarter-end and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- The filing’s MD&A cash-flow summary conflicts with the consolidated cash-flow statement on comparative cash-flow figures. The financial statements report Q1 2021 operating cash flow of $15.3 million, investing cash flow of $31.3 million, and financing cash flow of $(82.9) million; the MD&A summary presents different values. Verify the underlying filed tables.
- Track service-request trends, conversion to monetized transactions, and service-professional capacity, as well as progress in organic search traffic and brand integration.
- Assess whether Angi Services growth can improve profitability given its higher delivery costs and planned investment, including the impact of Angi Roofing.
- Monitor cash generation, planned capital spending, the 2028 notes, share repurchases, and the potential dilution and withholding-tax costs of equity awards.
- Follow developments in the FTC proceeding, service-professional litigation, and tax examinations.