Angi Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 9, 2023. Angi connects consumers with home-service professionals across more than 500 categories through Ads and Leads, Services, Roofing and International. IAC held 83.9% of Angi’s economic interest and 98.1% of its voting interest at quarter-end.
Key financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $392.4 million | $436.2 million |
| Gross profit / margin | $350.4 million / 89% | $337.2 million / 77% |
| Operating loss | $10.5 million | $34.0 million |
| Net loss attributable to Angi shareholders | $15.3 million; $0.03 per share | $33.4 million; $0.07 per share |
| Adjusted EBITDA | $30.5 million | $(3.2) million |
| Cash provided by (used in) operations | $19.1 million | $(0.7) million |
| Cash and cash equivalents, March 31 | $315.0 million | — |
| Long-term debt, net, March 31 | $495.5 million | — |
Cash and cash equivalents plus marketable debt securities totaled $327.5 million at quarter-end. Investing activities used $24.2 million, including $11.9 million of capital expenditures and $12.4 million of purchases of marketable debt securities. Financing activities used $1.4 million, primarily for employee tax withholding on net-settled awards. The $500 million senior notes bear interest at 3.875% and mature August 15, 2028.
Changes versus the prior-year quarter
- Revenue declined 10% to $392.4 million. Ads and Leads was essentially flat at $293.5 million; Services fell 58% to $32.1 million; Roofing grew 5% to $38.4 million; International was essentially flat at $29.9 million.
- Services revenue includes a significant presentation change: beginning January 1, 2023, Angi reports qualifying Services transactions net of amounts owed to professionals. This reduced reported Q1 revenue by $25.7 million, with no effect on operating loss or Adjusted EBITDA. Angi also cited an $18.0 million decrease from exiting complex, less-profitable offerings.
- Gross margin rose to 89% from 77%, but the revenue-recognition change also shifted professional payments out of cost of revenue. Margin comparisons are therefore affected by the changed presentation.
- Adjusted EBITDA improved by $33.7 million, from a loss to income. Services’ Adjusted EBITDA loss narrowed to $2.2 million, while Ads and Leads generated $39.9 million. Operating loss improved to $10.5 million.
- Service Requests fell 12% to 6.0 million, Monetized Transactions fell 5% to 6.5 million, and transacting service professionals fell 17% to 206,000.
Management outlook, risks and unusual items
- Management expects 2023 capital expenditures to be approximately 60% below 2022’s $116.4 million, primarily because of lower planned investment in capitalized software. No specific revenue or earnings guidance is provided in the filing.
- Management believes existing cash, cash equivalents and expected positive operating cash flow will fund normal operating needs, capital expenditures and debt service for the next 12 months. It cautions that demand weakness or adverse economic conditions could pressure liquidity and that additional financing may not be available on favorable terms.
- Q1’s $3.3 million income-tax provision was recorded despite a pretax loss, primarily because of nondeductible stock compensation, foreign income and state taxes, partly offset by research credits. Other income of $3.8 million primarily reflected $3.4 million of interest income.
- Legal accruals totaled $17.7 million at March 31. On April 20, 2023, the FTC approved a consent order with HomeAdvisor involving commitments concerning representations to service professionals and up to $7.2 million for restitution and administration costs.
- Other disclosed risks include competition and marketing effectiveness, consumer spending and home-service demand, data security and privacy, contractor classification, reliance on service professionals, and Angi’s relationship with IAC. IAC’s voting control may affect financing decisions.
- Management reported disclosure controls were effective at quarter-end and no material change to internal control over financial reporting during the quarter.
Important facts for investors to verify
- How much of the revenue and margin movement reflects the Services net-reporting change versus underlying transaction volume, pricing and mix.
- Whether declines in Service Requests and transacting professionals continue, and whether Services’ profitability improvement is sustainable.
- Cash conversion and credit quality: Q1 included a $24.9 million provision for credit losses and a $23.2 million accounts-receivable outflow.
- Progress and eventual cost of the FTC consent order and other litigation, including the service-professional class action and California false-advertising matter.
- Capital-spending plans, liquidity assumptions and the implications of IAC’s voting control for future financing or capital-allocation decisions.