Angi Inc. 2023 Q3 10-Q Summary
Business context and reporting period. This unaudited 10-Q covers the quarter and nine months ended September 30, 2023; it was filed November 7, 2023. Angi connects consumers with home-service professionals across more than 500 categories. It reported four segments: Ads and Leads, Services, Roofing, and International. IAC held 83.8% of Angi’s economic interest and 98.1% of its voting interest at quarter-end.
Financial results and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $371.8 million | $498.0 million | $1,139.3 million | $1,450.0 million |
| Gross profit / margin | $343.1 million / 92% | $389.0 million / 78% | $1,036.9 million / 91% | $1,114.2 million / 77% |
| Operating loss | $10.1 million | $11.1 million | $37.3 million | $65.9 million |
| Net loss attributable to Angi shareholders | $5.4 million | $17.5 million | $35.4 million | $75.1 million |
| Adjusted EBITDA | $25.9 million | $22.9 million | $74.7 million | $29.4 million |
| Operating cash flow | — | $88.8 million | $11.4 million |
Adjusted EBITDA is a non-GAAP measure. Cash and cash equivalents were $366.8 million at September 30, 2023, versus $321.2 million at December 31, 2022. Net long-term debt was $495.9 million, representing $500 million of 3.875% senior notes due August 2028, less issuance costs. Current assets were $515.8 million and current liabilities were $303.7 million.
Cash flows and investment. For the first nine months, investing activities used $35.6 million, including $36.1 million of capital expenditures; financing activities used $8.2 million. Cash and restricted cash increased $45.1 million. Capital expenditures for 2023 were expected to be approximately 55% below 2022’s $116.4 million, primarily due to lower capitalized-software investment.
Material changes versus prior periods
- Revenue fell 25% in Q3 and 21% for the nine-month period. Domestic revenue decreased 28% and 23%, respectively; International revenue increased 25% and 13%.
- Services revenue fell 72% in Q3 and 68% year to date. A change effective January 1, 2023 shifted Services to net revenue reporting: Angi reports its fee after amounts owed to providers rather than gross consumer payments. Management said this changed reported revenue but did not affect operating loss or Adjusted EBITDA. On a net basis, 2022 Services revenue would have been lower by $64.8 million in Q3 and $187.5 million for nine months, so reported revenue comparisons are not directly comparable.
- Other pressures included lower Ads and Leads consumer-connection revenue and fewer service professionals, lower Service Requests, and reduced Roofing revenue. Ads and Leads advertising revenue increased, while International revenue also grew.
- Operating loss narrowed, and Adjusted EBITDA rose. Services and International improved to positive Adjusted EBITDA, while Ads and Leads Adjusted EBITDA declined. Cost reductions included more efficient marketing, lower headcount and streamlined Services offerings.
- Service Requests declined 23% in Q3 and 19% for nine months; Monetized Transactions declined 5% and 6%. Transacting service professionals were 202,000 in Q3, down 17% year over year.
Outlook, commentary, risks and unusual items
- Management said existing cash, cash equivalents and expected positive operating cash flows should fund normal operating requirements, capital expenditures and debt service for the next 12 months. Additional financing may be sought for purposes beyond that period; availability and terms are not assured.
- On November 1, 2023, Angi sold Total Home Roofing, LLC, which comprised the entire Roofing segment. This occurred after quarter-end.
- After quarter-end, management announced its intention to establish a plan to use the 13,971,371 shares remaining under its repurchase authorization, subject to price and volume limits. No shares were repurchased during Q3; the company repurchased 1.1 million shares for $3.4 million during the first nine months.
- Risks highlighted include weaker consumer demand or adverse economic conditions, marketing effectiveness and search visibility, competition, attracting and retaining service professionals, contractor-classification challenges, privacy and cybersecurity, and dependence on IAC. IAC’s voting control gives it influence over Angi financing activities.
- Angi reported $5.3 million accrued for legal matters. It described a pending HomeAdvisor service-professional class action and said it believes the claims are without merit and will defend them; outcomes remain uncertain. The filing also notes that contingencies could potentially have a material impact.
- Q3 income tax benefit was $6.0 million, including a $3.9 million benefit from a change in the estimated annual effective tax rate. Nine-month tax benefit was $4.7 million. Management’s deferred-tax-asset realization depends partly on forecasts of future taxable income.
Important facts for investors to verify
- Assess underlying Services and total revenue trends using the net-revenue accounting change, rather than interpreting reported year-over-year revenue declines without adjustment.
- Track whether declines in Service Requests, Monetized Transactions and Ads and Leads consumer-connection revenue stabilize, and whether advertising and International growth persist.
- Review cash-flow sustainability, particularly working-capital movements and credit-loss provisions; nine-month operating cash flow included a $67.3 million provision for credit losses and a $50.7 million increase in accounts receivable.
- Confirm the impact of the Roofing sale on future results, segment reporting and cash proceeds; the supplied filing text does not provide the sale price.
- Monitor execution and funding of the proposed share repurchase plan, alongside the $495.9 million net debt and IAC’s control of voting rights.
- Follow the class-action litigation, tax audits and deferred-tax-asset assumptions, which depend on uncertain legal outcomes and future taxable income.