Angi Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022; filed August 9, 2022. Angi connects consumers with home-service professionals across more than 500 categories. It reports North America and Europe segments. IAC owned 84.5% of Angi’s economic interest and 98.2% of its voting interest.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $515.8 million | $421.0 million | $951.9 million | $808.0 million |
| Gross profit / margin | $388.0 million / 75% | $351.3 million / 83% | $725.2 million / 76% | $684.5 million / 85% |
| Operating loss | $20.9 million | $32.7 million | $54.8 million | $32.6 million |
| Net loss attributable to Angi shareholders | $24.2 million | $30.3 million | $57.6 million | $28.4 million |
| Adjusted EBITDA | $9.7 million | $(4.4) million | $6.5 million | $18.7 million |
| Loss per share, diluted | $(0.05) | $(0.06) | $(0.11) | $(0.06) |
Q2 revenue rose 23%, while six-month revenue rose 18%. Growth was concentrated in North America and Angi Services; Angi Services revenue more than doubled in both periods, reflecting the acquisition of Angi Roofing in July 2021 and organic growth. Q2 Angi Ads and Leads revenue increased 5%, but was nearly flat for the first six months (+1%). Europe revenue declined 5% in Q2 and 4% year to date, partly due to currency movements.
Cost of revenue grew faster than sales—83% in Q2 and 84% for the six-month period—reducing gross margin to 75% and 76%, respectively. Management attributed the increase primarily to Angi Services, including roofing materials and contractors. Q2 operating loss narrowed year over year, and Adjusted EBITDA turned positive; however, six-month operating loss and net loss worsened, and Adjusted EBITDA fell 65%.
- Cash and liquidity: Cash and cash equivalents were $361.0 million at June 30, down from $428.1 million at year-end. Current assets were $562.6 million versus current liabilities of $337.6 million.
- Cash flow: The cash-flow statement reports $7.1 million of operating cash flow for the first six months, compared with $59.3 million in 2021. Capital expenditures were $62.1 million; investing cash outflow was $62.0 million. Total cash and restricted cash declined $67.5 million.
- Debt: $500 million of 3.875% senior notes due August 2028; carrying value, net of issuance costs, was $494.9 million. The former $250 million revolver was terminated in 2021; the term loan was repaid in 2021.
- Other metrics: Q2 service requests fell 10% to 8.5 million and monetized transactions fell 5% to 4.7 million. The allowance for credit losses and revenue reserves was $46.3 million, up from $35.9 million a year earlier.
Changes, outlook and risks
Management said organic search results improved year over year after the March 2021 brand integration but remained below pre-integration levels. The shift in marketing toward Angi continues to weigh on HomeAdvisor traffic and search-marketing efficiency. Management said Angi Services investment peaked in Q1 2022, its negative profit impact was smaller in Q2, and it expected sequential improvement to continue; it did not expect year-over-year profit improvement until Q4 2022, with the trend expected to continue into 2023.
Angi expected 2022 capital expenditures to be approximately 20%–25% above 2021’s $70.2 million, mainly for software investment. The company stated that available cash and expected operating cash flows should cover normal requirements for the next 12 months. No clear full-year revenue or earnings guidance is provided in the filing.
Risks include uncertain effects of COVID-19, consumer demand and economic conditions, service-professional availability, brand and search-traffic performance, competition, contractor classification, data security, and reliance on IAC. A Federal Trade Commission administrative proceeding filed in March 2022 challenges certain HomeAdvisor practices; Angi disputes the allegations, and the outcome is uncertain. The company recorded a $4.1 million legal liability and cautioned that additional charges could be material. Management reported disclosure controls were effective, with no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the expected Angi Services margin and profit improvement materializes, given the sharp rise in cost of revenue and lower gross margins.
- Whether service requests, monetized transactions, and organic search performance stabilize or improve.
- The cash-flow comparison: the financial statements report six-month 2021 operating cash flow of $59.3 million, while the MD&A summary table appears to show $6.2 million; clarify this apparent inconsistency.
- Developments in the FTC proceeding, service-professional litigation, and potential exposure beyond the recorded legal liability.
- Capital-spending requirements, credit-loss trends, and the effect of IAC’s voting control on financing and corporate decisions.