Angi Inc. 10-Q Summary
Reporting period: Three months ended March 31, 2021; filed May 7, 2021. Angi connects consumers with home-service professionals through North America and Europe platforms. IAC owned 84.2% of Angi’s economic interest and 98.2% of its voting interest at quarter-end.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Revenue | $387.0 million | $343.7 million; up 13% |
| Operating income (loss) | $0.1 million | $(16.3) million |
| Net earnings (loss) attributable to Angi shareholders | $1.9 million | $(9.0) million |
| Adjusted EBITDA | $23.2 million; 6% of revenue | $34.4 million; 10% of revenue |
| Operating cash flow | $15.3 million | $55.9 million |
| Capital expenditures | $18.7 million | $13.2 million |
| Cash and cash equivalents | $777.0 million | $812.7 million at Dec. 31, 2020 |
| Long-term debt, net | $706.0 million | $712.3 million at Dec. 31, 2020 |
Revenue growth was led by North America, up 11% to $361.0 million, and Europe, up 33% to $26.0 million. North America marketplace revenue rose 12%; marketplace service requests increased 29% and monetized transactions increased 17%. GAAP operating income improved, but Adjusted EBITDA fell 33%, reflecting higher service-delivery and marketing costs and weaker segment results.
Cash and marketable debt securities totaled $777.0 million at quarter-end, versus $862.7 million at year-end. Operating cash flow was lower mainly because accounts receivable increased $34.6 million. Financing cash outflows included $48.2 million of employee award withholding taxes, $22.9 million to purchase noncontrolling interests, $6.9 million of term-loan prepayment, and $4.9 million of share repurchases. The $250 million revolving facility was undrawn.
Material changes and unusual items
- Cost of revenue increased 62% to $53.8 million, primarily from growth in Angi Services, which management says has lower margins.
- Selling and marketing expense increased 8% to $205.8 million. General and administrative expense fell 7%, principally because stock-based compensation was much lower than in Q1 2020.
- Europe results included a $6.0 million charge related to acquiring an additional 21% interest in MyBuilder at a premium to fair value. North America Adjusted EBITDA also included $4.0 million of expenses related to Fixd Services impairments and management changes.
- The Q1 2021 income tax benefit was $9.3 million, primarily from excess tax benefits on stock awards. Q1 2020’s $9.0 million benefit included a deferred-tax adjustment.
- Angi repaid the remaining $213.1 million term loan on May 6, 2021, after quarter-end. The company had $500 million of 3.875% senior notes due in 2028 at March 31.
Outlook, commentary and risks
- The March 2021 Angie’s List-to-Angi rebrand adversely affected organic search placement and marketing efficiency, reducing organic service requests and increasing reliance on paid search. Management expected lower profits, with the largest impact in Q2 2021, and anticipated effects through the rest of 2021 and potentially into 2022.
- Management increased investment in Angi Services and said this would reduce profits more than planned during 2021. 2021 capital expenditures were expected to be 50%–60% above 2020’s $52.5 million, mainly for software development.
- Demand for home services remained strong, but labor and materials constraints and limited service-professional capacity restricted Angi’s ability to monetize service requests. COVID-19 developments remained a source of demand and forecasting uncertainty.
- Management said existing cash, available revolving credit and expected operating cash flows should cover foreseeable needs. Debt covenants were in compliance at quarter-end; future financing could be affected by market conditions and IAC’s control over financing decisions.
- On April 19, 2021, FTC staff said it believed certain HomeAdvisor lead and mHelpDesk practices could be unfair or deceptive, proposed settlement discussions involving business-practice changes and an unspecified payment, and invited the company to negotiate. Angi disputed the potential claims and said it would defend itself.
- Other stated risks include the HomeAdvisor service-professional class action, executive transitions, brand acceptance and search visibility, competition, privacy and cybersecurity, contractor classification, acquisitions, and the relationship with IAC. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the rebrand restores organic search traffic and improves paid-marketing efficiency, and the realized profit impact versus management’s stated timeline.
- Whether Angi Services growth and constrained professional capacity improve monetization without further margin pressure.
- Subsequent cash, debt and liquidity after the May 6 term-loan repayment, including any effect on planned investment and capital returns.
- Final outcomes and potential costs of the FTC matter and HomeAdvisor litigation; the FTC’s proposed payment amount was not specified in this filing.
- Progress against the higher capital-expenditure plan and the effect on operating cash flow.