Angi Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021; filed August 6, 2021. Angi connects consumers with home-service professionals through North America and Europe platforms. IAC held 84.1% of Angi’s economic interest and 98.1% of its voting interest at quarter-end.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $421.0 million (+12%) | $375.1 million | $808.0 million (+12%) | $718.7 million |
| Operating income (loss) | ($32.7) million | $17.6 million | ($32.6) million | $1.3 million |
| Net income (loss) attributable to Angi | ($30.3) million | $12.7 million | ($28.4) million | $3.7 million |
| Adjusted EBITDA | ($4.4) million | $57.9 million | $18.7 million | $92.3 million |
Q2 operating margin was approximately (7.8%), compared with 4.7% a year earlier; Adjusted EBITDA margin was (1.1%), versus 15.4%. For the first half, Adjusted EBITDA margin was 2.3%, versus 12.8%. Adjusted EBITDA is a non-GAAP measure and excludes stock-based compensation, depreciation and specified acquisition-related items.
- Revenue mix and activity: Q2 North America revenue rose 12% to $399.9 million; Europe rose 19% to $21.0 million. Angi Services revenue increased 127% to $72.8 million, while consumer connection revenue declined 1% to $240.0 million. Marketplace Service Requests were roughly flat at 9.4 million, while Monetized Transactions rose 11% to 5.0 million.
- Costs and margins: Q2 cost of revenue rose 70% to $69.7 million, or 17% of revenue versus 11%. Selling and marketing rose 26% to $239.0 million, or 57% of revenue versus 51%, including higher online marketing spend associated with the brand transition. General and administrative expense included $9.6 million of real-estate footprint impairment and related costs.
- Cash and liquidity: Cash and equivalents were $584.3 million at June 30, down from $812.7 million at year-end; there were no marketable debt securities remaining. Current assets were $714.1 million and current liabilities $291.9 million. First-half operating cash flow was $59.3 million, versus $127.8 million; capital expenditures were $35.7 million, versus $24.7 million.
- Debt: Long-term debt, net, was $494.2 million, consisting of $500 million of 3.875% senior notes due 2028, net of issuance costs. Angi repaid its $220 million term loan in May. The $250 million undrawn revolving facility was terminated August 3, 2021, after quarter-end.
Material changes, outlook and risks
- The Angie’s List-to-Angi brand transition adversely affected organic search placement and mobile-app monetization. Management said the resulting reduction in service requests and increased paid-search spending hurt Q2 revenue and profitability more than expected, and expected these effects to continue until search ranking and consumer awareness improve.
- Management expects significant Angi Services revenue growth in the second half of 2021, while continued investment in the business is expected to weigh on profits through the rest of the year. The filing does not provide a comprehensive numeric revenue or earnings forecast.
- 2021 capital expenditures were expected to be approximately 35%–40% above 2020’s $52.5 million, mainly for software investment. Management said cash, cash equivalents and expected operating cash flows should fund requirements for the foreseeable future.
- COVID-19-related labor and material constraints limited some professionals’ capacity and Angi’s ability to monetize service requests; monetization had improved modestly in Q2 but remained below pre-pandemic levels. Future demand and capacity remain uncertain.
- Other unusual items included a $6.0 million Europe charge related to buying an additional 21% interest in MyBuilder at a premium to fair value and a $1.1 million write-off of deferred debt issuance costs on the repaid term loan. Angi acquired certain Total Home Roofing assets on July 1, 2021.
- The FTC proposed resolving its investigation of certain HomeAdvisor practices through business-practice changes and an unspecified payment; Angi said the outcome could not be predicted. HomeAdvisor also faces a service-professional class action. Management reported no currently identified legal matter with a probable and estimable loss requiring a reserve, while noting contingencies remain uncertain.
- Risks highlighted include brand-transition execution and search traffic, service-professional supply and monetization, COVID-19 developments, competition, executive-management changes, and dependence on IAC control. Management reported disclosure controls were effective at period-end.
Investor verification priorities
- Track organic and paid search traffic, Marketplace Service Requests, monetization, and the cost and progress of the Angi brand transition.
- Assess whether Angi Services growth improves profitability, given rising delivery costs and management’s planned continued investment.
- Reconcile ongoing cash generation and capital spending with the lower cash balance, debt-service needs, and employee-award withholding payments.
- Monitor the FTC investigation, including any proposed payment or required business changes, and developments in the HomeAdvisor class action.
- Review the effect of IAC’s voting control, management transitions, and the post-quarter roofing acquisition on capital allocation and execution.