Angi Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; filed November 5, 2021. Angi connects consumers with home-service professionals across North America and Europe. IAC owned 84.6% of Angi’s economic interest and 98.2% of its voting interest at quarter-end. Amounts below are in U.S. dollars.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $461.6 million | $389.9 million | $1,269.6 million | $1,108.6 million |
| Operating income (loss) | ($15.0) million | ($3.0) million | ($47.6) million | ($1.7) million |
| Net income (loss) attributable to Angi shareholders | ($17.0) million | $4.5 million | ($45.4) million | $8.2 million |
| Adjusted EBITDA | $12.4 million | $38.5 million | $31.1 million | $130.8 million |
| Operating cash flow | Not presented for the quarter | Not presented for the quarter | $25.9 million | $173.2 million |
Q3 revenue increased 18%, but operating costs grew faster, and the company reported a GAAP operating loss and net loss. Adjusted EBITDA, a company-defined non-GAAP measure, fell 68% in Q3. Q3 operating margin was approximately negative 3.2%, compared with negative 0.8% a year earlier; net margin was approximately negative 3.6%, compared with positive 1.1%.
North America generated $443.5 million of Q3 revenue, up 19%; Europe generated $18.0 million, up 2%. Angi Services revenue rose to $117.4 million from $45.1 million, with approximately half of the increase attributed to organic growth and half to Angi Roofing, acquired July 1. Angi Ads and Leads revenue was essentially flat at $326.2 million.
Q3 service requests declined 11% year over year to 8.7 million, while monetized transactions rose 1% to 4.8 million. For the nine-month period, revenue rose 15%, but Adjusted EBITDA fell 76% and operating cash flow declined substantially.
Balance sheet, debt and liquidity
- At September 30, cash and cash equivalents were $476.6 million, down from $812.7 million at December 31, 2020. Current assets were $651.0 million and current liabilities $303.3 million.
- Long-term debt, net, was $494.4 million, comprising $500 million of 3.875% senior notes due 2028, less unamortized issuance costs. The $220 million term loan was repaid in May 2021; the $250 million undrawn revolving facility was terminated in August.
- Nine-month cash flow included $25.9 million from operations, $26.7 million used in investing, and $335.0 million used in financing. Financing uses included the term-loan repayment, $56.1 million of employee stock-award withholding taxes, $35.4 million of share repurchases, and $23.5 million to purchase noncontrolling interests.
- Management said existing cash and expected operating cash flows should cover normal operating needs, capital expenditures, debt service and other commitments for the foreseeable future. The filing also notes that additional financing may require IAC approval and may not be available on favorable terms.
Material changes, outlook and risks
- Brand integration: The March 2021 shift from Angie’s List to Angi adversely affected organic-search rankings and mobile-app monetization, reducing service requests and requiring more paid marketing. Management said the Q3 effects on revenue and marketing spend were materially worse than anticipated and expected to continue until brand recognition and search rankings improve.
- Investment and costs: Angi Services growth increased contractor and materials costs. Management expected significant Q4 2021 Services revenue growth as the business expanded, while warning that investment would continue to pressure profit through year-end. No specific revenue or earnings guidance was provided.
- Capital expenditures: 2021 capital expenditures were expected to exceed 2020’s $52.5 million by approximately 25%–30%, mainly for software investment.
- COVID-19 and capacity: Service-professional labor and materials constraints limited capacity and monetization. Although monetization improved modestly in Q2 and Q3, it had not returned to pre-pandemic levels; future effects remained uncertain.
- Unusual items: The company recorded $9.6 million of impairment charges related to reducing its real-estate footprint and a $6.0 million charge in Europe related to acquiring an additional 21% interest in MyBuilder at a premium to fair value. It also recorded a $1.1 million write-off of term-loan issuance costs.
- Legal and regulatory matters: The FTC staff alleged that certain HomeAdvisor lead and mHelpDesk practices may be unfair or deceptive, proposed business-practice changes and an unspecified payment, and invited settlement discussions. Angi disputed the allegations and said the outcome could not be predicted. A HomeAdvisor service-professional class action also remained pending; Angi said it would defend the case.
- Other risks: The filing highlights executive leadership changes, dependence on search-engine placement and marketing efficiency, service-professional participation, contractor classification, cybersecurity, acquisition integration, IAC control and outstanding debt. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the Angi rebrand improves organic traffic, service requests and mobile-app monetization, and whether paid marketing costs moderate.
- Whether Angi Services growth converts into improved contribution economics and profitability, particularly after the Angi Roofing acquisition.
- Whether operating cash flow recovers from the nine-month decline and whether accounts-receivable growth and credit-loss provisions remain manageable.
- Developments in the FTC investigation and HomeAdvisor litigation, including any settlement terms, required business changes or financial exposure.
- Capital-spending execution, share repurchases and the company’s liquidity needs, considering the terminated revolving facility and IAC’s control over financing decisions.