As filed with the Securities and Exchange Commission on November 9, 2017

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2017
Or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________to__________

Commission File No. 0-20570

ANGI HOMESERVICES INC.

(Exact name of registrant as specified in its charter)

Delaware  (State or other jurisdiction of incorporation or organization)	82-1204801 (I.R.S. Employer Identification No.)
14023 Denver West Parkway, Building 64, Golden, CO 80401  (Address of registrant's principal executive offices)
(303) 963-7200 (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o    No ý

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting  company o Emerging growth company ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

As of November 3, 2017, the following shares of the registrant's common stock were outstanding:

Class A Common Stock	62,656,140
Class B Common Stock	414,753,615
Class C Common Stock	—
Total outstanding Common Stock	477,409,755

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of November 3, 2017 was $753,879,613. For the purpose of the foregoing calculation only, shares held by IAC/InterActiveCorp and all directors and executive officers of the registrant are assumed to be affiliates of the registrant.

TABLE OF CONTENTS

		Page Number
PART I
Item 1.	Consolidated and Combined Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	49
PART II
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	52
Item 6.	Exhibits	53
	Signatures	55

2

PART I

FINANCIAL INFORMATION

Item 1.    Consolidated and Combined Financial Statements

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED BALANCE SHEET

(Unaudited)

	September 30, 2017			December 31, 2016
	(In thousands, except par value amounts)
ASSETS
Cash and cash equivalents	$	59,543		$	36,377
Accounts receivable, net of allowance and reserves of $9,839 at September 30, 2017and $9,177 at December 31, 2016	30,684			18,696
Other current assets	23,386			8,739
Total current assets	113,613			63,812
Property and equipment, net of accumulated depreciation and amortization of $26,503 at September 30, 2017 and $18,077 at December 31, 2016	47,635			23,645
Goodwill	774,191			170,990
Intangible assets, net	343,393			10,792
Other non-current assets	72,918			26,278
TOTAL ASSETS	$	1,351,750		$	295,517
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Current portion of long-term debt—related party	$	—		$	2,838
Accounts payable	50,041			11,544
Deferred revenue	58,955			18,828
Accrued expenses and other current liabilities	90,008			34,438
Total current liabilities	199,004			67,648
Long-term debt—related party	79,504			47,000
Deferred income taxes	5,363			2,228
Other long-term liabilities	4,942			2,247
Redeemable noncontrolling interests	18,844			13,781
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Class A common stock, $0.001 par value; authorized 2,000,000 shares; 61,291 shares issued and outstanding	61			—
Class B common stock, $0.001 par value; authorized 1,500,000 shares; 414,754 shares issued and outstanding	415			—
Class C common stock, $0.001 par value; authorized 1,500,000shares; no shares issued and outstanding	—			—
Additional paid-in capital	1,094,046			—
Accumulated deficit	(63,540		)	—
Invested capital	—			154,852
Accumulated other comprehensive income (loss)	3,348			(1,721		)
Total ANGI Homeservices Inc. shareholders' equity and invested capital, respectively	1,034,330			153,131
Noncontrolling interests	9,763			9,482
Total shareholders' equity	1,044,093			162,613
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,351,750		$	295,517

The accompanying Notes to Consolidated and Combined Financial Statements are an integral part of these statements.

3

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In thousands, except per share data)
Revenue	$	181,717		$	133,560		$	513,173		$	375,222
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below)	7,999			6,826			22,391			19,565
Selling and marketing expense	130,866			80,274			337,654			234,344
General and administrative expense	129,088			29,509			217,962			80,234
Product development expense	20,010			5,356			32,529			15,142
Depreciation	3,491			2,026			9,705			5,824
Amortization of intangibles	2,768			726			6,885			2,271
Total operating costs and expenses	294,222			124,717			627,126			357,380
Operating (loss) income	(112,505		)	8,843			(113,953		)	17,842
Interest expense—related party	(1,864		)	(156		)	(5,538		)	(240		)
Other income (expense), net	1,364			195			2,100			(304		)
(Loss) earnings before income taxes	(113,005		)	8,882			(117,391		)	17,298
Income tax benefit (provision)	40,847			(4,414		)	71,095			(8,723		)
Net (loss) earnings	(72,158		)	4,468			(46,296		)	8,575
Net loss attributable to noncontrolling interests	397			607			1,402			1,833
Net (loss) earnings attributable to ANGI Homeservices Inc. shareholders	$	(71,761	)	$	5,075		$	(44,894	)	$	10,408
Net (loss) earnings per share attributable to ANGI Homeservices Inc. shareholders:
Basic	$	(0.17	)	$	0.01		$	(0.11	)	$	0.03
Diluted	$	(0.17	)	$	0.01		$	(0.11	)	$	0.03
Stock-based compensation expense by function:
Cost of revenue	$	9		$	—		$	19		$	—
Selling and marketing expense	19,709			225			20,402			630
General and administrative expense	71,732			1,837			86,650			5,138
Product development expense	12,530			329			13,209			917
Total stock-based compensation expense	$	103,980		$	2,391		$	120,280		$	6,685

The accompanying Notes to Consolidated and Combined Financial Statements are an integral part of these statements.

4

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE OPERATIONS

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
	(In thousands)
Net (loss) earnings	$	(72,158	)	$	4,468	$	(46,296	)	$	8,575
Other comprehensive income:
Change in foreign currency translation adjustment	3,579			32		5,592			610
Total other comprehensive income	3,579			32		5,592			610
Comprehensive (loss) income	(68,579		)	4,500		(40,704		)	9,185
Comprehensive loss attributable to noncontrolling interests	396			607		879			1,833
Comprehensive (loss) income attributable to ANGI Homeservices Inc. shareholders	$	(68,183	)	$	5,107	$	(39,825	)	$	11,018

The accompanying Notes to Consolidated and Combined Financial Statements are an integral part of these statements.

5

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF SHAREHOLDERS' EQUITY

Nine months ended September 30, 2017

(Unaudited)

					ANGI Homeservices Inc. Shareholders' Equity and Invested Capital
					Class A Common Stock $0.001 Par Value			Class B Common Stock $0.001 Par Value			Class C Common Stock $0.001 Par Value														Total ANGI Homeservices Inc. Shareholders' Equity and Invested Capital
																						Accumulated Other Comprehensive (Loss) Income									Total Shareholders' Equity
	Redeemable Noncontrolling Interests													Additional Paid-in Capital		Accumulated Deficit			Invested Capital									Noncontrolling Interests
					$		Shares	$		Shares	$		Shares
				(In thousands)
Balance as of December 31, 2016	$	13,781			$	—	—	$	—	—	$	—	—	$	—	$	—		$	154,852		$	(1,721	)	$	153,131		$	9,482		$	162,613
Net (loss) earnings	(1,256		)		—		—	—		—	—		—	—		(63,540		)	18,646			—			(44,894		)	(146		)	(45,040		)
Other comprehensive income	280				—		—	—		—	—		—	—		—			—			5,069			5,069			243			5,312
Stock-based compensation expense	1,577				—		—	—		—	—		—	96,939		—			—			—			96,939			—			96,939
Redeemable noncontrolling interests created in acquisitions	14,692				—		—	—		—	—		—	—		—			—			—			—			—			—
Purchase of redeemable noncontrolling interests	(11,991		)		—		—	—		—	—		—	—		—			—			—			—			—			—
Purchase of noncontrolling interests	—				—		—	—		—	—		—	—		—			—			—			—			(633		)	(633		)
Adjustment of redeemable noncontrolling interests to fair value	1,725				—		—	—		—	—		—	—		—			(1,725		)	—			(1,725		)	—			(1,725		)
Net increase in IAC/InterActiveCorp’s investment in HomeAdvisor prior to the Combination	—				—		—	—		—	—		—	—		—			46,339			—			46,339			—			46,339
Contribution of IAC/InterActiveCorp's HomeAdvisor business to ANGI Homeservices Inc. and Combination with Angie's List	—				61		61,291	415		414,754	—		—	997,107		—			(218,112		)	—			779,471			—			779,471
Other	36				—		—	—		—	—		—	—		—			—			—			—			817			817
Balance as of September 30, 2017	$	18,844			$	61	61,291	$	415	414,754	$	—	—	$	1,094,046	$	(63,540	)	$	—		$	3,348		$	1,034,330		$	9,763		$	1,044,093

The accompanying Notes to Consolidated and Combined Financial Statements are an integral part of these statements.

6

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2017			2016
	(In thousands)
Cash flows from operating activities:
Net (loss) earnings	$	(46,296	)	$	8,575
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Bad debt expense	20,625			12,336
Stock-based compensation expense	120,280			6,685
Depreciation	9,705			5,824
Amortization of intangibles	6,885			2,271
Deferred income taxes	(71,446		)	(2,742		)
Other adjustments, net	(1,328		)	488
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable	(30,080		)	(20,999		)
Other current assets	(5,972		)	(925		)
Accounts payable and other current liabilities	41,847			18,278
Income taxes payable	22			4,664
Deferred revenue	7,788			6,171
Net cash provided by operating activities	52,030			40,626
Cash flows from investing activities:
Acquisitions, net of cash acquired	(66,378		)	—
Capital expenditures	(16,278		)	(13,742		)
Net cash used in investing activities	(82,656		)	(13,742		)
Cash flows from financing activities:
Proceeds from the issuance of related party debt	131,359			446
Funds returned from escrow for MyHammer tender offer	10,604			—
Transfers from (to) IAC/InterActiveCorp	30,216			(26,485		)
Purchase of noncontrolling interests	(12,574		)	—
Principal payments on related party debt	(104,089		)	—
Other	34			—
Net cash provided by (used in) financing activities	55,550			(26,039		)
Total cash provided	24,924			845
Effect of exchange rate changes on cash and cash equivalents	(1,758		)	65
Net increase in cash and cash equivalents	23,166			910
Cash and cash equivalents at beginning of period	36,377			2,462
Cash and cash equivalents at end of period	$	59,543		$	3,372

The accompanying Notes to Consolidated and Combined Financial Statements are an integral part of these statements.

7

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ANGI Homeservices is creating the world's largest digital marketplace for home services, connecting millions of homeowners across the globe with home service professionals. ANGI Homeservices operates 10 brands in eight countries, including HomeAdvisor®, Angie's List, mHelpDesk, HomeStars (Canada), Travaux.com (France), MyHammer (Germany), MyBuilder (UK), Werkspot (Netherlands) and Instapro (Italy).

All references to "ANGI Homeservices," the "Company," "we," "our" or "us" in this report are to ANGI Homeservices Inc. The Company has two operating segments, North America and Europe. North America includes HomeAdvisor's operations in the United States, Angie's List, mHelpDesk and HomeStars. Europe includes Travaux.com, MyHammer, MyBuilder, Werkspot and Instapro.

Organization

On September 29, 2017, IAC/InterActiveCorp ("IAC") and Angie's List Inc. ("Angie's List") combined IAC's HomeAdvisor business and Angie's List under a new publicly traded company called ANGI Homeservices Inc. The merger agreement provided for the combination with Angie’s List by way of the merger of a direct wholly-owned subsidiary of ANGI Homeservices with and into Angie’s List (the "Combination"), with Angie’s List continuing as the surviving company in the Combination. Prior to the effective time of the Combination, IAC contributed its HomeAdvisor business, along with certain cash, to ANGI Homeservices in exchange for shares of ANGI Homeservices Class B common stock. Following the Combination, Angie’s List and the legal entity that holds the HomeAdvisor business are direct wholly-owned subsidiaries of ANGI Homeservices Inc. At September 30, 2017, IAC owned 87.1% and 98.5% of the economic and voting interest, respectively, of ANGI Homeservices. See "Note 3—Business Combinations" for additional information related to the Combination.

Nature of operations

ANGI Homeservices is the operator of the largest global home services marketplace, connecting homeowners with service professionals for home repair, maintenance and improvement projects. The Company’s marketplace provides the tools and resources to allow homeowners to find local pre-screened service professionals and instantly book appointments online or through its award-winning HomeAdvisor mobile application. The Company's marketplace also provides consumers with other home services-related resources, including access to average project costs using its HomeAdvisor True Cost Guide. Effective September 29, 2017, the Company also owns Angie's List, a nationwide marketplace for local services where consumers can research, hire, rate and review the providers of these services. Ratings and reviews assist members in identifying and hiring a provider for their local service needs. Angie's List's services are provided in markets located across the continental United States. In addition to its market-leading U.S. operations, ANGI Homeservices owns the leading home services online marketplaces in Canada (HomeStars), which was acquired on February 8, 2017, Germany (MyHammer), which was acquired on November 3, 2016, France (Travaux.com) and the Netherlands (Werkspot), as well as operations in Italy (Instapro) and the United Kingdom (MyBuilder), which was acquired on March 24, 2017. ANGI Homeservices also owns Felix, a pay-per-call advertising service, and mHelpDesk, a provider of cloud-based field service software for small to mid-size businesses.

As of September 30, 2017, the Company's network of service professionals in the United States consisted of approximately 172,000 Marketplace Paying Service Professionals providing services in more than 500 categories ranging from simple home repairs to larger home remodeling projects in more than 400 discrete geographies. The Company generated approximately 13.9 million Marketplace Service Requests from homeowners in the United States during the nine months endedSeptember 30, 2017. As of September 30, 2017, the Company also had 47,000 Angie's List service professionals under contract for advertising.

Basis of presentation and consolidation

The Company prepares its consolidated and combined financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company's financial statements were prepared on a consolidated basis beginning September 29, 2017 and on a combined basis for periods prior thereto. The difference in presentation is due to the fact that the final steps of the legal reorganization through which IAC contributed the HomeAdvisor business and cash to fund the cash consideration paid in the Combination to ANGI Homeservices Inc. were not completed, as planned, until immediately prior to September 29, 2017. The preparation of the financial statements on a combined basis for periods prior thereto allows for the

8

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

financial statements to be presented on a consistent basis for all periods presented. The combined financial statements have been prepared on a standalone basis and are derived from the historical consolidated financial statements and accounting records of IAC through September 29, 2017. The combined financial statements reflect the historical financial position, results of operations and cash flows of the businesses comprising the HomeAdvisor business since their respective dates of acquisition by IAC. The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest.

The consolidated and combined financial statements reflect the allocation to ANGI Homeservices of certain IAC corporate expenses relating to the HomeAdvisor business based on the historical consolidated financial statements and accounting records of IAC through September 29, 2017. For the purpose of these financial statements, income taxes have been computed as if ANGI Homeservices filed on a standalone, separate tax return basis.

All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. All intercompany transactions between (i) ANGI Homeservices and (ii) IAC and its subsidiaries, with the exception of notes payable due to IAC and its subsidiaries, are considered to be effectively settled for cash at the time the transaction is recorded. The notes payable due to IAC and its subsidiaries are included in “Long-term debt—related party” in the accompanying consolidated and combined balance sheet. See "Note 10—Related Party Transactions with IAC" for additional information on transactions between ANGI Homeservices and IAC.

In the opinion of management, the assumptions underlying the historical consolidated and combined financial statements, including the basis on which the expenses have been allocated from IAC, are reasonable. However, the allocations may not reflect the expenses that we may have incurred as an independent, standalone public company for the periods presented.

The unaudited interim consolidated and combined financial statements have been prepared on the same basis as the annual combined financial statements and reflect, in management's opinion, all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of our financial position, results of operations and cash flows for the periods presented. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim consolidated and combined financial statements should be read in conjunction with the audited combined financial statements of the HomeAdvisor business and notes thereto for the year ended December 31, 2016 included in the Company's Registration Statement on Form S-4 dated June 29, 2017 and the amendments thereto.

Accounting estimates

Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated and combined financial statements in accordance with GAAP. These estimates, judgments and assumptions impact the reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

On an ongoing basis, the Company evaluates its estimates and judgments including those related to: the recoverability of goodwill and indefinite-lived intangible assets; the useful lives and recoverability of definite-lived intangible assets and property and equipment; the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts; the determination of revenue reserves; the liabilities for uncertain tax positions; the valuation allowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets and other factors that the Company considers relevant.

Recent accounting pronouncements

Accounting pronouncements not yet adopted by the Company

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which clarifies the principles for recognizing revenue and develops a common standard for all industries. ASU No. 2014-09 was subsequently amended during 2015, 2016 and 2017; these amendments provide further revenue recognition guidance related to principal versus agent considerations, performance obligations and licensing, narrow-scope improvements and practical expedients.

9

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

ASU No. 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP. The new standard provides a single principles-based, five-step model to be applied to all contracts with customers. This five-step model includes (1) identifying the contract(s) with the customer, (2) identifying the performance obligations in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue when each performance obligation is satisfied. More specifically, revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. ASU No. 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted for interim and annual reporting periods beginning after December 15, 2016. Upon adoption, ASU No. 2014-09 may either be applied retrospectively to each prior period presented or using the modified retrospective approach with the cumulative effect recognized as of the date of initial application.

While the Company’s evaluation of the impact of the adoption of ASU No. 2014-09 on its consolidated and combined financial statements continues, it has progressed to the point where we have reached certain preliminary determinations. The Company will adopt ASU No. 2014-09 using the modified retrospective approach effective January 1, 2018. Therefore, the cumulative effect of adoption will be reflected as an adjustment to beginning retained earnings in the Form 10-Q for the period ending March 31, 2018. The effect on the Company will be that sales commissions, which represent the incremental direct costs of obtaining a service professional contract, will be capitalized and amortized over the average life of a service professional. These costs are expensed as incurred currently. The cumulative effect of the adoption of ASU No. 2014-09 will be to establish an asset equal to the unamortized cost of the sales commissions paid to obtain a service professional and a related deferred tax liability with the net effect being recorded as an increase to retained earnings as of January 1, 2018. The ultimate amounts recorded will depend upon both the timing and amount of monthly sales commissions during the year ended December 31, 2016 and the year ending December 31, 2017 and the average life of a service professional as of January 1, 2018. The Company is in the initial stages of assessing the impact of ASU No. 2014-09 on Angie's List following the Combination. Prior to the Combination, Angie's List capitalized sales commissions and amortized the cost over the term of the applicable advertising contract. Following the Combination, Angie's List accounting policies will be conformed to the Company's accounting policies and these costs will be expensed as incurred. Following the adoption of ASU No. 2014-09, these costs will be capitalized and amortized over the average life of a service professional. Exclusive of the impact of the adoption of ASU No. 2014-09 on Angie's List, the Company estimates that the cumulative effect of adoption on the Company's combined financial position, if January 1, 2017 were the date of adoption, would have been less than 9% of total assets, less than 8% of total liabilities and less than 10% of shareholders' equity. The Company, subject to the completion of assessing Angie's List, does not expect the adoption of ASU No. 2014-09 to have a material effect on its consolidated and combined results of operations or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes pre-existing guidance on accounting for leases in "Leases (Topic 840)" and generally requires all leases to be recognized in the statement of financial position. The provisions of ASU No. 2016-02 are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU No. 2016-02 are to be applied using a modified retrospective approach. The Company will adopt ASU No. 2016-02 effective January 1, 2019. The Company is currently evaluating the impact the adoption of this standard update will have on its consolidated and combined financial statements.

Accounting pronouncements adopted by the Company

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about the changes to the terms and conditions of a share-based payment award that require an entity to apply modification accounting in "Stock Compensation (Topic 718)." The provisions of ASU No. 2017-09 are effective for reporting periods beginning after December 15, 2017; early adoption is permitted. The provisions of ASU No. 2017-09 are to be applied prospectively to an award modified on or after the adoption date. The Company early adopted the provisions of ASU No. 2017-09 during the third quarter of 2017 and the adoption of this standard update did not have a material impact on its consolidated and combined financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies how cash receipts and cash payments in certain transactions are presented and classified on the statement of cash flows. The provisions of ASU No. 2016-15 are effective for reporting periods beginning after December 15, 2017, including interim periods, and will require adoption on a retrospective basis unless it is impracticable

10

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable; early adoption is permitted. The Company early adopted the provisions of ASU No. 2016-15 on January 1, 2017 and the adoption of this standard update did not have a material impact on its consolidated and combined financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The Company adopted the provisions of ASU No. 2016-09 on January 1, 2017. Excess tax benefits or deficiencies related to equity awards to employees upon exercise of stock options and the vesting of restricted stock units after January 1, 2017 are (i) reflected in the consolidated and combined statement of operations as a component of the provision for income taxes, rather than recognized in equity, and (ii) reflected as operating, rather than financing, cash flows in our consolidated and combined statement of cash flows. Excess tax benefits for the nine months endedSeptember 30, 2017 were $35.6 million. Excess tax benefits of $7.6 million for the nine months endedSeptember 30, 2016 were reclassified in the combined statement of cash flows to conform to the current year presentation. The Company continues to account for forfeitures using an estimated forfeiture rate.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which is intended to simplify the accounting for goodwill impairment. The guidance eliminates the requirement to calculate the implied fair value of goodwill under today’s two-step impairment test to measure a goodwill impairment charge. The provisions of ASU No. 2017-04 are effective for reporting periods beginning after December 15, 2019; early adoption is permitted. The provisions of ASU No. 2017-04 are to be applied on a prospective basis. The Company early adopted the provisions of ASU No. 2017-04 on January 1, 2017 and the adoption of this standard update did not and is not expected to have a material impact on its consolidated and combined financial statements.

NOTE 2—INCOME TAXES

ANGI Homeservices is included within IAC's tax group for purposes of federal and consolidated state income tax return filings. In all periods presented, current and deferred income taxes have been computed for the entities comprising ANGI Homeservices on an as if standalone, separate return basis. The Company’s payments to IAC for its share of IAC’s consolidated federal and state income tax return liabilities have been reflected within cash flows from operating activities in the accompanying consolidated and combined statement of cash flows.

At the end of each interim period, the Company makes its best estimate of the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to significant, unusual, or extraordinary items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which they occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or income tax contingencies is recognized in the interim period in which the change occurs.

The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. The accounting estimates used to compute the provision or benefit for income taxes may change as new events occur, more experience is acquired, additional information is obtained or our tax environment changes. To the extent that the expected annual effective income tax rate changes during a quarter, the effect of the change on prior quarters is included in income tax provision in the quarter in which the change occurs.

For the three and nine months endedSeptember 30, 2017, the Company recorded an income tax benefit of $40.8 million and $71.1 million, respectively. The income tax benefit for the three months ended September 30, 2017 represents an effective income tax rate of 36%, higher than the statutory rate of 35% due primarily to state taxes, partially offset by unbenefited losses in separate jurisdictions. The income tax benefit for the nine months endedSeptember 30, 2017 is due primarily to the effect of adopting the provisions of ASU No. 2016-09 on January 1, 2017 and state taxes, partially offset by unbenefited losses in separate jurisdictions. Under ASU No. 2016-09, excess tax benefits generated by the settlement or exercise of stock-based awards of $35.6 million for the nine months endedSeptember 30, 2017 are recognized as a reduction to the income tax provision rather than as an increase to additional paid-in capital. For the three and nine months endedSeptember 30, 2016, the Company recorded an income tax provision of $4.4 million and $8.7 million, respectively, which represents an effective income tax rate of 50% in each period. The effective income tax rate for the three and nine months endedSeptember 30, 2016 is higher

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(Unaudited)

than the statutory rate of 35% due primarily to unbenefited losses in separate jurisdictions and state taxes, partially offset by research credits.

ANGI Homeservices is routinely under audit by federal, state, local and foreign authorities in the area of income tax as a result of previously filed separate company and consolidated tax returns with IAC. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service is currently auditing IAC’s federal income tax returns for the years ended December 31, 2010 through 2012, which includes the operations of the HomeAdvisor business. The statute of limitations for the years 2010 through 2013 has been extended to June 30, 2018. Returns filed in various other jurisdictions are open to examination for various tax years beginning with 2009. Income taxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns. Changes to reserves from period to period and differences between amounts paid, if any, upon the resolution of audits and amounts previously provided may be material. Differences between the reserves for income tax contingencies and the amounts owed by the Company are recorded in the period they become known.

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At both September 30, 2017 and December 31, 2016, the Company has not accrued any amount for the payment of either interest or penalties.

At September 30, 2017 and December 31, 2016, unrecognized tax benefits are $1.3 million and $0.6 million, respectively. Included in unrecognized tax benefits at September 30, 2017 and December 31, 2016, is $1.3 million and $0.6 million, respectively, for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at September 30, 2017 are subsequently recognized, income tax provision would be reduced by $1.3 million. The comparable amount as of December 31, 2016 is $0.6 million.

The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, among other things, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, the duration of statutory carryforward periods, available tax planning and historical experience, to the extent these items are applicable. As of September 30, 2017, the Company has a gross deferred tax asset of $124.1 million that the Company expects to fully utilize on a more likely than not basis. However, the tax sharing agreement between ANGI Homeservices and IAC governs the parties’ respective rights, responsibilities and obligations with respect to tax matters, including responsibility for taxes attributable to ANGI Homeservices, entitlement to refunds, allocation of tax attributes and other matters. Any differences between taxes currently due or receivable under the tax sharing agreement and the current tax provision computed on an as if standalone, separate return basis are reflected as adjustments to additional paid-in capital.

NOTE 3—BUSINESS COMBINATIONS

Angie's List Combination

Through the Combination, the Company acquired 100% of the common stock of Angie's List on September 29, 2017 for a total purchase price valued at $781.4 million.

The purchase price of $781.4 million was determined based on the sum of (i) the fair value of the 61.3 million shares of Angie's List common stock outstanding immediately prior to the Combination based on the closing stock price of Angie's List common stock on the NASDAQ on September 29, 2017 of $12.46per share; (ii) the cash consideration of $1.9 million paid to holders of Angie's List common stock who elected to receive$8.50 in cash per share; and (iii) the fair value of vested equity awards (including the pro rata portion of unvested awards attributable to pre-combination services) outstanding under Angie's List stock plans on September 29, 2017. Each stock option to purchase shares of Angie's List common stock that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an option to purchase (i) that number of Class A shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List option immediately prior to the effective time of the Combination, (ii) at a per-share exercise price equal to the exercise price per share of Angie's List common stock at which such Angie's List option was exercisable immediately prior to the effective time of the Combination. Each award of Angie's List restricted stock units that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an ANGI Homeservices restricted stock unit award with respect to a number of Class A

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(Unaudited)

shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List restricted stock unit award immediately prior to the effective time of the Combination.

The table below summarizes the purchase price:

	Angie's List
	(In thousands)
Class A common stock	$	763,684
Cash consideration for holders who elected to receive $8.50 in cash per share of Angie's List common stock	1,913
Fair value of vested and pro rata portion of unvested stock options attributable to pre-combination services	11,749
Fair value of the pro rata portion of unvested restricted stock units attributable to pre-combination services	4,038
Total purchase price	$	781,384

The financial results of Angie's List are included in the Company's consolidated and combined financial statements, within the North America segment, beginning September 29, 2017. For both the three and nine months endedSeptember 30, 2017, the Company included $0.7 million of revenue and $19.5 million of net losses, respectively, in its consolidated and combined statement of operations related to Angie's List. The Company is in the process of completing its determination of the fair values of assets acquired and liabilities assumed and the preliminary fair values are subject to revision. These fair values are expected to be finalized in the fourth quarter of 2017.

The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of combination:

	Angie's List
	(In thousands)
Cash and cash equivalents	$	44,270
Other current assets	10,641
Property and equipment	16,341
Goodwill	546,851
Intangible assets	317,300
Total assets	935,403
Deferred revenue	(32,130		)
Other current liabilities	(46,106		)
Long-term debt - related party	(61,498		)
Deferred income taxes	(12,933		)
Other long-term liabilities	(1,352		)
Net assets acquired	$	781,384

The purchase price was based on the expected financial performance of Angie's List, not on the value of the net identifiable assets at the time of combination. This resulted in a significant portion of the purchase price being attributed to goodwill because Angie's List is complementary and synergistic to the other North America businesses of ANGI Homeservices.

The preliminary estimated fair values of the identifiable intangible assets acquired at the date of combination are as follows:

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Angie's List
	(In thousands)		Weighted-average useful life (years)
Indefinite-lived trade names and trademarks	$	137,000	Indefinite
Service providers	90,500		3
Developed technology	63,900		6
Memberships	15,900		3
User base	10,000		1
Total identifiable intangible assets acquired	$	317,300

Other current assets, current liabilities and other long-term liabilities of Angie's List were reviewed and adjusted to their fair values at the date of combination, as necessary. The fair value of deferred revenue was determined using an income approach that utilized a cost to fulfill analysis. The fair values of trade names and trademarks were determined using an income approach that utilized the relief from royalty methodology. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The fair values of the service providers and memberships were determined using an income approach that utilized the excess earnings methodology. The valuations of deferred revenue and intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows, cost and profit margins related to deferred revenue and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.

HomeStars Acquisition

The Company acquired a 90% voting interest in HomeStars Inc. ("HomeStars"), a leading home services platform in Canada, on February 8, 2017. The purchase price for HomeStars was $16.6 CAD million (or $12.7 million) in cash and is net of a $0.3 CAD million (or $0.2 million) working capital adjustment paid in full to the Company in the third quarter of 2017. In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 10% noncontrolling interest in HomeStars, which totaled $1.9 CAD million (or $1.4 million). The determination of the fair value of noncontrolling interest was calculated using the implied value of 100% of the enterprise value of the business using the purchase price.

The financial results of HomeStars are included in the Company's consolidated and combined financial statements, within the North America segment, beginning February 8, 2017. For the three and nine months endedSeptember 30, 2017, the Company included $2.0 million and $4.2 million of revenue, respectively, and less than $0.1 million and $1.0 million of net losses, respectively, in its consolidated and combined statement of operations related to HomeStars.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

	HomeStars
	(In thousands)
Cash and cash equivalents	$	181
Other current assets	165
Goodwill	9,841
Intangible assets	6,414
Total assets	16,601
Current liabilities	(649		)
Other long-term liabilities	(1,873		)
Net assets acquired	$	14,079

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(Unaudited)

The purchase price was based on the expected financial performance of HomeStars, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill because HomeStars is complementary and synergistic to the other North America businesses of ANGI Homeservices.

The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:

	HomeStars
	(In thousands)		Weighted-average useful life (years)
Indefinite-lived trade name	$	2,358	Indefinite
Contractor relationships	2,435		2
Developed technology	1,522		2
User base	99		1
Total identifiable intangible assets acquired	$	6,414

Other current assets, current liabilities and other long-term liabilities of HomeStars were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of the trade name and contractor relationships were determined using variations of the income approach; specifically, in respective order, the relief from royalty and excess earnings methodologies. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.

MyBuilder Acquisition

The Company acquired a 75% voting interest in MyBuilder Limited ("MyBuilder"), a leading home services platform in the United Kingdom, on March 24, 2017. The purchase price was £32.6 million (or $40.7 million) in cash and includes a £0.6 million (or $0.8 million) working capital adjustment paid in full by the Company in the third quarter of 2017. In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 25% noncontrolling interest in MyBuilder, which totaled £10.7 million (or $13.3 million). The determination of the fair value of noncontrolling interest was calculated using the implied value of 100% of the enterprise value of the business using the purchase price.

The financial results of MyBuilder are included in the Company's consolidated and combined financial statements, within the Europe segment, beginning April 1, 2017. For the three and nine months endedSeptember 30, 2017, the Company included $2.7 million and $5.4 million of revenue, respectively, and $0.7 million and $1.0 million of net losses, respectively, in its consolidated and combined statement of operations related to MyBuilder.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	MyBuilder
	(In thousands)
Cash and cash equivalents	$	6,004
Other current assets	344
Goodwill	38,521
Intangible assets	13,490
Total assets	58,359
Current liabilities	(2,065		)
Other long-term liabilities	(2,296		)
Net assets acquired	$	53,998

The purchase price was based on the expected financial performance of MyBuilder, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill because MyBuilder is complementary and synergistic to the other European businesses of ANGI Homeservices.

The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:

	MyBuilder
	(In thousands)		Weighted-average useful life (years)
Indefinite-lived trade name	$	6,245	Indefinite
Contractor relationships	4,122		2
Developed technology	1,499		2
User base	1,624		1
Total identifiable intangible assets acquired	$	13,490

Other current assets, current liabilities and other long-term liabilities of MyBuilder were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of the trade name and contractor relationships were determined using variations of the income approach; specifically, in respective order, the relief from royalty and excess earnings methodologies. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.

MyHammer Acquisition

On November 3, 2016, the Company acquired a 70% voting interest in MyHammer Holding AG ("MyHammer"), the leading home services marketplace in Germany. The purchase price was €17.7 million (or $19.7 million). In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 30% noncontrolling interest in MyHammer, which totaled €9.4 million (or $10.4 million). The determination of the fair value of noncontrolling interest was calculated using the MyHammer share price on the acquisition date.

The financial results of MyHammer are included in the Company's consolidated and combined financial statements, within the Europe segment, with effect from the date of acquisition. For the three and nine months endedSeptember 30, 2017, the Company included $3.3 million and $9.2 million of revenue, respectively, and $0.2 million and $0.6 million of net losses, respectively, in its consolidated and combined statement of operations related to MyHammer.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	MyHammer
	(In thousands)
Cash and cash equivalents	$	4,041
Other current assets	790
Goodwill	22,277
Intangible assets	8,107
Total assets	35,215
Current liabilities	(2,642		)
Other long-term liabilities	(2,447		)
Net assets acquired	$	30,126

The purchase price was based on the expected financial performance of MyHammer, not on the value of the net identifiable assets at the time of acquisition. This resulted in a significant portion of the purchase price being attributed to goodwill because MyHammer is complementary and synergistic to the other European businesses of ANGI Homeservices.

The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:

	MyHammer
	(In thousands)		Weighted-average useful life (years)
Indefinite-lived trade name	$	4,553	Indefinite
Contractor relationships	1,444		4
Developed technology	1,222		3
User base	888		1
Total identifiable intangible assets acquired	$	8,107

Other current assets, current liabilities and other long-term liabilities of MyHammer were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of the trade name and contractor relationships were determined using variations of the income approach; specifically, in respective order, the relief from royalty and excess earnings methodologies. The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology. The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates. The amount attributed to goodwill is not tax deductible.

Pro forma financial information

The unaudited pro forma financial information in the table below presents the combined results of the Company and Angie's List, HomeStars, MyBuilder and MyHammer as if these acquisitions had occurred on January 1, 2016. The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the acquisitions actually occurred on January 1, 2016. For the three and nine months endedSeptember 30, 2017, pro forma adjustments include (i) reductions in stock-based compensation expense of $85.1 million and $52.9 million, respectively, and transaction related costs of $22.1 million and $26.8 million, respectively, because they are one-time in nature and will not have a continuing impact on operations; and (ii) an increase in amortization of intangibles of $11.3 million and $34.4 million, respectively. The stock-based compensation expense is primarily related to the modification of previously issued HomeAdvisor vested equity awards, which were converted into ANGI Homeservices' equity awards, and the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination. The transaction related costs include severance and retention costs of $12.0 million related to the Combination. For the three and nine months endedSeptember 30, 2016, pro forma adjustments include a reduction in revenue of $5.1 million and $32.3 million, respectively, due to the write-off

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(Unaudited)

of deferred revenue at the date of acquisition as well as increases in stock-based compensation expense of $19.7 million and $51.6 million, respectively, and amortization of intangibles of $16.0 million and $48.3 million, respectively.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In thousands, except per share data)
Revenue	$	251,995		$	214,212		$	731,920		$	607,802
Net loss attributable to ANGI Homeservices Inc. shareholders	$	(7,172	)	$	(25,159	)	$	(2,178	)	$	(68,345	)
Basic and diluted loss per share attributable to ANGI Homeservices Inc. shareholders	$	(0.02	)	$	(0.06	)	$	(0.01	)	$	(0.16	)

NOTE 4—GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets, net are as follows:

	September 30, 2017		December 31, 2016
	(In thousands)
Goodwill	$	774,191	$	170,990
Intangible assets with indefinite lives	151,735		4,884
Intangible assets with definite lives, net	191,658		5,908
Total goodwill and intangible assets, net	$	1,117,584	$	181,782

The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the nine months endedSeptember 30, 2017:

	Balance at December 31, 2016		Additions		Deductions		Foreign exchange translation		Balance at September 30, 2017
	(In thousands)
North America	$	140,930	$	556,692	$	—	$	640	$	698,262
Europe	30,060		38,643		—		7,226		75,929
Total goodwill	$	170,990	$	595,335	$	—	$	7,866	$	774,191

Additions relate to the acquisitions of Angie's List and HomeStars (included in the North America segment) and MyBuilder (included in the Europe segment).

The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2016:

	Balance at December 31, 2015		Additions		(Deductions)		Foreign exchange translation			Balance at December 31, 2016
	(In thousands)
North America	$	140,930	$	—	$	—	$	—		$	140,930
Europe	9,700		21,985		—		(1,625		)	30,060
Total goodwill	$	150,630	$	21,985	$	—	$	(1,625	)	$	170,990

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(Unaudited)

Additions relate to the acquisition of MyHammer (included in the Europe segment).

Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. At September 30, 2017 and December 31, 2016, intangible assets with definite lives are as follows:

	September 30, 2017
	Gross carrying amount		Accumulated amortization			Net		Weighted-average useful life (years)
	(Dollars in thousands)
Contractor and service provider relationships	$	99,628	$	(2,989	)	$	96,639	3.0
Technology	78,761		(10,714		)	68,047		5.6
Memberships	15,900		(15		)	15,885		3.0
Customer lists and user base	13,911		(2,973		)	10,938		1.1
Trade names	5,612		(5,463		)	149		3.1
Total	$	213,812	$	(22,154	)	$	191,658	3.8

	December 31, 2016
	Gross carrying amount		Accumulated amortization			Net		Weighted-average useful life (years)
	(Dollars in thousands)
Contractor relationships	$	1,830	$	(495	)	$	1,335	4.0
Technology	11,377		(7,834		)	3,543		4.3
Customer lists and user base	4,136		(3,432		)	704		1.8
Trade names	5,260		(4,934		)	326		2.9
Total	$	22,603	$	(16,695	)	$	5,908	3.5

At September 30, 2017, amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:

Year Ending September 30,	(In thousands)
2018	$	64,155
2019	49,101
2020	46,446
2021	10,685
2022	10,650
Thereafter	10,621
Total	$	191,658

NOTE 5—FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:

• Level 1: Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.

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(Unaudited)

• Level 2: Other inputs, which are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.

• Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.

The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis:

	September 30, 2017
	Quoted market prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total fair value measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	1,670	$	—	$	—	$	1,670
Treasury discount notes	1,199		—		—		1,199
Certificates of deposit	—		6,199		—		6,199
Total	$	2,869	$	6,199	$	—	$	9,068

	December 31, 2016
	Quoted market prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total fair value measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	28,064	$	—	$	—	$	28,064
Total	$	28,064	$	—	$	—	$	28,064

Assets measured at fair value on a nonrecurring basis

The Company’s non-financial assets, such as goodwill, intangible assets and property and equipment are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.

Financial instruments measured at fair value only for disclosure purposes

	September 30, 2017						December 31, 2016
	Carrying value			Fair value			Carrying value			Fair value
	(In thousands)
Current portion of long-term debt—related party	$	—		$	—		$	(2,838	)	$	(2,776	)
Long-term debt—related party, net of current portion	(79,504		)	(79,611		)	(47,000		)	(46,324		)

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(Unaudited)

The fair value of the Company’s long-term debt—related party, including current portion, is based on Level 3 inputs and is estimated by discounting the future cash flows based on current market conditions.

NOTE 6—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present the components of accumulated other comprehensive income (loss):

	Three Months Ended September 30, 2017
	Foreign currency translation adjustment			Accumulated other comprehensive (loss) income
	(In thousands)
Balance at July 1	$	(230	)	$	(230	)
Other comprehensive income	3,578			3,578
Balance at September 30	$	3,348		$	3,348
	Three Months Ended September 30, 2016
	Foreign currency translation adjustment			Accumulated other comprehensive (loss) income
	(In thousands)
Balance at July 1	$	(486	)	$	(486	)
Other comprehensive income	32			32
Balance at September 30	$	(454	)	$	(454	)

	Nine Months Ended September 30, 2017
	Foreign currency translation adjustment			Accumulated other comprehensive (loss) income
	(In thousands)
Balance at January 1	$	(1,721	)	$	(1,721	)
Other comprehensive income	5,069			5,069
Balance at September 30	$	3,348		$	3,348
	Nine Months Ended September 30, 2016
	Foreign currency translation adjustment			Accumulated other comprehensive (loss) income
	(In thousands)
Balance at January 1	$	(1,064	)	$	(1,064	)
Other comprehensive income	610			610
Balance at September 30	$	(454	)	$	(454	)

At September 30, 2017 and 2016, there was no tax benefit or provision on the accumulated other comprehensive income (loss).

21

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 7—(LOSS) EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted (loss) earnings per share attributable to ANGI Homeservices shareholders:

	Three Months Ended September 30,
	2017						2016
	Basic			Diluted			Basic		Diluted
	(In thousands, except per share data)
Numerator:
Net (loss) earnings	$	(72,158	)	$	(72,158	)	$	4,468	$	4,468
Net loss attributable to noncontrolling interests	397			397			607		607
Net (loss) earnings attributable to ANGI Homeservices Inc. shareholders	$	(71,761	)	$	(71,761	)	$	5,075	$	5,075
Denominator:
Weighted average basic shares outstanding	415,420			415,420			414,754		414,754
Dilutive securities including stock appreciation rights, stock options, RSUs and subsidiary denominated equity awards (a)	—			—			—		—
Denominator for earnings per share—weighted average shares (b)	415,420			415,420			414,754		414,754
(Loss) earnings per share attributable to ANGI Homeservices Inc. shareholders:
(Loss) earnings per share	$	(0.17	)	$	(0.17	)	$	0.01	$	0.01

	Nine Months Ended September 30,
	2017						2016
	Basic			Diluted			Basic		Diluted
	(In thousands, except per share data)
Numerator:
Net (loss) earnings	$	(46,296	)	$	(46,296	)	$	8,575	$	8,575
Net loss attributable to noncontrolling interests	1,402			1,402			1,833		1,833
Net (loss) earnings attributable to ANGI Homeservices Inc. shareholders	$	(44,894	)	$	(44,894	)	$	10,408	$	10,408
Denominator:
Weighted average basic shares outstanding	414,978			414,978			414,754		414,754
Dilutive securities including stock appreciation rights, stock options, RSUs and subsidiary denominated equity awards (a)	—			—			—		—
Denominator for earnings per share—weighted average shares (b)	414,978			414,978			414,754		414,754
(Loss) earnings per share attributable to ANGI Homeservices Inc. shareholders:
(Loss) earnings per share	$	(0.11	)	$	(0.11	)	$	0.03	$	0.03

________________________

22

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

^(a)  For the three and nine months ended September 30, 2017, the Company had a loss from operations and as a result, approximately 58.3 million potentially dilutive securities were excluded from computing dilutive earnings per share because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute diluted earnings per share amounts.

^(b)  The Company computed basic and diluted earnings per share for the three and nine months ended September 30, 2016 using the shares issued to IAC for the contribution of the HomeAdvisor business.

NOTE 8—SEGMENT INFORMATION

The Company has two operating segments, North America and Europe, which are also the Company’s reportable segments. Each segment manager reports to the Company’s chief operating decision maker. The chief operating decision maker allocates resources and assesses performance at the segment level.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands)
Revenue:
North America	$	167,104	$	125,226	$	470,667	$	348,287
Europe	14,613		8,334		42,506		26,935
Total	$	181,717	$	133,560	$	513,173	$	375,222

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In thousands)
Operating (Loss) Income:
North America	$	(107,687	)	$	11,573		$	(99,479	)	$	23,202
Europe	(4,818		)	(2,730		)	(14,474		)	(5,360		)
Total	$	(112,505	)	$	8,843		$	(113,953	)	$	17,842

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In thousands)
Adjusted EBITDA(a):
North America	$	60		$	16,119		$	31,356		$	35,990
Europe	(2,326		)	(2,133		)	(8,439		)	(3,368		)
Total	$	(2,266	)	$	13,986		$	22,917		$	32,622

___________________________

^(a)  The Company’s primary financial measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of amortization of intangible assets and impairments of goodwill and intangible assets, if applicable. The Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Moreover, our management uses this measure internally to evaluate the performance of our business as a whole and our individual business segments, and this measure is one of the primary metrics by which our internal budgets are based and by which management is compensated. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, and we believe that by excluding these items, Adjusted EBITDA corresponds more closely to the cash operating income generated from our business, from which capital investments are made and long-term related party debt is serviced. Adjusted EBITDA has certain limitations in that it does not take into account the impact to ANGI Homeservices Inc.'s statement of operations of certain expenses.

23

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Nine Months Ended September 30,
	2017		2016
	(In thousands)
Capital expenditures:
North America	$	14,472	$	12,238
Europe	1,806		1,504
Total	$	16,278	$	13,742

The following tables present revenue disaggregated by service for the Company's reportable segments:

	Three Months Ended September 30,
	2017						2016
	North America		Europe		Total		North America		Europe		Total
	(In thousands)
Consumer connection revenue (b)	$	141,055	$	10,001	$	151,056	$	104,427	$	6,447	$	110,874
Membership subscription revenue	17,826		4,320		22,146		12,379		1,704		14,083
Other revenue	8,223		292		8,515		8,420		183		8,603
Total	$	167,104	$	14,613	$	181,717	$	125,226	$	8,334	$	133,560

	Nine Months Ended September 30,
	2017						2016
	North America		Europe		Total		North America		Europe		Total
	(In thousands)
Consumer connection revenue (b)	$	398,218	$	29,636	$	427,854	$	289,952	$	21,010	$	310,962
Membership subscription revenue	48,947		12,198		61,145		34,774		5,234		40,008
Other revenue	23,502		672		24,174		23,561		691		24,252
Total	$	470,667	$	42,506	$	513,173	$	348,287	$	26,935	$	375,222

___________________________

^(b)  Fees paid by services professionals for consumer matches.

Geographic information about revenue and long-lived assets is presented below. Revenue by geography is based on where the customer is located.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands)
Revenue
United States	$	164,999	$	125,124	$	466,134	$	347,934
All other countries	16,718		8,436		47,039		27,288
Total	$	181,717	$	133,560	$	513,173	$	375,222

24

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The United States is the only country whose revenue is greater than 10% of total revenue of the Company for the three and nine months endedSeptember 30, 2017 and 2016.

	September 30,		December 31,
	2017		2016
	(In thousands)
Long-lived assets (excluding goodwill and intangible assets)
United States	$	44,027	$	21,775
All other countries	3,608		1,870
Total	$	47,635	$	23,645

The following tables reconcile operating (loss) income for the Company’s reportable segments and net (loss) earnings attributable to ANGI Homeservices Inc. shareholders to Adjusted EBITDA:

	Three Months Ended September 30, 2017
	Operating loss			Stock-based compensation		Depreciation		Amortization of intangibles		Adjusted EBITDA
	(In thousands)
North America	$	(107,687	)	$	103,565	$	3,085	$	1,097	$	60
Europe	(4,818		)	415		406		1,671		(2,326		)
Total	(112,505		)	$	103,980	$	3,491	$	2,768	$	(2,266	)
Interest expense—related party	(1,864		)
Other income, net	1,364
Loss before income taxes	(113,005		)
Income tax benefit	40,847
Net loss	(72,158		)
Net loss attributable to noncontrolling interests	397
Net loss attributable to ANGI Homeservices Inc. shareholders	$	(71,761	)

25

ANGI HOMESERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Three Months Ended September 30, 2016
	Operating income (loss)			Stock-based compensation		Depreciation		Amortization of intangibles		Adjusted EBITDA
	(In thousands)
North America	$	11,573		$	1,977	$	1,944	$	625	$	16,119
Europe	(2,730		)	414		82		101		(2,133		)
Total	8,843			$	2,391	$	2,026	$	726	$	13,986
Interest expense—related party	(156		)
Other income, net	195
Earnings before income taxes	8,882
Income tax provision	(4,414		)
Net earnings	4,468
Net loss attributable to noncontrolling interests	607
Net earnings attributable to ANGI Homeservices Inc. shareholders	$	5,075