As filed with the Securities and Exchange Commission on November 7, 2019

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2019

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. 001-38220

ANGI HOMESERVICES INC.

(Exact name of registrant as specified in its charter)

Delaware	82-1204801
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3601 Walnut Street, Denver, CO 80205

(Address of registrant's principal executive offices)

(303) 963-7200

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of exchange on which registered
Class A Common Stock, par value $0.001	ANGI	The Nasdaq Stock Market LLC

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 ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

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 ☐

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

As of November 1, 2019, the following shares of the registrant's common stock were outstanding:

Class A Common Stock	81,230,434
Class B Common Stock	421,569,641
Class C Common Stock	—
Total outstanding Common Stock	502,800,075

TABLE OF CONTENTS

		Page Number
PART I
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheet	3
	Consolidated Statement of Operations	4
	Consolidated Statement of Comprehensive Operations	5
	Consolidated Statement of Shareholders' Equity	6
	Consolidated Statement of Cash Flows	8
	Note 1—The Company and Summary of Significant Accounting Policies	9
	Note 2—Leases	11
	Note 3—Income Taxes	13
	Note 4—Business Combination	14
	Note 5—Financial Instruments	14
	Note 6—Long-term Debt	16
	Note 7—Accumulated Other Comprehensive (Loss) Income	17
	Note 8—Earnings per Share	18
	Note 9—Segment Information	20
	Note 10—Consolidated Financial Statement Details	24
	Note 11—Contingencies	24
	Note 12—Related Party Transactions with IAC	25
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	44
PART II
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 5.	Other Information	47
Item 6.	Exhibits	48
	Signatures	49

2

PART I

FINANCIAL INFORMATION

Item 1.    Consolidated Financial Statements

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Unaudited)

	September 30, 2019			December 31, 2018
	(In thousands, except par value amounts)
ASSETS
Cash and cash equivalents	$	402,914		$	336,984
Marketable securities	—			24,947
Accounts receivable, net of allowance and reserves of $21,507 and $16,603, respectively	44,045			27,263
Other current assets	62,524			84,933
Total current assets	509,483			474,127
Right-of-use assets	101,270			—
Property and equipment, net of accumulated depreciation and amortization of $57,502 and $36,473, respectively	101,972			70,859
Goodwill	882,144			894,709
Intangible assets, net of accumulated amortization of $127,792 and $85,589, respectively	264,310			304,295
Deferred income taxes	75,881			40,837
Other non-current assets	8,940			23,200
TOTAL ASSETS	$	1,944,000		$	1,808,027
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Current portion of long-term debt	$	13,750		$	13,750
Accounts payable	25,485			20,083
Deferred revenue	64,832			61,417
Accrued expenses and other current liabilities	127,165			105,987
Total current liabilities	231,232			201,237
Long-term debt, net	235,246			244,971
Long-term debt—related party	—			1,015
Deferred income taxes	3,312			3,808
Other long-term liabilities	119,760			16,846
Redeemable noncontrolling interests	21,999			18,163
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 86,075 and 80,515 shares, respectively, and outstanding 81,922 and 80,515 shares, respectively	86			81
Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 421,570 and 421,118 shares issued and outstanding	422			421
Class C common stock, $0.001 par value; authorized 1,500,000 shares; no shares issued and outstanding	—			—
Additional paid-in capital	1,344,956			1,333,097
Retained earnings (accumulated deficit)	16,139			(18,797		)
Accumulated other comprehensive loss	(4,163		)	(1,861		)
Treasury stock, 4,153 and no shares, respectively	(34,157		)	—
Total ANGI Homeservices Inc. shareholders' equity	1,323,283			1,312,941
Noncontrolling interests	9,168			9,046
Total shareholders' equity	1,332,451			1,321,987
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,944,000		$	1,808,027

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

3

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands, except per share data)
Revenue	$	357,358		$	303,116		$	1,004,697		$	853,249
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below)	13,312			14,015			34,045			42,313
Selling and marketing expense	195,542			136,412			567,011			416,187
General and administrative expense	82,344			82,154			254,786			238,112
Product development expense	16,021			15,309			46,907			44,751
Depreciation	11,244			6,100			27,039			18,170
Amortization of intangibles	14,169			15,611			42,421			47,695
Total operating costs and expenses	332,632			269,601			972,209			807,228
Operating income	24,726			33,515			32,488			46,021
Interest expense—third party	(3,007		)	(3,132		)	(8,964		)	(8,797		)
Interest expense—related party	—			(23		)	(16		)	(102		)
Other income, net	1,505			1,566			4,839			2,975
Earnings before income taxes	23,224			31,926			28,347			40,097
Income tax (provision) benefit	(4,900		)	(5,140		)	7,062			598
Net earnings	18,324			26,786			35,409			40,695
Net earnings attributable to noncontrolling interests	(325		)	(169		)	(473		)	(64		)
Net earnings attributable to ANGI Homeservices Inc. shareholders	$	17,999		$	26,617		$	34,936		$	40,631
Earnings per share attributable to ANGI Homeservices Inc. shareholders:
Basic earnings per share	$	0.04		$	0.06		$	0.07		$	0.08
Diluted earnings per share	$	0.04		$	0.05		$	0.07		$	0.08
Stock-based compensation expense by function:
Cost of revenue	$	—		$	—		$	—		$	—
Selling and marketing expense	796			868			2,801			2,526
General and administrative expense	6,375			19,326			37,124			60,331
Product development expense	1,613			2,280			5,661			6,576
Total stock-based compensation expense	$	8,784		$	22,474		$	45,586		$	69,433

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

4

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)
Net earnings	$	18,324		$	26,786		$	35,409		$	40,695
Other comprehensive loss:
Change in foreign currency translation adjustment	(3,071		)	(177		)	(2,880		)	(1,628		)
Change in unrealized gains and losses on available-for-sale debt securities	—			(3		)	(3		)	(3		)
Total other comprehensive loss	(3,071		)	(180		)	(2,883		)	(1,631		)
Comprehensive income	15,253			26,606			32,526			39,064
Components of comprehensive loss (income) attributable to noncontrolling interests:
Net earnings attributable to noncontrolling interests	(325		)	(169		)	(473		)	(64		)
Change in foreign currency translation adjustment attributable to noncontrolling interests	390			367			581			677
Comprehensive loss attributable to noncontrolling interests	65			198			108			613
Comprehensive income attributable to ANGI Homeservices Inc. shareholders	$	15,318		$	26,804		$	32,634		$	39,677

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

5

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Three Months Ended September 30, 2019 and 2018

(Unaudited)

					ANGI Homeservices Inc. Shareholders' Equity
					Class A Common Stock $0.001 Par Value			Class B Convertible Common Stock $0.001 Par Value			Class C Common Stock $0.001 Par Value															Total ANGI Homeservices Inc. Shareholders' Equity
																				Accumulated Other Comprehensive (Loss) Income												Total Shareholders' Equity
	Redeemable Noncontrolling Interests													Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings						Treasury Stock						Noncontrolling Interests
					$		Shares	$		Shares	$		Shares
				(In thousands)
Balance as of June 30, 2019	$	23,421			$	86	85,803	$	421	421,453	$	—	—	$	1,338,280		$	(1,860	)	$	(1,482	)	$	—		$	1,335,445		$	9,101		$	1,344,546
Net earnings	233				—		—	—		—	—		—	—			17,999			—			—			17,999			92			18,091
Other comprehensive loss	(365		)		—		—	—		—	—		—	—			—			(2,681		)	—			(2,681		)	(25		)	(2,706		)
Stock-based compensation expense	36				—		—	—		—	—		—	8,748			—			—			—			8,748			—			8,748
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—				—		272	—		—	—		—	(2,357		)	—			—			—			(2,357		)	—			(2,357		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—				—		—	1		117	—		—	(971		)	—			—			—			(970		)	—			(970		)
Purchase of treasury stock	—				—		—	—		—	—		—	—			—			—			(34,157		)	(34,157		)	—			(34,157		)
Purchase of redeemable noncontrolling interests	(71		)		—		—	—		—	—		—				—			—			—			—			—			—
Adjustment of redeemable noncontrolling interests to fair value	(1,255		)		—		—	—		—	—		—	1,255			—			—			—			1,255			—			1,255
Other	—				—		—	—		—	—		—	1			—			—			—			1			—			1
Balance as of September 30, 2019	$	21,999			$	86	86,075	$	422	421,570	$	—	—	$	1,344,956		$	16,139		$	(4,163	)	$	(34,157	)	$	1,323,283		$	9,168		$	1,332,451

Balance as of June 30, 2018	$	21,840		$	65	65,416	$	416	415,885	$	—	—	$	1,138,938		$	(82,101	)	$	1,091	$	—	$	1,058,409		$	9,081		$	1,067,490
Net (loss) earnings	(53		)	—		—	—		—	—		—	—			26,617			—		—		26,617			222			26,839
Other comprehensive (loss) income	(372		)	—		—	—		—	—		—	—			—			187		—		187			5			192
Stock-based compensation expense	284			—		—	—		—	—		—	22,190			—			—		—		22,190			—			22,190
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			1		657	—		—	—		—	(4,253		)	—			—		—		(4,252		)	—			(4,252		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			—		—	—		19	—		—	—			—			—		—		—			—			—
Purchase of noncontrolling interests	—			—		—	—		—	—		—	—			—			—		—		—			(418		)	(418		)
Adjustment of redeemable noncontrolling interests to fair value	243			—		—	—		—	—		—	(243		)	—			—		—		(243		)	—			(243		)
Other	—			—		—	—		—	—		—	(146		)	—			—		—		(146		)	124			(22		)
Balance as of September 30, 2018	$	21,942		$	66	66,073	$	416	415,904	$	—	—	$	1,156,486		$	(55,484	)	$	1,278	$	—	$	1,102,762		$	9,014		$	1,111,776

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

6

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Nine Months Ended September 30, 2019 and 2018

(Unaudited)

					ANGI Homeservices Inc. Shareholders' Equity
					Class A Common Stock $0.001 Par Value			Class B Convertible Common Stock $0.001 Par Value			Class C Common Stock $0.001 Par Value															Total ANGI Homeservices Inc. Shareholders' Equity
																				Accumulated Other Comprehensive (Loss) Income												Total Shareholders' Equity
	Redeemable Noncontrolling Interests													Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings						Treasury Stock						Noncontrolling Interests
					$		Shares	$		Shares	$		Shares
				(In thousands)
Balance as of December 31, 2018	$	18,163			$	81	80,515	$	421	421,118	$	—	—	$	1,333,097		$	(18,797	)	$	(1,861	)	$	—		$	1,312,941		$	9,046		$	1,321,987
Net earnings	284				—		—	—		—	—		—	—			34,936			—			—			34,936			189			35,125
Other comprehensive loss	(514		)		—		—	—		—	—		—	—			—			(2,302		)	—			(2,302		)	(67		)	(2,369		)
Stock-based compensation expense	113				—		—	—		—	—		—	45,473			—			—			—			45,473			—			45,473
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—				5		5,560	—		—	—		—	(27,805		)	—			—			—			(27,800		)	—			(27,800		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—				—		—	1		452	—		—	(1,766		)	—			—			—			(1,765		)	—			(1,765		)
Purchase of treasury stock	—				—		—	—		—	—		—	—			—			—			(34,157		)	(34,157		)	—			(34,157		)
Purchase of redeemable noncontrolling interest	(71		)		—		—	—		—	—		—	—			—			—			—			—			—			—
Adjustment of redeemable noncontrolling interests to fair value	4,024				—		—	—		—	—		—	(4,024		)	—			—			—			(4,024		)	—			(4,024		)
Other	—				—		—	—		—	—		—	(19		)	—			—			—			(19		)	—			(19		)
Balance as of September 30, 2019	$	21,999			$	86	86,075	$	422	421,570	$	—	—	$	1,344,956		$	16,139		$	(4,163	)	$	(34,157	)	$	1,323,283		$	9,168		$	1,332,451

Balance as of December 31, 2017	$	21,300		$	63	62,818	$	415	415,186	$	—	—	$	1,112,400		$	(121,764	)	$	2,232		$	—	$	993,346		$	9,748		$	1,003,094
Cumulative effect of adoption of ASU No. 2014-09	—			—		—	—		—	—		—	—			25,649			—			—		25,649			—			25,649
Net (loss) earnings	(142		)	—		—	—		—	—		—	—			40,631			—			—		40,631			206			40,837
Other comprehensive loss	(590		)	—		—	—		—	—		—	—			—			(954		)	—		(954		)	(87		)	(1,041		)
Stock-based compensation expense	1,084			—		—	—		—	—		—	68,349			—			—			—		68,349			—			68,349
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			3		3,255	—		—	—		—	(23,545		)	—			—			—		(23,542		)	—			(23,542		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			—		—	1		718	—		—	(1		)	—			—			—		—			—			—
Purchase of noncontrolling interests	(53		)	—		—	—		—	—		—	—			—			—			—		—			(1,236		)	(1,236<