As filed with the Securities and Exchange Commission on August 10, 2020

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 June 30, 2020

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 August 7, 2020, the following shares of the registrant's common stock were outstanding:

Class A Common Stock	74,149,518
Class B Common Stock	421,756,247
Class C Common Stock	—
Total outstanding Common Stock	495,905,765

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—Income Taxes	13
	Note 3—Financial Instruments and Fair Value Measurements	14
	Note 4—Long-term Debt	16
	Note 5—Accumulated Other Comprehensive Loss	16
	Note 6—Earnings Per Share	18
	Note 7—Segment Information	19
	Note 8—Consolidated Financial Statement Details	23
	Note 9—Contingencies	24
	Note 10—Related Party Transactions with IAC	24
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	43
PART II
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	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)

	June 30, 2020			December 31, 2019
	(In thousands, except par value amounts)
ASSETS
Cash and cash equivalents	$	420,985		$	390,565
Accounts receivable, net of allowance and reserves of $27,991 and $20,293, respectively	49,760			41,669
Other current assets	63,598			67,759
Total current assets	534,343			499,993
Capitalized software, leasehold improvements and equipment, net of accumulated depreciation and amortization	104,261			103,361
Goodwill	882,406			883,960
Intangible assets, net of accumulated amortization	225,401			251,725
Other non-current assets	178,980			182,572
TOTAL ASSETS	$	1,925,391		$	1,921,611
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Current portion of long-term debt	$	13,750		$	13,750
Accounts payable	44,600			25,987
Deferred revenue	58,091			58,220
Accrued expenses and other current liabilities	138,822			116,997
Total current liabilities	255,263			214,954
Long-term debt, net	225,336			231,946
Deferred income taxes	1,891			3,441
Other long-term liabilities	115,882			121,055
Redeemable noncontrolling interests	25,093			26,663
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 89,076 and 87,007 shares, respectively, and outstanding 73,953 and 79,681, respectively	89			87
Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 421,757 and 421,570 shares issued and outstanding	422			422
Class C common stock, $0.001 par value; authorized 1,500,000 shares; no shares issued and outstanding	—			—
Additional paid-in capital	1,387,618			1,357,075
Retained earnings	19,741			16,032
Accumulated other comprehensive loss	(2,740		)	(1,379		)
Treasury stock, 15,123 and 7,326 shares, respectively	(112,808		)	(57,949		)
Total ANGI Homeservices Inc. shareholders' equity	1,292,322			1,314,288
Noncontrolling interests	9,604			9,264
Total shareholders' equity	1,301,926			1,323,552
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,925,391		$	1,921,611

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 June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands, except per share data)
Revenue	$	375,061		$	343,896		$	718,711		$	647,339
Operating costs and expenses:
Cost of revenue (exclusive of depreciation shown separately below)	41,042			10,722			74,271			20,733
Selling and marketing expense	189,984			196,167			379,943			371,469
General and administrative expense	85,451			88,013			180,007			172,442
Product development expense	15,407			15,082			32,491			30,886
Depreciation	12,555			8,796			24,693			15,795
Amortization of intangibles	12,978			13,713			25,958			28,252
Total operating costs and expenses	357,417			332,493			717,363			639,577
Operating income	17,644			11,403			1,348			7,762
Interest expense	(1,620		)	(2,963		)	(3,894		)	(5,957		)
Other income, net	212			1,047			633			3,318
Earnings (loss) before income taxes	16,236			9,487			(1,913		)	5,123
Income tax (provision) benefit	(3,025		)	(2,253		)	5,940			11,962
Net earnings	13,211			7,234			4,027			17,085
Net earnings attributable to noncontrolling interests	(544		)	(266		)	(318		)	(148		)
Net earnings attributable to ANGI Homeservices Inc. shareholders	$	12,667		$	6,968		$	3,709		$	16,937
Earnings per share information attributable to ANGI Homeservices Inc. shareholders:
Basic earnings per share	$	0.03		$	0.01		$	0.01		$	0.03
Diluted earnings per share	$	0.02		$	0.01		$	0.01		$	0.03
Stock-based compensation expense by function:
Selling and marketing expense	$	720		$	1,046		$	1,723		$	2,005
General and administrative expense	13,131			14,642			36,111			30,749
Product development expense	908			1,832			2,500			4,048
Total stock-based compensation expense	$	14,759		$	17,520		$	40,334		$	36,802

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 June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Net earnings	$	13,211		$	7,234		$	4,027		$	17,085
Other comprehensive income (loss):
Change in foreign currency translation adjustment	4,486			(1,674		)	(2,082		)	191
Change in unrealized gains and losses on available-for-sale debt securities	—			—			—			(3		)
Total other comprehensive income (loss)	4,486			(1,674		)	(2,082		)	188
Comprehensive income	17,697			5,560			1,945			17,273
Components of comprehensive (income) loss attributable to noncontrolling interests:
Net earnings attributable to noncontrolling interests	(544		)	(266		)	(318		)	(148		)
Change in foreign currency translation adjustment attributable to noncontrolling interests	767			383			721			191
Comprehensive loss attributable to noncontrolling interests	223			117			403			43
Comprehensive income attributable to ANGI Homeservices Inc. shareholders	$	17,920		$	5,677		$	2,348		$	17,316

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 June 30, 2020 and 2019

(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											Total Shareholders' Equity
	Redeemable Noncontrolling Interests												Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)					Treasury Stock						Noncontrolling Interests
				$		Shares	$		Shares	$		Shares
				(In thousands)
Balance as of March 31, 2020	$	23,813		$	88	87,624	$	422	421,757	$	—	—	$	1,379,079		$	7,074	$	(7,993	)	$	(96,920	)	$	1,281,750		$	9,260	$	1,291,010
Net earnings	220			—		—	—		—	—		—	—			12,667		—			—			12,667			324		12,991
Other comprehensive (loss) income	(786		)	—		—	—		—	—		—	—			—		5,253			—			5,253			19		5,272
Stock-based compensation expense	—			—		—	—		—	—		—	18,607			—		—			—			18,607			—		18,607
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			1		1,452	—		—	—		—	(8,220		)	—		—			—			(8,219		)	—		(8,219		)
Purchase of treasury stock	—			—		—	—		—	—		—	—			—		—			(15,888		)	(15,888		)	—		(15,888		)
Adjustment of redeemable noncontrolling interests to fair value	1,846			—		—	—		—	—		—	(1,846		)	—		—			—			(1,846		)	—		(1,846		)
Other	—			—		—	—		—	—		—	(2		)	—		—			—			(2		)	1		(1		)
Balance as of June 30, 2020	$	25,093		$	89	89,076	$	422	421,757	$	—	—	$	1,387,618		$	19,741	$	(2,740	)	$	(112,808	)	$	1,292,322		$	9,604	$	1,301,926

Balance as of March 31, 2019	$	23,242		$	85	84,718	$	421	421,452	$	—	—	$	1,331,371		$	(8,828	)	$	(191	)	$	—	$	1,322,858		$	9,043		$	1,331,901
Net earnings	160			—		—	—		—	—		—	—			6,968			—			—		6,968			106			7,074
Other comprehensive loss	(335		)	—		—	—		—	—		—	—			—			(1,291		)	—		(1,291		)	(48		)	(1,339		)
Stock-based compensation expense	35			—		—	—		—	—		—	17,485			—			—			—		17,485			—			17,485
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			1		1,085	—		—	—		—	(10,257		)	—			—			—		(10,256		)	—			(10,256		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			—		—	—		1	—		—	—			—			—			—		—			—			—
Adjustment of redeemable noncontrolling interests to fair value	319			—		—	—		—	—		—	(319		)	—			—			—		(319		)	—			(319		)
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

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

Six Months Ended June 30, 2020 and 2019

(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												Total Shareholders' Equity
	Redeemable Noncontrolling Interests												Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)					Treasury Stock						Noncontrolling Interests
				$		Shares	$		Shares	$		Shares
				(In thousands)
Balance as of December 31, 2019	$	26,663		$	87	87,007	$	422	421,570	$	—	—	$	1,357,075		$	16,032	$	(1,379	)	$	(57,949	)	$	1,314,288		$	9,264		$	1,323,552
Net (loss) earnings	(55		)	—		—	—		—	—		—	—			3,709		—			—			3,709			373			4,082
Other comprehensive loss	(687		)	—		—	—		—	—		—	—			—		(1,361		)	—			(1,361		)	(34		)	(1,395		)
Stock-based compensation expense	15			—		—	—		—	—		—	40,818			—		—			—			40,818			—			40,818
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			2		2,069	—		—	—		—	(10,773		)	—		—			—			(10,771		)	—			(10,771		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			—		—	—		187	—		—	(791		)	—		—			—			(791		)	—			(791		)
Purchase of treasury stock	—			—		—	—		—	—		—	—			—		—			(54,859		)	(54,859		)	—			(54,859		)
Purchase of redeemable noncontrolling interests	(3,165		)	—		—	—		—	—		—	—			—		—			—			—			—			—
Adjustment of redeemable noncontrolling interests to fair value	2,322			—		—	—		—	—		—	(2,322		)	—		—			—			(2,322		)	—			(2,322		)
Adjustment pursuant to the tax sharing agreement	—			—		—	—		—	—		—	3,613			—		—			—			3,613			—			3,613
Other	—			—		—	—		—	—		—	(2		)	—		—			—			(2		)	1			(1		)
Balance as of June 30, 2020	$	25,093		$	89	89,076	$	422	421,757	$	—	—	$	1,387,618		$	19,741	$	(2,740	)	$	(112,808	)	$	1,292,322		$	9,604		$	1,301,926

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	51			—		—	—		—	—		—	—			16,937			—			—		16,937			97			17,034
Other comprehensive (loss) income	(149		)	—		—	—		—	—		—	—			—			379			—		379			(42		)	337
Stock-based compensation expense	77			—		—	—		—	—		—	36,725			—			—			—		36,725			—			36,725
Issuance of common stock pursuant to stock-based awards, net of withholding taxes	—			5		5,288	—		—	—		—	(25,448		)	—			—			—		(25,443		)	—			(25,443		)
Issuance of common stock to IAC pursuant to the employee matters agreement	—			—		—	—		335	—		—	(795		)	—			—			—		(795		)	—			(795		)
Adjustment of redeemable noncontrolling interests to fair value	5,279			—		—	—		—	—		—	(5,279		)	—			—			—		(5,279		)	—			(5,279		)
Other	—			—		—	—		—	—		—	(20		)	—			—			—		(20		)	—			(20		)
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

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

7

ANGI HOMESERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2020			2019
	(In thousands)
Cash flows from operating activities:
Net earnings	$	4,027		$	17,085
Adjustments to reconcile net earnings to net cash provided by operating activities:
Stock-based compensation expense	40,334			36,802
Amortization of intangibles	25,958			28,252
Bad debt expense	39,338			32,143
Depreciation	24,693			15,795
Deferred income taxes	(6,290		)	(12,407		)
Other adjustments, net	5,524			3,446
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Accounts receivable	(48,222		)	(61,889		)
Other assets	7,132			10,556
Accounts payable and other liabilities	35,930			29,588
Income taxes payable and receivable	(502		)	269
Deferred revenue	(125		)	3,384
Net cash provided by operating activities	127,797			103,024
Cash flows from investing activities:
Acquisition, net of cash acquired	—			(20,341		)
Capital expenditures	(24,665		)	(39,113		)
Proceeds from maturities of marketable debt securities	—			25,000
Net proceeds from the sale of a business	731