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As filed with the Securities and Exchange Commission on November 5, 2021
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, 2021
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 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)
(Former name or former address, if changed since last report)
| | | | | | | | | | | | | | |
| 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 October 29, 2021, the following shares of the Registrant’s common stock were outstanding:
| | | | | |
| Class A Common Stock | 80,373,715 | |
| Class B Common Stock | 422,019,247 | |
| Class C Common Stock | — | |
| Total outstanding Common Stock | 502,392,962 | |
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited) | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| (In thousands, except par value amounts) |
| ASSETS | | | |
| Cash and cash equivalents | $ | 476,625 | | | $ | 812,705 | |
| Marketable debt securities | — | | | 49,995 | |
Accounts receivable, net of reserves of $40,276 and $27,839, respectively | 98,538 | | | 43,148 | |
| Other current assets | 75,818 | | | 71,958 | |
| Total current assets | 650,981 | | | 977,806 | |
| | | |
| Capitalized software, leasehold improvements and equipment, net | 116,825 | | | 108,842 | |
| Goodwill | 917,081 | | | 891,797 | |
| Intangible assets, net | 198,024 | | | 209,717 | |
| | | |
| Other non-current assets, net | 192,127 | | | 180,020 | |
| TOTAL ASSETS | $ | 2,075,038 | | | $ | 2,368,182 | |
| | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
| LIABILITIES: | | | |
| | | |
| Accounts payable | $ | 39,491 | | | $ | 30,805 | |
| Deferred revenue | 60,025 | | | 54,654 | |
| Accrued expenses and other current liabilities | 203,752 | | | 148,219 | |
| Total current liabilities | 303,268 | | | 233,678 | |
| | | |
| Long-term debt, net | 494,373 | | | 712,277 | |
| Deferred income taxes | 1,633 | | | 1,296 | |
| Other long-term liabilities | 102,434 | | | 111,710 | |
| | | |
| Redeemable noncontrolling interests | 4,524 | | | 26,364 | |
| | | |
| Commitments and contingencies | | | |
| | | |
| SHAREHOLDERS’ EQUITY: | | | |
Class A common stock, $0.001 par value; authorized 2,000,000 shares; issued 99,252 and 94,238 shares, respectively, and outstanding 80,146 and 78,333, respectively | 99 | | | 94 | |
Class B convertible common stock, $0.001 par value; authorized 1,500,000 shares; 422,019 and 421,862 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 | 1,345,549 | | | 1,379,469 | |
| (Accumulated deficit) retained earnings | (35,608) | | | 9,749 | |
| Accumulated other comprehensive income | 4,933 | | | 4,637 | |
Treasury stock, 19,107 and 15,905 shares, respectively | (157,484) | | | (122,081) | |
| Total Angi Inc. shareholders’ equity | 1,157,911 | | | 1,272,290 | |
| Noncontrolling interests | 10,895 | | | 10,567 | |
| Total shareholders’ equity | 1,168,806 | | | 1,282,857 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 2,075,038 | | | $ | 2,368,182 | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (In thousands, except per share data) |
| Revenue | $ | 461,565 | | | $ | 389,913 | | | $ | 1,269,582 | | | $ | 1,108,624 | |
| Operating costs and expenses: | | | | | | | |
| Cost of revenue (exclusive of depreciation shown separately below) | 99,467 | | | 48,253 | | | 222,999 | | | 122,524 | |
| Selling and marketing expense | 237,755 | | | 210,171 | | | 682,626 | | | 590,114 | |
| General and administrative expense | 103,086 | | | 90,122 | | | 298,734 | | | 270,129 | |
| Product development expense | 17,675 | | | 17,577 | | | 54,474 | | | 50,068 | |
| Depreciation | 14,701 | | | 13,921 | | | 45,728 | | | 38,614 | |
| Amortization of intangibles | 3,854 | | | 12,888 | | | 12,616 | | | 38,846 | |
| Total operating costs and expenses | 476,538 | | | 392,932 | | | 1,317,177 | | | 1,110,295 | |
| Operating loss | (14,973) | | | (3,019) | | | (47,595) | | | (1,671) | |
| Interest expense | (6,032) | | | (3,699) | | | (18,463) | | | (7,593) | |
| Other (expense) income, net | (479) | | | 223 | | | (1,882) | | | 856 | |
| Loss before income taxes | (21,484) | | | (6,495) | | | (67,940) | | | (8,408) | |
| Income tax benefit | 4,791 | | | 11,698 | | | 23,209 | | | 17,638 | |
| Net (loss) earnings | (16,693) | | | 5,203 | | | (44,731) | | | 9,230 | |
| Net earnings attributable to noncontrolling interests | (302) | | | (731) | | | (626) | | | (1,049) | |
| Net (loss) earnings attributable to Angi Inc. shareholders | $ | (16,995) | | | $ | 4,472 | | | $ | (45,357) | | | $ | 8,181 | |
| | | | | | | |
| Per share information attributable to Angi Inc. shareholders: |
| Basic (loss) earnings per share | $ | (0.03) | | | $ | 0.01 | | | $ | (0.09) | | | $ | 0.02 | |
| Diluted (loss) earnings per share | $ | (0.03) | | | $ | 0.01 | | | $ | (0.09) | | | $ | 0.02 | |
| | | | | | | |
| Stock-based compensation expense by function: | | | | | | | |
| | | | | | | |
| Selling and marketing expense | $ | 1,256 | | | $ | 2,346 | | | $ | 3,138 | | | $ | 4,069 | |
| General and administrative expense | 5,836 | | | 10,866 | | | 13,330 | | | 46,977 | |
| Product development expense | 1,721 | | | 1,485 | | | 3,922 | | | 3,985 | |
| Total stock-based compensation expense | $ | 8,813 | | | $ | 14,697 | | | $ | 20,390 | | | $ | 55,031 | |
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ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (in thousands) |
| Net (loss) earnings | $ | (16,693) | | | $ | 5,203 | | | $ | (44,731) | | | $ | 9,230 | |
| Other comprehensive (loss) income: | | | | | | | |
| Change in foreign currency translation adjustment | (1,353) | | | 3,053 | | | 722 | | | 971 | |
| | | | | | | |
| | | | | | | |
| Comprehensive (loss) income | (18,046) | | | 8,256 | | | (44,009) | | | 10,201 | |
| Components of comprehensive loss (income) attributable to noncontrolling interests: | | | | | | | |
| Net earnings attributable to noncontrolling interests | (302) | | | (731) | | | (626) | | | (1,049) | |
| Change in foreign currency translation adjustment attributable to noncontrolling interests | 313 | | | (1,298) | | | (426) | | | (577) | |
| Comprehensive loss (income) attributable to noncontrolling interests | 11 | | | (2,029) | | | (1,052) | | | (1,626) | |
| Comprehensive (loss) income attributable to Angi Inc. shareholders | $ | (18,035) | | | $ | 6,227 | | | $ | (45,061) | | | $ | 8,575 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three and Nine Months Ended September 30, 2021
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Angi 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 Inc. Shareholders' Equity | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | | 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, 2021 | $ | 4,536 | | | | $ | 99 | | | 99,111 | | | $ | 422 | | | 421,977 | | | $ | — | | | — | | | $ | 1,338,208 | | | $ | (18,613) | | | $ | 5,973 | | | $ | (127,718) | | | $ | 1,198,371 | | | $ | 11,054 | | | $ | 1,209,425 | |
| Net earnings (loss) | 61 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (16,995) | | | — | | | — | | | (16,995) | | | 241 | | | (16,754) | |
| Other comprehensive loss | (73) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,040) | | | — | | | (1,040) | | | (240) | | | (1,280) | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,817 | | | — | | | — | | | — | | | 8,817 | | | — | | | 8,817 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | — | | | 139 | | | — | | | — | | | — | | | — | | | (1,066) | | | — | | | — | | | — | | | (1,066) | | | — | | | (1,066) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | — | | | 3 | | | — | | | 42 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (29,766) | | | (29,766) | | | — | | | (29,766) | |
| Purchase of noncontrolling interests | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (160) | | | (160) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (410) | | | — | | | — | | | — | | | (410) | | | — | | | (410) | |
| Balance as of September 30, 2021 | $ | 4,524 | | | | $ | 99 | | | 99,253 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,345,549 | | | $ | (35,608) | | | $ | 4,933 | | | $ | (157,484) | | | $ | 1,157,911 | | | $ | 10,895 | | | $ | 1,168,806 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2020 | $ | 26,364 | | | | $ | 94 | | | 94,238 | | | $ | 422 | | | 421,862 | | | $ | — | | | — | | | $ | 1,379,469 | | | $ | 9,749 | | | $ | 4,637 | | | $ | (122,081) | | | $ | 1,272,290 | | | $ | 10,567 | | | $ | 1,282,857 | |
| Net earnings (loss) | 49 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (45,357) | | | — | | | — | | | (45,357) | | | 577 | | | (44,780) | |
| Other comprehensive income (loss) | 515 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 296 | | | — | | | 296 | | | (89) | | | 207 | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 22,836 | | | — | | | — | | | — | | | 22,836 | | | — | | | 22,836 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 2 | | | 2,427 | | | — | | | — | | | — | | | — | | | (55,809) | | | — | | | — | | | — | | | (55,807) | | | — | | | (55,807) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | 3 | | | 2,588 | | | — | | | 157 | | | — | | | — | | | (3) | | | — | | | — | | | — | | | — | | | — | | | — | |
| Purchase of treasury stock | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (35,403) | | | (35,403) | | | — | | | (35,403) | |
| Purchase of noncontrolling interests | (22,938) | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (160) | | | (160) | |
| Adjustment of noncontrolling interests to fair value | 534 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (534) | | | — | | | — | | | — | | | (534) | | | — | | | (534) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (410) | | | — | | | — | | | — | | | (410) | | | — | | | (410) | |
| Balance as of September 30, 2021 | $ | 4,524 | | | | $ | 99 | | | 99,253 | | | $ | 422 | | | 422,019 | | | $ | — | | | — | | | $ | 1,345,549 | | | $ | (35,608) | | | $ | 4,933 | | | $ | (157,484) | | | $ | 1,157,911 | | | $ | 10,895 | | | $ | 1,168,806 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three and Nine Months Ended September 30, 2020
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Angi 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 Inc. Shareholders' Equity | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Accumulated Other Comprehensive (Loss) Income | | | | | | | Total Shareholders' Equity |
| Redeemable
Noncontrolling
Interests | | | | | | | | | | | | | | | Additional Paid-in Capital | | Retained Earnings | | | Treasury
Stock | | | Noncontrolling
Interests | |
| | | $ | | Shares | | $ | | Shares | | $ | | Shares | | | | | | | |
| | | (In thousands) | | |
| 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 | |
| Net earnings | 438 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,472 | | | — | | | — | | | 4,472 | | | 293 | | | 4,765 | |
| Other comprehensive income | 920 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,755 | | | — | | | 1,755 | | | 378 | | | 2,133 | |
| Stock-based compensation expense | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,846 | | | — | | | — | | | — | | | 13,846 | | | — | | | 13,846 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 4 | | | 3,584 | | | — | | | — | | | — | | | — | | | (37,842) | | | — | | | — | | | — | | | (37,838) | | | — | | | (37,838) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | — | | | — | | | — | | | 102 | | | — | | | — | | | (632) | | | — | | | — | | | — | | | (632) | | | — | | | (632) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjustment of redeemable noncontrolling interests to fair value | (677) | | | | — | | | — | | | — | | | — | | | — | | | — | | | 677 | | | — | | | — | | | — | | | 677 | | | — | | | 677 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purchase of noncontrolling interests | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,115) | | | (1,115) | |
| Other | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (690) | | | — | | | — | | | — | | | (690) | | | 689 | | | (1) | |
| Balance as of September 30, 2020 | $ | 25,774 | | | | $ | 93 | | | 92,660 | | | $ | 422 | | | 421,859 | | | $ | — | | | — | | | $ | 1,362,977 | | | $ | 24,213 | | | $ | (985) | | | $ | (112,808) | | | $ | 1,273,912 | | | $ | 9,849 | | | $ | 1,283,761 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 earnings | 383 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,181 | | | — | | | — | | | 8,181 | | | 666 | | | 8,847 | |
| Other comprehensive income | 233 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 394 | | | — | | | 394 | | | 344 | | | 738 | |
| Stock-based compensation expense | 15 | | | | — | | | — | | | — | | | — | | | — | | | — | | | 54,664 | | | — | | | — | | | — | | | 54,664 | | | — | | | 54,664 | |
| Issuance of common stock pursuant to stock-based awards, net of withholding taxes | — | | | | 6 | | | 5,653 | | | — | | | — | | | — | | | — | | | (48,615) | | | — | | | — | | | — | | | (48,609) | | | — | | | (48,609) | |
| Issuance of common stock to IAC pursuant to the employee matters agreement | — | | | | — | | | — | | | — | | | 289 | | | — | | | — | | | (1,423) | | | — | | | — | | | — | | | (1,423) | | | — | | | (1,423) | |
| 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 | 1,645 | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,645) | | | — | | | — | | | — | | | (1,645) | | | — | | | (1,645) | |
| Purchase of noncontrolling interests | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,115) | | | (1,115) | |
| Adjustment pursuant to the tax sharing agreement | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,613 | | | — | | | — | | | — | | | 3,613 | | | — | | | 3,613 | |
| Other | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (692) | | | — | | | — | | | — | | | (692) | | | 690 | | | (2) | |
| Balance as of September 30, 2020 | $ | 25,774 | | | | $ | 93 | | | 92,660 | | | $ | 422 | | | 421,859 | | | $ | — | | | — | | | $ | 1,362,977 | | | $ | 24,213 | | | $ | (985) | | | $ | (112,808) | | | $ | 1,273,912 | | | $ | 9,849 | | | $ | 1,283,761 | |
ANGI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2021 | | 2020 |
| (In thousands) |
| Cash flows from operating activities: | | | |
| Net (loss) earnings | $ | (44,731) | | | $ | 9,230 | |
| Adjustments to reconcile net (loss) earnings to net cash provided by operating activities: | | | |
| Provision for credit losses | 66,081 | | | 60,090 | |
| Stock-based compensation expense | 20,390 | | | 55,031 | |
| Depreciation | 45,728 | | | 38,614 | |
| Amortization of intangibles | 12,616 | | | 38,846 | |
| Deferred income taxes | (25,435) | | | (18,081) | |
| | | |
| Impairment of long-lived and right-of-use assets | 12,280 | | | 188 | |
| Non-cash lease expense | 9,587 | | | 10,166 | |
| Revenue reserves | 6,392 | | | 6,998 | |
| Other adjustments, net | 4,226 | | | 1,508 | |
| Changes in assets and liabilities, net of effects of acquisitions and dispositions: | | | |
| Accounts receivable | (106,234) | | | (70,705) | |
| Other assets | (3,342) | | | (4,966) | |
| Accounts payable and other liabilities | 23,271 | | | 46,941 | |
| Income taxes payable and receivable | 499 | | | (570) | |
| Deferred revenue | 4,560 | | | (105) | |
| Net cash provided by operating activities | 25,888 | | | 173,185 | |
| Cash flows from investing activities: | | | |
| Acquisition, net of cash acquired | (25,357) | | | — | |
| Capital expenditures | (52,056) | | | (37,637) | |
| Purchases of marketable debt securities | — | | | (49,987) | |
| Proceeds from maturities of marketable debt securities | 50,000 | | | — | |
| Net proceeds from the sale of a business | 750 | | | 730 | |
| | | |
| | | |
| Net cash used in investing activities | (26,663) | | | (86,894) | |
| Cash flows from financing activities: | | | |
| Proceeds from the issuance of Senior Notes | — | | | 500,000 | |
| Principal payments on Term Loan | (220,000) | | | (10,313) | |
| Debt issuance costs | — | | | (5,635) | |
| | | |
| Purchase of treasury stock | (35,403) | | | (54,400) | |
| | | |
| Withholding taxes paid on behalf of employees on net settled stock-based awards | (56,135) | | | (49,993) | |
| Distribution from IAC pursuant to the tax sharing agreement | — | | | 3,071 | |
| Purchase of noncontrolling interests | (23,508) | | | (4,280) | |
| | | |
| Net cash (used in) provided by financing activities | (335,046) | | | 378,450 | |
| Total cash (used) provided | (335,821) | | | 464,741 | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 373 | | | (354) | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | (335,448) | | | 464,387 | |
| Cash and cash equivalents and restricted cash at beginning of period | 813,561 | | | 391,478 | |
| Cash and cash equivalents and restricted cash at end of period | $ | 478,113 | | | $ | 855,865 | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Angi Inc., formerly ANGI Homeservices, Inc., (“Angi Inc.,” the “Company,” “we,” “our,” or “us”) connects quality home service professionals with consumers across 400 different categories, from repairing and remodeling homes to cleaning and landscaping. Over 260,000 domestic service professionals actively sought consumer matches, completed jobs, or advertised work through Angi Inc. platforms during the three months ended September 30, 2021. Additionally, consumers turned to at least one of our brands to find a professional for approximately 33 million projects during the twelve months ended September 30, 2021.
The Company has two operating segments: (i) North America (United States and Canada), which includes Angi Ads and Leads and Angi Services; and (ii) Europe. The brands for North America operate as follows: Angi Ads operates under the Angi (formerly Angie’s List) brand, Angi Leads operates primarily under the HomeAdvisor, powered by Angi brand, and Angi Services operates primarily under the Handy brand.
As used herein, “Angi Inc.,” the “Company,” “we,” “our,” “us,” and similar terms refer to Angi Inc. and its subsidiaries (unless the context requires otherwise).
At September 30, 2021, IAC/InterActiveCorp (“IAC”) owned 84.6% and 98.2% of the economic interest and voting interest, respectively, of the Company.
Basis of Presentation and Consolidation
The Company prepares its consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). 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. All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. All intercompany transactions between (i) Angi Inc. and (ii) IAC and its subsidiaries are considered to be effectively settled for cash at the time the transaction is recorded. See “Note 10—Related Party Transactions with IAC” for additional information on transactions between Angi Inc. and IAC.
The Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings. For the purpose of these financial statements, income taxes have been computed as if Angi Inc. filed tax returns on a standalone, separate tax return basis. Any differences between taxes currently payable to or receivable from IAC under the tax sharing agreement between the Company and IAC and the current tax provision computed on an as if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital and as financing activities within the statement of cash flows.
The accompanying unaudited financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited financial statements include all normal recurring adjustments considered necessary for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and notes thereto for the year ended December 31, 2020.
COVID-19 Update
The impact on the Company from the COVID-19 pandemic and the measures designed to contain its spread has been varied and volatile.
As previously disclosed, the initial impact of COVID-19 on the Company resulted in a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While we experienced a rebound in service requests in the second half of 2020 and through early 2021, service requests did start to decline in May 2021 compared to the comparable months of 2020 as a result of the surge in 2020 and due to impacts of
ANGI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
the brand integration initiative launched on March 17, 2021. Moreover, many service professionals’ businesses had been adversely impacted by labor and material constraints and many service professionals had limited capacity to take on new business, which negatively impacted our ability to monetize this increased level of service requests through the first quarter of 2021. Although our ability to monetize service requests rebounded modestly in the second and third quarters of 2021, we still have not returned back to levels we experienced pre-COVID-19. No assurances can be provided that we will continue to be able to improve monetization, or that service professionals’ businesses will not be adversely impacted in the future.
The extent to which developments related to the COVID-19 pandemic and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the continuing spread of COVID-19, the severity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and attitudes toward receiving them, materials and supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments.
Accounting Estimates
Management of the Company is required to make certain estimates, judgments, and assumptions during the preparation of its consolidated 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 fair values of cash equivalents and marketable debt securities; the carrying value of accounts receivable, including the determination of the allowance for credit losses and the determination of revenue reserves; the determination of the customer relationship period for certain costs to obtain a contract with a customer; the carrying value of right-of-use assets (“ROU assets”); the useful lives and recoverability of definite-lived intangible assets and capitalized software, leasehold improvements, and equipment; the recoverability of goodwill and indefinite-lived intangible assets; unrecognized tax benefits; 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.
General Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers and in the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Deferred Revenue
Deferred revenue consists of payments that are received or are contractually due in advance of the Company’s performance obligation. The Company’s deferred revenue is reported on a contract-by-contract basis at the end of each reporting period. The Company classifies deferred revenue as current when the remaining term of the applicable subscription period or expected completion of its performance obligation is one year or less. At December 31, 2020, the current and non-current deferred revenue balances were $54.7 million and $0.2 million, respectively, and during the nine months ended September 30, 2021, the Company recognized $52.3 million of revenue that was included in the deferred revenue balance as of December 31, 2020. At December 31, 2019, the current and non-current deferred revenue balances were $58.2 million and $0.2 million, respectively, and during the nine months ended September 30, 2020, the Company recognized $55.7 million of revenue that was included in the deferred revenue balance as of December 31, 2019.
The current and non-current deferred revenue balances at September 30, 2021 are $60.0 million and $0.1 million, respectively. Non-current deferred revenue is included in “Other long-term liabilities” in the accompanying consolidated balance sheet.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Practical Expedients and Exemptions
As permitted under the practical expedient available under Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which the Company has the right to invoice for services performed.
Commissions Paid to Employees Pursuant to Sales Incentive Programs
The Company has determined that commissions paid to employees pursuant to certain sales incentive programs meet the requirements to be capitalized as the incremental costs to obtain a contract with a customer. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods. Capitalized commissions paid to employees pursuant to these sales incentive programs are amortized over the estimated customer relationship period. The Company calculates the anticipated customer relationship period as the average customer life, which is based on historical data.
For sales incentive programs where the anticipated customer relationship period is one year or less, the Company has elected the practical expedient to expense the commissions as incurred.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company uses a portfolio approach to assess the accounting treatment of the incremental costs to obtain a contract with a customer. The Company recognizes an asset for these costs if we expect to recover those costs. To the extent that these costs are capitalized, the resultant asset is amortized on a systematic basis consistent with the pattern of the transfer of the services to which the asset relates. The current contract assets are $40.3 million and $49.2 million at September 30, 2021 and December 31, 2020, respectively. The non-current assets are $1.2 million and $0.4 million at September 30, 2021 and December 31, 2020, respectively. The current and non-current capitalized costs to obtain a contract with a customer are included in “Other current assets” and “Other non-current assets” in the accompanying balance sheet.
Recent Accounting Pronouncements
Accounting Pronouncement Not Yet Adopted by the Company
ASU 2021-08 – Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the Financial Accounting Standards Board issued ASU No. 2021-08, which changes how entities will recognize assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers. The provisions of ASU No. 2021-08 will require acquiring entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU No. 2014-09 (Topic 606), Revenue from Contracts with Customers, as if it had originated the contracts. The provisions of ASU No. 2021-08 are effective for fiscal years beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. The Company will early adopt ASU 2021-08 effective in the fourth quarter of 2021. An entity that early adopts in an interim period is required to apply the amendments (i) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early adoption and (ii) prospectively to all business combinations that occur on or after the date of initial application. Early adoption will have no material retrospective impact on the Company. The adoption of ASU 2021-08 may have a material impact on the purchase accounting for prospective business combinations.
