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Angie's List Reports Third Quarter 2015 Results

INDIANAPOLIS--(BUSINESS WIRE)--Angie’s List, Inc. (NASDAQ:ANGI) today announced financial results for the quarter ended September 30, 2015.

“That said, we have much work remaining to achieve our full potential”

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“We are pleased to report the first profitable third quarter in the history of Angie’s List. This was a quarter with stabilizing results. We are seeing good progress in key areas of our business, many of which are leading indicators for future results,” said Scott Durchslag, Angie’s List President and Chief Executive Officer.

“Improved efficiencies, including in selling and marketing expenses, together with increased quarter over quarter revenues, led to expanding margins. The increased revenue reflects improved service provider metrics from a year ago, including increases in contract value, backlog, total members, first year member retention, web traffic, mobile web traffic and consumer and service provider participation in e-commerce. Additionally, we turned around last quarter’s sequential decline in participating service providers. With our announcement this morning of Angie’s Fair Price Guarantee and Angie’s Service Quality Guarantee, we’ve further differentiated and strengthened our position as the leader in home services and taken our commitment to ensuring happy transactions between members and service providers to an entirely new level.”

“That said, we have much work remaining to achieve our full potential,” continued Durchslag. “Our top priority is to improve operational execution to reignite revenue growth, drive adjusted EBITDA and deliver free cash flow. We’ve already begun to take action, including identifying millions in annualized cost reductions to be implemented in 2016, redesigning our sales force, baselining our Net Promoter Scores and improving our marketing execution by shifting mix and changing agencies. This quarter we expect to begin scaling our new Angie’s List 4.0 platform, release our new service provider mobile application and improve execution in e-commerce, all capitalizing on investments that have already been made. Looking further ahead, we expect to introduce new products and partnerships that will monetize our more than 100 million unique visitors across all of our platforms. While it will take some time to realize the full benefit, I believe improvements will be more visible in our results in 2016. Ultimately, I am confident that through these actions, and given the Company’s many strengths, Angie’s List is well positioned to drive significant value creation for our shareholders and customers alike.”

Key Operating Metrics

Three months ended September 30,
2015
September 30,
2014
Change
Total paid memberships (end of period) 3,248,239 2,983,439 9 %
Gross paid memberships added (in period) 298,922 350,376 (15 )%
Marketing cost per paid membership acquisition (in period) $ 78 $ 64 22 %
First-year membership renewal rate (in period) 75 % 74 % 1 pt
Average membership renewal rate (in period) 77 % 77 % flat
Participating service providers (end of period)* 53,918 54,392 (1 )%
Total service provider contract value (end of period, in thousands) $ 270,904 $ 236,303 15 %
Total service provider contract value backlog (end of period, in thousands) $ 162,817 $ 145,829 12 %
Nine months ended September 30,
2015
September 30,
2014
Change
Gross paid memberships added (in period) 818,775 1,035,814 (21 )%
Marketing cost per paid membership acquisition (in period) $ 80 $ 79 1 %
First-year membership renewal rate (in period) 74 % 74 % flat
Average membership renewal rate (in period) 77 % 77 % flat

* We include in participating service providers the total number of service providers under contract for advertising, e-commerce or both at the end of the period.

Market Cohort Analysis

Pre-2003 2003-2007 Post-2007 Total
September 30, September 30, September 30, September 30,
2015 2014 2015 2014 2015 2014 2015 2014
Number of Markets 10 10 35 35 208 208 253 253
Average Revenue/Market $ 7,957,661 $ 7,258,018 $ 6,107,238 $ 5,416,899 $ 223,525 $ 188,725 $ 1,343,174 $ 1,191,409
Average Marketing Expense/Market $ 1,070,334 $ 1,416,968 $ 1,126,209 $ 1,486,922 $ 99,040 $ 131,304 $ 279,530 $ 369,657
Membership Revenue/Paid Member $ 26.59 $ 34.01 $ 24.41 $ 30.35 $ 14.77 $ 15.74 $ 22.29 $ 27.15
Service Provider Revenue/Paid Member $ 107.18 $ 108.50 $ 101.31 $ 99.70 $ 41.88 $ 39.24 $ 86.77 $ 85.27
Total Revenue/Paid Member $ 133.77 $ 142.51 $ 125.72 $ 130.05 $ 56.65 $ 54.98 $ 109.06 $ 112.42
Total Paid Memberships 625,159 564,568 1,778,286 1,622,252 844,794 796,619 3,248,239 2,983,439
Estimated Penetration Rate* 17 % 15 % 13 % 12 % 12 % 11 % 13 %

12

%

Annual Membership Growth Rate 11 % 24 % 10 % 25 % 6 % 26 % 9 %

25

%

Cohort table presents financial and operational data for the twelve months ended September 30, 2015 and 2014.

* Demographic information used in penetration rate calculations is based on third-party studies we commissioned in September 2015 and September 2014, respectively. According to these studies, the number of U.S. households in our target demographic was 27 million for the period ended September 30, 2015 and 28 million for the period ended September 30, 2014.

Third Quarter Results

Revenue

Total revenue for the third quarter of 2015 was $87.0 million, an increase of 7 percent compared to the prior year period, driven by higher service provider revenue, which increased 11 percent to $69.8 million, offset by a decline in membership revenue of 6 percent to $17.2 million from a year ago.

The growth in service provider revenue, which includes both advertising and e-commerce revenue, quarter over quarter was largely the result of a 12 percent increase in service provider revenue per participating service provider as well as a 15 percent quarter over quarter increase in service provider contract value. These gains were partially offset by lower average e-commerce take rates on higher unit sales compared to the year ago period.

The decline in membership revenue quarter over quarter is primarily the result of a 14 percent decrease in membership revenue per paid member attributable to tiered pricing, which has reduced average membership fees across all markets, as well as a 15 percent decrease in gross paid memberships added, partially offset by a...


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