Angie’s List Sinks on Earnings Miss and Weak Q1 Guidance

Andrew Klips |

Shares of online professional services research and review website Angie’s List (ANGI) are trading lower on Thursday morning following the company reporting a miss on fourth-quarter profits, while also disappointing on guidance for the current quarter.  Other than that, it was a good report.

For the quarter ended December 31, 2013, the Indianapolis-based company said that revenue improved to $68.76 million, up 49 percent from $46.18 million in the same quarter of 2012.  Net income for the latest quarter totaled $2.8 million, or 5 cents per share, versus $2.43 million, or 4 cents per share, in the year prior quarter.  The recent fourth quarter included a $4 million accrual associated with a pending litigation settlement.  Angie’s List is the subject of three lawsuits alleging management has been less-than-honest with shareholders about the business model.

Wall Street was expecting earnings per share of 13 cents on revenue of $68.5 million.

Membership revenue in the fourth quarter rose 29 percent to $17.7 million as Angie’s List added 39 percent more paying members.  2013 ended with the company having 2.48 million total paid memberships.

Service provider revenue, the company’s largest component of total sales, rose 57 percent to $51.0 million year-over-year.  Within that total, advertising revenue jumped 55 percent compared to the year earlier quarter to $45.0 million.  E-commerce revenue, also a component of service provider sales, increased 72 percent to $6.0 million.  The number of total service providers increased by 29 percent to 46,329.

The improved receivables were accompanied by a sharp rise in expenses.  Marketing costs were up 30 percent to $11.61 million.  Selling expenses mushroomed from $15.62 million to $24.56 million, a surge of 57 percent.  General and administrative costs rose 78 percent to $11.81 million.

"We recorded very good performance from each of our cohorts in 2013," said Angie's List CEO Bill Oesterle in a prepared statement.  "Each one demonstrated growing membership, deepening penetration rates and increasing contribution."

Angie’s List went public in November 2011 and has typically posted quarterly losses as rising revenue has been offset by rising costs.  For all of 2013, the company lost $32.99 million, or 57 cents per share, compared to a loss of $52.89 million, or 92 cents per share, in 2012.  At the same time, revenue was up 58 percent from $155.8 million to $245.64 million.

For the current quarter, the company sees revenue in the range of $71.5 million and $72.5 million.  Analysts were expecting sales of $74 million.

The quarterly results and guidance translated to some price target adjustments by analysts.  RBC Capital Markets maintained its “outperform” rating, but lowered its price target for ANGI to $21 from $24.  Canaccord Genuity trimmed its price target to $16 from $22.

After closing Wednesday at $17.10, shares sunk as low as $13.50 just after Thursday’s opening bell.  The price has recovered some ground, but is still trading at $14.31 90 minutes into the session for a loss of 16.32 percent, wiping out any gains so far in 2014.

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Companies

Symbol Name Price Change % Volume
ANGI Angie\'s List Inc. 8.23 0.08 0.92 196,873
ASAM Assuranceamerica Corp 0.03 0.00 0.00 0

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