What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-16 compared with 2020-02-28 · 275 added, 236 removed, 251 unchanged (67% of the section changed)

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(“ANGI Homeservices,” the “Company,” “ANGI,” “we,” “our,” or “us”) connects quality home service professionals across 500 different categories, from repairing and remodeling to cleaning and landscaping, with consumers.

Over 250,000 domestic service professionals find work through ANGI Homeservices, and consumers turn to at least one of our brands to find a professional for more than 25 million projects each year.

We’ve established category-transforming products with brands such as HomeAdvisor, Angie’s List, Handy and Fixd Repair.

Over 240,000 domestic service professionals actively sought consumer matches, completed jobs or advertised work through ANGI Homeservices’ platforms and consumers turned to at least one of our brands to find a professional for approximately 32 million projects during the year ended December 31, 2020.

We have established category-transforming products with brands such as HomeAdvisor, Angie’s List, and Handy.

The HomeAdvisor digital marketplace service connects consumers with service professionals nationwide for home repair, maintenance and improvement projects.

HomeAdvisor provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals, as well as instantly book appointments with those professionals online or connect with them by telephone.

Effective September 29, 2017 , the Company also owns and operates Angie’s List, Inc.

("Angie's List"), which connects consumers with service professionals for local services through a nationwide online directory of service professionals in over 700 service categories and provides consumers with valuable tools, services and content, including verified reviews, to help them research, shop and hire for local services.

On October 19, 2018, the Company acquired Handy Technologies, Inc.

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We refer to the HomeAdvisor and Handy businesses in the United States as the (“Marketplace”).

On January 25, 2019, the Company completed the acquisition of Fixd Repair, a home warranty and service company.

We also own and operate mHelpDesk and CraftJack.

Prior to its sale on December 31, 2018, we also operated Felix.

The Company also owns and operates Angie’s List, Inc.

(“Angie’s List”), which connects consumers with service professionals for local services through a nationwide online directory of service professionals in over 700 service categories and provides consumers with valuable tools, services and content, including verified reviews, to help them research, shop and hire for local services.

We also own and operate Fixd Repair, mHelpDesk, and CraftJack.

The Company has two operating segments:

(i) North America (United States and Canada), which includes HomeAdvisor, Angie's List, Handy, mHelpDesk, HomeStars, Fixd Repair and Felix, for periods prior to sale on December 31, 2018, and (ii) Europe, which includes Travaux, MyHammer, MyBuilder, Werkspot and Instapro.

The Company in the U.S.

markets its services to consumers through search engine marketing, television advertising and affiliate agreements with third parties.

Pursuant to these affiliate agreements, third parties agree to advertise and promote Marketplace products and services and those of Marketplace service professionals on their platforms.

In exchange for these efforts, the Company generally pays these third parties a fixed fee when visitors from their platforms click through to one of our platforms and submit a valid service request through the Marketplace, or when visitors submit a valid service request on the affiliate platform and the affiliate transmits the service request to the Marketplace.

(i) North America (United States and Canada), which includes HomeAdvisor, Angie’s List, Handy, Fixd Repair, mHelpDesk, HomeStars, and CraftJack and (ii) Europe, which includes Travaux, MyHammer, MyBuilder, Werkspot and Instapro.

In the U.S., the Company markets its services to consumers through search engine marketing, television advertising and affiliate agreements with third parties.

The Company also markets its services to consumers through email, digital display advertisements, partnerships with other contextually related websites and, to a lesser extent, through relationships with certain retailers, direct mail and radio advertising.

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We have made, and expect to continue to make, substantial investments in digital and traditional advertising (with continued expansion into new and existing digital platforms) to consumers and service professionals to promote our products and services and to drive traffic to our various platforms and service professionals.

Operating Metrics:

In connection with the management of our businesses, we identify, measure and assess a variety of operating metrics.

The principal metrics we use in managing our businesses are set forth below:

Marketplace Revenue includes revenue from the HomeAdvisor and Handy domestic marketplace, including consumer connection revenue for consumer matches, revenue from completed jobs sourced through the HomeAdvisor and Handy platforms and service professional membership subscription revenue.

It excludes revenue from Angie's List, mHelpDesk, HomeStars, Fixd Repair and Felix.

Advertising & Other Revenue includes Angie’s List revenue (revenue from service professionals under contract for advertising and membership subscription fees from consumers) as well as revenue from mHelpDesk, HomeStars, Fixd Repair and, for periods prior to its sale on December 31, 2018, Felix.

Marketplace Service Requests are fully completed and submitted domestic customer service requests to HomeAdvisor and completed jobs sourced through the HomeAdvisor and Handy platforms.

Marketplace Paying Service Professionals ("Marketplace Paying SPs") are the number of HomeAdvisor and Handy domestic service professionals that paid for consumer matches or completed a job sourced through the HomeAdvisor and Handy platforms in the last month of the period and/or had an active HomeAdvisor membership subscription on the last day of the relevant period.

Defined Terms and Operating Metrics:

Unless otherwise indicated or as the context otherwise requires certain terms used in this annual report, which include the principal operating metrics we use in managing our business, as defined below:

• Marketplace Revenue primarily includes revenue from the HomeAdvisor and Handy domestic marketplaces, including consumer connection revenue for consumer matches, revenue from pre-priced jobs sourced through the HomeAdvisor and Handy platforms and service professional membership subscription revenue.

It excludes revenue from Angie’s List and HomeStars.

Effective January 1, 2020, Fixd Repair has been moved to Marketplace from Advertising and Other and prior year amounts have been reclassified to conform to the current year presentation.

• Advertising and Other Revenue includes Angie’s List revenue (revenue from service professionals under contract for advertising and membership subscription fees from consumers) as well as revenue from mHelpDesk and HomeStars.

• Marketplace Service Requests are fully completed and submitted domestic customer service requests to HomeAdvisor and includes pre-priced jobs sourced through the HomeAdvisor and Handy platforms.

• Marketplace Monetized Transactions are fully completed and submitted domestic customer service requests to HomeAdvisor that were matched to and paid for by a service professional and includes pre-priced jobs sourced through the HomeAdvisor and Handy platforms in the period.

• Marketplace Transacting Service Professionals (“Marketplace Transacting SPs”) are the number of HomeAdvisor and Handy domestic service professionals that paid for consumer matches or performed a job sourced through the HomeAdvisor and Handy platforms during the most recent quarter.

• Advertising Service Professionals (“Advertising SPs”) are the total number of Angie’s List service professionals under contract for advertising at the end of the period.

• Senior Notes - On August 20, 2020, ANGI Group, LLC (“ANGI Group”), a direct wholly-owned subsidiary of the Company, issued $500.0 million of its 3.875% Senior Notes due August 15, 2028, with interest payable February 15 and August 15 of each year, commencing February 15, 2021.

• ANGI Group Term Loan - due November 5, 2023.

Pursuant to the joinder agreement entered into on August 12, 2020, ANGI Group became the successor borrower under the ANGI Group Term Loan and ANGI Homeservices Inc.’s obligations thereunder were terminated.

The outstanding balance of the ANGI Group Term Loan as of December 31, 2020 is $220.0 million and quarterly principal payments are required through maturity.

In December 2020, ANGI Group prepaid its required quarterly principal payments for the year ending December 31, 2021 in the aggregate amount of $13.8 million.

At December 31, 2020 and 2019, the ANGI Group Term Loan bore interest at LIBOR plus 2.00% and 1.50%, respectively.

The interest rate was 2.16% and 3.25% at December 31, 2020 and 2019, respectively.

• ANGI Group Revolving Facility - The ANGI Group $250.0 million revolving credit facility expires on November 5, 2023.

Pursuant to the joinder agreement entered into on August 12, 2020, ANGI Group became the successor borrower under the ANGI Group Revolving Facility and ANGI Homeservices Inc.’s obligations thereunder were

At December 31, 2020 and 2019, there were no outstanding borrowings under the ANGI Group Revolving Facility.

The ANGI Group Revolving Facility and ANGI Group Term Loan are collectively referred to as the ANGI Group Credit Agreement.

Components of Results of Operations

Marketplace Revenue is primarily derived from (i) consumer connection revenue, which comprises fees paid by HomeAdvisor service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service) and fees from completed jobs sourced through the HomeAdvisor and Handy platforms, and (ii) HomeAdvisor service professional membership subscription fees.

Sources of Revenue

Marketplace Revenue is primarily derived from (i) consumer connection revenue, which comprises fees paid by HomeAdvisor service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service) and revenue from completed jobs sourced through the HomeAdvisor and Handy platforms, and (ii) HomeAdvisor service professional membership subscription fees.

Consumer connection revenue varies based upon several factors, including the service requested, product experience offered and geographic location of service.

Advertising & Other Revenue is primarily derived from (i) sales of time-based website, mobile and call center advertising to service professionals, (ii) membership subscription fees from consumers and (iii) service warranty subscription and other services.

Advertising and Other Revenue is primarily derived from (i) sales of time-based website, mobile and call center advertising to service professionals and (ii) membership subscription fees from consumers.

Prior to January 1, 2020, Handy recorded revenue on a net basis.

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Revenue from HomeAdvisor’s pre-priced product offering is also recorded on a gross basis effective January 1, 2020.

In addition to changing the presentation of revenue to gross from net, the timing of revenue recognition will change for pre-priced jobs and will be later than the timing of existing consumer connection revenue for HomeAdvisor because we will not be able to record revenue, generally, until the service professional completes the job on our behalf.

The change to gross revenue reporting for Handy and HomeAdvisor’s pre-priced product offering, effective January 1, 2020, resulted in an increase in revenue of $73.8 million during the year ended December 31, 2020.

Operating Costs and Expenses:

Cost of revenue - consists primarily of credit card processing fees, compensation expense and other employee-related costs at Fixd Repair for service work performed, hosting fees and traffic acquisition costs.

Traffic acquisition costs include amounts based on revenue share arrangements, which relate to Felix for periods prior to its sale.

• Cost of revenue - consists primarily of payments made to independent service professionals who perform work contracted under pre-priced arrangements through the HomeAdvisor and Handy platforms, credit card processing fees, compensation expense and other employee-related costs for service work performed, and hosting fees.

• Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including fees paid to search engines, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to our brands, compensation expense (including stock-based compensation expense) and other employee-related costs for our sales force and marketing personnel, and facilities costs.

General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources and customer service functions, fees for professional services (including transaction-related costs related to acquisitions), bad debt expense, software license and maintenance costs and facilities costs.

• General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources and customer service functions, fees for professional services (including transaction-related costs related to acquisitions), provision for credit losses, software license and maintenance costs and facilities costs.

Our customer service function includes personnel who provide support to our service professionals and consumers.

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Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is a non-GAAP financial measure.

See " Principles of Financial Reporting " for the definition of Adjusted EBITDA and a reconciliation of net

earnings (loss) attributable to ANGI Homeservices Inc.

shareholders to operating income (loss) to consolidated and combined Adjusted EBITDA for the years ended December 31, 2019 and 2018 .

The Combination

On September 29, 2017 , IAC/InterActiveCorp's ("IAC") HomeAdvisor business and Angie's List combined under a new publicly traded company called ANGI Homeservices Inc.

(the "Combination").

At December 31, 2019 , IAC owned 84.1% and 98.1% of the economic interest and voting interest, respectively, of ANGI Homeservices.

During the years ended December 31, 2018 and 2017 , the Company incurred $3.6 million and $44.1 million , respectively, in costs related to this transaction (including severance, retention, transaction and integration related costs).

In addition, the Company had deferred revenue write-offs of $5.5 million and $7.8 million during the years ended December 31, 2018 and 2017 , respectively.

The Company also incurred $ 32.6 million , $70.6 million and $122.1 million in stock-based compensation expense during the years ended December 31, 2019 , 2018 and 2017 , respectively, related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination, and the acceleration of certain converted equity awards resulting from the termination of Angie's List employees in connection with the Combination.

Stock-based compensation expense arising from the Combination is expected to be approximately $20 million in 2020.

See “ P rinciples of Financial Reporting ” for the definition of Adjusted EBITDA and a reconciliation of net earnings attributable to ANGI Homeservices Inc.

shareholders to operating (loss) income to consolidated Adjusted EBITDA for the years ended December 31, 2020 and 2019.

The following discussion should be read in conjunction with Item 8.

Consolidated and Combined Financial Statements and Supplementary Data .

For a discussion regarding our financial condition and results of operations for the year ended December 31, 2018 compared to the year ended December 31, 2017, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 1, 2019.

Overview—Consolidated Results

Years Ended December 31,

(Dollars in thousands)

North America

Operating Income (Loss):

North America

Adjusted EBITDA:

North America

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Revenue increased $194.0 million , or 17% , to $1.3 billion , driven by growth in North America of $187.7 million , or 18% and in Europe of $6.2 million , or 9% .

North America revenue growth was driven by Marketplace Revenue growth of $210.7 million , or 27% , reflecting, in part, the contribution from Handy, partially offset by a decrease of $23.0 million , or 8% , in Advertising & Other Revenue, driven principally by the sale of Felix on December 31, 2018, partially offset by the contribution from Fixd Repair.

Operating income decreased $25.3 million , or 40% , to $38.6 million , due primarily to a decrease in Adjusted EBITDA of $45.2 million , described below, and an increase of $15.6 million in depreciation, partially offset by decreases of $28.8 million in stock-based compensation expense and $6.7 million in amortization of intangibles.

The increase in depreciation was due to the development of capitalized software to support our products and services, as well as leasehold improvements related to additional office space.

The decrease in stock-based compensation expense was due primarily to a decrease of $38.0 million in modification and acceleration charges related to the Combination ( $32.6 million in 2019 compared to $70.6 million in 2018) and the reversal of $7.6 million in cumulative expense in 2019 related principally to certain performance-based awards that did not vest, partially offset by $17.1 million of expense related to awards issued in connection with the acquisitions of Handy and Fixd Repair and the issuance of new equity awards since 2018.

The decrease in amortization of intangibles was due primarily to lower expense from the Combination and certain intangible assets that became fully amortized in 2019, partially offset by an increase in amortization expense related to the acquisition of Handy.

Adjusted EBITDA decreased $45.2 million , or 18% , to $202.3 million , despite higher revenue, due primarily to higher selling and marketing expense as a percentage of revenue, an increase of $16.8 million in bad debt expense due to higher Marketplace Revenue, and investments in Fixd Repair and Handy, partially offset by the inclusion in 2018 of $9.0 million in costs related to the Combination (including deferred revenue write-offs, severance, retention and integration related costs) and $1.3 million in transaction-related costs related to the acquisition of Handy.

Consolidated Financial Statements and Supplementary Data .

For a discussion regarding our financial condition and results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 27, 2020.

COVID-19 Update

The impact on the Company from the COVID-19 outbreak, which has been declared a “pandemic” by the World Health Organization, has been varied.

The extent to which developments related to the COVID-19 outbreak 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 speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel, discretionary services (including those provided by certain of our service professionals) and other activity, and public reactions to these developments.

For example, these developments and measures have resulted in rapid and adverse changes to the operating environment in which we do business, as well as significant uncertainty concerning the near and long term economic ramifications of the COVID-19 outbreak, which have adversely impacted our ability to forecast our results and respond in a timely and effective manner to trends related to the COVID-19 outbreak.

The longer the global outbreak and measures designed to curb the spread of the virus continue to adversely affect levels of consumer confidence, discretionary spending and the willingness of consumers to interact with other consumers, vendors and service providers face-to-face (and in turn, adversely affect demand for the Company’s various products and services), the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations and the more limited will be the Company’s ability to try and make up for delayed or lost revenues.

When COVID-19 first impacted North America and Europe in the spring of 2020, the Company experienced a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects).

Toward the end of the spring of 2020, the Company experienced a rebound in service requests, exceeding pre-COVID-19 growth levels, driven by increased demand from homeowners who spent more time at home due to measures taken to reduce the spread of COVID-19.

The Company continued to experience strong demand for home services in the second half of 2020.

However, many service professionals’ businesses have been adversely impacted by labor and material constraints and many service professionals have limited capacity to take on new business, which has negatively impacted the Company's ability to monetize this increased level of service requests.

In addition, North America, which represents 95% of the Company’s revenue for the year ended December 31, 2020, experienced a significant resurgence of the COVID-19 virus with record levels of infections being reported during the fourth quarter of 2020 and continuing into the first quarter of 2021.

Europe, which is the second largest market for the Company’s products and services, has also seen a dramatic resurgence in COVID-19.

This resurgence and the measures designed to curb its spread could materially and adversely affect our business, financial condition and results of operations.

Results of Operations for the Years Ended December 31, 2020 and 2019

Years Ended December 31,

2020 $ Change % Change 2019

(Amounts in thousands)

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Total Marketplace Revenue 1,131,320 138,652 14% 992,668

Advertising & Other Revenue

Advertising and Other Revenue 264,108 6,884 3% 257,224

North America 1,395,428 145,536 12% 1,249,892

Europe 72,497 (3,816) (5)% 76,313

Total Revenue $ 1,467,925 $ 141,720 11% $ 1,326,205

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North America 95 % 94 %

Europe 5 % 6 %

Total Revenue 100 % 100 %

Years Ended December 31,

2020 Change % Change 2019

(Amounts in thousands)

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Marketplace Service Requests

Marketplace Paying SPs

Advertising Service Professionals

North America revenue increased $187.7 million , or 18% , driven by an increase in Marketplace Revenue of $210.7 million or 27% , partially offset by a decrease of $23.0 million , or 8% , in Advertising & Other Revenue.

The increase in Marketplace Revenue was due primarily to an increase in consumer connection revenue of $209.2 million , or 30% , which was driven by a 17% increase in Marketplace Service Requests to 27.4 million , reflecting, in part, the contribution from Handy.

The decrease in Advertising & Other Revenue was driven principally by the sale of Felix, partially offset by the contribution from Fixd Repair.

Europe revenue grew $6.2 million , or 9% , due to growth across several countries, partially offset by the unfavorable impact from the strengthening of the U.S.

32,412 5,036 18 % 27,376

Marketplace Monetized Transactions 16,672 604 4 % 16,068

Marketplace Transacting SPs 208 22 12 % 186

Advertising SPs 39 2 5 % 37

North America revenue increased $145.5 million, or 12%, driven by an increase in Marketplace Revenue of $138.7 million or 14%, in addition to an increase of $6.9 million, or 3%, in Advertising and Other Revenue.

The increase in Marketplace Revenue was primarily due to an increase in consumer connection revenue of $141.1 million, or 15%, which was driven by an 18% increase in Marketplace Service Requests to 32.4 million resulting in a 4% increase in Marketplace Monetized Transactions up to 16.7 million, and an increase in revenue of $73.8 million from the change to gross revenue reporting for Handy and HomeAdvisor’s pre-priced product offering, effective January 1, 2020.

Europe revenue decreased $3.8 million, or 5%, due primarily to lower monetization from transitioning the business in France to a common European technology platform with the businesses in the Netherlands and Italy, which began in early February 2020, partially offset by the favorable impact of the weakening of the U.S.

dollar relative to the Euro and British Pound.

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Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

Cost of revenue (exclusive of depreciation shown separately below)

Cost of revenue (exclusive of depreciation shown separately below) $ 173,281 $ 126,788 NM $ 46,493

As a percentage of revenue 12% 4%

North America cost of revenue decreased $9.6 million , or 18% , due primarily to a decrease of $23.9 million in traffic acquisition costs due to the sale of Felix, partially offset by $12.8 million of expense from the inclusion of Fixd Repair and Handy and an increase of $3.1 million in credit card processing fees due to higher Marketplace Revenue.

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North America cost of revenue increased $126.8 million, due primarily to the change from net to gross revenue reporting for Handy and HomeAdvisor's pre-priced product offering effective January 1, 2020, as well as growth of the pre-priced product offering itself.

Selling and marketing expense

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

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As a percentage of revenue 52% 55%

North America selling and marketing expense increased $190.5 million , or 38% , driven by an increase in advertising expense of $132.6 million , expense of $29.2 million from the inclusion of Handy and Fixd Repair, and an increase in compensation expense of $26.0 million .

The increase in advertising expense was due primarily to increased online marketing and television spend.

The efficiency of online marketing spend was negatively impacted by traffic sourced through Google.

In 2019, the proportion of service requests through Google free traffic declined while service requests through Google paid traffic increased.

In addition, paid service requests were considerably more expensive on average than in 2018.

We have implemented new processes in the second half of 2019 and we expect the year over year increase in 2020 to be more modest, particularly in the back half of the year.

As our new processes are fully in place, we are increasingly more focused on profitability targets of our paid service requests than the cost of each service request.

Compensation expense increased due primarily to growth in the sales force.

Europe selling and marketing expense increased $1.3 million , or 3% , driven by an increase in advertising expense of $3.3 million , partially offset by a decrease in compensation expense of $1.6 million .

North America selling and marketing expense increased $34.2 million, or 5%, driven by increases of $23.1 million in compensation expense, $7.1 million in outsourced personnel and consulting costs, $6.1 million in advertising expense and $1.5 million software license and maintenance costs, partially offset by a decrease of $3.8 million in travel related expenses resulting from the impact of COVID-19.

The increase in compensation expense was due primarily to increased commission expense.

The increase in outsourced personnel and consulting costs was due primarily to various sales initiatives at Handy.

Advertising expense increased due primarily to an increase in online marketing costs as the proportion of service requests from Google paid traffic increased.

The Company continues to benefit from the search engine marketing strategy that was implemented in the second half of 2019, which focuses on the lifetime profitability rather than the cost of each service request.

This increase in online marketing was partially offset by a decrease in television spend resulting from cost cutting initiatives due to the impact of COVID-19.

Europe selling and marketing expense decreased $4.8 million, or 11%, driven by decreases in advertising expense of $2.8 million and compensation expense of $1.5 million.

The decrease in advertising expense is due, in part, to mitigating the negative impact of COVID-19 on revenue.

The decrease in compensation expense is due primarily to a reduction in sales force headcount associated with the platform migration in France, partially offset by severance cost associated with headcount reductions in France.

General and administrative expense

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

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As a percentage of revenue 25% 26%

North America general and administrative expense increased $22.4 million , or 8% , due primarily to expense of $30.4 million from the inclusion of Handy and Fixd Repair, which includes $9.5 million of stock-based compensation expense related to awards issued in connection with these acquisitions, an increase of $15.4 million in bad debt expense due to higher Marketplace Revenue, and an increase of $2.9 million in software license and maintenance costs, partially offset by a decrease in compensation expense of $27.4 million , the inclusion in 2018 of $3.6 million in integration-related costs in connection with the Combination and the inclusion in 2018 of transaction-related costs related to the acquisition of Handy of $1.3 million.

The decrease in compensation expense was due primarily to a decrease of $36.7 million in stock-based compensation expense, partially offset by an increase in headcount resulting from existing business growth.

The decrease in stock-based compensation expense reflects a decrease of $33.8 million in expense due to the modification and acceleration charges related to the Combination ( $27.2 million in 2019 compared to $61.0 million in 2018 ) and the reversal of $7.3 million in cumulative expense in 2019 related to certain performance-based awards that did not vest, partially offset by the issuance of new equity awards since 2018.

Europe general and administrative expense increased $2.4 million , or 9% , due primarily to increases of $1.4 million in bad debt expense, $0.9 million related to the recently enacted French digital services tax, which is retroactive to the beginning of 2019 , and compensation expense of $0.9 million due, in part, to increased headcount, partially offset by lower stock-based compensation expense.

North America general and administrative expense increased $25.1 million, or 8%, due primarily to increases of $13.9 million in the provision for credit losses due to hig her Marketplace Revenue, the impact from COVID-19 on expected credit losses and anticipated losses from Advertising service professionals , $13.9 million i n compensation expense and $5.0 million in pr ofessional fees, partially offset by decreases of $3.1 million in tra vel related expenses resulting from the impact of COVID-19 an d $2.4 million in software license and maintenance costs.

The increase in compensation expense is due primarily to an increase of $17.2 million in stock-based compensation expense, partially offset by a decrease of $6.0 million in salary expense resulting from reduced headcount.

The increase in stock-based compensation expense is due primarily to the issuance of new equity awards since 2019, a modification charge of $14.1 million related to the departure of the president and chief operating officer of the Company in December 2020, and the reversal of $7.3 million in cumulative expense in 2019 related to certain performance-based awards that did not vest.

The increase in professional fees is due primarily to a n increase in legal fees and

outsourced personnel costs.

The increase in outsourced personnel costs is due primarily to an increase in call volume related to our customer service function.

Europe general and administrative expense increased $0.7 million, or 3%, due primarily to an increase of $1.2 million in compensation expense resulting from severance costs associated with headcount reductions in France and an increase of $0.1 million in the provision for credit losses due, in part, from the impact of COVID-19 on expected credit losses, partially offset by a $0.6 million in travel related expenses resulting from the impact of COVID-19.

Product development expense

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

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As a percentage of revenue 5% 5%

North America product development expense increased $1.8 million , or 3% , due primarily to $6.1 million of expense from the inclusion of Handy, partially offset by decreases in compensation expense of $2.1 million , software license and maintenance costs of $1.1 million and outsourced personnel costs of $0.8 million.

North America product development expense increased $4.0 million, or 7%, due primarily to increases in compensation expense of $3.0 million and software license and maintenance costs of $0.9 million.

Europe product development expense increased $0.6 million, or 6%, due primarily to an increase of $0.8 million in compensation expense due primarily to increased headcount.

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

Depreciation $ 52,621 $ 12,706 32% $ 39,915

As a percentage of revenue 4% 3%

North America depreciation increased $15.6 million , or 71% , due primarily to continued growth, including internally developed capitalized software and leasehold improvements.

Operating income (loss)

North America depreciation increased $11.0 million, or 29%, due primarily to continued growth, including the development of capitalized software to support our products and services, partially offset by a decrease in leasehold improvements.

Europe depreciation increased $1.7 million, or 69%, due primarily to continued growth, including the development of capitalized software to support products and services.

Operating (loss) income

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

North America $ 4,811 $ (44,156) (90)% $ 48,967

Europe $ (11,179) (857) (8)% (10,322)

Total $ (6,368) $ (45,013) NM $ 38,645

As a percentage of revenue —% 3%

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North America operating income decreased $29.1 million , due to the decrease in Adjusted EBITDA of $45.8 million , described below, and an increase of $15.6 million in depreciation, partially offset by decreases of $28.4 million in stock-based compensation expense and $3.8 million in amortization of intangibles.

The increase in depreciation was due primarily to the development of capitalized software to support our products and services, as well as leasehold improvements related to additional office space.

The decrease in amortization of intangibles was due primarily to lower expense from the Combination, partially offset by an increase in amortization expense related to the acquisition of Handy.

Europe operating loss decreased $3.9 million or 27% , due to the lower Adjusted EBITDA losses of $0.6 million , described below, and decreases of $2.9 million in amortization of intangibles and $0.4 million in stock-based compensation expense.

The decrease in amortization of intangibles was due primarily to certain intangible assets that became fully amortized in 2019 .

North America operating income decreased $44.2 million, due to the decrease in Adjusted EBITDA of $29.3 million, described below, and increases of $15.3 million in stock-based compensation expense and $11.0 million in depreciation, partially offset by a decrease of $11.5 million in amortization of intangibles.

The increase in stock-based compensation expense was due primarily to the issuance of new equity awards since 2019 and the factors described above in the general and administrative expense discussion.

The increase in depreciation was due primarily to the development of capitalized software to support our products and services, partially offset by a decrease in leasehold improvements.

The decrease in amortization of intangibles was due primarily to lower expense as certain intangible assets became fully amortized in 2019 and 2020.

Europe operating loss increased $0.9 million or 8%, due to an increase in Adjusted EBITDA loss of $0.2 million, described below, and decreases of $1.1 million in amortization of intangibles and $0.1 million in stock-based compensation expense.

At December 31, 2020, there is $77.2 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.2 years.

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Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

North America $ 178,854 $ (29,338) (14)% $ 208,192

Europe (6,050) (155) (3)% (5,895)

Total $ 172,804 $ (29,493) (15)% $ 202,297

As a percentage of revenue 12% 15%

For a reconciliation of net earnings (loss) attributable to ANGI Homeservices Inc.

shareholders to operating income (loss) to consolidated and combined Adjusted EBITDA, see " Principles of Financial Reporting ." For a reconciliation of operating income (loss) to Adjusted EBITDA for the Company's reportable segments, see " Note 12—Segment Information " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

North America Adjusted EBITDA decreased $45.8 million to $208.2 million , despite higher revenue, due primarily to higher selling and marketing expense as a percentage of revenue, an increase of $15.4 million in bad debt expense, due to higher Marketplace Revenue, and investments in Fixd Repair and Handy, partially offset by the inclusion in 2018 of $9.0 million in costs related to the Combination (including deferred revenue write-offs, severance, retention and integration-related costs) and $1.3 million in transaction-related costs related to the acquisition of Handy.

Europe Adjusted EBITDA loss decreased $0.6 million , or 9% , due primarily to the increase of $6.2 million in revenue, partially offset by increases in advertising expense of $3.3 million , bad debt expense of $1.4 million and $0.9 million related to the recently enacted French digital services tax.

For a reconciliation of net earnings attributable to ANGI Homeservices Inc.

shareholders to operating (loss) income to consolidated Adjusted EBITDA, see “ Principles of Financial Reporting .” For a reconciliation of operating (loss) income to Adjusted EBITDA for the Company’s reportable segments, see “ Note 12—Segment Information ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

North America Adjusted EBITDA decreased $29.3 million, or 14%, to $178.9 million, despite higher revenue, due primarily to an increases of $126.9 million in cost of revenue and $13.9 million in the provision for credit losses due primarily to the factors described above in the general and administrative expense discussion.

Europe Adjusted EBITDA loss increased $0.2 million, or 3%, to $6.1 million due primarily to the decrease of $3.8 million in revenue and an increase in the provision for credit losses of $0.1 million, partially offset by decreases in advertising expense of $2.8 million and travel related expenses resulting from the impact of COVID-19 of $1.0 million.

Interest expense

Interest expense-third party principally relates to interest on a term loan, which is due on November 5, 2023, and commitment fees on a five-year revolving credit facility of $250 million, which commenced on November 5, 2018.

Interest expense-related party relates to a loan from a foreign subsidiary of IAC, which was settled during the first quarter of 2019.

For a detailed description of long-term debt, net and long-term debt—related party, see " Note 7—Long-term Debt " and " Note 15—Related Party Transactions with IAC " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

Interest expense relates to interest on the Senior Notes and Term Loan and commitment fees on the undrawn Revolving Facility.

For a detailed description of long-term debt, net see “ Note 7—Long-term Debt ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

Interest expense—third-party

Interest expense—related party

Interest expense $ 14,178 $ 2,685 23% $ 11,493

Interest expense increased primarily due to the issuance of the Senior Notes in August 2020, partially offset by a decrease in interest expense on the Term Loan due primarily to lower interest rates and the decrease in the average outstanding balance of the Term Loan compared to the prior year period.

Other income, net

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

Other income, net $ 1,218 $ (5,276) (81)% $ 6,494

Other income, net in 2019 principally includes third party interest income of $8.0 million and net foreign currency exchange gains of $0.6 million , partially offset by a $1.8 million mark-to-market charge for an indemnification claim related to the Handy acquisition that will be settled in ANGI shares held in escrow.

Other income, net in 2018 includes a gain of $13.2 million related to the sale of Felix and third-party interest income of $4.8 million .

Other income, net in 2020 principally includes interest income of $1.7 million, partially offset by a $0.2 million mark-to-market charge for an indemnification claim related to the Handy acquisition that was settled in ANGI shares held in escrow.

Other income, net in 2019 principally included interest income of $8.0 million and net foreign currency exchange gains of $0.6 million, partially offset by a $1.8 million mark-to-market charge for an indemnification claim related to the Handy acquisition that was settled in ANGI shares held in escrow in 2020.

Income tax benefit

Years Ended December 31,

2020 $ Change % Change 2019

(Dollars in thousands)

Income tax benefit

Effective income tax rate

For further details of income tax matters, see " Note 3—Income Taxes " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

The income tax benefits in 2019 and 2018, despite pre-tax income, were due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards.

Income tax benefit $ 15,168 $ 13,500 NM $ 1,668

Effective income tax rate NM NM

For further details of income tax matters, see “ Note 3—Income Taxes ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

In 2020, the income tax benefit was due primarily to a reduction to deferred taxes due to the true-up of the state tax rate of an indefinite-lived intangible asset, a change in judgement about the valuation allowance at the beginning of the year, and excess tax benefits generated by the exercise and vesting of stock-based awards.

In 2019, the income tax benefit, despite pre-tax income, was due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards.

PRINCIPLES OF FINANCIAL REPORTING

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Adjusted EBITDA has certain limitations because it excludes the impact of these expenses.

The following table reconciles net earnings (loss) attributable to ANGI Homeservices Inc.

shareholders to operating income (loss) to consolidated and combined Adjusted EBITDA:

The following table reconciles net (loss) earnings attributable to ANGI Homeservices Inc.

shareholders to operating (loss) income to consolidated Adjusted EBITDA:

Years Ended December 31,

(In thousands)

Net earnings (loss) attributable to ANGI Homeservices Inc.

Net earnings (loss) attributable to noncontrolling interests

Net (loss) earnings attributable to ANGI Homeservices Inc.

shareholders $ (6,283) $ 34,829

Net earnings attributable to noncontrolling interests 2,123 485

Income tax benefit (15,168) (1,668)

Other income, net (1,218) (6,494)

Interest expense—related party

Interest expense—third-party

Operating income (loss)

Interest expense 14,178 11,493

Operating (loss) income (6,368) 38,645

Stock-based compensation expense 83,649 68,255

Depreciation 52,621 39,915

Amortization of intangibles 42,902 55,482

Adjusted EBITDA $ 172,804 $ 202,297

For a reconciliation of operating income (loss) to Adjusted EBITDA for the Company's reportable segments, see " Note 12—Segment Information " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

Non-Cash Expenses That Are Excluded from Non-GAAP Measure

Stock-based compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of stock appreciation rights, restricted stock units ("RSUs"), stock options and performance-based RSUs.

These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding using the treasury stock method.

Performance-based RSUs are included only to the extent the applicable performance condition(s) have been met (assuming the end of the reporting period is the end of the contingency period).

To the extent that stock-based awards are settled on a net basis, the Company remits the required tax-withholding amount from its current funds.

Depreciation is a non-cash expense relating to our capitalized software, leasehold improvements and equipment that is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.

For a reconciliation of operating (loss) income to Adjusted EBITDA for the Company’s reportable segments, see “ Note 12—Segment Information ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

Non-Cash Expenses That Are Excluded From Our Non-GAAP Measure

These expenses are not paid in cash and we view the economic costs of stock-based awards to be the dilution to our share base;

we also include the related shares in our fully diluted shares outstanding for GAAP earnings per share using the treasury stock method.

PSUs and market-based awards are included only to the extent the applicable performance condition(s) have been met (assuming the end of the reporting period is the end of the contingency period).

The Company is currently settling all stock-based awards on a net basis and remits the required tax-withholding amounts from its current funds.

Depreciation is a non-cash expense relating to our capitalized software, leasehold improvements and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.

Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions.

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An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value.

We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairment charges of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.

We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairments of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

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(In thousands)

Cash and cash equivalents:

Cash and cash equivalents and marketable debt securities:

United States

All other countries (a)

$ 793,679 $ 377,648

All other countries

19,026 12,917

Total cash and cash equivalents 812,705 390,565

Marketable securities (United States) 49,995 —

Total cash and cash equivalents and marketable securities

Total cash and cash equivalents and marketable debt securities $ 862,700 $ 390,565

Long-term debt:

Term Loan due November 5, 2023

Senior Notes $ 500,000 $ —

Term Loan $ 220,000 $ 247,500

Total long-term debt 720,000 247,500

current portion of Term Loan — 13,750

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Total long-term debt, net $ 712,277 $ 231,946

Long-term debt—related party

Total long-term debt—related party, net

_________________________________________________________________________

If needed for U.S.

operations, the cash and cash equivalents held by the Company's foreign subsidiaries could be repatriated without significant tax consequences.

For a detailed description of long-term debt, see " Note 7—Long-term Debt " and for a detailed description of long-term debt—related party, see " Note 15—Related Party Transactions with IAC " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

The Company’s international cash can be repatriated without significant tax consequences.

Cash Flow Information

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Net cash provided by operating activities consists of earnings adjusted for non-cash items and the effect of changes in working capital.

Non-cash adjustments include stock-based compensation expense, bad debt expense, amortization of intangibles, deferred income taxes, depreciation, and loss (gain) from the sale of a business.

Adjustments to earnings consist primarily of $68.3 million of stock-based compensation expense, $64.3 million of bad debt expense, $55.5 million of amortization of intangibles, and $39.9 million of depreciation.

Non-cash adjustments include stock-based compensation expense, provision for credit losses, amortization of intangibles, deferred income taxes, depreciation, and (gain) loss from the sale of a business.

Adjustments to earnings consist primarily of $83.6 million of stock-based compensation expense, $78.2 million of provision for credit losses, $52.6 million of depreciation, and $42.9 million of amortization of intangibles.

The decrease from changes in working capital consists primarily of an increase in accounts receivable of $79.8 million, partially offset by an increase in accounts payable and other liabilities of $17.2 million, and a decrease in other assets of $6.0 million.

The increase in accounts receivable is primarily due to revenue growth in North America.

The increase in accounts payable and other liabilities is

primarily due to an increase in accrued advertising and related payables.

The increase in accounts payable and other liabilities is due primarily to an increase in accrued advertising and related payables, and accrued compensation costs due, in part, to the deferral of payroll tax payments under the Coronavirus Aid, Relief, and Economic Security Act.

Net cash used in investing activities includes purchases of marketable debt securities of $100.0 million, capital expenditures of $52.5 million, primarily related to investments in the development of capitalized software to support the Company’s products and services, $2.3 million related to the acquisition of a business, partially offset by $50.0 million of proceeds from maturities of marketable debt securities, and $0.7 million of net proceeds received in 2020 related to the December 31, 2018 sale of Felix.

Net cash provided by financing activities includes $500.0 million of proceeds from the issuance of the ANGI Group Senior Notes and a $3.1 million distribution from IAC pursuant to the tax sharing agreement, net of $63.7 million for the repurchase of 8.5 million of ANGI common stock, on a settlement date basis, at an average price of $7.47 per share, $64.1 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $27.5 million of principal payments on the Term Loan, including prepayment of the $13.8 million of principal payments that were otherwise due in 2021 , $6.5 million of debt issuance costs, and $4.3 million for the purchase of redeemable noncontrolling interests.

The decrease from changes in working capital consists primarily of an increase in accounts receivable of $79.0 million and an increase in accounts payable and other liabilities of $13.6 million, and a decrease in other assets of $13.4 million.

The increase in accounts receivable is primarily due to revenue growth in North America.

The increase in accounts payable and other liabilities is primarily due to an increase in accrued advertising and related payables.

The decrease in other assets is due, in part, to a receipt of tenant improvement allowances.

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Net cash used in financing activities includes $56.9 million for the repurchase of 7.2 million of ANGI common stock, on a settlement date basis, at an average price of $7.90 per share, $35.3 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $13.8 million of principal payments on the Term Loan, and an $11.4 million distribution to IAC pursuant to the tax sharing agreement.

Adjustments to earnings consist primarily of $97.1 million of stock-based compensation expense, $62.2 million of amortization of intangibles, $47.2 million of bad debt expense and $24.3 million of depreciation, partially offset by $13.2 million in gain from sale of Felix and $8.4 million of deferred income taxes.

The deferred income tax benefit primarily relates to amortization of intangibles and stock-based compensation expense, partially offset by the utilization of net operating losses.

The decrease from changes in working capital consists primarily of an increase in accounts receivable of $47.7 million and an increase in other assets of $13.0 million.

The increase in accounts receivable is primarily due to revenue growth in North America.

The increase in other assets is due to increases in capitalized sales commissions and prepaid marketing.

Net cash used in investing activities includes capital expenditures of $47.0 million , primarily related to investments in the development of capitalized software to support the Company's products and services, leasehold improvements and computer hardware, and purchases (net of maturities) of marketable debt securities of $24.7 million, partially offset by $10.4 million in net proceeds from the sale of Angie's List's campus located in Indianapolis and $3.7 million in cash from the acquisition of Handy, net of cash consideration paid.

Net cash used in financing activities includes $29.8 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $13.8 million in principal payments on the Term Loan and $6.1 million for the purchase of noncontrolling interests, partially offset by $4.7 million in proceeds from the exercise of stock options.

Liquidity and Capital Resources

Prior to the Combination, the HomeAdvisor business received funding from IAC, including loans from certain IAC foreign subsidiaries, the proceeds of which were primarily used to fund acquisitions.

All outstanding long-term debt—related party amounts due between certain IAC subsidiaries and the HomeAdvisor business were settled prior to the completion of the Combination, with the exception of a promissory note payable to a foreign subsidiary of IAC, which was settled during the first quarter of 2019.

On November 1, 2017, the Company borrowed $275 million under a five -year term loan facility ("Term Loan").

On November 5, 2018, the Term Loan was amended and restated, and is now due on November 5, 2023.

Interest payments are due at least quarterly through the term of the loan.

Additionally, there are quarterly principal payments of $3.4 million through December 31, 2021 , $6.9 million for the one-year period ending December 31, 2022 and $10.3 million through maturity of the loan when the final amount of $161.6 million is due.

At December 31, 2019 , the Term Loan bears interest at LIBOR plus 1.50% , or 3.25% .

The spread over LIBOR is subject to change in future periods based on the Company's consolidated net leverage ratio.

On November 5, 2018, the Company entered into a five-year $250 million revolving credit facility (the "Credit Facility").

The annual commitment fee on undrawn funds is currently 25 basis points and is based on the consolidated net leverage ratio most recently reported.

Borrowings under the Credit Facility bear interest, at the Company's option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined based on the Company's consolidated net leverage ratio.

At December 31, 2019 , there were no outstanding borrowings under the Credit Facility.

Both the Term Loan and Credit Facility borrowings are guaranteed by the Company's wholly-owned material domestic subsidiaries and are secured by substantially all assets of the Company and the guarantors, subject to certain exceptions.

The terms of the Credit Facility and the Term Loan require ANGI to maintain a consolidated net leverage ratio of not more than 4.5 to 1.0 and a minimum interest coverage ratio of not less than 2.0 to 1.0 .

There are additional covenants under both the Term Loan and the Credit Facility that limit the ability of the Company and its subsidiaries to, among other things, incur indebtedness, pay dividends or make distributions.

On February 6, 2019, the Board of Directors of ANGI Homeservices authorized the Company to repurchase up to 15 million shares of its common stock.

Financing Transactions During the Year Ended December 31, 2020

On August 20, 2020, ANGI Group issued $500.0 million of its Senior Notes due August 15, 2028, with interest payable February 15 and August 15 of each year, commencing February 15, 2021.

The proceeds from the offering are being used for general corporate purposes, which may include potential future acquisitions and return of capital.

On August 12, 2020, ANGI Group entered into a joinder agreement with the Company, the other subsidiaries of the Company that are party to the credit agreement, and each of the other loan parties to the credit agreement, pursuant to which ANGI Group became the successor borrower under the credit agreement (“ANGI Group Credit Agreement”) and ANGI Homeservices Inc.’s obligations thereunder were terminated.

The ANGI Group Credit Agreement governs the ANGI Group Term Loan and ANGI Group Revolving Facility.

In addition, on August 12, 2020, the definition of “Permitted Unsecured Ratio Debt” in the credit agreement was amended to remove the requirement that guarantees of certain indebtedness of the borrower be subordinated to the guarantees under the ANGI Group Credit Agreement.

The $250.0 million ANGI Group Revolving Facility expires on November 5, 2023.

At December 31, 2020 and 2019, there were no outstanding borrowings under the Revolving Facility.

The annual commitment fee on undrawn funds is and is based on ANGI Group’s consolidated net leverage ratio most recently reported and was 35 basis points and 25 basis points at December 31, 2020 and 2019, respectively.

Borrowings under the Revolving Facility bear interest, at ANGI Group’s option, at either a base rate or LIBOR, in each case plus an applicable margin, which is determined based on ANGI Group’s consolidated net leverage ratio.

Share Repurchase Authorizations and Activity

On March 9, 2020 and February 6, 2019, the Board of Directors of ANGI Homeservices authorized the Company to repurchase up to 20 million and 15 million shares of its common stock, respectively.

During the year ended December 31, 2020, the Company repurchased 8.4 million shares, on a trade date basis, of its common stock at an average price of $7.45 per share, or $62.6 million in aggregate.

1 unchanged sentence

The Company had 18.9 million shares remaining in its share repurchase authorization as of February 4, 2021.

The Company may purchase shares over an indefinite period of time on the open market and in privately negotiated transaction, depending on those factors ANGI management deems relevant at any particular time, without limitation, market conditions, share price and future outlook.

The Company currently settles all equity awards on a net basis.

The Company may purchase shares over an indefinite

period of time on the open market and in privately negotiated transaction, depending on those factors ANGI management deems relevant at any particular time, without limitation, market conditions, share price and future outlook.

Outstanding Stock-based Awards

The Company may settle equity awards on a gross or a net basis upon factors deemed relevant at the time.

In connection with the Combination, previously issued stock appreciation rights related to the common stock of HomeAdvisor (US) were converted into ANGI stock appreciation rights that are settleable, at the Company’s option, on a net basis with ANGI remitting withholding taxes on behalf of the employee or on a gross basis with the Company issuing a sufficient number of Class A shares to cover the withholding taxes.

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If settled in IAC common stock, ANGI reimburses IAC in either cash or through the issuance of Class A shares to IAC.

Assuming all of the stock appreciation rights outstanding on January 31, 2020 were net settled on that date, ANGI would have issued 6.5 million Class A shares (either to award holders or to IAC as reimbursement) and ANGI would have remitted $52.3 million in cash for withholding taxes (assuming a 50% withholding rate).

Assuming all other ANGI equity awards outstanding on January 31, 2020 were net settled on that date, including stock options, RSUs and subsidiary-denominated equity, ANGI would have issued 5.1 million shares and would have remitted $41.2 million in cash for withholding taxes (assuming a 50% withholding rate).

The Company currently settles all equity awards on a net basis.

Pursuant to the employee matters agreement, in the event of a distribution of ANGI capital stock to IAC stockholders in a transaction intended to qualify as tax-free for U.S.

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Such authority includes (but is not limited to) the ability to convert all or part of IAC equity awards outstanding immediately prior to the distribution into equity awards denominated in shares of ANGI Class A Common Stock, which ANGI would be obligated to assume and which would be dilutive to ANGI’s stockholders.

The Company believes its existing cash, cash equivalents, available borrowings under the Credit Facility and expected positive cash flows generated from operations will be sufficient to fund its normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes on behalf of employees for net-settled stock-based awards, and investing and other commitments, for the foreseeable future.

The Company's 2020 capital expenditures are expected to be lower than 2019 capital expenditures of $68.8 million by approximately 10% , due primarily to lower capital expenditures related to leasehold improvements.

The Company's liquidity could be negatively affected by a decrease in demand for its products and services.

The following table summarizes the aggregate intrinsic value of all awards outstanding as of January 29, 2021;

assuming these awards were net settled on that date, the withholding taxes that would be paid by the Company on behalf of employees upon exercise or vesting that would be payable (assuming these equity awards are net settled with a 50% tax rate), and the shares that would have been issued are as follows:

Aggregate intrinsic value of awards outstanding

Estimated withholding taxes payable

Estimated shares to be issued

(In thousands)

(Shares in thousands)

ANGI stock appreciation rights $ 92,126 $ 46,063 3,295

Other ANGI equity awards (a)(b)

162,112 81,056 5,798

Total ANGI outstanding employee stock-based awards $ 254,238 $ 127,119 9,093

_______________

(a) The number of shares ultimately needed to settle these awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant subsidiary.

In addition, the number of shares required to settle these awards will be impacted by movement in the stock price of ANGI.

(b) Includes stock options, RSUs and subsidiary denominated equity.

For a detailed description of employee stock-based awards, see “ Note 11—Stock-based Compensation ” to the financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

Capital and Other Expenditures

The Company’s 2021 capital expenditures are expected to be higher than 2020 capital expenditures of $52.5 million by approximately 40% to 45%, due primarily to the development of capitalized software to support products and services.

The Company’s liquidity could be negatively affected by a decrease in demand for our products and services due to COVID-19 or other factors.

As described in the “COVID-19 Update” section above, to date, the COVID-19 outbreak and measures designed to curb its spread have had an impact on the Company’s business.

The longer the global outbreak and measures designed to curb the spread of the virus have adverse impacts on economic conditions generally, the greater the adverse impact is likely to be on the Company’s business, financial condition and results of operations.

The Company believes it has ample access to capital to navigate current and coming economic pressures.

The Company’s indebtedness could limit its ability to:

(i) obtain additional financing to fund working capital needs, acquisitions, capital expenditures or debt service or other requirements;

and (ii) use operating cash flow to make certain acquisitions or investments, in the event a default has occurred or, in certain circumstances, if its leverage ratio (as defined in the Credit Facility and Term Loan) exceeds the ratios set forth in the Term Loan.

and (ii) use operating cash flow to make certain acquisitions or investments, in the event a default has occurred or, in certain circumstances, if ANGI Group’s leverage ratio

exceeds the ratios set forth in the Term Loan.

There were no such limitations at December 31, 2020.

The Company’s ability to obtain additional financing may also be impacted by any disruptions in the financial markets caused by COVID-19 or otherwise.

The Company believes its existing cash, cash equivalents, marketable debt securities, available borrowings under the Revolving Facility and expected positive cash flows generated from operations will be sufficient to fund its normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes paid on behalf of employees for net-settled stock-based awards, and investing and other commitments, for the foreseeable future.

At December 31, 2020, IAC held all Class B shares of ANGI which represent 84.3% of the economic interest and 98.2% of the voting interest of ANGI.

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CONTRACTUAL OBLIGATIONS

AS OF DECEMBER 31, 2020

Payments Due by Period

Contractual Obligations (a)

Years More Than

5 Years Total

(in thousands)

Long-term debt (b)

$ 23,656 $ 267,414 $ 38,750 $ 558,125 $ 887,945

Operating leases (c)

22,421 42,037 39,187 43,376 147,021

Purchase obligations (d)

12,916 22 — — 12,938

Total contractual obligations $ 58,993 $ 309,473 $ 77,937 $ 601,501 $ 1,047,904

______________________________________________

The Company has excluded $4.0 million in unrecognized tax benefits from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid.

For additional information on income taxes, see " Note 3—Income Taxes " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

Long-term debt consists of contractual amounts due including interest on a variable rate instrument.

Long-term debt at December 31, 2019 consists of the $247.5 million Term Loan, bearing interest at LIBOR plus 1.50% , or 3.25% , at December 31, 2019 .

The Term Loan interest rate is subject to change in future periods based on the Company's consolidated net leverage ratio.

(a) The Company has excluded $5.3 million in unrecognized tax benefits and related interest from the table above as we are unable to make a reasonably reliable estimate of the period in which these liabilities might be paid.

For additional information on income taxes, see “ Note 3—Income Taxes ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

(b) Long-term debt at December 31, 2020 consists of $500.0 million of Senior Notes, which bear interest at a fixed rate of 3.875% and $220.0 million of the Term Loan, which bears interest at a variable rate.

The Term Loan bore interest at LIBOR plus 2.00%, or 2.16%, at December 31, 2020.

The amount of interest ultimately paid on the variable rate debt may differ based on changes in interest rates.

For additional information on long-term debt, see " Note 7—Long-term Debt " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

The Company leases office space, data center facilities and equipment used in connection with operations under various operating leases, the majority of which contain escalation clauses.

Operating leases obligations include legally binding minimum lease payments for leases signed but not yet commenced.

For additional information on long-term debt, see “ Note 7—Long-term Debt ” to the financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

(c) The Company leases office space, data center facilities and equipment used in connection with operations under various operating leases, the majority of which contain escalation clauses.

Operating lease obligations include legally binding minimum lease payments for leases signed but not yet commenced.

The Company is also committed to pay a portion of the related operating expenses under certain lease agreements.

These operating expenses are not included in the table above.

For additional information on operating leases, see " Note 13—Leases " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

The purchase obligations primarily consist of payments for advertising commitments and the Company's allocable share of a three year cloud computing arrangement between IAC and a third party provider.

For additional information on purchase obligations, see " Note 14—Commitments and Contingencies " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

For additional information on operating leases, see “ Note 13—Leases ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

(d) The purchase obligations primarily consist of payments for advertising commitments and the Company’s allocable share of a three year cloud computing arrangement between IAC and a third party provider.

For additional information on purchase obligations, see “ Note 14—Commitments and Contingencies ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

Off-Balance Sheet Arrangements

See the commitments section of " Note 14—Commitments and Contingencies " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data " for additional information on our off-balance sheet arrangements.

See the commitments section of “ Note 14—Commitments and Contingencies ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data ” for additional information on our off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following disclosure is provided to supplement the descriptions of ANGI Homeservices' accounting policies contained in " Note 2—Summary of Significant Accounting Policies " to the consolidated and combined financial statements included " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data " in regard to significant areas of judgment.

Management of the Company is required to make certain estimates, judgments and assumptions during the preparation of its consolidated and combined financial statements in accordance with GAAP.

These estimates, judgments and assumptions impact the reported amount of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities as of the date of the consolidated and combined financial statements.

The following disclosure is provided to supplement the descriptions of ANGI Homeservices’ accounting policies contained in “ Note 2—Summary of Significant Accounting Policies ” to the consolidated financial statements included “ Item 8.

Consolidated Financial Statements and Supplementary Data ” in regard to significant areas of judgment.

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 amount of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities.

Actual results could differ from these estimates.

Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on our consolidated and combined financial statements than others.

Because of the size of the financial statement elements to which they relate, some of our accounting policies and estimates have a more significant impact on our financial statements than others.

What follows is a discussion of some of our more significant accounting policies and estimates.

Allowance for Doubtful Accounts and Revenue Reserves

The Company makes judgments as to its ability to collect outstanding receivables and provides allowances when it has determined that all or a portion of the receivable will not be collected.

The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected.

The allowance for doubtful accounts is based upon a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history and the specific customer’s ability to pay its obligation to the Company.

The term between the Company issuance of an invoice and payment due date is not significant.

The Company also maintains allowances to reserve for potential credits issued to service professionals or other revenue adjustments.

Credit Loss and Revenue Reserves

The Company makes judgments as to its ability to collect outstanding receivables and provides reserves when it has determined that all or a portion of the receivable will not be collected.

The Company maintains a credit loss reserve to provide for the estimated amount of accounts receivable that will not be collected.

The credit loss reserve is based upon a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history and the specific customer’s ability to pay its obligation to the Company.

The term between the Company’s issuance of an invoice and payment due date is not significant.

The Company also maintains reserves for potential revenue adjustments.

The amounts of these reserves are based primarily upon historical experience.

The carrying value of the allowance for doubtful accounts and revenue reserves is $20.3 million and $16.6 million at December 31, 2019 and 2018 , respectively.

Bad debt expense was $64.3 million and $47.2 million for the years ended December 31, 2019 and 2018 , respectively.

The carrying value of the credit loss and revenue reserves is $27.8 million and $20.3 million at December 31, 2020 and 2019, respectively.

The provision for credit losses was $78.2 million and $64.3 million for the years ended December 31, 2020 and 2019, respectively.

Business Combinations

Acquisitions, which are generally referred to in GAAP as business combinations, are an important part of the Company’s growth strategy.

The Company invested $20.3 million and $167.8 million (including the value of ANGI Homeservices Class A common stock issued in connection with the acquisition of Handy) in acquisitions for the years ended December 31, 2019 and 2018 , respectively.

The Company invested $2.7 million and $20.3 million in acquisitions for the years ended December 31, 2020 and 2019, respectively.

The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill.

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Historically, when the Company’s acquisitions have been complementary to these reporting units the goodwill has been assigned to either the North America or Europe reporting unit.

for example, the goodwill related to the 2019 acquisition of Fixd Repair and the 2018 acquisition of Handy was assigned to North America.

The allocation of purchase price to the assets acquired and liabilities assumed based upon their fair values is complex because of the judgments involved in determining these values.

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Recoverability of Goodwill and Indefinite-Lived Intangible Assets

Goodwill is the Company’s largest asset with a carrying value of $884.0 million and $894.7 million at December 31, 2019 and 2018 , respectively.

The carrying value of goodwill is $891.8 million and $884.0 million at December 31, 2020 and 2019, respectively.

Indefinite-lived intangible assets, which consist of the Company’s acquired trade names and trademarks, have a carrying value of $171.9 million and $171.6 million at December 31, 2020 and 2019, respectively.

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GAAP provides a not all-inclusive set of examples of macroeconomic, industry, market and company specific factors for entities to consider in performing the qualitative assessment described above;

management considers the factors it deems relevant in making its more likely than not assessment.

While the Company also has the option under GAAP to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company's policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent.

If required, a quantitative test of the recovery of goodwill or indefinite-lived intangible asset involves a comparison of the estimated fair value of the Company reporting unit or indefinite-lived intangible asset that is being tested to its carrying value.

If the estimated fair value of a reporting unit or indefinite-lived intangible asset exceeds its carrying value, goodwill of the reporting unit or indefinite-lived intangible asset is not impaired.

If the carrying value of a reporting unit or indefinite-lived intangible asset exceeds its estimated fair value, an impairment equal to the excess is recorded.

For the Company’s annual goodwill test at October 1, 2019 , a qualitative assessment of the North America and Europe reporting units' goodwill was performed because the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values.

management considers the factors it deems relevant in making its more likely than not assessments.

While the Company also has the option under GAAP to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company’s policy is to quantitatively determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent.

If the conclusion of our qualitative assessment is that there are indicators of impairment and a quantitative test is required, the annual or interim quantitative test of the recovery of goodwill involves a comparison of the estimated fair value of the Company’s reporting unit that is being tested to its carrying value.

If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired.

If the carrying value of a reporting unit exceeds its estimated fair value, a goodwill impairment equal to the excess is recorded.

The Company’s annual assessment of the recovery of goodwill begins with management’s reassessment of its operating segments and reporting units.

A reporting unit is an operating segment or one level below an operating segment, which is referred to as a component.

This reassessment of reporting units is also made each time the Company changes its operating segments.

If the goodwill of a reporting unit is allocated to newly formed reporting units, the allocation is usually made to each reporting unit based upon their relative fair values.

For the Company’s annual goodwill test at October 1, 2020, a qualitative assessment of the North America and Europe reporting units’ goodwill was performed and the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values.

In the aggregate, ANGI Homeservices’ October 1, 2020 market capitalization of $5.5 billion exceeded its carrying value by approximately $4.3 billion.

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The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets.

The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company’s trade names and trademarks.

Assumptions used in the avoided royalty DCF analyses, including the discount rate

and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors.

The discount rates used in the Company’s annual indefinite-lived impairment assessment ranged from 11.5% to 27.5% in both 2019 and 2018 , and the royalty rates used ranged from 1.5% to 5.5% in both 2019 and 2018 .

The royalty rates used

in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company’s trade names and trademarks.

The future cash flows are based on the Company's most recent forecast and budget and, for years beyond the budget, the Company’s estimates, which are based, in part, on forecasted growth rates.

Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors.

The discount rates used in the Company’s annual indefinite-lived impairment assessment ranged from 11.5% to 15.0% in 2020 and 11.5% to 27.5% in 2019, and the royalty rates used ranged from 2.0% to 5.5% in 2020 and 1.5% to 5.5% in 2019.

The 2020 and 2019 annual assessments of goodwill and indefinite-lived intangible assets identified no impairments.

Recoverability and Estimated Useful Lives of Long-Lived Assets

We review the carrying value of all long-lived assets, comprising right-of-use assets ("ROU assets"), capitalized software, leasehold improvements and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

We review the carrying value of all long-lived assets, comprising of leased right-of-use assets (“ROU assets”), capitalized software, leasehold improvements and equipment and definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

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The Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings.

In all periods presented, current and deferred income tax provision/benefit have been computed for the Company on an as if standalone, separate return basis and payments to and refunds from IAC for the Company's share of IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying consolidated and combined statement of cash flows.

The tax sharing agreement between the Company and IAC governs the parties’ respective rights, responsibilities and obligations with respect to tax matters, including responsibility for taxes attributable to the Company, entitlement to refunds, allocation of tax attributes and other matters and, therefore, ultimately governs the amount payable to or receivable from IAC under the tax sharing agreement 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.

In all periods presented, the income tax provision and/or benefit has been computed for the Company on an as if standalone, separate return basis and payments to and refunds from IAC for the Company’s share of IAC’s consolidated federal and state tax return liabilities/receivables calculated on this basis have been reflected within cash flows from operating activities in the accompanying consolidated statement of cash flows.

Any differences between taxes currently payable to or receivable from IAC under the tax sharing agreement and the current tax provision computed on an if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital in the consolidated statement of shareholders’ equity and financing activities within the consolidated statement of cash flows.

The portion of the December 31, 2020 deferred tax assets that will be payable to IAC pursuant to the tax sharing agreement, upon realization, is $88.0 million.

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This measurement step is inherently difficult and requires subjective estimations of such amounts to determine the probability of various possible outcomes.

At December 31, 2019 and 2018 , we have unrecognized tax benefits, including interest, of $4.1 million and $2.4 million , respectively.

At December 31, 2020 and 2019, the Company has unrecognized tax benefits, including interest, of $5.3 million and $4.1 million, respectively.

We consider many factors when evaluating and estimating our tax positions and unrecognized tax benefits, which may require periodic adjustment and which may not accurately anticipate actual outcomes.

Although management currently believes changes to unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

The ultimate amount of deferred income tax assets realized and the amounts paid for deferred income tax liabilities and unrecognized tax benefits may vary from our estimates due to future changes in income tax law, state income tax apportionment or the outcome of any review of our tax returns by the various tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results.

The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience.

As of December 31, 2019 , the Company is in a three-year cumulative loss position because of costs incurred in connection with the Combination.

The Company’s most significant net deferred tax asset relates to U.S.

federal net operating loss ("NOL") carryforwards of $77.0 million.

Based upon current forecasts of future profits, the Company does not expect to be in a three-year cumulative loss position as of December 31, 2020.

The Company expects to generate future taxable income of at least $366.9 million prior to the expiration of these NOLs between 2030 and 2037 to fully realize this deferred tax asset.

Although management currently believes changes to unrecognized tax benefits from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

or the outcome of any review of our tax returns by the various tax authorities, as well as actual operating results of the Company that vary significantly from anticipated results.

Stock-Based Compensation

Stock-based compensation expense reflected in our consolidated and combined statement of operations consists of expense related to the Company's stock appreciation rights, stock options and RSUs, equity instruments denominated in shares of subsidiaries, and IAC denominated stock options and PSUs held by ANGI Homeservices employees.

The stock-based compensation expense reflected in our statements of operations includes expense related to the Company’s stock options, stock appreciation rights, RSU awards, including those that are linked to the achievement of the Company’s stock price, known as market-based awards (“MSUs”) and those that are linked to the achievement of a performance target, known as performance-based awards (“PSUs”), equity instruments denominated in shares of subsidiaries, and IAC denominated stock options.

The Company recorded stock-based compensation expense of $83.6 million and $68.3 million for the years ended December 31, 2020 and 2019, respectively.

Included in stock-based compensation expense in the years ended December 31, 2019 and 2018 is $32.6 million and $70.6 million , respectively, related to the modification of previously issued HomeAdvisor equity awards and previously issued Angie's List equity awards, both of which were converted into ANGI Homeservices' equity awards in the Combination, and the acceleration of certain converted equity awards resulting from the termination of Angie's List employees in connection with the Combination.

Included in stock-based compensation expense in the years ended December 31, 2020 and 2019 is $22.2 million and $32.6 million, respectively, related to the modification of previously issued HomeAdvisor equity awards and Angie’s List equity awards, both of which were converted into ANGI Homeservices’ equity awards when the businesses combined on September 29, 2017.

These modified awards continue to vest through the first quarter of 2021.

Additionally, in connection with the departure of the president and chief operating officer of the Company in December 2020, the Company recognized $14.1 million of expense related to the acceleration of vesting of his unvested stock appreciation rights and RSUs and the extension of the post-termination exercise period for his vested and exercisable stock appreciation rights.

Stock-based compensation at the Company is complex due to our desire to attract, retain, inspire and reward outstanding entrepreneurs and managers at each of our companies, including recently acquired companies, by allowing them to benefit directly from the value they help to create.

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These transactions may result in the modification of equity awards which creates additional complexity and additional stock-based compensation expense.

For example, the conversion of previously issued Home Advisor and Angie’s List awards into ANGI Homeservices awards in the Combination resulted in additional stock-based compensation expense.

In addition, our internal reorganizations can also lead to modifications of equity awards and result in additional complexity and stock-based compensation expense.

Also, our internal reorganizations can also lead to modifications of equity awards and result in additional complexity and stock-based compensation expense.

Finally, the means by which we settle our equity-based awards also introduces complexity into our financial reporting.

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These features increase the complexity of our earnings per share calculations.

The Company estimates the fair value of stock appreciation rights (including those modified in connection with the Combination) and stock options, including equity instruments denominated in shares of subsidiaries, using the Black-Scholes option-pricing model.

There were no stock options or stock appreciation rights granted by the Company for the years ended December 31, 2020, 2019 or 2018.

The Company estimates the fair value of modified stock appreciation rights and stock options, including equity instruments denominated in shares of subsidiaries, using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, the most significant of which include expected term, expected volatility of the underlying shares, risk-free interest rates and the expected dividend yield.

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For stock appreciation rights and stock options, including equity instruments denominated in shares of subsidiaries, the grant date fair value of the award is recognized as an expense on a straight-line basis, net of estimated forfeitures, over the requisite service period, which is the vesting period of the award.

The impact on stock-based compensation expense for the year ended December 31, 2019 , assuming a 1% increase in the risk-free interest rate, a 10% increase in the volatility factor and a one-year increase in the weighted average expected term of the outstanding awards would be an increase of $0.8 million , $1.9 million and $0.8 million , respectively.

The Company also issues RSUs, performance-based RSUs and market-based RSUs.

The Company also issues RSUs, PSUs and MSUs.

For RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying ANGI Homeservices common stock and expensed as stock-based compensation expense over the vesting term.

For performance-based RSUs, the value of the instrument is measured at the grant date as the fair value of the underlying ANGI Homeservices common stock and expensed as stock-based compensation over the vesting

term when the performance targets are considered probable of being achieved.

For market-based RSUs, a lattice model is used to estimate the value of the awards.

For PSUs, the value of the instrument is measured at the grant date as the fair value of the underlying ANGI Homeservices common stock and expensed as stock-based compensation over the vesting term when the performance targets are considered probable of being achieved.

For MSUs, a lattice model is used to estimate the value of the awards.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see " Note 2—Summary of Significant Accounting Policies " to the consolidated and combined financial statements included in " Item 8.

Consolidated and Combined Financial Statements and Supplementary Data ."

For a discussion of recent accounting pronouncements, see “ Note 2—Summary of Significant Accounting Policies ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis