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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-02-16 compared with 2020-02-28 · 633 added, 767 removed, 898 unchanged (61% of the section changed)

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The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s long-term debt, including current maturities.

At December 31, 2019 , the $247.5 million outstanding balance on the Company's Term Loan bears interest at LIBOR plus 1.50% .

As of December 31, 2019 , the rate in effect was 3.25% .

If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the Term Loan would increase or decrease by $2.5 million .

At December 31, 2020, the principal amount of the Company’s outstanding debt totals $720.0 million, $500.0 million of which is the ANGI Group Senior Notes, which bears interest at a fixed rate, and $220.0 million of which is the ANGI Group Term Loan, which bears interest at a variable rate.

If market rates decline, the Company runs the risk that the related required payments of the ANGI Group Senior Notes will exceed those based on market rates.

A 100-basis point increase or decrease in the level of interest rates would, respectively, decrease or increase the fair value of the fixed-rate debt by $32.3 million.

Such potential increase or decrease in fair value is based on certain simplifying assumptions, including an immediate increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period.

At December 31, 2020, the outstanding balance of the ANGI Group Term Loan of $220.0 million bore interest at LIBOR plus 2.00%, or 2.16%.

If LIBOR were to increase or decrease by 100 basis points, then the annual interest expense on the ANGI Group Term Loan would increase or decrease by $2.2 million.

Foreign Currency Exchange Risk

We conduct business in certain foreign markets, principally in the European Union, and, as a result, are exposed to foreign exchange risk for both the Euro and British Pound ("GBP").

For the years ended December 31, 2019 , 2018 and 2017 , international revenue accounted for 7% , 7% and 9% , respectively, of our consolidated and combined revenue.

The Company's primary exposure to foreign currency exchange risk relates to investments in foreign subsidiaries that transact business in a functional currency other than the U.S.

As a result, as foreign currency exchange rates fluctuate, translation of the statement of operations of the Company's international businesses into U.S.

The Company has operations in certain foreign markets, primarily in various jurisdictions within the European Union and the United Kingdom.

The Company has exposure to foreign currency exchange risk related to its foreign subsidiaries that transact business in a functional currency other than the U.S.

As a result, as foreign currency exchange rates fluctuate, the translation of the statement of operations of the Company’s international businesses into U.S.

dollars affects year-over-year comparability of operating results.

Foreign currency exchange gains and losses included in the Company's earnings for the years ended December 31, 2019 , 2018 and 2017 are gains and (losses) of $0.6 million , $(0.2) million and $0.9 million , respectively.

Historically, foreign currency exchange gains and losses have not been material to the Company.

As a result, historically, we have not hedged any foreign currency exposures.

Our continued international expansion increases our exposure to foreign exchange rate fluctuations and as a result, such fluctuations could have a significant impact on our future results of operations.

Consolidated and Combined Financial Statements and Supplementary Data

In addition, certain of the Company’s U.S.

operations have customers in international markets.

International revenue, which is measured based upon where the customer is located, accounted for 6%, 7%, and 7% for the years ended December 31, 2020, 2019 and 2018, respectively.

The company is also exposed to foreign currency transaction gains and losses to the extent it or its subsidiaries conduct transactions in and/or have assets and/or liabilities that are denominated in a currency other than the entity’s functional currency.

The Company recorded foreign exchange gains and (losses) of $(0.1) million, $0.6 million, and $(0.2) million for the year ended December 31, 2020, 2019 and 2018, respectively.

The Company’s exposure to foreign currency exchange gains or losses have not been material to the Company, therefore, the Company has not hedged any foreign currency exposures.

Any growth and expansion of our international operations increases our exposure to foreign exchange rate fluctuations.

Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could have a significant impact on our future results of operations.

Consolidated Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheet of ANGI Homeservices Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018 , and the related consolidated and combined statements of operations, comprehensive operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2019 , and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 16, 2021 expressed an unqualified opinion thereon.

Adoption of Accounting Standards Update

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases, which generally requires all leases be recognized in the statement of financial position, in 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842) .

The Company adopted the standard effective January 1, 2019 on a prospective basis.

Basis for Opinion

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Stock-Based Compensation

Description of

During the year ended December 31, 2019, the Company recorded stock-based compensation expense of $68.3 million.

As discussed in Note 11 to the consolidated and combined financial statements, the Company issues various types of equity awards, including stock options, restricted stock units, performance-based stock units, market-based awards and equity instruments denominated in the shares of certain subsidiaries.

Auditing the Company's accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the subjectivity of assumptions used to value stock-based awards (e.g.

expected term), the frequent use of performance-based vesting conditions and the existence of awards denominated in the shares of certain subsidiaries.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over stock-based compensation.

the Matter During the year ended December 31, 2020, the Company recorded stock-based compensation expense of $83.6 million.

As discussed in Note 11 to the consolidated financial statements, the Company issues various types of equity awards, including stock options, restricted stock units, performance-based stock units, market-based awards and equity instruments denominated in the shares of certain subsidiaries.

Auditing the Company’s accounting for stock-based compensation required complex auditor judgment due to the number and the variety of the types of equity awards, the prevalence of modifications, the subjectivity of assumptions used to value stock-based awards, the use of market-based vesting conditions and the existence of awards denominated in the shares of certain subsidiaries.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over stock-based compensation.

For example, we tested controls over the Company’s process to assess the completeness of its share-based awards and for measuring and recording stock-based compensation, including management’s review of the underlying calculations, the significant assumptions used in valuing certain awards and related valuation reports prepared by its specialists.

To test stock-based compensation expense, we performed audit procedures that included, among others, assessing the completeness of the awards granted and evaluating the methodologies used to estimate the fair value of the awards granted and the significant assumptions described above.

Our procedures also included, evaluating the key terms and conditions of awards granted to assess the accounting treatment for a sample of awards and testing the clerical accuracy of the calculation of the expense recorded.

Our procedures also included, evaluating the key terms and conditions of awards granted to assess the accounting treatment for a sample of awards, testing the clerical accuracy of the calculation of the expense recorded and assessing the Company’s accounting for award modifications.

Additionally, for certain awards issued by the Company, we involved our internal valuation specialists to assess the valuation methodologies and assumptions used in estimating the fair value of the awards.

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Cash and cash equivalents $ 812,705 $ 390,565

Marketable securities

Accounts receivable, net of allowance and reserves of $20,293 and $16,603, respectively

Marketable debt securities 49,995 —

Accounts receivable, net of reserves of $ 27,839 and $ 20,293 , respectively

43,148 41,669

Other current assets 71,958 67,759

Total current assets 977,806 499,993

Right-of-use assets, net

Capitalized software, leasehold improvements and equipment, net

Intangible assets, net

Deferred income taxes

Capitalized software, leasehold improvements and equipment, net of amortization and depreciation 108,842 103,361

Goodwill 891,797 883,960

Intangible assets, net of amortization 209,717 251,725

Other non-current assets 180,020 182,572

TOTAL ASSETS $ 2,368,182 $ 1,921,611

LIABILITIES AND SHAREHOLDERS’ EQUITY

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Long-term debt, net 712,277 231,946

Long-term debt—related party, net

Deferred income taxes 1,296 3,441

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Additional paid-in capital 1,379,469 1,357,075

Retained earnings (accumulated deficit)

Accumulated other comprehensive loss

Treasury stock, 7,326 and no shares, respectively

Retained earnings 9,749 16,032

Accumulated other comprehensive income (loss) 4,637 ( 1,379 )

Treasury stock, 15,905 and 7,326 , respectively

( 122,081 ) ( 57,949 )

Total ANGI Homeservices Inc.

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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

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

$ 2,368,182 $ 1,921,611

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

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

CONSOLIDATED STATEMENT OF OPERATIONS

Years Ended December 31,

2020 2019 2018

(In thousands, except per share data)

Revenue $ 1,467,925 $ 1,326,205 $ 1,132,241

Operating costs and expenses:

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Product development expense 68,803 64,200 61,143

Depreciation 52,621 39,915 24,310

Amortization of intangibles 42,902 55,482 62,212

Total operating costs and expenses 1,474,293 1,287,560 1,068,335

Operating income (loss)

Interest expense—third-party

Interest expense—related party

Operating (loss) income ( 6,368 ) 38,645 63,906

Interest expense ( 14,178 ) ( 11,493 ) ( 11,623 )

Other income, net 1,218 6,494 17,741

Earnings (loss) before income taxes

(Loss) earnings before income taxes ( 19,328 ) 33,646 70,024

Income tax benefit 15,168 1,668 7,483

Net earnings (loss)

Net (earnings) loss attributable to noncontrolling interests

Net earnings (loss) attributable to ANGI Homeservices Inc.

Net (loss) earnings ( 4,160 ) 35,314 77,507

Net earnings attributable to noncontrolling interests ( 2,123 ) ( 485 ) ( 189 )

Net (loss) earnings attributable to ANGI Homeservices Inc.

shareholders $ ( 6,283 ) $ 34,829 $ 77,318

Per share information attributable to ANGI Homeservices Inc.

shareholders:

Basic earnings (loss) per share

Diluted earnings (loss) per share

Basic (loss) earnings per share $ ( 0.01 ) $ 0.07 $ 0.16

Diluted (loss) earnings per share $ ( 0.01 ) $ 0.07 $ 0.15

Stock-based compensation expense by function:

Cost of revenue

Selling and marketing expense $ 4,662 $ 3,717 $ 3,368

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Total stock-based compensation expense $ 83,649 $ 68,255 $ 97,078

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

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

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE OPERATIONS

CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS

Years Ended December 31,

2020 2019 2018

(In thousands)

Net earnings (loss)

Net (loss) earnings $ ( 4,160 ) $ 35,314 $ 77,507

Other comprehensive income (loss):

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Total other comprehensive income (loss) 6,827 396 ( 4,859 )

Comprehensive income (loss)

Comprehensive income 2,667 35,710 72,648

Components of comprehensive (income) loss attributable to noncontrolling interests:

Net (earnings) loss attributable to noncontrolling interests

Net earnings attributable to noncontrolling interests ( 2,123 ) ( 485 ) ( 189 )

Change in foreign currency translation adjustment attributable to noncontrolling interests ( 811 ) 86 766

Comprehensive (income) loss attributable to noncontrolling interests ( 2,934 ) ( 399 ) 577

Comprehensive income (loss) attributable to ANGI Homeservices Inc.

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

Comprehensive (loss) income attributable to ANGI Homeservices Inc.

shareholders $ ( 267 ) $ 35,311 $ 73,225

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

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF SHAREHOLDERS' EQUITY

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Years Ended December 31, 2020, 2019 and 2018

ANGI Homeservices Inc.

Shareholders' Equity and Invested Capital

Shareholders’ Equity

Class B Convertible

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ANGI Homeservices Inc.

Shareholders' Equity and Invested Capital

Shareholders’ Equity

Comprehensive

(Loss) Income

Income (Loss) Total

Shareholders’

Noncontrolling

Additional Paid-in Capital

(Accumulated Deficit) Retained Earnings

Noncontrolling

Interests Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Treasury

Stock Noncontrolling

$ Shares $ Shares $ Shares

(In thousands)

Balance as of December 31, 2017 $ 21,300 $ 63 62,818 $ 415 415,186 $ — — $ 1,112,400 $ ( 121,764 ) $ 2,232 $ — $ 993,346 $ 9,748 $ 1,003,094

Net (loss) earnings

Other comprehensive income

Net increase in IAC’s investment in HomeAdvisor prior to the Combination

Contribution of IAC's HomeAdvisor business to ANGI Homeservices Inc.

and Combination with Angie's List

Stock-based compensation expense

Issuance of common stock pursuant to stock-based awards, net of withholding taxes

Issuance of common stock to IAC pursuant to the employee matters agreement

Redeemable noncontrolling interests created in acquisitions

Purchase of noncontrolling interests

Adjustment of redeemable noncontrolling interests to fair value

Balance as of December 31, 2017

Cumulative effect of adoption of ASU No.

— — — — — — — — 25,649 — — 25,649 — 25,649

Net (loss) earnings ( 146 ) — — — — — — — 77,318 — — 77,318 335 77,653

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Purchase of noncontrolling interests ( 4,825 ) — — — — — — — — — — — ( 1,236 ) ( 1,236 )

Adjustment of redeemable noncontrolling interests to fair value 1,244 — — — — — — ( 1,244 ) — — — ( 1,244 ) — ( 1,244 )

Other 34 — — — — — — ( 2,581 ) — — — ( 2,581 ) 383 ( 2,198 )

Balance as of December 31, 2018 $ 18,163 $ 81 80,515 $ 421 421,118 $ — — $ 1,333,097 $ ( 18,797 ) $ ( 1,861 ) $ — $ 1,312,941 $ 9,046 $ 1,321,987

Net earnings 142 — — — — — — — 34,829 — — 34,829 343 35,172

Other comprehensive income (loss) 39 — — — — — — — — 482 — 482 ( 125 ) 357

Stock-based compensation expense 148 — — — — — — 65,815 — — — 65,815 — 65,815

Issuance of common stock pursuant to stock-based awards, net of withholding taxes — 6 6,492 — — — — ( 32,963 ) — — — ( 32,957 ) — ( 32,957 )

Issuance of common stock to IAC pursuant to the employee matters agreement — — — 1 452 — — ( 1,766 ) — — — ( 1,765 ) — ( 1,765 )

Purchase of treasury stock — — — — — — — — — — ( 57,949 ) ( 57,949 ) — ( 57,949 )

Adjustment pursuant to the tax sharing agreement — — — — — — — 1,151 — — — 1,151 — 1,151

Purchase of redeemable noncontrolling interests ( 71 ) — — — — — — — — — — — — —

Adjustment of redeemable noncontrolling interests to fair value 8,242 — — — — — — ( 8,242 ) — — — ( 8,242 ) — ( 8,242 )

Other — — — — — — — ( 17 ) — — — ( 17 ) — ( 17 )

Balance as of December 31, 2019 $ 26,663 $ 87 87,007 $ 422 421,570 $ — — $ 1,357,075 $ 16,032 $ ( 1,379 ) $ ( 57,949 ) $ 1,314,288 $ 9,264 $ 1,323,552

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Continued)

Years Ended December 31, 2020, 2019 and 2018

ANGI Homeservices Inc.

Shareholders' Equity and Invested Capital

Shareholders’ Equity

Class B Convertible

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ANGI Homeservices Inc.

Shareholders' Equity and Invested Capital

Shareholders’ Equity

Comprehensive

(Loss) Income

Income (Loss) Total

Shareholders’

Noncontrolling

Additional Paid-in Capital

(Accumulated Deficit) Retained Earnings

Noncontrolling

Interests Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Treasury

Stock Noncontrolling

$ Shares $ Shares $ Shares

(In thousands)

Adjustment of redeemable noncontrolling interests to fair value

Balance as of December 31, 2018

Other comprehensive income (loss)

Net earnings 767 — — — — — — — ( 6,283 ) — — ( 6,283 ) 1,356 ( 4,927 )

Other comprehensive income 439 — — — — — — — — 6,016 — 6,016 372 6,388

Stock-based compensation expense 15 — — — — — — 85,267 — — — 85,267 — 85,267

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Adjustment of redeemable noncontrolling interests to fair value 1,645 — — — — — — ( 1,645 ) — — — ( 1,645 ) — ( 1,645 )

Purchase of noncontrolling interests — — — — — — — — — — — — — —

Other — — — — — — — ( 692 ) — — — ( 692 ) 690 ( 2 )

Balance as of December 31, 2020 $ 26,364 $ 94 94,238 $ 422 421,862 $ — — $ 1,379,469 $ 9,749 $ 4,637 $ ( 122,081 ) $ 1,272,290 $ 10,567 $ 1,282,857

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

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

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CASH FLOWS

Years Ended December 31,

2020 2019 2018

(In thousands)

Cash flows from operating activities:

Net earnings (loss)

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Net (loss) earnings $ ( 4,160 ) $ 35,314 $ 77,507

Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:

Stock-based compensation expense 83,649 68,255 97,078

Amortization of intangibles 42,902 55,482 62,212

Bad debt expense

Provision for credit losses 78,229 64,278 47,242

Depreciation 52,621 39,915 24,310

Deferred income taxes ( 15,278 ) ( 3,250 ) ( 8,368 )

Loss (gain) from the sale of a business 273 218 ( 13,237 )

Revenue reserves 10,251 5,934 221

Other adjustments, net 1,598 2,053 ( 740 )

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Accounts receivable ( 79,830 ) ( 78,954 ) ( 47,686 )

Other assets 5,987 13,382 ( 12,959 )

Accounts payable and other liabilities 17,206 13,627 ( 576 )

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Capital expenditures ( 52,488 ) ( 68,804 ) ( 46,976 )

Proceeds from maturities of marketable debt securities

Purchases of marketable debt securities ( 99,977 ) — ( 59,671 )

Proceeds from maturities of marketable debt securities 50,000 25,000 35,000

Net proceeds from the sale of a business 731 23,615 —

Proceeds from sale of fixed assets 20 — 10,412

Other, net 24 ( 103 ) ( 25 )

Net cash used in investing activities ( 103,954 ) ( 40,633 ) ( 57,591 )

Cash flows from financing activities:

Borrowings under term loan

Proceeds from the issuance of Senior Notes 500,000 — —

Principal payments on Term Loan ( 27,500 ) ( 13,750 ) ( 13,750 )

Debt issuance costs ( 6,484 ) — ( 2,168 )

Proceeds from issuance of related party debt

Principal payments on related party debt — ( 1,008 ) ( 1,904 )

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Withholding taxes paid on behalf of employees on net settled stock-based awards ( 64,079 ) ( 35,284 ) ( 29,844 )

Transfers from IAC for periods prior to the Combination

Distribution to IAC pursuant to tax sharing agreement

Distribution from (to) IAC pursuant to tax sharing agreement 3,071 ( 11,355 ) —

Purchase of noncontrolling interests ( 4,281 ) ( 71 ) ( 6,061 )

Net cash (used in) provided by financing activities

Other, net — ( 3,732 ) 13

Net cash provided (used in) by financing activities 337,053 ( 121,532 ) ( 49,021 )

Total cash provided 421,518 51,996 117,088

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Cash and cash equivalents and restricted cash at end of period $ 813,561 $ 391,478 $ 338,821

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

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

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1— ORGANIZATION

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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.

On September 29, 2017 , IAC/InterActiveCorp's ("IAC") HomeAdvisor business and Angie's List Inc.

("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.

See " Note 4—Business Combinations " for additional information related to the Combination.

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, which connects consumers with service professionals for local services through a nationwide online directory of service professionals in over 700 service categories, as well as provides consumers with valuable tools, services and content, including verified reviews of local service professionals, to help them research, shop and hire for local services.

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

("Handy"), a leading platform for connecting individuals looking for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals.

Together, 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, a provider of cloud-based field service software for small to mid-size businesses.

Prior to its sale on December 31, 2018, the Company also operated Felix, a pay-per-call advertising service business that was included in our North America segment.

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.

The Company has established category-transforming products with brands such as HomeAdvisor, Angie’s List, and Handy.

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

Handy Technologies, Inc.

(“Handy”), is a leading platform for connecting individuals looking for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals.

Together, the Company refers to the HomeAdvisor and Handy businesses in the United States as the “Marketplace”.

The Company also owns and operates 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, as well as provides consumers with valuable tools, services and content, including verified reviews of local service professionals, to help them research, shop and hire for local services.

In addition to its market-leading U.S.

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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 its sale on December 31, 2018, and (ii) Europe, which includes Travaux, MyHammer, MyBuilder, Werkspot and Instapro.

As used herein, "ANGI Homeservices," the "Company," "ANGI," "we," "our" or "us" and similar terms refer to ANGI Homeservices Inc and its subsidiaries (unless the context requires otherwise).

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

As used herein, “ANGI Homeservices,” the “Company,” “ANGI,” “we,” “our” or “us” and similar terms refer to ANGI Homeservices Inc.

and its subsidiaries (unless the context requires otherwise).

At December 31, 2020, IAC owned 84.3 % and 98.2 % of the economic interest and voting interest, respectively, of ANGI Homeservices.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The Company prepares its consolidated and combined financial statements in accordance with U.S.

The Company prepares its consolidated financial statements in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The Company's financial statements were prepared on a consolidated basis beginning September 29, 2017 and on a combined basis for periods prior thereto.

The difference in presentation is due to the fact that the final steps of the legal reorganization, through which IAC contributed the HomeAdvisor business and cash to fund the cash consideration paid in the Combination to ANGI Homeservices Inc., were not completed, as planned, until immediately prior to September 29, 2017 .

The preparation of the financial statements on a combined basis for periods prior thereto allows for the financial statements to be presented on a consistent basis for all periods presented.

The combined financial statements have been prepared on a standalone basis and are derived from the historical consolidated financial statements and accounting records of IAC through September 29, 2017 .

The combined financial statements reflect the results of operations and cash flows of the businesses comprising the HomeAdvisor business since their respective dates of acquisition by IAC.

The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

The combined financial statements reflect the allocation to ANGI Homeservices of certain IAC corporate expenses relating to the HomeAdvisor business based on the historical consolidated financial statements and accounting records of IAC through September 29, 2017 .

For the purpose of these financial statements, income taxes have been computed as if ANGI Homeservices filed tax returns on a standalone, separate basis.

All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated.

All intercompany transactions between (i) ANGI Homeservices and (ii) IAC and its subsidiaries, with the exception of a promissory note payable to a foreign subsidiary of IAC, are considered to be effectively settled for cash at the time the transaction is recorded.

The promissory note payable to a foreign subsidiary of IAC is included in "Long-term debt—related party" in the accompanying consolidated balance sheet and was settled during the first quarter of 2019.

See “ Note 15—Related Party Transactions with IAC ” for additional information on transactions between ANGI Homeservices and IAC.

In the opinion of management, the assumptions underlying the historical consolidated and combined financial statements, including the basis on which the expenses have been allocated from IAC, are reasonable.

However, the allocations may not reflect the expenses that we may have incurred as a standalone public company for the periods presented.

In the opinion of management, the assumptions underlying the historical consolidated financial statements, including the basis on which the expenses have been allocated from IAC, are reasonable.

However, the allocations may not reflect all of the expenses that ANGI Homeservices may have incurred as a standalone public company for the periods presented.

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 early 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 last 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.

Accounting Estimates

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

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

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

Actual results could differ from these estimates.

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the fair values of cash equivalents and marketable debt securities;

the carrying value of accounts receivable, including the determination of the allowance for doubtful accounts;

the carrying value of accounts receivable, including the determination of the credit loss reserve;

the determination of revenue reserves;

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2014-09 was that commissions paid to employees pursuant to certain sales incentive programs, which represent the incremental direct costs of obtaining a service professional contract, are now capitalized and amortized over the estimated life of a service professional (also referred to as the estimated customer relationship period).

These costs were expensed as incurred prior to January 1, 2018.

The cumulative effect of the adoption of ASU No.

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The Company’s disaggregated revenue disclosures are presented in “ Note 12—Segment Information .”

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The following table presents the impact of the adoption of ASU No.

2014-09 by segment under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers , as reported, and ASC 605, Revenue Recognition , for the year ended December 31, 2018.

Under ASC 606

(as reported)

Under ASC 605

Effect of adoption of ASU No.

(In thousands)

Revenue by segment:

North America

Operating costs and expenses by segment:

North America

Operating income (loss) by segment:

North America

The Company accounts for a contract with a customer when it has approval and commitment from all parties, the rights of the parties and payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Revenue is recognized when control of the promised services or goods is transferred to our customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or goods.

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.

Revenue is primarily derived from 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.

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

The Company’s consumer connection revenue is generated and recognized when an in-network service professional is delivered a consumer match or when a job sourced through the HomeAdvisor and Handy platforms are completed.

Service professional membership subscription revenue is initially deferred and is recognized using the straight-line method over the applicable subscription period, which is typically one year.

Consumer connection revenue is generally billed one week following a consumer match, with payment due upon receipt of invoice or collected when a consumer schedules a job through the HomeAdvisor and Handy platforms.

The Company maintains revenue reserves for potential credits for services provided by Handy service professionals to consumers.

Revenue is also 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.

The Company maintains revenue reserves for potential credits issued to HomeAdvisor services providers and for services provided by Handy service professionals to consumers.

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

Angie’s List service professionals generally pay for advertisements in advance on a monthly or annual basis at the option of the service professional, with the average advertising contract term being approximately one year.

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Revenue from the sale of advertising in the Angie’s List Magazine is recognized in the period in which the publication is distributed.

Angie's List prepaid consumer membership

Service professional membership subscription revenue is initially deferred and is recognized using the straight-line method over the applicable subscription period, which is typically one year.

Angie’s List prepaid consumer membership subscription fees are recognized as revenue using the straight-line method over the term of the applicable subscription period, which is typically one year.

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

Effective January 1, 2020, the Company modified the Handy terms and conditions so that Handy, rather than the service professional, has the contractual relationship with the consumer to deliver the service and Handy, rather than the consumer, has the contractual relationship with the service

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subscription fees are recognized as revenue using the straight-line method over the term of the applicable subscription period, which is typically one year.

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

Effective January 1, 2020, we modified the Handy terms and conditions so that Handy, rather than the service professional, has the contractual relationship with the consumer to deliver the service and Handy, rather than the consumer, has the contractual relationship with the service professional.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

professional.

Consumers request services and pay for such services directly through the Handy platform and then Handy fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services.

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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 commences 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.

Transaction Price

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For sales incentive programs where the customer relationship period is one year or less, the Company has elected the practical expedient to expense the costs as incurred.

During the years ended December 31, 2019 and 2018 , the Company recognized expense of $ 56.8 million and $ 50.0 million , respectively, related to the amortization of these costs.

The current contract assets are $ 35.1 million , $ 35.5 million and $ 29.7 million at December 31, 2019 and 2018 , and January 1, 2018 , respectively.

The non-current contract asset balances are $ 4.0 million , $ 3.4 million and $ 4.2 million at December 31, 2019 and 2018 , and January 1, 2018 , respectively.

During the years ended December 31, 2020, 2019 and 2018 the Company recognized expense of $ 64.8 million, $ 56.8 million, and $ 50.0 million, respectively, related to the amortization of these costs.

The current contract assets are $ 49.2 million and $ 35.1 million at December 31, 2020, and 2019, respectively.

The non-current contract asset balances are $ 0.4 million and $ 4.0 million at December 31, 2020 and 2019, respectively.

The current and non-current contract assets are included in “Other current assets” and “Other non-current assets,” respectively, in the accompanying consolidated balance sheet.

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Performance Obligations

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2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed.

Accounts Receivable, Net of Allowance for Doubtful Accounts and Revenue Reserves

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Accounts Receivables, Net of Credit Loss and Revenue Reserves

Accounts receivable include amounts billed and currently due from customers.

Accounts receivable outstanding longer than the contractual payment terms are considered past due.

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.

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

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.

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

customer payments that are not collected in advance of the transfer of promised services or goods are generally due no later than 30 days from invoice date.

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

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

Credit Losses and Revenue Reserve

The following table presents the changes in the credit loss reserve for the year ended December 31, 2020:

December 31, 2020

(In thousands)

Balance at January 1 $ 19,066

Current period provision for credit losses 78,229

Write-offs charged against the credit loss reserve ( 73,682 )

Recoveries collected 2,433

Balance at December 31 $ 26,046

The revenue reserve was $ 1.8 million and $ 1.2 million at December 31, 2020 and 2019, respectively.

The total credit loss and revenue reserve was $ 27.8 million and $ 20.3 million as of December 31, 2020 and 2019.

Deferred Revenue

Deferred revenue consists of payments that are received or are contractually due in advance of the Company's performance.

Deferred revenue consists of advance payments that are received or are contractually due in advance of the Company’s performance.

The Company’s deferred revenue is reported on a contract by contract basis at the end of each reporting period.

The Company classifies deferred revenue as current when the term of the applicable subscription period or expected completion of our performance obligation is one year or less.

The deferred revenue balance is $ 58.4 million , $ 61.9 million and $ 64.1 million at December 31, 2019 and 2018 , and January 1, 2018 , respectively.

During the years ended December 31, 2019 and 2018 , the Company recognized $ 61.0 million and $ 61.2 million of revenue that was included in the deferred revenue balance at December 31, 2018 and January 1, 2018 , respectively.

The Company classifies deferred revenue as current when the term of the applicable subscription period or expected completion of its performance obligation is one year or less.

During the years ended December 31, 2020 and 2019, the Company recognized $ 57.6 million and $ 61.0 million of revenue that was included in the deferred revenue balance as of December 31, 2019 and 2018, respectively.

The current deferred revenue balances are $ 54.7 million and $ 58.2 million at December 31, 2020 and 2019, respectively.

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The specific-identification method is used to determine the cost of debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss) into earnings.

We review our debt securities for impairment each reporting period.

The Company recognizes an unrealized loss on debt securities in net earnings when the impairment is determined to be other-than-temporary.

Factors we consider in making such determination include the duration, severity and reason for the decline in value and the potential recovery and our intent to sell the debt security.

We also consider whether we will be required to sell the security before recovery of its amortized cost basis and whether the amortized cost basis cannot be recovered because of credit losses.

If an impairment is considered to be other-than-temporary, the debt security will be written down to its fair value and the loss will be recognized within other income (expense), net.

The Company held no marketable debt securities at December 31, 2019 .

At December 31, 2018 , marketable debt securities consisted of treasury discount notes.

The Company reviews its debt securities for impairment, including from risk of credit loss, each reporting period.

The Company recognizes an unrealized loss on debt securities in net earnings when the impairment is determined to be other-than-

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Factors the Company considers in making such determination include the duration, severity and reason for the decline in value and the potential recovery and our intent to sell the debt security.

The Company also considers whether it will be required to sell the security before recovery of its amortized cost basis and whether the amortized cost basis cannot be recovered because of credit losses.

If an impairment is considered to be other-than-temporary, the debt security will be written down to its fair value and the loss will be recognized within other income (expense), net.

The Company held $ 50.0 million in marketable debt securities at December 31, 2020.

The Company held no marketable debt securities at December 31, 2019.

Capitalized Software, Leasehold Improvements and Equipment

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Depreciation is computed using the straight-line method over the estimated useful lives of the assets, or, in the case of leasehold improvements, the lease term, if shorter.

Asset Category

Capitalized software and computer equipment

Furniture and other equipment

Leasehold improvements

5 to 25 Years

Asset Category Estimated

Capitalized software and computer equipment 2 to 3 Years

Furniture and other equipment 5 to 7 Years

Leasehold improvements 5 to 25 Years

The Company capitalizes certain internal use software costs including external direct costs utilized in developing or obtaining the software and compensation for personnel directly associated with the development of the software.

Capitalization of such costs begins when the preliminary project stage is complete and ceases when the project is substantially complete and ready for its intended purpose.

The net book value of capitalized internal use software is $ 56.3 million and $ 37.6 million at December 31, 2019 and 2018 , respectively.

The net book value of capitalized internal use software was $ 67.9 million and $ 56.3 million at December 31, 2020 and 2019, respectively.

Business Combinations

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If the carrying value of the reporting unit exceeds its 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.

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 it was concluded that 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 fair value based on the valuation that was most proximate to, but not as of, October 1, 2020 exceeded the carrying value of the Europe reporting unit by $ 131.4 million.

The primary factor that the Company considered in its qualitative assessment for its North America reporting unit was the significant excess of the estimated fair value of the North America reporting unit over its carrying value.

The fair value of the North America reporting unit was estimated by subtracting the fair value of the Europe reporting unit, based on the valuation described above, from the October 1, 2019 market capitalization of the Company;

the estimated fair value of the North America reporting unit exceeded its carrying value by approximately $ 2.1 billion .

The primary factor that the Company

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considered in its qualitative assessment for its North America reporting unit was the significant excess of the estimated fair value of the North America reporting unit over its carrying value.

the estimated fair value of the North America reporting unit exceeded its carrying value by approximately $ 4.1 billion.

The fair value of the Company’s Europe reporting unit is determined using both an income approach based on discounted cash flows (“DCF”) and a market approach when it tests goodwill for impairment, either on an interim basis or annual basis as of October 1 each year.

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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 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, 2019 and 2018 annual assessments of goodwill and indefinite-lived intangible assets identified no impairments.

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Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.

Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data.

The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying

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securities that may not be actively traded.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair values of the Company’s Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded.

Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.

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Such fair value measurements are based predominantly on Level 3 inputs.

Warranty Costs

As part of certain of our revenue arrangements, we include warranties providing customers with assurance on the quality of the services provided.

Under our warranties, we incur costs to ensure the services performed are up to the customers standard and/or to reimburse for any claim for damages submitted in accordance with our warranty terms and conditions.

These costs are recorded as a component of cost of revenue in the Consolidated Statement of Operations.

Advertising Costs

Advertising costs are expensed in the period incurred (when the advertisement first runs for production costs that are initially capitalized) and represent 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 platforms.

Advertising expense is $ 484.3 million , $ 334.7 million and $ 282.3 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Advertising expense was $ 487.6 million, $ 484.3 million and $ 334.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Legal costs are expensed as incurred.

ANGI Homeservices 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 ANGI Homeservices on an as if standalone, separate return basis and payments to and refunds from IAC for its 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 Company is included within IAC’s tax group for purposes of federal and consolidated state income tax return filings.

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.

The Company accounts for income taxes under the liability method, and deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases.

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De-recognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.

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Earnings Per Share

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The financial position and operating results of foreign entities whose primary economic environment is based on their local currency are consolidated using the local currency as the functional currency.

These local currency assets and liabilities

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are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses of these operations are translated at average rates of exchange during the period.

Translation gains and losses are included in accumulated other comprehensive income as a component of shareholders’ equity.

Transaction gains and losses resulting from assets and liabilities denominated in a currency other than the functional currency are included in the consolidated and combined statement of operations as a component of other income (expense), net.

These local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenue and expenses of these operations are translated at average rates of exchange during the period.

Translation gains and losses are included in accumulated other comprehensive income (loss) as a component of shareholders’ equity.

Transaction gains and losses resulting from assets and liabilities denominated in a currency other than the functional currency are included in the consolidated statement of operations as a component of other income (expense), net.

Translation gains and losses relating to foreign entities that are liquidated or substantially liquidated are reclassified out of accumulated other comprehensive income (loss) into earnings.

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These put and call arrangements become exercisable by the Company and the counter-party at various dates.

No put and call arrangements were exercised during 2019.

During the years ended December 31, 2018 and 2017 , one of these arrangements was exercised.

Because these put arrangements are exercisable by the counter-party outside the control of the Company, to the extent that the fair value of these interests exceeds the value determined by normal noncontrolling interest accounting, the value of such interests is adjusted to fair value with a corresponding adjustment to additional paid-in capital or invested capital for periods subsequent to and prior to the Combination, respectively.

During the year ended December 31, 2020, one of these arrangements was exercised.

No put and call arrangements were exercised during the year ended December 31, 2019, and one of these arrangements was exercised during the year ended December 31, 2018.

During the years ended December 31, 2020, 2019 and 2018, the Company recorded adjustments of $ 1.6 million, $ 8.2 million and $ 1.2 million, respectively, to increase these interests to fair value.

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Cash and cash equivalents are maintained with financial institutions and are in excess of Federal Deposit Insurance Corporation insurance limits.

Recent Accounting Pronouncements

Accounting Pronouncement adopted by the Company

Adoption of ASU No.

2016-02, Leases (Topic 842)

The Company adopted ASU No.

2016-02, Leases (Topic 842) ("ASC 842") effective January 1, 2019.

ASC 842 superseded previously existing guidance on accounting for leases and generally requires all leases to be recognized in the statement of financial position.

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The adoption of ASC 842 resulted in the recognition of $ 69.4 million of ROU assets and related lease liabilities as of January 1, 2019, with no cumulative effect adjustment.

The adoption of ASC 842 had no impact on the Company’s consolidated statement of operations and consolidated statement of cash flows.

The Company adopted ASC 842 prospectively and, therefore, did not revise comparative period information or disclosure.

In addition, the Company elected the package of practical expedients permitted under ASC 842.

See " Note 13—Leases " for additional information on the adoption of ASC 842.

Accounting Pronouncements Not Yet Adopted by the Company

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recent Accounting Pronouncements

Accounting Pronouncements Adopted

Adoption of Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No.

2016-13, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable.

The Company adopted ASU No.

2016-13 effective January 1, 2020.

2016-13 replaces the “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses.

The Company adopted ASU No.

2016-13 on January 1, 2020 using the modified retrospective approach.

2016-13 using the modified retrospective approach and there was no cumulative effect arising from the adoption.

The adoption of ASU No.

2016-13 will not have a material impact on the Company's consolidated financial statements.

2016-13 did not have a material impact on the Company’s consolidated financial statements.

Adoption of ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No.

2019-12, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

The provisions of ASU No.

2019-12 are effective for reporting periods beginning after December 15, 2020 with early adoption permitted.

The Company adopted ASU No.

2019-12 effective January 1, 2020, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

Most amendments within ASU No.

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The adoption of ASU No.

2019-12 will not have a material impact on the Company’s consolidated financial statements.

2019-12 did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

There are no recently issued accounting pronouncements that have not yet been adopted that are expected to have a material effect of the financial statement of the Company.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

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NOTE 3— INCOME TAXES

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.

In all periods presented, the income tax benefit and/or provision 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.

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 with respect to income taxes.

Any differences between taxes currently payable 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.

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and foreign earnings (loss) before income taxes and noncontrolling interests are as follows:

and foreign (loss) earnings before income taxes and noncontrolling interests are as follows:

Years Ended December 31,

2020 2019 2018

(In thousands)

$ ( 10,913 ) $ 39,821 $ 82,652

Foreign ( 8,415 ) ( 6,175 ) ( 12,628 )

Total $ ( 19,328 ) $ 33,646 $ 70,024

The components of the income tax (benefit) provision are as follows:

Years Ended December 31,

2020 2019 2018

(In thousands)

Current income tax provision (benefit):

Current income tax provision (benefit)

Current income tax provision:

Federal $ ( 306 ) $ ( 43 ) $ —

State 1,408 819 ( 20 )

Foreign ( 992 ) 806 905

Current income tax provision 110 1,582 885

Deferred income tax benefit

Federal ( 5,163 ) ( 3,416 ) ( 5,549 )

State ( 6,249 ) 517 ( 1,100 )

Foreign ( 3,866 ) ( 351 ) ( 1,719 )

Deferred income tax benefit ( 15,278 ) ( 3,250 ) ( 8,368 )

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below.

2 unchanged sentences

Deferred tax assets:

NOL carryforwards

Net operating loss (“NOL”) carryforwards $ 182,449 $ 158,727

Stock-based compensation 18,955 33,613

Long-term lease liabilities 29,314 32,642

Other 32,885 26,226

Total deferred tax assets 263,603 251,208

6 unchanged sentences

Capitalized costs to obtain a contract with a customer ( 12,233 ) ( 9,400 )

Other ( 4,338 ) ( 83 )

Total deferred tax liabilities ( 102,077 ) ( 110,596 )

1 unchanged sentence

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.

At December 31, 2019 , the Company has federal and state NOLs of $ 372.2 million and $ 365.8 million , respectively.

If not utilized, the federal NOLs will expire between 2030 and 2037 and the state NOLs will expire at various times primarily between 2025 and 2039 .

At December 31, 2020, the Company has federal and state NOLs of $ 431.5 million and $ 375.9 million, respectively, available to offset future income.

Of these federal NOLs, $ 59.3 million can be carried forward indefinitely and $ 372.2 million, if not utilized, will expire at various times between 2030 and 2037.

The state NOLs, if not utilized, will expire at various times primarily between 2025 and 2040.

Federal and state NOLs of $ 166.1 million and $ 79.9 million, respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable state law.

2 unchanged sentences

During 2020, the Company recognized tax benefits related to NOLs of $ 12.6 million.

Included in this amount is $ 26.9 million of tax benefits of acquired attributes which was recorded as a reduction to goodwill.

At December 31, 2020, the Company has tax credit carryforwards of $ 16.6 million relating to federal and state tax credits for research activities.

Of these credit carryforwards, $ 0.6 million can be carried forward indefinitely and $ 11.0 million will expire between 2024 and 2039 .

Of these credit carryforwards, $ 0.6 million can be carried forward indefinitely and $ 16.0 million, if not utilized, will expire between 2024 and 2040.

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.

1 unchanged sentence

gross deferred tax asset of $ 176.4 million that the Company expects to fully utilize on a more likely than not basis.

Of this amount, $ 61.8 million will be utilized upon the future reversal of deferred tax liabilities and the remaining net deferred tax asset of $ 115.9 million will be utilized based on forecasts of future taxable income.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

During 2019 , the Company’s valuation allowance increased by $ 12.6 million primarily due to an increase in foreign and state net operating losses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During 2020, the Company’s valuation allowance increased by $ 5.6 million primarily due to an increase in foreign NOLs offset by a decrease in state NOLs.

At December 31, 2020, the Company has a valuation allowance of $ 77.1 million related to the portion of NOLs and other items for which it is more likely than not that the tax benefit will not be realized.

A reconciliation of the income tax (benefit) provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:

A reconciliation of the income tax benefit to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:

Years Ended December 31,

2020 2019 2018

(In thousands)

Income tax provision (benefit) at the federal statutory rate of 21% (35% for 2017)

Income tax (benefit) provision at the federal statutory rate of 21% $ ( 4,058 ) $ 7,066 $ 14,705

State income taxes, net of effect of federal tax benefit 1,641 2,693 4,702

Deferred tax adjustment for enacted changes in tax law and rates ( 5,244 ) $ 502 $ ( 1,431 )

Change in judgement on beginning of the year valuation allowance ( 3,544 ) $ — $ —

Stock-based compensation ( 2,914 ) ( 12,768 ) ( 25,184 )

Research credit

Unbenefited losses 2,899 1,523 2,227

Deferred tax adjustment for enacted changes in tax law and rates

Research credit ( 2,494 ) ( 3,308 ) ( 1,169 )

Net adjustment related to the reconciliation of income tax provision accruals to tax returns ( 743 ) 448 ( 1,669 )

Other, net ( 711 ) 2,176 336

Income tax benefit $ ( 15,168 ) $ ( 1,668 ) $ ( 7,483 )

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows:

2020 2019 2018

(In thousands)

2 unchanged sentences

Additions for tax positions of prior years 423 344 397

Settlements ( 856 ) — —

Balance at December 31 $ 5,268 $ 4,025 $ 2,356

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision.

At December 31, 2019 and 2018 , accruals for interest and penalties are not material.

The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax as a result of previously filed separate company and consolidated tax returns with IAC.

These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions.

The Internal Revenue Service is currently auditing IAC’s federal income tax returns for the years ended December 31, 2010 through 2016, which includes the operations of the HomeAdvisor business.

The statute of limitations for the years 2010 through 2012 has been extended to November 30, 2020 and the statute of limitations for years 2013 through 2015 has been extended to December 31, 2020.

The Internal Revenue Service has substantially completed its audit of IAC’s federal income tax returns for the years ended December 31, 2010 through 2016, which includes the operations of the Company.

The IRS began its audit of the year ended December 31, 2017 in the second quarter of 2020.

The statute of limitations for the years 2010 through 2012 and for the years 2013 through 2017 have been extended to May 31, 2021 and December 31, 2021, respectively.

Returns filed in various other jurisdictions are open to examination for various tax years beginning with 2009.

Income taxes payable include unrecognized tax benefits considered sufficient to pay assessments that may result from examination of prior year tax returns.

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

The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may not accurately anticipate actual outcomes and, therefore, may require periodic adjustment.

Although management currently believes changes in 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.

1 unchanged sentence

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

At December 31, 2019 and 2018 , unrecognized tax benefits are $ 4.1 million and $ 2.4 million respectively, including tax positions included in IAC’s consolidated tax return filings.

If unrecognized tax benefits at December 31, 2019 are subsequently recognized, income tax provision would be reduced by $ 4.0 million .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision.

At December 31, 2020, there are no accruals for interest and penalties.

At December 31, 2019, accruals for interest are not material and there are no accruals for penalties.

At December 31, 2020 and 2019, unrecognized tax benefits, including interest, are $ 5.3 million and $ 4.1 million respectively;

all of which are for tax positions included in IAC’s consolidated tax return filings.

If unrecognized tax benefits at December 31, 2020 are subsequently recognized, the income tax provision would be reduced by $ 5.1 million.

The comparable amount as of December 31, 2019 is $ 4.0 million.

The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $ 1.4 million by December 31, 2020 , due to potential settlements;

$ 1.2 million of which would reduce the income tax provision.

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the "Tax Act").

The Tax Act implemented a number of changes that took effect on January 1, 2018, including but not limited to, a reduction of the U.S.

federal corporate tax rate from 35% to 21% and a new minimum tax on global intangible low-taxed income earned by foreign subsidiaries.

The Company was able to make a reasonable estimate of the impacts of the Tax Act in the fourth quarter of 2017 as described below.

In the third quarter of 2018, the Company finalized its calculations related to the impacts of the Tax Act with no adjustment in 2018 to the Company’s previously recorded provisional tax expense.

The Company's income tax benefit for the year ended December 31, 2017 , includes a tax expense of $ 33.0 million related to the Tax Act, for the remeasurement of U.S.

net deferred tax assets due to the reduction in the corporate income tax rate.

The Company was not subject to the one-time transition tax because it had cumulative losses from its international operations.

The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $ 0.5 million by December 31, 2021, due to settlements, all of which would reduce the income tax provision.

At December 31, 2020, all of the Company’s international cash can be repatriated without any significant tax consequences.

NOTE 4— BUSINESS COMBINATIONS

1 unchanged sentence

On October 19, 2018, the Company acquired 100 % of Handy, a leading platform for connecting individuals looking for household services, for total consideration of $ 168.4 million.

This includes the aggregate fair value of 8.6 million shares of Class A common stock issued by the Company of $ 165.8 million , which is based on the closing stock price of ANGI on the NASDAQ on October 19, 2018 of $ 19.31 and cash consideration paid by the Company.

This includes the aggregate fair value of 8.6 million shares of Class A common stock issued by the Company of $ 165.8 million, which was based on the closing stock price of ANGI on the NASDAQ on October 19, 2018 of $ 19.31 and cash consideration paid by the Company.

During 2019, the Company finalized its assessment of net operating losses acquired in the Handy acquisition.

As a result, the Company revised the purchase price allocation for Handy by increasing the fair value of deferred tax assets by $ 27.2 million and decreasing goodwill by $ 27.2 million.

The financial results of Handy are included in the Company's consolidated and combined financial statements, within the North America segment, beginning October 19, 2018 .

The financial results of Handy are included in the Company’s consolidated financial statements, within the North America segment, beginning October 19, 2018.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

2 unchanged sentences

Other current assets 2,050

Goodwill 115,183

Intangible assets 38,800

1 unchanged sentence

Deferred income taxes 20,070

Total assets 181,821

Current liabilities ( 13,419 )

4 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:

(In thousands)

Weighted-Average

Indefinite-lived trade name and trademarks

(In thousands) Weighted-Average

Indefinite-lived trade name and trademarks $ 18,800 Indefinite

Developed technology 15,600 4

User base 3,400 1

Retail partners 600 3

7 unchanged sentences

The amount attributed to goodwill is not tax deductible.

Angie's List Combination

Through the Combination, the Company acquired 100 % of the common stock of Angie's List on September 29, 2017 for a total purchase price valued at $ 781.4 million .

The purchase price of $ 781.4 million was determined based on the sum of (i) the fair value of the 61.3 million shares of Angie's List common stock outstanding immediately prior to the Combination based on the closing stock price of Angie's List common stock on the NASDAQ on September 29, 2017 of $ 12.46 per share;

(ii) the cash consideration of $ 1.9 million paid to holders of Angie's List common stock who elected to receive $ 8.50 in cash per share;

and (iii) the fair value of vested equity awards (including the pro rata portion of unvested awards attributable to pre-combination services) outstanding under Angie's List stock plans on September 29, 2017 .

Each stock option to purchase shares of Angie's List common stock that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an option to purchase (i) that number of Class A shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List option immediately prior to the effective time of the Combination, (ii) at a per-share exercise price equal to the exercise price per share of Angie's List common stock at which such Angie's List option was exercisable immediately prior to the effective time of the Combination.

Each award of Angie's List restricted stock units that was outstanding immediately prior to the effective time of the Combination was, as of the effective time of the Combination, converted into an ANGI Homeservices restricted stock unit award with respect to a number of Class A shares of ANGI Homeservices equal to the total number of shares of Angie's List common stock subject to such Angie's List restricted stock unit award immediately prior to the effective time of the Combination.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

The table below summarizes the purchase price:

(In thousands)

Class A common stock

Cash consideration for holders who elected to receive $8.50 in cash per share of Angie's List common stock

Fair value of vested and pro rata portion of unvested stock options attributable to pre-combination services

Fair value of the pro rata portion of unvested restricted stock units attributable to pre-combination services

Total purchase price

The financial results of Angie's List are included in the Company's consolidated and combined financial statements, within the North America segment, beginning September 29, 2017 .

For the year ended December 31, 2017, the Company included $ 58.9 million of revenue and $ 21.7 million of net loss in its consolidated and combined statement of operations related to Angie's List.

The net loss of Angie's List reflects $ 28.7 million in stock-based compensation expense related to (i) the acceleration of previously issued Angie's List equity awards held by employees terminated in connection with the Combination and (ii) the expense related to previously issued Angie's List equity awards, severance and retention costs of $ 19.8 million related to the Combination and a reduction in revenue of $ 7.8 million due to the write-off of deferred revenue related to the Combination.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of combination:

(In thousands)

Cash and cash equivalents

Other current assets

Property and equipment

Intangible assets

Deferred revenue

Other current liabilities

Long-term debt - related party

Deferred income taxes

Other long-term liabilities

Net assets acquired

The purchase price was based on the expected financial performance of Angie's List, not on the value of the net identifiable assets at the time of combination.

This resulted in a significant portion of the purchase price being attributed to goodwill because Angie's List is complementary and synergistic to the other North America businesses of ANGI Homeservices.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

The fair values of the identifiable intangible assets acquired at the date of combination are as follows:

(In thousands)

Weighted-Average

Indefinite-lived trade name and trademarks

Service professionals

Developed technology

Total identifiable intangible assets acquired

Other current assets, current liabilities and other long-term liabilities of Angie's List were reviewed and adjusted to their fair values at the date of combination, as necessary.

The fair value of deferred revenue was determined using an income approach that utilized a cost to fulfill analysis.

The fair value of the trade name and trademarks was determined using an income approach that utilized the relief from royalty methodology.

The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology.

The fair values of the service professionals and memberships were determined using an income approach that utilized the excess earnings methodology.

The valuations of deferred revenue and intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows, cost and profit margins related to deferred revenue and the determination of royalty and discount rates.

The amount attributed to goodwill is not tax deductible.

HomeStars Acquisition

The Company acquired a 90 % voting interest in HomeStars Inc.

("HomeStars"), a leading home services platform in Canada, on February 8, 2017 .

The purchase price for HomeStars was $ 16.6 CAD million (or $ 12.7 million ) in cash and is net of a $ 0.3 CAD million (or $ 0.2 million ) working capital adjustment paid in full to the Company in the third quarter of 2017.

In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 10 % noncontrolling interest in HomeStars, which totaled $ 1.9 CAD million (or $ 1.4 million ).

The determination of the fair value of noncontrolling interest was calculated using the implied value of 100 % of the enterprise value of the business using the purchase price.

The financial results of HomeStars are included in the Company's consolidated and combined financial statements, within the North America segment, beginning February 8, 2017 .

For the year ended December 31, 2017, the Company included $ 6.5 million of revenue and $ 1.2 million of net loss in its consolidated and combined statement of operations related to HomeStars.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

(In thousands)

Cash and cash equivalents

Other current assets

Intangible assets

Current liabilities

Other long-term liabilities

Net assets acquired

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

The purchase price was based on the expected financial performance of HomeStars, not on the value of the net identifiable assets at the time of acquisition.

This resulted in a significant portion of the purchase price being attributed to goodwill because HomeStars is complementary and synergistic to the other North America businesses of ANGI Homeservices.

The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:

(In thousands)

Weighted-Average

Indefinite-lived trade name

Contractor relationships

Developed technology

Total identifiable intangible assets acquired

Other current assets, current liabilities and other long-term liabilities of HomeStars were reviewed and adjusted to their fair values at the date of acquisition, as necessary.

The fair values of the trade name and contractor relationships were determined using variations of the income approach;

specifically, in respective order, the relief from royalty and excess earnings methodologies.

The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology.

The valuations of the intangible assets incorporate significant unobservable inputs and require significant judgment and estimates, including the amount and timing of future cash flows and the determination of royalty and discount rates.

The amount attributed to goodwill is not tax deductible.

MyBuilder Acquisition

The Company acquired a 75 % voting interest in MyBuilder Limited ("MyBuilder"), a leading home services platform in the United Kingdom, on March 24, 2017.

The purchase price was £ 32.6 million (or $ 40.7 million ) in cash and includes a £ 0.6 million (or $ 0.8 million ) working capital adjustment paid in full by the Company in the third quarter of 2017.

In connection with the acquisition, the Company measured and recorded the acquisition date fair value of the 25 % noncontrolling interest in MyBuilder, which totaled £ 10.7 million (or $ 13.3 million ).

The determination of the fair value of noncontrolling interest was calculated using the implied value of 100 % of the enterprise value of the business using the purchase price.

The financial results of MyBuilder are included in the Company's consolidated and combined financial statements, within the Europe segment, beginning April 1, 2017.

For the year ended December 31, 2017, the Company included $ 8.0 million of revenue and $ 1.4 million of net loss in its consolidated and combined statement of operations related to MyBuilder.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

(In thousands)

Cash and cash equivalents

Other current assets

Intangible assets

Current liabilities

Other long-term liabilities

Net assets acquired

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

The purchase price was based on the expected financial performance of MyBuilder, not on the value of the net identifiable assets at the time of acquisition.

This resulted in a significant portion of the purchase price being attributed to goodwill because MyBuilder is complementary and synergistic to the other European businesses of ANGI Homeservices.

The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows:

(In thousands)

Weighted-Average

Indefinite-lived trade name

Contractor relationships

Developed technology

Total identifiable intangible assets acquired

Other current assets, current liabilities and other long-term liabilities of MyBuilder were reviewed and adjusted to their fair values at the date of acquisition, as necessary.

The fair values of the trade name and contractor relationships were determined using variations of the income approach;

specifically, in respective order, the relief from royalty and excess earnings methodologies.

The fair values of developed technology and user base were determined using a cost approach that utilized the cost to replace methodology.

The amount attributed to goodwill is not tax deductible.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information in the table below presents the combined results of the Company, Angie's List, HomeStars and MyBuilder as if these acquisitions had occurred on January 1, 2016 (the "2017 Acquisitions"), and Handy as if this acquisition had occurred on January 1, 2017.

The unaudited pro forma financial information includes adjustments required under the acquisition method of accounting and is presented for informational purposes only and is not necessarily indicative of the results that would have been achieved had the 2017 Acquisitions actually occurred on January 1, 2016 and the Handy acquisition actually occurred on January 1, 2017.

For the year ended December 31, 2018, pro forma adjustments include a reduction in transaction related costs of $ 4.6 million because they are one-time in nature and will not have a continuing impact on operations and an increase in amortization of intangibles of $ 2.5 million .

For the year ended December 31, 2017, pro forma adjustments include (i) reductions in stock-based compensation expense of $ 77.2 million and transaction related costs of $ 35.2 million because they are one-time in nature and will not have a continuing impact on operations;

and (ii) an increase in amortization of intangibles of $ 39.1 million .

The stock-based compensation expense is primarily 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.

The transaction related costs include severance and retention costs of $ 19.8 million related to the Combination.

Years Ended December 31,

(In thousands)

Net earnings (loss) attributable to ANGI Homeservices Inc.

Basic earnings (loss) per share attributable to ANGI Homeservices Inc.

Diluted earnings (loss) per share attributable to ANGI Homeservices Inc.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTE 5— GOODWILL AND INTANGIBLE ASSETS

1 unchanged sentence

(In thousands)

Goodwill $ 891,797 $ 883,960

Intangible assets with indefinite lives 171,888 171,599

2 unchanged sentences

The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2020:

Balance at December 31,

2019 Additions (Deductions) Foreign

Translation Balance at December 31,

(In thousands)

North America $ 813,417 $ 2,665 $ — $ 225 $ 816,307

Europe 70,543 — — 4,947 75,490

Total goodwill $ 883,960 $ 2,665 $ — $ 5,172 $ 891,797

Additions relate to the acquisition of Fixd Repair (included in the North America segment).

Deductions primarily relate to tax benefits of acquired attributes related to the acquisition of Handy (included in the North America segment).

Additions relate to immaterial acquisition activity during the year (included in the North America segment).

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the balance of goodwill by reportable segment, including the changes in the carrying value of goodwill, for the year ended December 31, 2019:

2018 Additions (Deductions) Foreign

Translation Balance at December 31,

(In thousands)

North America $ 824,037 $ 18,326 $ ( 29,266 ) $ 320 $ 813,417

Europe 70,672 — — ( 129 ) 70,543

Total goodwill $ 894,709 $ 18,326 $ ( 29,266 ) $ 191 $ 883,960

Additions relate to the acquisition of Handy (included in the North America segment).

Deductions relate to the sale of Felix (included in the North America segment).

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Additions relate to the acquisition of Fixd Repair (included in the North America segment).

Deductions primarily relate to tax benefits of acquired attributes related to the acquisition of Handy (included in the North America segment).

Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions.

1 unchanged sentence

December 31, 2020

Weighted-Average

Amount Accumulated

Amortization Net Weighted-Average

(Dollars in thousands)

Service professional relationships $ 97,160 $ ( 97,000 ) $ 160 3.0

Technology 83,468 ( 47,144 ) 36,324 5.5

Memberships 15,900 ( 15,900 ) — 3.0

Customer lists and user base 800 ( 192 ) 608 8.0

Trade names 3,128 ( 2,391 ) 737 5.6

Total $ 200,456 $ ( 162,627 ) $ 37,829 4.1

December 31, 2019

Weighted-Average

Amount Accumulated

Amortization Net Weighted-Average

(Dollars in thousands)

Service professional relationships $ 99,651 $ ( 76,445 ) $ 23,206 2.9

Technology 89,095 ( 37,721 ) 51,374 5.3

Memberships 15,900 ( 11,940 ) 3,960 3.0

Customer lists and user base 14,298 ( 13,590 ) 708 1.4

At December 31, 2019 , amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:

Years Ending December 31,

(In thousands)

Trade names 2,390 ( 1,512 ) 878 6.8

Total $ 221,334 $ ( 141,208 ) $ 80,126 3.8

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At December 31, 2020, amortization of intangible assets with definite lives for each of the next five years and thereafter is estimated to be as follows:

Years Ending December 31, (In thousands)

2021 $ 14,951

Thereafter 386

Total $ 37,829

NOTE 6— FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Marketable Debt Securities

The Company did no t hold any available-for-sale marketable debt securities at December 31, 2019 .

At December 31, 2020, current available-for-sale marketable debt securities were as follows:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

(In thousands)

1 unchanged sentence

Total available-for-sale marketable debt securities $ 49,995 $ — $ — $ 49,995

There were no investments in available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of December 31, 2018 .

The contractual maturities of debt securities classified as current available-for-sale at December 31, 2020 are within one year.

The Company did no t hold any available-for-sale marketable debt securities at December 31, 2019.

For the years ended December 31, 2020 and 2019, proceeds from maturities of available-for-sale marketable debt securities were $ 50.0 million and $ 25.0 million, respectively.

There were no gross realized gains or losses from the maturities of available-for-sale marketable debt securities for the years ended December 31, 2020 and 2019.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

4 unchanged sentences

Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Total

(In thousands)

1 unchanged sentence

Money market funds $ 374,014 $ — $ — $ 374,014

Treasury discount notes — 324,995 — 324,995

Time deposits — 2,721 — $ 2,721

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Marketable debt securities:

Treasury discount notes — 49,995 — 49,995

Total $ 374,014 $ 377,711 $ — $ 751,725

December 31, 2019

2 unchanged sentences

Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Total

(In thousands)

1 unchanged sentence

Money market funds $ 291,810 $ — $ — $ 291,810

Treasury discount notes

Commercial paper

Time deposits — 23,040 — 23,040

Marketable debt securities:

Treasury discount notes

Total $ 291,810 $ 23,040 $ — $ 314,850

Financial instruments measured at fair value only for disclosure purposes

The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:

December 31, 2019

December 31, 2018

Carrying Value

December 31, 2020 December 31, 2019

Carrying Value Fair Value Carrying Value Fair Value

(In thousands)

1 unchanged sentence

Long-term debt, net (a)

Long-term debt—related party, net

( 712,277 ) ( 725,700 ) ( 231,946 ) ( 232,581 )

At December 31, 2019 and 2018 , the carrying value of long-term debt, net includes unamortized debt issuance costs of $ 1.8 million and $ 2.5 million , respectively.

_________________

(a) At December 31, 2020 and 2019, the carrying value of long-term debt, net includes unamortized debt issuance costs of $ 7.7 million and $ 1.8 million, respectively.

The fair value of long-term debt, including the current portion, is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs .

The fair value of long-term debt—related party, which was settled during the first quarter of 2019, was based on Level 3 inputs and was estimated by discounting the future cash flows based on current market conditions.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7— LONG-TERM DEBT

1 unchanged sentence

(In thousands)

Term Loan due November 5, 2023

3.875 % ANGI Group Senior Notes due August 15, 2028 (“Senior Notes”);

interest payable each February 15 and August 15, commencing February 15, 2021

$ 500,000 $ —

ANGI Group Term Loan due November 5, 2023 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

See " Note 15—Related Party Transactions with IAC " for a description of long-term debt—related party.

ANGI Group Senior Notes

On August 20, 2020, ANGI Group, LLC (“ANGI Group”), a direct, wholly-owned subsidiary of the Company, issued $ 500.0 million in aggregate principal amount of the Senior Notes, the proceeds of which are intended for general corporate purposes, including potential future acquisitions and return of capital.

At any time prior to August 15, 2023, these notes may be redeemed at a redemption price equal to the sum of the principal amount thereof, plus accrued and unpaid interest and a make-whole premium.

Thereafter, these notes may be redeemed at the redemption prices set forth below, plus accrued and unpaid interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on August 15 of the years indicated below:

Year Percentage

2023 101.938 %

2024 100.969 %

2025 and thereafter 100.000 %

The indenture governing the Senior Notes contains a covenant that would limit ANGI Group’s ability to incur liens for borrowed money in the event a default has occurred or ANGI Group’s secured leverage ratio (as defined in the indenture) exceeds 3.75 to 1.0.

At December 31, 2020, there were no limitations pursuant thereto.

ANGI Group Term Loan and ANGI Group Revolving Facility

ANGI was a party to a credit agreement that terminates on November 5, 2021.

The credit agreement governs the Term Loan and revolving credit facility (the “Revolving Facility”).

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.

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 credit agreement.

The outstanding balance of the ANGI Group Term Loan was $ 220 million and $ 247.5 million at December 31, 2020 and 2019, respectively.

As of December 31, 2020, the Company prepaid its quarterly principal payments totaling of $ 13.8 million due in 2021.

There are quarterly principal payments of $ 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.

Additionally, interest payments are due at least quarterly through the term of the loan.

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

The spread over LIBOR is subject to change in future periods based on ANGI Group’s consolidated net leverage ratio.

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

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Term Loan and Credit Facility

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.

At both December 31, 2019 and 2018 , the Term Loan bears interest at LIBOR plus 1.50 % .

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

The interest rate was 3.25 % and 3.98 % , at December 31, 2019 and 2018 , respectively.

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.

The terms of the Term Loan require the Company 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 (in each case as defined in the credit agreement).

The Term Loan also contains covenants that would limit the Company's ability to pay dividends, make distributions or repurchase its stock in the event a default has occurred or its consolidated net leverage ratio exceeds 4.25 to 1.0 .

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

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

At December 31, 2019 and 2018 , there were no outstanding borrowings under the Credit Facility.

The annual commitment fee on undrawn funds is based on the consolidated net leverage ratio most recently reported and is 25 basis points at both December 31, 2019 and 2018 .

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 based on the Company's consolidated net leverage ratio.

The financial and other covenants are the same as those for the Term Loan.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The ANGI Group Credit Agreement requires ANGI Group 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.

The ANGI Group Credit Agreement also contains covenants that would limit ANGI Group’s ability to pay dividends or make distributions in the event a default has occurred or ANGI Group’s consolidated net leverage ratio exceeds 4.25 to 1.0.

At December 31, 2020, there were no limitations pursuant thereto.

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 ANGI Group Revolving Facility.

The annual commitment fee on undrawn funds 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.

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

The financial and other covenants are the same as those for the ANGI Group Term Loan.

The ANGI Group Senior Notes and ANGI Group Credit Agreement are guaranteed by certain of ANGI Group’s wholly-owned material domestic subsidiaries and ANGI Group’s obligations under the ANGI Group Credit Agreement are secured by substantially all assets of ANGI Group and the guarantors, subject to certain exceptions.

The ANGI Group Term Loan and outstanding borrowings, if any, under the ANGI Group Revolving Facility rank equally with each other, and have priority over the ANGI Group Senior Notes to the extent of the value of the assets securing the borrowings under the ANGI Group Credit Agreement.

Long-term debt maturities :

Years Ending December 31,

(In thousands)

current portion of Term Loan

Long-term debt maturities as of December 31, 2020 are summarized in the table below:

Years Ending December 31, (In thousands)

Total 720,000

unamortized debt issuance costs 7,723

Total long-term debt, net $ 712,277

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8— SHAREHOLDERS’ EQUITY

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Holders of Class C common stock have no voting rights, except as otherwise required by the laws of the State of Delaware, in which case holders of Class C common stock are entitled to one one-hundredth ( 1 /100) of a vote per share.

Holders of the Company's

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Class A common stock, Class B common stock and Class C common stock do not have cumulative voting rights in the election of directors.

Holders of the Company’s Class A common stock, Class B common stock and Class C common stock do not have cumulative voting rights in the election of directors.

Shares of ANGI Homeservices Class B common stock are convertible into shares of our Class A common stock at the option of the holder at any time on a share for share basis.

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In the event of a liquidation, dissolution or winding up, holders of the Company’s Class A common stock, Class B common stock and Class C common stock are entitled to receive ratably the assets available for distribution to the stockholders after payment of all liabilities and accrued but unpaid dividends and liquidation preferences on any outstanding preferred stock.

At December 31, 2019 , IAC holds all 421.6 million outstanding shares of our Class B common stock, which represents an 84.1 % economic interest and 98.1 % voting interest in the Company.

At December 31, 2020, IAC holds all 421.9 million outstanding shares of the Company’s Class B common stock, which represents an 84.3 % economic interest and 98.2 % voting interest in the Company.

In the event that ANGI Homeservices issues or proposes to issue any shares of ANGI Homeservices Class A common stock, Class B common stock or Class C common stock (with certain limited exceptions), including shares issued upon the exercise, conversion or exchange of options, warrants and convertible securities, IAC will generally have a purchase right that permits it to purchase for fair market value, as defined in the agreement, up to such number of shares of the same class as the issued shares as would (i) enable IAC to maintain the same ownership interest in the Company that it had immediately prior to such issuance or proposed issuance, with respect to issuances of our voting capital stock, or (ii) enable IAC to maintain ownership of at least 80.1 % of each class of the Company’s non-voting capital stock, with respect to issuances of our non-voting capital stock.

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Common Stock Repurchases

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.

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 of ANGI common stock for aggregate consideration, on a trade date basis, of $ 62.6 million.

2 unchanged sentences

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTE 9— ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following tables present the components of accumulated other comprehensive (loss) income and items reclassified out of accumulated other comprehensive (loss) income into earnings:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9— ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present the components of accumulated other comprehensive income (loss) income and items reclassified out of accumulated other comprehensive income (loss) income into earnings:

Year Ended December 31, 2020

Unrealized Gains On Available-For-Sale Debt Securities

Adjustment Unrealized Gains On Available-For-Sale Debt Securities Accumulated

Comprehensive

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Balance at January 1 $ ( 1,379 ) $ — $ ( 1,379 )

Other comprehensive income (loss)

Net current period other comprehensive income (loss)

Other comprehensive income 6,016 — 6,016

Net current period other comprehensive income 6,016 — 6,016

Balance at December 31 $ 4,637 $ — $ 4,637

Year Ended December 31, 2019

Unrealized Gains On Available-For-Sale Debt Securities

Comprehensive

Income (Loss)

Adjustment Unrealized Gains On Available-For-Sale Debt Securities Accumulated

Comprehensive (Loss) Income

(In thousands)

Balance at January 1 $ ( 1,864 ) $ 3 $ ( 1,861 )

Other comprehensive (loss) income before reclassifications

Amounts reclassified to earnings

Net current period other comprehensive (loss) income

Other comprehensive income (loss) before reclassifications 485 ( 3 ) 482

Net current period other comprehensive income (loss) 485 ( 3 ) 482

Balance at December 31 $ ( 1,379 ) $ — $ ( 1,379 )

Year Ended December 31, 2018

Adjustment Unrealized Gains On Available-For-Sale Debt Securities Accumulated

Comprehensive

(Loss) Income

Income (Loss)

(In thousands)

Balance at January 1 $ 2,232 $ — $ 2,232

Other comprehensive income before reclassifications

Other comprehensive (loss) income before reclassifications ( 4,044 ) 3 ( 4,041 )

Amounts reclassified to earnings ( 52 ) — ( 52 )

Net current period other comprehensive income

Net current period other comprehensive loss ( 4,096 ) 3 ( 4,093 )

Balance at December 31 $ ( 1,864 ) $ 3 $ ( 1,861 )

The amounts reclassified out of foreign currency translation adjustment into earnings for the years ended December 31, 2018 and 2017 relate to the liquidation of an international subsidiary.

The amounts reclassified out of foreign currency translation adjustment into earnings for the year ended December 31, 2018 relate to the liquidation of an international subsidiary.

At December 31, 2020, 2019 and 2018, there was no tax benefit or provision on the accumulated other comprehensive income (loss).

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTE 10— EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted earnings (loss) per share attributable to ANGI Homeservices shareholders:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10— EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted (loss) earnings per share attributable to ANGI Homeservices shareholders:

Years Ended December 31,

2020 2019 2018

Basic Diluted Basic Diluted Basic Diluted

(In thousands, except per share data)

Net earnings (loss)

Net (earnings) loss attributable to noncontrolling interests

Net earnings (loss) attributable to ANGI Homeservices Inc.

Net (loss) earnings $ ( 4,160 ) $ ( 4,160 ) $ 35,314 $ 35,314 $ 77,507 $ 77,507

Net earnings attributable to noncontrolling interests ( 2,123 ) ( 2,123 ) ( 485 ) ( 485 ) ( 189 ) ( 189 )

Net (loss) earnings attributable to ANGI Homeservices Inc.

shareholders $ ( 6,283 ) $ ( 6,283 ) $ 34,829 $ 34,829 $ 77,318 77,318

Weighted average basic shares outstanding 498,159 498,159 504,875 504,875 484,232 484,232

Dilutive securities (a)(b)(c)

— — — 13,044 — 29,365

Denominator for earnings per share—weighted average shares 498,159 498,159 504,875 517,919 484,232 513,597

Earnings (loss) per share attributable to ANGI Homeservices Inc.

(Loss) earnings per share attributable to ANGI Homeservices Inc.

shareholders:

Earnings (loss) per share

(Loss) earnings per share $ ( 0.01 ) $ ( 0.01 ) $ 0.07 $ 0.07 $ 0.16 $ 0.15

________________________

If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock appreciation rights, stock options and subsidiary denominated equity and vesting of restricted stock units ("RSUs").

(a) For the year ended December 31, 2020, the Company had a loss from operations and as a result, approximately 24.9 million potentially dilutive securities were excluded from computing dilutive earnings per share because the impact would have been anti-dilutive.

Accordingly, the weighted average basic shares outstanding were used to compute all earnings per share amounts.

(b) If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock appreciation rights, stock options and subsidiary denominated equity and vesting of restricted stock units (“RSUs”).

For the years ended December 31, 2019 and 2018, 5.5 million, and 3.1 million potentially dilutive securities, respectively, are excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Performance-based stock units ("PSUs") and market-based awards are considered contingently issuable shares.

Shares issuable upon exercise or vesting of PSUs and market-based awards are included in the denominator for earnings per share if (i) the applicable performance or market condition(s) has been met and (ii) the inclusion of the PSUs and market-based awards is dilutive for the respective reporting periods.

For the years ended December 31, 2019 and 2018 , 0.9 million and 1.3 million shares underlying PSUs and market-based awards were excluded from the calculation of diluted earnings per share because the performance or market condition(s) had not been met.

For the year ended December 31, 2017, the Company had a loss from operations and as a result, approximately 54.1 million potentially dilutive securities were excluded from computing dilutive earnings per share because the impact would have been anti-dilutive.

Accordingly, the weighted average basic shares outstanding were used to compute diluted earnings per share amounts.

Shares issuable upon exercise or vesting of market-based awards and performance-based stock units are included in the denominator for earnings per share if (i) the applicable performance or market condition(s) has been met and (ii) the inclusion of the market-based award and performance-based stock units is dilutive for the respective reporting periods.

For the years ended December 31, 2019 and 2018, 0.9 million, and 1.3 million shares underlying market-based awards and performance-based stock units, respectively, were excluded from the calculation of diluted earnings per share because the performance or market condition(s) had not been met.

NOTE 11— STOCK-BASED COMPENSATION

The Company currently has one active stock plan, which became effective in 2017 upon the completion of the Combination.

This plan replaced the HomeAdvisor 2013 Incentive plan, which governed equity awards prior to the Combination.

The Company currently has one active stock plan, which became effective in 2017 upon the completion of the combination of IAC’s HomeAdvisor business and Angie’s List, Inc.

on September 29, 2017 (the “Combination”).

The 2017 plan covers stock options, stock appreciation rights and 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”), denominated in shares of ANGI Homeservices common stock, as well as provides for the future grant of these and other equity awards.

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The 2017 plan has a stated term of ten years , and provides that the exercise price of stock options and stock appreciation rights granted will not be less than the market price of the Company’s common stock on the grant date.

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MSU awards granted subsequent to the Combination generally vest in five installments over a two-year period from the grant date.

PSU awards granted subsequent to the Combination generally cliff vest in either a three or five-year period from the grant date.

Stock-based compensation expense recognized in the consolidated and combined statement of operations includes expense related to:

PSU awards granted subsequent to the Combination generally cliff vest in a two to five-year period from the grant date.

Stock-based compensation expense recognized in the consolidated statement of operations includes expense related to:

(i) the Company’s stock options, stock appreciation rights and RSUs;

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The expense ultimately recorded is for the awards that vest.

At December 31, 2019 , there is $ 108.0 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 2.3 years.

The total income tax benefit recognized in the accompanying consolidated and combined statement of operations for the years ended December 31, 2019 , 2018 and 2017 related to all stock-based compensation is $ 28.8 million , $ 49.5 million and $ 71.1 million , respectively.

At December 31, 2020, there was $ 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.

The total income tax benefit recognized in the accompanying consolidated statement of operations for the years ended December 31, 2020, 2019 and 2018 related to all stock-based compensation is $ 24.3 million, $ 28.8 million and $ 49.5 million, respectively.

The aggregate income tax benefit recognized related to the exercise of stock options and stock appreciation rights for the years ended December 31, 2020, 2019 and 2018 is $ 11.4 million, $ 27.9 million and $ 40.2 million, respectively.

1 unchanged sentence

Stock Options and Stock Appreciation Rights

Stock options and stock appreciation rights outstanding at December 31, 2019 and changes during the year ended December 31, 2019 is as follows:

Stock options and stock appreciation rights outstanding at December 31, 2020 and changes during the year ended December 31, 2020 were as follows:

December 31, 2020

Weighted Average

Shares Weighted Average

Exercise Price

4 unchanged sentences

Outstanding at January 1, 2020 23,984 $ 3.89

Exercised ( 12,931 ) 3.18

Forfeited ( 352 ) 6.16

Expired ( 12 ) 15.03

Outstanding at December 31, 2020 10,689 $ 4.67 5.68 $ 92.08

Exercisable 8,944 $ 4.59 5.59 $ 77.97

The aggregate intrinsic value in the table above represents the difference between ANGI Homeservices closing stock price on the last trading day of 2020 and the exercise price, multiplied by the number of in-the-money awards that would have been

1 unchanged sentence

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

exercised had all award holders exercised their awards on December 31, 2020.

1 unchanged sentence

The following table summarizes the information about stock options and stock appreciation rights outstanding and exercisable at December 31, 2020:

Awards Outstanding

Awards Exercisable

Range of Exercise Prices

Awards Outstanding Awards Exercisable

Range of Exercise Prices Outstanding

2020 Weighted average

Life in Years

life in years Weighted

price Exercisable

2020 Weighted average

Life in Years

life in years Weighted

(Shares in thousands)

$ 0.01 to $ 3.00

2,864 4.9 $ 2.29 2,864 4.9 $ 2.29

$ 3.01 to $ 6.00

6,814 6.1 4.53 5,213 6.1 4.53

$ 6.01 to $ 9.00

106 4.0 8.04 106 4 8.04

$ 9.01 to $ 12.00

405 6.0 10.54 324 5.7 10.47

$ 12.01 to $ 15.00

369 5.5 12.94 306 5.3 12.98

$ 15.01 to $ 18.00

$ 18.01 to$ 21.00

115 2.2 19.88 115 2.2 19.88

$ 21.01 to $ 24.00

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

Approximately 0.9 million stock options and stock appreciation rights were granted by the Company subsequent to the Combination through December 31, 2017 .

Approximately 4.7 million stock appreciation rights were granted by the Company for the period prior to the Combination in 2017 .

The fair value of stock options and stock appreciation rights is estimated on the grant date using the Black-Scholes option pricing model.

The Black-Scholes option pricing model incorporates various assumptions, including expected volatility and expected term.

Prior to the Combination, expected stock price volatilities were estimated based on historical stock price volatilities of a group of peer companies.

Subsequent to the Combination, expected stock price volatilities were estimated based on the average of IAC's historical volatility, as a result of the Company representing a large percentage of the overall value of IAC, and the historical stock price volatilities of the aforementioned group of peer companies.

The risk-free interest rates are based on U.S.

Treasuries with comparable terms as the awards, in effect at the grant date.

Prior to the Combination, expected term was based on the mid-point of the first and last windows for exercise.

Subsequent to the Combination, expected term is based on the historical exercise pattern of IAC's employees for comparable awards, a ten-year contractual life with vesting in four equal annual installments, because the Company did not have sufficient data to estimate an expected term for these awards.

No dividends have been assumed.

The following are the weighted average assumptions used in the Black-Scholes option pricing model:

December 31, 2017

Expected volatility

Risk-free interest rate

Expected term

Dividend yield

The per share weighted average grant date fair value of stock options and stock appreciation rights granted by the Company subsequent to the Combination through December 31, 2017 is $ 4.30 .

The per share weighted average grant date fair value of stock appreciation rights granted by the Company for the period prior to the Combination in 2017 is $ 8.24 .

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

In connection with the Combination, the previously issued HomeAdvisor (US) stock appreciation rights were converted into ANGI Homeservices' equity awards resulting in a modification charge of $ 217.7 million of which $ 29.0 million , $ 56.9 million and $ 93.4 million were recognized as stock-based compensation expense in the years ended December 31, 2019 , 2018 and 2017 , respectively, and the remaining charge will be recognized over the remaining vesting period of the modified awards.

16 2.6 22.02 16 2.6 22.02

10,689 5.7 $ 4.67 8,944 5.6 $ 4.59

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

In connection with the Combination, the previously issued HomeAdvisor (US) stock appreciation rights were converted into ANGI Homeservices’ equity awards resulting in a modification charge.

Included in stock-based compensation expense in the years ended December 31, 2020, 2019 and 2018 were charges of $ 21.1 million, $ 29.0 million and $ 56.9 million, respectively, related to these modified awards, and the remaining charge of $ 0.9 million will be recognized over the remaining vesting period of the modified awards.

In connection with the departure of the president and chief operating officer in the fourth quarter of 2020, the Company recognized a modification charge of $ 6.8 million related to the acceleration of vesting of his unvested stock appreciation rights and the extension of the post-termination exercise period for his vested and exercisable stock appreciation rights.

In connection with the chief executive officer transition during the fourth quarter of 2018, the Company accelerated $ 3.9 million of expense into 2018 from 2019.

During the second quarter of 2017, the Company modified certain HomeAdvisor (US) stock appreciation rights and recognized a modification charge of $ 6.6 million .

Cash received from stock option exercises was $ 0.6 million , $ 4.7 million and $ 1.7 million for the years ended December 31, 2019 and 2018 and for the period subsequent to the Combination through December 31, 2017 , respectively.

For periods prior to the Combination, no cash was received from the exercise of stock appreciation rights because they were net settled in shares of IAC’s common stock.

No cash was received from stock option exercises during the year ended December 31, 2020 because they were net settled in shares of ANGI Homeservices’ common stock.

Cash received from stock option exercises was $ 0.6 million and $ 4.7 million for the years ended December 31, 2019 and 2018, respectively.

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

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.

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 the Company 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.

In addition, at IAC’s option, these awards can be settled in either Class A shares of ANGI or shares of IAC common stock.

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Assuming all of the stock appreciation rights outstanding on December 31, 2020 were net settled on that date, ANGI would have issued 3.4 million Class A shares (either to award holders or to IAC as reimbursement) and ANGI would have remitted $ 45.2 million in cash for withholding taxes (assuming a 50 % withholding rate).

Assuming all other ANGI equity awards outstanding on December 31, 2019 , were net settled on that date, including stock options, RSUs and subsidiary denominated equity described below, ANGI would have issued 5.1 million shares and would have remitted $ 43.4 million in cash for withholding taxes (assuming a 50 % withholding rate).

Assuming all other ANGI equity awards outstanding on December 31, 2020, were net settled on that date, including stock options, RSUs and subsidiary denominated equity described

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

below, ANGI would have issued 6.0 million shares and would have remitted $ 76.8 million in cash for withholding taxes (assuming a 50 % withholding rate).

Restricted Stock Units, Market-based Stock Units and Performance-based Stock Units

7 unchanged sentences

Unvested RSUs, MSUs and PSUs outstanding at December 31, 2020 and changes during the year ended December 31, 2020 are as follows:

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Number of Shares

Weighted Average

Number of Shares (a)

RSUs MSUs PSUs

Number of Shares Weighted Average

Fair Value Number of Shares (a)

Weighted Average

Number of Shares (a)

Fair Value Number of Shares (a)

Weighted Average

1 unchanged sentence

Unvested at January 1, 2020 5,660 $ 15.29 3,503 $ 3.62 881 $ 15.89

Granted 6,962 7.37 — — 1,844 6.92

Vested ( 2,128 ) 13.78 ( 738 ) 6.8 — —

Forfeited ( 934 ) 11.93 ( 269 ) 6.8 ( 767 ) 16.4

Unvested at December 31, 2020 9,560 $ 10.19 2,496 $ 7.82 1,958 $ 5.11

___________________________

Included in the table are MSUs and PSUs which vests in varying amounts depending upon certain market or performance conditions.

(a) Included in the table are MSUs and PSUs which vests in varying amounts depending upon certain market or performance conditions.

The MSUs and PSUs in the table above includes these awards at their maximum potential payout.

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The weighted average fair value of RSUs granted during the years ended December 31, 2020, 2019 and 2018 based on market prices of ANGI Homeservices’ common stock on the grant date was $ 7.37 , $ 13.16 and $ 18.08 , respectively.

There were no MSUs granted during the year ended December 31, 2020.

The weighted average fair value of MSUs granted during the year ended December 31, 2019 based on the lattice model was $ 3.67 .

The weighted average fair value of PSUs granted during the year ended December 31, 2019 based on market prices of ANGI Homeservices’ common stock on the grant date was $ 15.93 .

There were no MSUs or PSUs granted or outstanding during the years ended December 31, 2018 and 2017 .

The weighted average fair value of PSUs granted during the years ended December 31, 2020 and 2019 based on market prices of ANGI Homeservices’ common stock on the grant date was $ 6.92 and $ 15.93 , respectively.

There were no MSUs or PSUs granted or outstanding during the year ended December 31, 2018.

The total fair value of RSUs that vested during the years ended December 31, 2020, 2019 and 2018 was $ 23.4 million, $ 16.1 million and $ 19.5 million, respectively.

The total fair value of MSUs that vested during the year ended December 31, 2019 , was $ 3.2 million .

The total fair value of MSUs that vested during the years ended December 31, 2020 and 2019, was $ 5.2 million and $ 3.2 million, respectively.

There were no PSUs that vested during the years ended December 31, 2020, 2019 and 2018.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the departure of the president and chief operating officer in the fourth quarter of 2020, the Company recognized a modification charge of $ 7.3 million related to the acceleration of vesting of his unvested RSUs.

Equity Instruments Denominated in the Shares of Certain Subsidiaries

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The plans under which these awards are granted establish specific settlement dates or liquidity events for which the valuation of the relevant subsidiary is determined for purposes of settlement of the awards.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

IAC Denominated Stock Options

There were no IAC stock options granted by IAC under its equity incentive plans to employees of ANGI Homeservices during the years ended December 31, 2019 , 2018 and 2017 .

At December 31, 2019 , approximately 0.1 million IAC options remain outstanding to employees of ANGI Homeservices.

The fair value of each stock option award is estimated on the grant date using the Black-Scholes option-pricing model.

IAC stock options are granted with exercise prices at least equal to the fair value on the date of grant, vest ratably in annual installments over a four -year period and expire ten years from the date of grant.

IAC Denominated Performance Stock Units ("PSUs")

There were no IAC PSUs granted by IAC to employees of ANGI Homeservices during the years ended December 31, 2019 and 2018 .

For the year ended December 31, 2017, approximately 0.1 million IAC PSUs were granted by IAC to employees of ANGI Homeservices.

PSUs are awards in the form of phantom shares or units, denominated in a hypothetical equivalent number of shares of IAC common stock and with the value of each PSU equal to the fair value of IAC common stock at the date of grant.

Each PSU grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests and certain performance targets, set at the time of grant, must be achieved before an award vests.

At December 31, 2019, these awards did not vest because the performance conditions were not achieved.

NOTE 12— SEGMENT INFORMATION

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Years Ended December 31,

2020 2019 2018

(In thousands)

North America $ 1,395,428 $ 1,249,892 $ 1,062,171

Europe 72,497 76,313 70,070

Total $ 1,467,925 $ 1,326,205 $ 1,132,241

ANGI HOMESERVICES INC.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the revenue of the Company’s segments disaggregated by type of service:

Years Ended December 31,

2020 2019 2018

(In thousands)

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Consumer connection revenue (a)

$ 1,054,660 $ 913,533 $ 704,341

Service professional membership subscription revenue 50,975 63,872 66,214

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Advertising and other revenue (b)

264,108 257,224 287,676

Total North America revenue 1,395,428 1,249,892 1,062,171

Consumer connection revenue (a)

Consumer connection revenue (c)

57,692 59,611 50,913

Service professional membership subscription revenue 13,091 14,231 17,362

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___________________________

Includes fees paid by service professionals for consumer matches and revenue from completed jobs sourced through the HomeAdvisor and Handy platforms.

Includes Angie's List revenue from service professionals under contract for advertising and Angie's List membership subscription fees from consumers, as well as revenue from mHelpDesk, HomeStars, Fixd Repair and Felix.

Felix was sold on December 31, 2018 and its revenue for the years ended December 31, 2018 and 2017 were $ 36.9 million and $ 26.9 million , respectively.

(a) Includes fees paid by service professionals for consumer matches and revenue from pre-priced jobs sourced through the HomeAdvisor and Handy platforms.

(b) Includes Angie’s List revenue from service professionals under contract for advertising and Angie’s List membership subscription fees from consumers, as well as revenue from mHelpDesk, HomeStars and Felix.

Felix was sold on December 31, 2018 and its revenue for the year ended December 31, 2018 was $ 36.9 million.

Revenue by geography is based on where the customer is located.

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Years Ended December 31,

2020 2019 2018

(In thousands)

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All other countries 88,689 91,450 81,600

Total $ 1,467,925 $ 1,326,205 $ 1,132,241

The United States is the only country whose revenue is greater than 10 % of total revenue of the Company for the years ended December 31, 2020, 2019 and 2018.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

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All other countries 11,001 7,539

Total $ 108,842 $ 103,361

The following tables present operating income (loss) and Adjusted EBITDA by reportable segment:

Years Ended December 31,

2020 2019 2018

(In thousands)

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North America $ 4,811 $ 48,967 $ 78,102

Europe ( 11,179 ) ( 10,322 ) ( 14,196 )

Total $ ( 6,368 ) $ 38,645 $ 63,906

Years Ended December 31,

2020 2019 2018

(In thousands)

Adjusted EBITDA (c) :

Adjusted EBITDA (d) :

North America $ 178,854 $ 208,192 $ 253,963

Europe $ ( 6,050 ) $ ( 5,895 ) $ ( 6,457 )

___________________________

The Company’s primary financial measure is Adjusted EBITDA, which is defined as operating income excluding:

(d) The Company’s primary financial measure is Adjusted EBITDA, which is defined as operating income excluding:

(1) stock-based compensation expense;

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

The following tables reconcile operating income (loss) for the Company’s reportable segments and net earnings (loss) attributable to ANGI Homeservices Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables reconcile operating income (loss) for the Company’s reportable segments and net (loss) earnings attributable to ANGI Homeservices Inc.

shareholders to Adjusted EBITDA:

Year Ended December 31, 2020

Operating Income (Loss)

Stock-Based Compensation Expense

Amortization of Intangibles

Adjusted EBITDA

Operating Income (Loss) Stock-Based Compensation Expense Depreciation Amortization of Intangibles Adjusted EBITDA

(In thousands)

North America $ 4,811 $ 82,933 $ 48,515 $ 42,595 $ 178,854

Operating income

Interest expense—third-party

Interest expense—related party

Europe ( 11,179 ) $ 716 $ 4,106 $ 307 $ ( 6,050 )

Operating (loss) ( 6,368 )

Interest expense ( 14,178 )

Other income, net 1,218

1 unchanged sentence

Income tax benefit 15,168

Net loss ( 4,160 )

Net earnings attributable to noncontrolling interests ( 2,123 )

Net earnings attributable to ANGI Homeservices Inc.

Net loss attributable to ANGI Homeservices Inc.

shareholders $ ( 6,283 )

Year Ended December 31, 2019

Operating Income (Loss)

Stock-Based Compensation Expense

Amortization of Intangibles

Adjusted EBITDA

Operating Income (Loss) Stock-Based Compensation Expense Depreciation Amortization of Intangibles Adjusted EBITDA

(In thousands)

North America $ 48,967 $ 67,646 $ 37,481 $ 54,098 $ 208,192

Europe ( 10,322 ) $ 609 $ 2,434 $ 1,384 $ ( 5,895 )

Operating income 38,645

Interest expense—third-party

Interest expense—related party

Interest expense ( 11,493 )

Other income, net 6,494

1 unchanged sentence

Income tax benefit 1,668

Net earnings 35,314

Net earnings attributable to noncontrolling interests ( 485 )

Net earnings attributable to ANGI Homeservices Inc.

shareholders $ 34,829

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended December 31, 2018

Operating Loss

Stock-Based Compensation Expense

Amortization of Intangibles

Adjusted EBITDA

Operating Income (Loss) Stock-Based Compensation Expense Depreciation Amortization of Intangibles Adjusted EBITDA

(In thousands)

North America $ 78,102 $ 96,078 $ 21,888 $ 57,895 $ 253,963

Operating loss

Interest expense—third-party

Interest expense—related party

Europe ( 14,196 ) $ 1,000 $ 2,422 $ 4,317 $ ( 6,457 )

Operating income 63,906

Interest expense ( 11,623 )

Other income, net 17,741

Loss before income taxes

Earnings before income taxes 70,024

Income tax benefit 7,483

Net loss attributable to noncontrolling interests

Net loss attributable to ANGI Homeservices Inc.

Net earnings 77,507

Net earnings attributable to noncontrolling interests ( 189 )

Net earnings attributable to ANGI Homeservices Inc.

shareholders $ 77,318

The following table presents capital expenditures by reportable segment:

Years Ended December 31,

2020 2019 2018

(In thousands)

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North America $ 50,462 $ 64,215 $ 42,976

Europe 2,026 4,589 4,000

Total $ 52,488 $ 68,804 $ 46,976

NOTE 13— LEASES

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

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

ROU assets represent the Company’s right to use the underlying assets for the lease term and lease liabilities represent the present value of the Company’s obligation to make payments arising from these leases.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Balance Sheet Classification

December 31, 2019

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Leases Balance Sheet Classification 2020 2019

(In thousands)

Right-of-use assets

Right-of-use assets, net

Current lease liabilities

Accrued expenses and other current liabilities

Long-term lease liabilities

Other long-term liabilities

Right-of-use assets Other non-current assets $ 87,559 $ 101,243

Current lease liabilities Accrued expenses and other current liabilities 15,700 13,234

Long-term lease liabilities Other long-term liabilities 103,575 119,375

Total lease liabilities $ 119,275 $ 132,609

Income Statement Classification

Year Ended December 31, 2019

Lease Cost Income Statement Classification 2020 2019

(In thousands)

Fixed lease cost

Cost of revenue

Fixed lease cost

Selling and marketing expense

Fixed lease cost

General and administrative expense

Fixed lease cost

Product development expense

Fixed lease cost Cost of revenue $ 321 $ 207

Fixed lease cost Selling and marketing expense 9,913 9,277

Fixed lease cost General and administrative expense 7,545 7,617

Fixed lease cost Product development expense 1,848 1,456

Total fixed lease cost (a)

Variable lease cost

Cost of revenue

Variable lease cost

Selling and marketing expense

Variable lease cost

General and administrative expense

Variable lease cost

Product development expense

19,627 18,557

Variable lease cost Cost of revenue — —

Variable lease cost Selling and marketing expense 2,314 1,572

Variable lease cost General and administrative expense 1,567 1,021

Variable lease cost Product development expense 867 308

Total variable lease cost 4,748 2,901

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________________________________

Includes $ 0.6 million of short-term lease cost and $ 1.4 million of sublease income for the year ended December 31, 2019, respectively.

(a) Includes $ 0.04 million and $ 0.6 million of short-term lease cost and $ 1.8 million and $ 1.4 million of sublease income for the years ended December 31, 2020 and 2019, respectively.

Maturities of lease liabilities as of December 31, 2020 (b) :

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(In thousands)

2021 $ 22,321

Thereafter 43,376

Total 146,910

Interest 27,635

Present value of lease liabilities $ 119,275

1 unchanged sentence

(b) Lease payments exclude $ 0.1 million of legally binding minimum lease payments for leases signed but not yet commenced.

The following are the weighted average assumptions used for lease term and discount rate as of December 31, 2019 :

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Remaining lease term

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following are the weighted average assumptions used for lease terms and discount rates as of December 31, 2020 and 2019:

Remaining lease term 6.9 years 7.7 years

Discount rate 5.91 % 5.99 %

Year Ended December 31, 2019

(In thousands)

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The Company has entered into certain off-balance sheet commitments that require the future purchase of services (“purchase obligations”).

Future payments under noncancelable unconditional purchase obligations as of December 31, 2019 are as follows:

Future payments under non-cancelable unconditional purchase obligations as of December 31, 2020 are as follows:

Amount of Commitment Expiration Per Period

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Purchase obligations $ 12,916 $ 22 $ — $ — $ 12,938

Purchase obligations include (i) the Company's allocable share of a three-year cloud computing arrangement between IAC and a third party provider of $ 15.6 million , of which $ 5.4 million was paid in 2019 and had a related prepaid asset of $ 4.3 million at December 31, 2019 included in "Other current assets" on the consolidated balance sheet, and two remaining minimum payments of $ 4.7 million and $ 5.6 million that are due in 2020 and 2021, respectively, and (ii) remaining payments of $ 23.8 million related to advertising commitments to be made in 2020.

Contingencies

Purchase obligations include (i) a remaining minimum payment of $ 5.6 million that is due in 2021 under the Company’s allocable share of a three-year cloud computing arrangement, and (ii) payments of $ 7.3 million related to advertising commitments to be made in 2021.

The Company has an allocable share of a three-year cloud computing arrangement between IAC and a third party provider of $ 15.6 million, of which $ 3.2 million and $ 5.6 million was paid in 2020 and 2019, respectively, and the Company had a related prepaid asset of $ 4.2 million and $ 4.3 million at December 31, 2020 and 2019, respectively, which is included in “Other current assets” on the consolidated balance sheet.

In the ordinary course of business, the Company is a party to various lawsuits.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 15— RELATED PARTY TRANSACTIONS WITH IAC

Relationship with IAC Following the Combination

In connection with the Combination, ANGI Homeservices and IAC entered into certain agreements to govern our relationship following the Combination.

Relationship with IAC

ANGI Homeservices and IAC have entered into certain agreements to govern their relationship.

These agreements include:

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Investor Rights Agreement

The investor rights agreement provides IAC with certain registration, preemptive and governance rights related to us and the shares of our capital stock it holds, as well as certain governance rights for the benefit of stockholders other than IAC.

The investor rights agreement provides IAC with certain registration, preemptive and governance rights related to the Company and the shares of its capital stock it holds, as well as certain governance rights for the benefit of stockholders other than IAC.

Services Agreement

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and (v) such other services as to which IAC and the Company may agree.

The services agreement has an initial term of one year from the date of the Combination and will automatically renew for additional one -year periods thereafter for so long as IAC continues to own a majority of the outstanding shares of the Company's common stock.

For the years ended December 31, 2019 and 2018 and for the period subsequent to the Combination through December 31, 2017, the Company was charged $ 4.8 million , $ 5.7 million and $ 1.7 million , respectively, by IAC for services rendered pursuant to the services agreement.

There were no outstanding receivables or payables pursuant to the services agreement as of December 31, 2019.

The services agreement automatically renews annually for an additional one-year period for so long as IAC continues to own a majority of the outstanding shares of the Company’s common stock.

For the years ended December 31, 2020, 2019 and 2018, the Company was charged $ 4.8 million, $ 4.8 million and $ 5.7 million, respectively, by IAC for services rendered pursuant to the services agreement.

There were no outstanding receivables or payables pursuant to the services agreement as of December 31, 2020 and 2019, respectively.

At December 31, 2018, the Company had an outstanding receivable due from IAC of $ 0.1 million pursuant to the services agreement.

This amount was deducted from the charges due to IAC pursuant to the services agreement discussed above during the first quarter of 2019.

Separately, the Company subleases office space to IAC and charged IAC $ 1.4 million of rent for the year ended December 31, 2019 .

There were outstanding receivables of $ 0.9 million due from IAC at December 31, 2019, pursuant to sublease agreements.

Separately, the Company subleases office space to IAC and charged rent of $ 1.8 million and $ 1.4 million for the years ended December 31, 2020 and 2019, respectively.

There were no amounts charged pursuant to subleases for office space to IAC for the year ended December 31, 2018.

At both December 31, 2020 and 2019, there were outstanding receivables of less than $ 0.1 million due from IAC pursuant to sublease agreements, which were subsequently paid in full in the first quarter of 2021 and 2020, respectively.

Tax Sharing Agreement

The tax sharing agreement governs the rights, responsibilities, and obligations of the Company and IAC with respect to tax liabilities and benefits, entitlements to refunds, preparation of tax returns, tax contests and other tax matters regarding U.S.

federal, state, local and foreign income taxes.

Under the tax sharing agreement, the Company is generally responsible and

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

federal, state, local and foreign income taxes.

Under the tax sharing agreement, the Company is generally responsible and required to indemnify IAC for:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

required to indemnify IAC for:

(i) all taxes imposed with respect to any consolidated, combined or unitary tax return of IAC or its subsidiaries that includes the Company or any of its subsidiaries to the extent attributable to the Company or any of its subsidiaries, as determined under the tax sharing agreement, and (ii) all taxes imposed with respect to any of the Company's or its subsidiaries’ consolidated, combined, unitary or separate tax returns.

At December 31, 2020 and 2019, the Company had outstanding payables of $ 0.9 million and $ 0.2 million, respectively, due to IAC pursuant to the tax sharing agreement, which is included in “Accrued expenses and other current liabilities” in the accompanying consolidated balance sheet.

There were $ 3.1 million of refunds received from IAC pursuant to this agreement during the twelve months ended December 31, 2020.

During the first quarter of 2019, $ 11.4 million was paid to IAC, pursuant to this agreement.

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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.

For the years ended December 31, 2019 and 2018 and for the period subsequent to the Combination through December 31, 2017, 0.5 million , 0.9 million and 0.4 million shares of ANGI Homeservices Class B common stock were issued to IAC, respectively, pursuant to the employee matters agreement as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by ANGI Homeservices employees.

Relationship with IAC Prior to the Combination

For periods prior to the Combination, the Company’s combined statement of operations includes allocations of general and administrative costs, including stock-based compensation expense, related to IAC’s accounting, treasury, legal, tax, corporate support and internal audit functions.

These allocations were based on the HomeAdvisor business' revenue as a percentage of IAC’s total revenue.

Allocated general and administrative costs, inclusive of stock-based compensation expense, was $ 4.8 million for the year ended December 31, 2017 and is included in "General and administrative expense" in the accompanying consolidated and combined statement of operations.

It is not practicable to determine the actual expenses that would have been incurred for these services had the HomeAdvisor business operated as a standalone entity during the periods presented.

Management considers the allocation method to be reasonable.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

The following table summarizes the components of the net increase in IAC’s investment in HomeAdvisor prior to the contribution of the HomeAdvisor business to ANGI Homeservices:

Through September 29, 2017

(In thousands)

Cash transfers from IAC related to its centrally managed U.S.

treasury management function, acquisitions and cash expenses paid by IAC on behalf of HomeAdvisor, net

Interest income, net (a)

Allocation of general and administrative expense

Net increase in IAC’s investment in HomeAdvisor

________________________________

Interest expense on long-term debt—related party is not included.

The related party notes described below were settled in full immediately prior to the Combination.

On October 14, 2016, the Company, through a foreign subsidiary, issued a promissory note due October 14, 2023 in the amount of $ 42.0 million to a foreign subsidiary of IAC that is not part of the HomeAdvisor business.

The proceeds were used to finance the acquisition of MyHammer and refinance an $ 11.4 million loan that was previously outstanding.

The promissory note bore interest at 11 % per annum.

On March 20, 2017, the Company, through two foreign subsidiaries, issued promissory notes in the amount of £ 21.0 million due March 20, 2024 ("Note A") and $ 15.5 million due March 20, 2047 ("Note B"), respectively, to two foreign subsidiaries of IAC that are not part of the HomeAdvisor business.

The proceeds were used to finance the acquisition of MyBuilder.

Note A and Note B bore interest at 6.5 % and 7 % per annum, respectively.

On February 7, 2017, the Company, through a foreign subsidiary, issued a promissory note due February 7, 2024 in the amount of £ 8.4 million to a foreign subsidiary of IAC that is not part of the HomeAdvisor business.

The proceeds were used to finance the acquisition of HomeStars.

The promissory note bore interest at 6.875 % per annum.

On August 29, 2013, the Company, through a foreign subsidiary, issued a promissory note due August 29, 2018 in the amount of $ 5.0 million to a foreign subsidiary of IAC that is not part of the HomeAdvisor business.

The proceeds were used to repay certain indebtedness.

The promissory note bore interest at LIBOR plus 2.00 % .

Intercompany Loans Entered Into in Connection with the Combination

On September 29, 2017 , the Company and IAC entered into two intercompany notes (collectively referred to as "Intercompany Notes") as follows:

(i) a Payoff Intercompany Note, which provided the funds necessary to repay the outstanding balance under Angie's List's existing credit agreement, totaling $ 61.5 million ;

and (ii) a Working Capital Intercompany Note, which provided ANGI Homeservices with $ 15 million for working capital purposes.

These Intercompany Notes were repaid on November 1, 2017 with a portion of the proceeds from the Term Loan that were received on the same date.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

Long-Term Debt—Related Party for Periods Prior and Subsequent to the Combination

Long-term debt—related party consists of:

(in thousands)

Long-term debt—related party

Total long-term debt—related party, net

Immediately prior to the Combination, the Company, through a foreign subsidiary, sold a promissory note in the amount of € 2.4 million to a foreign subsidiary of IAC.

During the first quarter of 2019, the amount outstanding on the promissory note at December 31, 2018 of € 0.9 million , or $ 1.0 million , was repaid.

Interest expense related to long-term debt—related party is included in "Interest expense—related party" in the accompanying consolidated and combined statement of operations.

For the years ended December 31, 2020, 2019 and 2018, 0.3 million, 0.5 million and 0.9 million shares of ANGI Homeservices Class B common stock were issued to IAC, respectively, pursuant to the employee matters agreement as reimbursement for shares of IAC common stock issued in connection with the exercise and vesting of IAC equity awards held by ANGI Homeservices employees.

NOTE 16— BENEFIT PLANS

The Company's employees in the United States are eligible to participate in a retirement savings plan sponsored by IAC, which is qualified under Section 401(k) of the Internal Revenue Code.

The Company’s employees in the United States are eligible to participate in a retirement savings program offered by IAC, which is qualified under Section 401(k) of the Internal Revenue Code.

Under the IAC/InterActiveCorp Retirement Savings Plan (the “IAC Plan”), participating employees may contribute up to 50 % of their pre-tax earnings, but not more than statutory limits.

The current employer match under the IAC Plan is fifty cents for each dollar a participant contributes in the IAC Plan, with a maximum contribution of 3 % of a participant’s eligible earnings.

Matching contributions under the IAC Plan for the years ended December 31, 2019 , 2018 and 2017 are $ 6.3 million , $ 5.6 million and $ 3.5 million , respectively.

Matching contributions are invested in the same manner as each participant’s voluntary contributions in the investment options provided under the IAC Plan.

Matching contributions under the IAC Plan for the years ended December 31, 2020, 2019 and 2018 were $ 7.7 million, $ 6.3 million and $ 5.6 million, respectively.

Matching contributions are invested in the same manner as each participant’s voluntary contributions in the investment options provided

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

under the IAC Plan.

An investment option in the IAC Plan is IAC common stock, but neither participant nor matching contributions are required to be invested in IAC common stock.

The increase in matching contributions in 2019 and 2018 was due to an increase in headcount from continued business growth.

Internationally, the Company also has or participates in various benefit plans, primarily defined contribution plans.

The Company’s contributions for these plans for the years ended December 31, 2020, 2019 and 2018 were $ 0.6 million, $ 0.5 million, and $ 0.4 million, respectively.

Angie's List Plan Merger into the IAC Plan Effective January 1, 2018

Angie's List sponsored a 401(k) profit-sharing plan (the "Angie's List Plan") that covered substantially all of its employees.

Contributions to the Angie's List Plan were discretionary.

Angie's List contributed 3 % of gross pay for all eligible employees.

Matching contributions under the Angie's List Plan, for the period subsequent to the Combination through December 31, 2017 were $ 0.6 million .

The Angie's List Plan was merged into the IAC Plan effective January 1, 2018.

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTE 17— CONSOLIDATED AND COMBINED FINANCIAL STATEMENT DETAILS

NOTE 17— CONSOLIDATED FINANCIAL STATEMENT DETAILS

Cash and Cash Equivalents and Restricted Cash:

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheet to the total amounts shown in the consolidated statement of cash flows:

December 31, 2020 December 31, 2019

(In thousands)

Cash and cash equivalents $ 812,705 $ 390,565

Restricted cash included in other current assets 407 504

Restricted cash included in other non-current assets 449 409

Total cash and cash equivalents and restricted cash as shown on the consolidated statement of cash flows $ 813,561 $ 391,478

Restricted cash included in other current assets at December 31, 2020 primarily consists of cash received from customers at ANGI through the Handy platform, representing funds collected for payment to service providers, which were not settled as of the period end.

Restricted cash included in other current assets at December 31, 2019 primarily consists of a deposit related to corporate credit cards.

Restricted cash included in other non-current assets at December 31, 2020 and 2019 consists of deposits related to leases.

(In thousands)

Other current assets:

Capitalized costs to obtain a contract with a customer $ 49,194 $ 35,103

Proceeds receivable from the sale of a business

Prepaid expenses 17,742 21,790

Other 5,022 10,866

Other current assets $ 71,958 $ 67,759

8 unchanged sentences

Capitalized software, leasehold improvements and equipment, net $ 108,842 $ 103,361

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In thousands)

2 unchanged sentences

Accrued employee compensation and benefits 47,310 28,630

Current lease liabilities 15,700 13,234

Other 55,176 45,451

Accrued expenses and other current liabilities $ 148,219 $ 116,997

Years Ended December 31,

2020 2019 2018

(In thousands)

Other income, net $ 1,218 $ 6,494 $ 17,741

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 2017 is principally net foreign currency exchange gains.

Cash and Cash Equivalents and Restricted Cash

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NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2016

(In thousands)

Cash and cash equivalents

Restricted cash included in other current assets

Restricted cash included in other assets

Total cash and cash equivalents and restricted cash as shown on the consolidated and combined statement of cash flows

Restricted cash at December 31, 2019 primarily consists of a deposit related to corporate credit cards.

Restricted cash at December 31, 2018 primarily consists of a cash collateralized letter of credit and a deposit related to corporate credit cards.

Restricted cash at December 31, 2016 primarily includes funds held in escrow for the MyHammer tender offer, which were returned to the Company in the first quarter of 2017 .

Other income, net in 2020 principally includes interest income of $ 1.7 million, offset by other expense of $ 0.5 million.

Other income, net in 2019 includes 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 interest income of $ 4.8 million.

Supplemental Disclosure of Non-Cash Transactions:

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On October 10, 2018, ANGI issued 5.1 million shares of its Class B common stock to IAC pursuant to the post-closing adjustment provision of the Angie’s List merger agreement.

On September 29, 2017, ANGI issued 61.3 million shares of its Class A common stock valued at $ 763.7 million in connection with the Combination.

Supplemental Disclosure of Cash Flow Information:

Years Ended December 31,

2020 2019 2018

(In thousands)

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Income tax payments, including amounts paid to IAC for ANGI Homeservices' share of IAC's consolidated tax liability 1,789 12,224 332

Income tax refunds

Income tax refunds, including amounts received from IAC for ANGI Homeservices' share of IAC's consolidated tax liability ( 3,506 ) ( 957 ) ( 172 )

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 18— QUARTERLY RESULTS (UNAUDITED)

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Year Ended December 31, 2020

Revenue $ 343,650 $ 375,061 $ 389,913 $ 359,301

Cost of revenue 33,229 41,042 48,253 50,757

Operating (loss) income ( 16,296 ) 17,644 ( 3,019 ) ( 4,697 )

Net earnings attributable to ANGI Homeservices Inc.

Net (loss) earnings ( 9,184 ) 13,211 5,203 ( 13,390 )

Net (loss) earnings attributable to ANGI Homeservices Inc.

shareholders ( 8,958 ) 12,667 4,472 ( 14,464 )

Per share information attributable to ANGI Homeservices Inc.

shareholders:

Basic earnings (loss) per share (f)

Diluted earnings (loss) per share (f)

Basic (loss) earnings per share (c)

$ ( 0.02 ) $ 0.03 $ 0.01 $ ( 0.03 )

Diluted (loss) earnings per share (c)

$ ( 0.02 ) $ 0.02 $ 0.01 $ ( 0.03 )

Quarter Ended

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Quarter Ended

September 30 (d)

September 30 (b)

Quarter Ended

December 31 (e)

December 31 (b)

(In thousands, except per share data)

Year Ended December 31, 2019

Revenue $ 303,443 $ 343,896 $ 357,358 $ 321,508

Cost of revenue 10,011 10,722 13,312 12,448

Operating (loss) income ( 3,641 ) 11,403 24,726 6,157

Net (loss) earnings

Net (loss) earnings attributable to ANGI Homeservices Inc.

Net earnings (loss) 9,851 7,234 18,324 ( 95 )

Net earnings (loss) attributable to ANGI Homeservices Inc.

shareholders 9,969 6,968 17,999 ( 107 )

Per share information attributable to ANGI Homeservices Inc.

shareholders:

Basic (loss) earnings per share (f)

Diluted (loss) earnings per share (f)

Basic earnings (loss) per share (c)

$ 0.02 $ 0.01 $ 0.04 $ ( 0.00 )

The first, second, third and fourth quarters of 2019 include after-tax stock-based compensation expense of $ 2.3 million , $ 2.0 million , $ 1.8 million , and $ 1.8 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.

The first quarter of 2018 includes after-tax stock-based compensation expense of $ 14.7 million 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, as well as after-tax costs of $ 4.0 million related to the Combination (including $ 2.8 million of deferred revenue write-offs).

The second quarter of 2018 includes after-tax stock-based compensation expense of $ 12.8 million 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, as well as after-tax costs of $ 1.9 million related to the Combination (including $ 1.8 million of deferred revenue write-offs).

The third quarter of 2018 includes after-tax stock-based compensation expense of $ 12.3 million 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.

The fourth quarter of 2018 includes:

after-tax stock-based compensation expense of $ 14.4 million 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.

ANGI HOMESERVICES INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Continued)

an after-tax gain of $ 10.0 million related to the sale of Felix.

Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.

Diluted earnings (loss) per share (c)

$ 0.02 $ 0.01 $ 0.04 $ ( 0.00 )

_________________________________________________________________________

(a) The first, second, third and fourth quarters of 2020 include after-tax stock-based compensation expense of $ 8.8 million, $ 2.6 million, $ 4.0 million, and $ 1.5 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.

(b) The first, second, third and fourth quarters of 2019 include after-tax stock-based compensation expense of $ 7.3 million, $ 6.2 million, $ 5.7 million, and $ 5.6 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.

(c) Quarterly per share amounts may not add to the related annual per share amount because of differences in the average common shares outstanding during each period.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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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 7A. Quantitative and Qualitative Disclosures About Market Risk