Angi Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk 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, 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 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. dollar. 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. 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. 49 Table of Contents Item 8. Consolidated Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of ANGI Homeservices Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of ANGI Homeservices Inc. 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. generally accepted accounting principles. 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. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (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 accounts or disclosures to which it relates. 50 Stock-Based Compensation Description of 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, 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2017. New York, New York February 16, 2021 51 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2020 2019 (In thousands, except par value amounts) ASSETS Cash and cash equivalents $ 812,705 $ 390,565 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 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 LIABILITIES: Current portion of long-term debt $ — $ 13,750 Accounts payable 30,805 25,987 Deferred revenue 54,654 58,220 Accrued expenses and other current liabilities 148,219 116,997 Total current liabilities 233,678 214,954 Long-term debt, net 712,277 231,946 Deferred income taxes 1,296 3,441 Other long-term liabilities 111,710 121,055 Redeemable noncontrolling interests 26,364 26,663 Commitments and contingencies SHAREHOLDERS’ EQUITY: Class A common stock, $ 0.001 par value; authorized 2,000,000 shares, issued 94,238 and 87,007 shares, respectively, and outstanding 78,333 and 79,681 , respectively 94 87 Class B convertible common stock, $ 0.001 par value; authorized 1,500,000 shares; 421,862 and 421,570 shares issued and outstanding 422 422 Class C common stock, $ 0.001 par value; authorized 1,500,000 shares; no shares issued and outstanding — — Additional paid-in capital 1,379,469 1,357,075 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. shareholders’ equity 1,272,290 1,314,288 Noncontrolling interests 10,567 9,264 Total shareholders’ equity 1,282,857 1,323,552 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,368,182 $ 1,921,611 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 52 ANGI HOMESERVICES INC. AND SUBSIDIARIES 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: Cost of revenue (exclusive of depreciation shown separately below) 173,281 46,493 55,739 Selling and marketing expense 762,590 733,223 541,469 General and administrative expense 374,096 348,247 323,462 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 (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 (Loss) earnings before income taxes ( 19,328 ) 33,646 70,024 Income tax benefit 15,168 1,668 7,483 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 (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: Selling and marketing expense $ 4,662 $ 3,717 $ 3,368 General and administrative expense 73,846 56,475 84,028 Product development expense 5,141 8,063 9,682 Total stock-based compensation expense $ 83,649 $ 68,255 $ 97,078 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 53 ANGI HOMESERVICES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS Years Ended December 31, 2020 2019 2018 (In thousands) Net (loss) earnings $ ( 4,160 ) $ 35,314 $ 77,507 Other comprehensive income (loss): Change in foreign currency translation adjustment 6,827 399 ( 4,862 ) Change in unrealized gains and losses on available-for-sale debt securities — ( 3 ) 3 Total other comprehensive income (loss) 6,827 396 ( 4,859 ) Comprehensive income 2,667 35,710 72,648 Components of comprehensive (income) 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 (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. 54 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY Years Ended December 31, 2020, 2019 and 2018 ANGI Homeservices Inc. Shareholders’ Equity Class A Common Stock $ 0.001 Par Value Class B Convertible Common Stock $ 0.001 Par Value Class C Common Stock $ 0.001 Par Value Total ANGI Homeservices Inc. Shareholders’ Equity Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Redeemable Noncontrolling Interests Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Treasury Stock Noncontrolling Interests $ 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 Cumulative effect of adoption of ASU No. 2014-09 — — — — — — — — 25,649 — — 25,649 — 25,649 Net (loss) earnings ( 146 ) — — — — — — — 77,318 — — 77,318 335 77,653 Other comprehensive loss ( 582 ) — — — — — — — — ( 4,093 ) — ( 4,093 ) ( 184 ) ( 4,277 ) Stock-based compensation expense 1,138 — — — — — — 95,940 — — — 95,940 — 95,940 Issuance of common stock pursuant to stock-based awards, net of withholding taxes — 9 9,111 — — — — ( 25,100 ) — — — ( 25,091 ) — ( 25,091 ) Issuance of common stock to IAC pursuant to the employee matters agreement — — — 1 856 — — ( 1 ) — — — — — — Issuance of common stock to IAC pursuant to the post-closing adjustment provision of the Angie’s List merger agreement — — — 5 5,076 — — ( 5 ) — — — — — — Issuance of common stock to the equity holders of Handy Technologies, Inc. pursuant to the merger agreement — 9 8,586 — — — — 165,788 — — — 165,797 — 165,797 Distribution to IAC pursuant to the tax sharing agreement — — — — — — — ( 12,100 ) — — — ( 12,100 ) — ( 12,100 ) 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 55 ANGI HOMESERVICES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Continued) Years Ended December 31, 2020, 2019 and 2018 ANGI Homeservices Inc. Shareholders’ Equity Class A Common Stock $ 0.001 Par Value Class B Convertible Common Stock $ 0.001 Par Value Class C Common Stock $ 0.001 Par Value Total ANGI Homeservices Inc. Shareholders’ Equity Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Redeemable Noncontrolling Interests Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Treasury Stock Noncontrolling Interests $ Shares $ Shares $ Shares (In thousands) 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 Issuance of common stock pursuant to stock-based awards, net of withholding taxes — 7 7,231 — — — — ( 62,704 ) — — — ( 62,697 ) — ( 62,697 ) Issuance of common stock to IAC pursuant to the employee matters agreement — — — — 292 — — ( 1,445 ) — — — ( 1,445 ) — ( 1,445 ) Purchase of treasury stock — — — — — — — — — — ( 64,132 ) ( 64,132 ) — ( 64,132 ) Adjustment pursuant to the tax sharing agreement — — — — — — — 3,613 — — — 3,613 — 3,613 Purchase of redeemable noncontrolling interests ( 3,165 ) — — — — — — — — — — — ( 1,115 ) ( 1,115 ) 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 Financial Statements are an integral part of these statements. 56 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Years Ended December 31, 2020 2019 2018 (In thousands) Cash flows from 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 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 ) Changes in assets and liabilities, net of effects of acquisitions and dispositions: 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 ) Income taxes payable and receivable ( 1,243 ) 1,650 725 Deferred revenue ( 3,786 ) ( 3,743 ) ( 2,029 ) Net cash provided by operating activities 188,419 214,161 223,700 Cash flows from investing activities: Acquisitions, net of cash acquired ( 2,264 ) ( 20,341 ) 3,669 Capital expenditures ( 52,488 ) ( 68,804 ) ( 46,976 ) 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: 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 ) Principal payments on related party debt — ( 1,008 ) ( 1,904 ) Purchase of treasury stock ( 63,674 ) ( 56,905 ) — Proceeds from the exercise of stock options — 573 4,693 Withholding taxes paid on behalf of employees on net settled stock-based awards ( 64,079 ) ( 35,284 ) ( 29,844 ) Distribution from (to) IAC pursuant to tax sharing agreement 3,071 ( 11,355 ) — Purchase of noncontrolling interests ( 4,281 ) ( 71 ) ( 6,061 ) 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 Effect of exchange rate changes on cash and cash equivalents and restricted cash 565 661 212 Net increase in cash and cash equivalents and restricted cash 422,083 52,657 117,300 Cash and cash equivalents and restricted cash at beginning of period 391,478 338,821 221,521 Cash and cash equivalents and restricted cash at end of period $ 813,561 $ 391,478 $ 338,821 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 57 ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— ORGANIZATION ANGI Homeservices Inc. connects quality home service professionals across 500 different categories, from repairing and remodeling to cleaning and landscaping, with consumers. 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. 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 online or connect them by telephone. 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. operations, ANGI Homeservices owns leading home services online marketplaces in France (Travaux), Germany (MyHammer), Netherlands (Werkspot), United Kingdom (MyBuilder), Canada (HomeStars) and Italy (Instapro), as well as operations in Austria (MyHammer). The Company has two operating segments: (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. 58 Table of Contents 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 financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include the accounts of the Company, all entities that are wholly-owned by the Company and all entities in which the Company has a controlling financial interest. All intercompany transactions and balances between and among the Company and its subsidiaries have been eliminated. All intercompany transactions between (i) ANGI 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. 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 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 financial statements in accordance with GAAP. These estimates, judgments and assumptions impact the reported 59 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to: the fair values of cash equivalents and marketable debt securities; the carrying value of accounts receivable, including the determination of the credit loss reserve; the determination of revenue reserves; the carrying value of right-of-use assets (“ROU assets”); the useful lives and recoverability of definite-lived intangible assets and capitalized software, leasehold improvements and equipment; the recoverability of goodwill and indefinite-lived intangible assets; unrecognized tax benefits; the valuation allowance for deferred income tax assets; and the fair value of and forfeiture rates for stock-based awards, among others. The Company bases its estimates and judgments on historical experience, its forecasts and budgets and other factors that the Company considers relevant. Revenue Recognition The Company adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, effective January 1, 2018 using the modified retrospective transition method for open contracts as of the date of initial application. The effect of the adoption of ASU No. 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). The cumulative effect of the adoption of ASU No. 2014-09 was the establishment of a current and non-current asset for capitalized sales commissions of $ 29.7 million and $ 4.2 million, respectively, and a related deferred tax liability of $ 8.3 million, resulting in a net increase to retained earnings of $ 25.6 million on January 1, 2018. The Company’s disaggregated revenue disclosures are presented in “ Note 12—Segment Information .” 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 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. 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 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. Angie’s List website, mobile and call center advertising revenue is recognized ratably over the contract term. Revenue from the sale of advertising in the Angie’s List Magazine is recognized in the period in which the publication is distributed. 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 60 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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. This change in contractual terms requires gross revenue accounting treatment effective January 1, 2020. Also, in the case of certain tasks, HomeAdvisor provides a pre-priced product offering, pursuant to which consumers can request services through a HomeAdvisor platform and pay HomeAdvisor for the services directly. HomeAdvisor then fulfills the request with independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services. Revenue from HomeAdvisor’s pre-priced product offering is also recorded on a gross basis effective January 1, 2020. 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 The objective of determining the transaction price is to estimate the amount of consideration the Company is due in exchange for its services or goods, including amounts that are variable. The Company determines the total transaction price, including an estimate of any variable consideration, at contract inception and reassesses this estimate each reporting period. The Company excludes from the measurement of transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net revenue or cost of revenue. For contracts that have an original duration of one year or less, the Company uses the practical expedient available under ASU No. 2014-09, applicable to such contracts and does not consider the time value of money. Arrangements with Multiple Performance Obligations The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers, which are directly observable or based on an estimate if not directly observable. Assets Recognized from the Costs to Obtain a Contract with a Customer The Company has determined that certain costs, primarily commissions paid to employees pursuant to certain sales incentive programs, meet the requirements to be capitalized as a cost of obtaining a contract. Capitalized sales commissions are amortized over the estimated customer relationship period. The Company calculates the estimated customer relationship period as the average customer life, which is based on historical data. When customer renewals are expected and the renewal commission is not commensurate with the initial commission, the average customer life includes renewal periods. 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, 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. Performance Obligations As permitted under the practical expedient available under ASU No. 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. 61 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accounts Receivables, Net of Credit Loss and Revenue Reserves Accounts receivable include amounts billed and currently due from customers. 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 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 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. The non-current deferred revenue balances are $ 0.2 million and $ 0.2 million at December 31, 2020 and 2019, respectively. Non-current deferred revenue is included in “Other long-term liabilities” in the accompanying consolidated balance sheet. Cash and Cash Equivalents Cash and cash equivalents include cash and short-term investments, with maturities of less than 91 days from the date of purchase. Domestically, cash equivalents consist of AAA rated government money market funds, treasury discount notes, commercial paper, time deposits and certificates of deposit. Internationally, there are no cash equivalents at December 31, 2020 and 2019. Investments in Marketable Debt Securities The Company invests in marketable debt securities with active secondary or resale markets to ensure portfolio liquidity to fund current operations or satisfy other cash requirements as needed. Marketable debt securities are adjusted to fair value each quarter, and the unrealized gains and losses, net of tax, are included in accumulated other comprehensive income (loss) as a separate component of shareholders’ equity. 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. 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- 62 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) temporary. 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 Capitalized software, leasehold improvements and equipment, including significant improvements, are recorded at cost. Repairs and maintenance costs are expensed as incurred. 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 Estimated Useful Lives 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 was $ 67.9 million and $ 56.3 million at December 31, 2020 and 2019, respectively. Business Combinations The purchase price of each acquisition is attributed to the assets acquired and liabilities assumed based on their fair values at the date of acquisition, including identifiable intangible assets that either arise from a contractual or legal right or are separable from goodwill. The Company usually uses the assistance of outside valuation experts to assist in the allocation of purchase price to identifiable intangible assets acquired. While outside valuation experts may be used, management has ultimate responsibility for the valuation methods, models and inputs used and the resulting purchase price allocation. The excess purchase price over the net tangible and identifiable intangible assets is recorded as goodwill and is assigned to the reporting unit(s) that is expected to benefit from the combination as of the acquisition date. Goodwill and Indefinite-Lived Intangible Assets The Company assesses goodwill and indefinite-lived intangible assets for impairment annually as of October 1, or more frequently if an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit or the fair value of an indefinite-lived intangible asset has declined below its carrying value. At October 1, 2020, the Company has two reporting units: North America and Europe. When the Company elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit’s goodwill is necessary; otherwise, a quantitative assessment is performed and the fair value of the reporting unit is determined. 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, 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. The primary factor that the Company considered in its qualitative assessment for its Europe reporting unit were valuations performed during 2020 that indicated a fair value in excess of the carrying value. 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 63 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, 2020 market capitalization of the Company; 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. Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the DCF analyses are based on the Company’s most recent forecast and budget and, for years beyond the budget, the Company’s estimates, which are based, in part, on forecasted growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective reporting units. Assumptions used in the DCF analyses, including the discount rate, are assessed based on the reporting units’ current results and forecasted future performance, as well as macroeconomic and industry specific factors. The discount rate used in determining the fair value of the Company’s Europe reporting unit was 15 % in both 2020 and 2019. Determining fair value using a market approach considers multiples of financial metrics based on both acquisitions and trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined which is applied to financial metrics to estimate the fair value of a reporting unit. To determine a peer group of companies for our respective reporting units, we considered companies relevant in terms of consumer use, monetization model, margin and growth characteristics, and brand strength operating in their respective sectors. While the Company has the option to qualitatively assess whether it is more likely than not that the fair values of its indefinite-lived intangible assets are less than their carrying values, the Company’s policy is to determine the fair value of each of its indefinite-lived intangible assets annually as of October 1, in part, because the level of effort required to perform the quantitative and qualitative assessments is essentially equivalent. The Company determines the fair value of indefinite-lived intangible assets using an avoided royalty DCF valuation analysis. Significant judgments inherent in this analysis include the selection of appropriate royalty and discount rates and estimating the amount and timing of expected future cash flows. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows generated by the respective intangible assets. The royalty rates used in the DCF analyses are based upon an estimate of the royalty rates that a market participant would pay to license the Company’s trade names and trademarks. Assumptions used in the avoided royalty DCF analyses, including the discount rate and royalty rate, are assessed annually based on the actual and projected cash flows related to the asset, as well as macroeconomic and industry specific factors. The discount rates used in the Company’s annual indefinite-lived impairment assessment ranged from 11.5 % to 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. Long-Lived Assets and Intangible Assets with Definite Lives Long-lived assets, which consist of ROU assets, capitalized software, leasehold improvements and equipment and intangible assets with definite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is deemed not to be recoverable, an impairment loss is recorded equal to the amount by which the carrying value of the long-lived asset exceeds its fair value. Amortization of definite-lived intangible assets is computed either on a straight-line basis or based on the pattern in which the economic benefits of the asset will be realized. Fair Value Measurements The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are: • Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets. 64 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) • Level 2: 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 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. • Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. The Company’s non-financial assets, such as goodwill, intangible assets, ROU assets, capitalized software, leasehold improvements and equipment are adjusted to fair value only when an impairment is recognized. 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 was $ 487.6 million, $ 484.3 million and $ 334.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. Legal Costs Legal costs are expensed as incurred. 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, 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. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if it is determined that it is more likely than not that the deferred tax asset will not be realized. The Company records interest, net of any applicable related income tax benefit, on potential income tax contingencies as a component of income tax expense. The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustainable upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. 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. 65 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Earnings Per Share Basic earnings per share is computed by dividing net earnings attributable to ANGI Homeservices Inc. shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if stock appreciation rights, stock options and other commitments to issue common stock were exercised or equity awards vested resulting in the issuance of common stock that could share in the earnings of the Company. Foreign Currency Translation and Transaction Gains and Losses 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 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. Stock-Based Compensation Stock-based compensation is measured at the grant date based on the fair value of the award and is expensed over the requisite service period. See “ Note 11—Stock‑based Compensation ” for a discussion of the Company’s stock-based compensation plans. Redeemable Noncontrolling Interests Noncontrolling interests in the consolidated subsidiaries of the Company are ordinarily reported on the consolidated balance sheet within shareholders’ equity, separately from the Company’s equity. However, securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of shareholders’ equity. Accordingly, all noncontrolling interests that are redeemable at the option of the holder are presented outside of shareholders’ equity in the accompanying consolidated balance sheet. In connection with the acquisition of certain subsidiaries, management of these businesses has retained an ownership interest. The Company is party to fair value put and call arrangements with respect to these interests. These put and call arrangements allow management of these businesses to require the Company to purchase their interests or allow the Company to acquire such interests at fair value, respectively. The put arrangements do not meet the definition of a derivative instrument as the put agreements do not provide for net settlement. These put and call arrangements become exercisable by the Company and the counter-party at various dates. 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. 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. 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. Fair value determinations require high levels of judgment and are based on various valuation techniques, including market comparables and discounted cash flow projections. Certain Risks and Concentrations The Company’s business is subject to certain risks and concentrations including dependence on third-party technology providers, exposure to risks associated with online commerce security and credit card fraud. Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents and marketable debt securities. Cash and cash equivalents are maintained with financial institutions and are in excess of Federal Deposit Insurance Corporation insurance limits. 66 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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 The Company adopted ASU No. 2016-13 effective January 1, 2020. ASU No. 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 using the modified retrospective approach and there was no cumulative effect arising from the adoption. The adoption of ASU No. 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 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. 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company adopted ASU No. 2019-12 on January 1, 2020 using the modified retrospective basis for those amendments that are not applied on a prospective basis. The adoption of ASU No. 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. 67 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, 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. U.S. and foreign (loss) earnings before income taxes and noncontrolling interests are as follows: Years Ended December 31, 2020 2019 2018 (In thousands) U.S. $ ( 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: 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 ) Income tax benefit $ ( 15,168 ) $ ( 1,668 ) $ ( 7,483 ) 68 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized. December 31, 2020 2019 (In thousands) Deferred tax assets: 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 Less valuation allowance ( 77,076 ) ( 71,472 ) Net deferred tax assets 186,527 179,736 Deferred tax liabilities: Intangible assets ( 47,858 ) ( 63,900 ) Right-of-use assets ( 21,496 ) ( 24,836 ) Capitalized software, leasehold improvements and equipment ( 16,152 ) ( 12,377 ) 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 ) Net deferred tax assets $ 84,450 $ 69,140 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, 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. At December 31, 2020, the Company has foreign NOLs of $ 413.7 million available to offset future income. Of these foreign NOLs, $ 374.3 million can be carried forward indefinitely and $ 39.4 million, if not utilized, will expire at various times between 2022 and 2039. During 2020, the Company recognized tax benefits related to NOLs of $ 12.6 million. 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 $ 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. At December 31, 2020, the Company has a U.S. gross deferred tax asset of $ 176.4 million that the Company expects to fully utilize on a more likely than not basis. 69 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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 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 (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 ) Unbenefited losses 2,899 1,523 2,227 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: December 31, 2020 2019 2018 (In thousands) Balance at January 1 $ 4,025 $ 2,356 $ 1,548 Additions based on tax positions related to the current year 1,676 1,325 411 Additions for tax positions of prior years 423 344 397 Settlements ( 856 ) — — Balance at December 31 $ 5,268 $ 4,025 $ 2,356 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 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. 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. 70 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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 $ 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 Handy Acquisition 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 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 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: Handy (In thousands) Cash and cash equivalents $ 5,710 Other current assets 2,050 Goodwill 115,183 Intangible assets 38,800 Other non-current assets 8 Deferred income taxes 20,070 Total assets 181,821 Current liabilities ( 13,419 ) Net assets acquired $ 168,402 The purchase price was based on the expected financial performance of Handy, 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 Handy is complementary and synergistic to the other North America businesses of ANGI Homeservices. 71 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The fair values of the identifiable intangible assets acquired at the date of acquisition are as follows: Handy (In thousands) Weighted-Average Useful Life (Years) Indefinite-lived trade name and trademarks $ 18,800 Indefinite Developed technology 15,600 4 User base 3,400 1 Retail partners 600 3 Service professionals 400 1 Total identifiable intangible assets acquired $ 38,800 Other current assets, other non-current assets and current liabilities of Handy were reviewed and adjusted to their fair values at the date of acquisition, as necessary. The fair values of the trade name and developed technology were determined using variations of the income approach; specifically, in respective order, the relief from royalty and excess earnings methodologies. The fair values of user base, retail partners, and service professionals 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. NOTE 5— GOODWILL AND INTANGIBLE ASSETS Goodwill and intangible assets, net are as follows: December 31, 2020 2019 (In thousands) Goodwill $ 891,797 $ 883,960 Intangible assets with indefinite lives 171,888 171,599 Intangible assets with definite lives, net of accumulated amortization 37,829 80,126 Total goodwill and intangible assets, net $ 1,101,514 $ 1,135,685 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 Currency Translation Balance at December 31, 2020 (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 immaterial acquisition activity during the year (included in the North America segment). 72 Table of Contents 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: Balance at December 31, 2018 Additions (Deductions) Foreign Currency Translation Balance at December 31, 2019 (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 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. At December 31, 2020 and 2019, intangible assets with definite lives are as follows: December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Weighted-Average Useful Life (Years) (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 Gross Carrying Amount Accumulated Amortization Net Weighted-Average Useful Life (Years) (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 Trade names 2,390 ( 1,512 ) 878 6.8 Total $ 221,334 $ ( 141,208 ) $ 80,126 3.8 73 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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 2022 13,964 2023 8,148 2024 190 2025 190 Thereafter 386 Total $ 37,829 NOTE 6— FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Marketable Debt Securities At December 31, 2020, current available-for-sale marketable debt securities were as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (In thousands) Treasury discount notes $ 49,995 $ — $ — $ 49,995 Total available-for-sale marketable debt securities $ 49,995 $ — $ — $ 49,995 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. 74 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value Measurements The following tables present the Company’s financial instruments that are measured at fair value on a recurring basis: December 31, 2020 Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurements (In thousands) Assets: Cash equivalents: Money market funds $ 374,014 $ — $ — $ 374,014 Treasury discount notes — 324,995 — 324,995 Time deposits — 2,721 — $ 2,721 Marketable debt securities: Treasury discount notes — 49,995 — 49,995 Total $ 374,014 $ 377,711 $ — $ 751,725 December 31, 2019 Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurements (In thousands) Assets: Cash equivalents: Money market funds $ 291,810 $ — $ — $ 291,810 Time deposits — 23,040 — 23,040 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, 2020 December 31, 2019 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Current portion of long-term debt $ — $ — $ ( 13,750 ) $ ( 13,681 ) Long-term debt, net (a) ( 712,277 ) ( 725,700 ) ( 231,946 ) ( 232,581 ) _________________ (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 . 75 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 7— LONG-TERM DEBT Long-term debt consists of: December 31, 2020 2019 (In thousands) 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 Less: current portion of Term Loan — 13,750 Less: unamortized debt issuance costs 7,723 1,804 Total long-term debt, net $ 712,277 $ 231,946 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. 76 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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 : Long-term debt maturities as of December 31, 2020 are summarized in the table below: Years Ending December 31, (In thousands) 2022 27,500 2023 192,500 2028 500,000 Total 720,000 Less: unamortized debt issuance costs 7,723 Total long-term debt, net $ 712,277 77 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 8— SHAREHOLDERS’ EQUITY Description of Class A Common Stock, Class B Convertible Common Stock and Class C Common Stock Except as described herein, shares of ANGI Homeservices Class A common stock, Class B common stock and Class C common stock are identical. Holders of Class A common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of Class B common stock are entitled to ten votes per share on all matters to be voted upon by stockholders. 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 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. Such conversion ratio will in all events be equitably preserved in the event of any recapitalization of ANGI Homeservices by means of a stock dividend on, or a stock split or combination of, our outstanding Class A common stock or Class B common stock, or in the event of any merger, consolidation or other reorganization of ANGI Homeservices with another corporation. Upon the conversion of a share of our Class B common stock into a share of our Class A common stock, the applicable share of Class B common stock will be retired and will not be subject to reissue. Shares of Class A common stock and Class C common stock have no conversion rights. The holders of shares of ANGI Homeservices Class A common stock, Class B common stock and Class C common stock are entitled to receive, share for share, such cash dividends as may be declared by ANGI Homeservices Board of Directors out of funds legally available therefor. 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, 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. Reserved Common Shares In connection with equity compensation plans, 40.2 million shares of ANGI Homeservices common stock are reserved at December 31, 2020. Common Stock Repurchases 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. At December 31, 2020, the Company has approximately 19.3 million shares remaining in its share repurchase authorization. 78 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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 Foreign Currency Translation Adjustment Unrealized Gains On Available-For-Sale Debt Securities Accumulated Other Comprehensive (Loss) Income (In thousands) Balance at January 1 $ ( 1,379 ) $ — $ ( 1,379 ) 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 Foreign Currency Translation Adjustment Unrealized Gains On Available-For-Sale Debt Securities Accumulated Other Comprehensive (Loss) Income (In thousands) Balance at January 1 $ ( 1,864 ) $ 3 $ ( 1,861 ) 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 Foreign Currency Translation Adjustment Unrealized Gains On Available-For-Sale Debt Securities Accumulated Other Comprehensive Income (Loss) (In thousands) Balance at January 1 $ 2,232 $ — $ 2,232 Other comprehensive (loss) income before reclassifications ( 4,044 ) 3 ( 4,041 ) Amounts reclassified to earnings ( 52 ) — ( 52 ) 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 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). 79 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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) Numerator: 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 Denominator: 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 (Loss) earnings per share attributable to ANGI Homeservices Inc. shareholders: (Loss) earnings per share $ ( 0.01 ) $ ( 0.01 ) $ 0.07 $ 0.07 $ 0.16 $ 0.15 ________________________ (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. (c) Market-based awards and performance-based stock units are considered contingently issuable shares. 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 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. The 2017 plan authorizes the Company to grant awards to its employees, officers, directors and consultants. At December 31, 2020, there are 15.2 million shares available for grant under the 2017 plan. 80 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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. The plan does not specify grant dates or vesting schedules for awards, as those determinations have been delegated to the Compensation Committee of ANGI Homeservices Board of Directors (the “Committee”). Each grant agreement reflects the grant date and vesting schedule for that particular grant as determined by the Committee. Stock options and stock appreciation rights granted subsequent to the Combination through December 31, 2018 generally vest in equal annual installments over a four-year period from the grant date. RSU awards granted subsequent to the Combination through December 31, 2020 generally vest either in two 50 % installments over a three and four-year period or in equal annual installments over a four-year period, in each case, from the grant date. 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 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; (ii) equity instruments denominated in shares of its subsidiaries; and (iii) IAC denominated stock options and PSUs held by ANGI Homeservices employees. The amount of stock-based compensation expense recognized is net of estimated forfeitures. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimated rate. The expense ultimately recorded is for the awards that vest. 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. There may be some delay in the timing of the realization of the cash benefit of the income tax deductions related to stock-based compensation because it will be dependent upon the amount and timing of future taxable income and the timing of estimated income tax payments. Stock Options and Stock Appreciation Rights 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 Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value (Shares and intrinsic value in thousands) Outstanding at January 1, 2020 23,984 $ 3.89 Granted — — 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 81 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) exercised had all award holders exercised their awards on December 31, 2020. The total intrinsic value of awards exercised during the years ended December 31, 2020, 2019 and 2018 is $ 120.9 million, $ 107.5 million and $ 151.2 million, respectively. 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 Outstanding at December 31, 2020 Weighted average remaining contractual life in years Weighted average exercise price Exercisable at December 31, 2020 Weighted average remaining contractual life in years Weighted average exercise price (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 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. 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 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. If settled in IAC common stock, ANGI reimburses IAC in either cash or through the issuance of Class A shares to IAC. Assuming all of the stock appreciation rights outstanding on 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, 2020, were net settled on that date, including stock options, RSUs and subsidiary denominated equity described 82 Table of Contents 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 RSUs, MSUs and PSUs are awards in the form of phantom shares or units denominated in a hypothetical equivalent number of shares of ANGI Homeservices common stock and with the value of each RSU and PSU equal to the fair value of ANGI Homeservices common stock at the date of grant. The value of each MSU is estimated using a lattice model that incorporates a Monte Carlo simulation of ANGI’s stock price. Each RSU, MSU and PSU grant is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. MSUs also include market-based vesting, tied to the stock price of ANGI before an award vests and PSUs include performance-based vesting, where certain performance targets set at the time of grant must be achieved before an award vests. For RSU grants, the expense is measured at the grant date as the fair value of ANGI Homeservices common stock and expensed as stock-based compensation over the vesting term. For MSU grants, the expense is measured using a lattice model and expensed as stock-based compensation over the requisite service period. For PSU grants, the expense is measured at the grant date as the fair value of ANGI Homeservices common stock and expensed as stock-based compensation over the vesting term if the performance targets are considered probable of being achieved. Unvested RSUs, MSUs and PSUs outstanding at December 31, 2020 and changes during the year ended December 31, 2020 are as follows: RSUs MSUs PSUs Number of Shares Weighted Average Grant Date Fair Value Number of Shares (a) Weighted Average Grant Date Fair Value Number of Shares (a) Weighted Average Grant Date Fair Value (Shares in thousands) 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 ___________________________ (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. In 2019, the Company granted certain MSUs that are liability-classified stock-settled awards with a market condition. The fair value of these awards is subject to remeasurement each reporting period until settlement of the award. The total expense related to these awards will ultimately be equal to the number of shares vested based on the fair value of ANGI Homeservices’ common stock on the settlement date. 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 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 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. 83 Table of Contents 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 ANGI Homeservices has granted stock appreciation rights denominated in the equity of certain non-publicly traded subsidiaries to employees and management of those subsidiaries. These equity awards vest over a period of years, which is typically four years . The value of the stock appreciation rights is tied to the value of the common stock of these subsidiaries, which is determined by the Company using a variety of valuation techniques including a combination of market based and discounted cash flow valuation methodologies. Accordingly, these interests only have value to the extent the relevant business appreciates in value above the initial value utilized to determine the exercise price. These interests can have significant value in the event of significant appreciation. The fair value of these interests is generally determined by negotiation or arbitration when settled, which will occur at various dates through 2026 and are ultimately settled in IAC common stock or ANGI Homeservices Class A common stock, at IAC’s election. These equity awards are settled on a net basis, with the award holder entitled to receive a payment in shares equal to the intrinsic value of the award at exercise less an amount equal to the required cash tax withholding payment. The expense associated with these equity awards is initially measured at fair value, using the Black-Scholes option pricing model, at the grant date and is expensed as stock-based compensation over the vesting term. 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. NOTE 12— SEGMENT INFORMATION The overall concept that ANGI employs in determining its operating segments is to present the financial information in a manner consistent with: how the chief operating decision maker views the businesses; how the businesses are organized as to segment management; and the focus of the businesses with regards to the types of services or products offered or the target market. The following table presents revenue by reportable segment: Years Ended December 31, 2020 2019 2018 (In thousands) Revenue: 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 84 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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) North America Marketplace: Consumer connection revenue (a) $ 1,054,660 $ 913,533 $ 704,341 Service professional membership subscription revenue 50,975 63,872 66,214 Other revenue 25,685 15,263 3,940 Total Marketplace revenue 1,131,320 992,668 774,495 Advertising and other revenue (b) 264,108 257,224 287,676 Total North America revenue 1,395,428 1,249,892 1,062,171 Europe Consumer connection revenue (c) 57,692 59,611 50,913 Service professional membership subscription revenue 13,091 14,231 17,362 Advertising and other revenue 1,714 2,471 1,795 Total Europe revenue 72,497 76,313 70,070 Total revenue $ 1,467,925 $ 1,326,205 $ 1,132,241 ___________________________ (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. (c) Includes fees paid by service professionals for consumer matches. Revenue by geography is based on where the customer is located. Geographic information about revenue and long-lived assets is presented below: Years Ended December 31, 2020 2019 2018 (In thousands) Revenue: United States $ 1,379,236 $ 1,234,755 $ 1,050,641 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. 85 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2020 2019 (In thousands) Long-lived assets (excluding goodwill and intangible assets): United States $ 97,841 $ 95,822 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) Operating income (loss): 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 (d) : North America $ 178,854 $ 208,192 $ 253,963 Europe $ ( 6,050 ) $ ( 5,895 ) $ ( 6,457 ) ___________________________ (d) The Company’s primary financial measure is Adjusted EBITDA, which is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of amortization of intangible assets and impairments of goodwill and intangible assets, if applicable. The Company believes this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses. 86 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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 Depreciation Amortization of Intangibles Adjusted EBITDA (In thousands) North America $ 4,811 $ 82,933 $ 48,515 $ 42,595 $ 178,854 Europe ( 11,179 ) $ 716 $ 4,106 $ 307 $ ( 6,050 ) Operating (loss) ( 6,368 ) Interest expense ( 14,178 ) Other income, net 1,218 Earnings before income taxes ( 19,328 ) Income tax benefit 15,168 Net loss ( 4,160 ) Net earnings attributable to noncontrolling interests ( 2,123 ) Net loss attributable to ANGI Homeservices Inc. shareholders $ ( 6,283 ) Year Ended December 31, 2019 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 ( 11,493 ) Other income, net 6,494 Earnings before income taxes 33,646 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 87 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2018 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 Europe ( 14,196 ) $ 1,000 $ 2,422 $ 4,317 $ ( 6,457 ) Operating income 63,906 Interest expense ( 11,623 ) Other income, net 17,741 Earnings before income taxes 70,024 Income tax benefit 7,483 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) Capital expenditures: 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 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. ROU assets and related lease liabilities are based on the present value of fixed lease payments over the lease term using the Company’s incremental borrowing rate on the lease commencement date or January 1, 2019 for leases that commenced prior to that date. The Company combines the lease and non-lease components of lease payments in determining ROU assets and related lease liabilities. If the lease includes one or more options to extend the term of the lease, the renewal option is considered in the lease term if it is reasonably certain the Company will exercise the option(s). Lease expense is recognized on a straight-line basis over the term of the lease. As permitted by ASC 842, leases with an initial term of twelve months or less (“short-term leases”) are not recorded on the accompanying consolidated balance sheet. Variable lease payments consist primarily of common area maintenance, utilities and taxes, which are not included in the recognition of ROU assets and related lease liabilities. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. 88 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, Leases Balance Sheet Classification 2020 2019 (In thousands) Assets: Right-of-use assets Other non-current assets $ 87,559 $ 101,243 Liabilities: 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 December 31, Lease Cost Income Statement Classification 2020 2019 (In thousands) 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) 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 Net lease cost $ 24,375 $ 21,458 ________________________________ (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) : For Years Ending December 31: (In thousands) 2021 $ 22,321 2022 21,514 2023 20,512 2024 19,994 2025 19,193 Thereafter 43,376 Total 146,910 Less: Interest 27,635 Present value of lease liabilities $ 119,275 ________________________________ (b) Lease payments exclude $ 0.1 million of legally binding minimum lease payments for leases signed but not yet commenced. 89 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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: December 31, 2020 2019 Remaining lease term 6.9 years 7.7 years Discount rate 5.91 % 5.99 % December 31, 2020 2019 (In thousands) Other information: Right-of-use assets obtained in exchange for lease liabilities $ 326 $ 58,701 Cash paid for amounts included in the measurement of lease liabilities $ 20,939 $ 18,363 NOTE 14— COMMITMENTS AND CONTINGENCIES Commitments The Company has entered into certain off-balance sheet commitments that require the future purchase of services (“purchase obligations”). Future payments under non-cancelable unconditional purchase obligations as of December 31, 2020 are as follows: Amount of Commitment Expiration Per Period Less Than 1 Year 1–3 Years 3–5 Years More Than 5 Years Total (In thousands) Purchase obligations $ 12,916 $ 22 $ — $ — $ 12,938 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. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where we believe an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against us, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. The Company also evaluates other contingent matters, including income and non-income tax contingencies, to assess the likelihood of an unfavorable outcome and estimated extent of potential loss. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company. See “ Note 3—Income Taxes ” for additional information related to income tax contingencies. 90 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 15— RELATED PARTY TRANSACTIONS WITH IAC Relationship with IAC ANGI Homeservices and IAC have entered into certain agreements to govern their relationship. These agreements include: a contribution agreement; an investor rights agreement; a services agreement; a tax sharing agreement; and an employee matters agreement. 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. Contribution Agreement The contribution agreement sets forth the agreements between the Company and IAC regarding the principal transactions necessary for IAC to separate the HomeAdvisor business from IAC's other businesses and to cause the HomeAdvisor business to be transferred to ANGI Homeservices prior to the Combination, as well as governs certain aspects of our relationship following the Combination. Under the contribution agreement, the Company agreed to assume all of the assets and liabilities related to the HomeAdvisor business and agreed to indemnify IAC against any losses arising out of any breach by the Company of the contribution agreement or the other transaction related agreements described below. IAC also agreed to indemnify the Company against losses arising out of any breach by IAC of the contribution agreement or any of the other transaction related agreements described below. Investor Rights Agreement 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 The services agreement governs services that IAC provides to the Company including, among others: (i) assistance with certain legal, M&A, human resources, finance, risk management, internal audit and treasury functions, health and welfare benefits, information security services and insurance and tax affairs, including assistance with certain public company and unclaimed property reporting obligations; (ii) accounting, controllership and payroll processing services; (iii) investor relations services; (iv) tax compliance services; and (v) such other services as to which IAC and the Company may agree. 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 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 91 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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. Employee Matters Agreement The employee matters agreement addresses certain compensation (including stock-based compensation) and benefit issues related to the allocation of liabilities associated with: (i) employment or termination of employment, (ii) employee benefit plans and (iii) equity awards. Under the employee matters agreement, the Company's employees participate in IAC’s U.S. health and welfare plans, 401(k) plan and flexible benefits plan and the Company reimburses IAC for the costs of such participation. In the event IAC no longer retains shares representing at least 80 % of the aggregate voting power of shares entitled to vote in the election of the Company’s Board of Directors, ANGI Homeservices will no longer participate in IAC’s employee benefit plans, but will establish its own employee benefit plans that will be substantially similar to the plans sponsored by IAC prior to the Combination. In addition, the employee matters agreement requires the Company to reimburse IAC for the cost of any IAC equity awards held by ANGI Homeservices current and former employees, with IAC electing to receive payment in cash or shares of our Class B common stock. This agreement also provides that IAC may require stock appreciation rights granted prior to the closing of the Combination and equity awards in our subsidiaries to be settled in either shares of our Class A common stock or IAC common stock. To the extent shares of IAC common stock are issued in settlement of these awards, the Company is obligated to reimburse IAC for the cost of those shares by issuing shares of our Class A common stock in the case of stock appreciation rights granted prior to the closing of the Combination and shares of our Class B common stock in the case of equity awards in our subsidiaries. Lastly, pursuant to the employee matters agreement, in the event of a distribution of ANGI capital stock to IAC stockholders in a transaction intended to qualify as tax-free for U.S. federal income tax purposes, the Compensation Committee of the IAC Board of Directors has the exclusive authority to determine the treatment of outstanding IAC equity awards. 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, 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 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, 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 92 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES 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. 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. 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. December 31, 2020 2019 (In thousands) Other current assets: Capitalized costs to obtain a contract with a customer $ 49,194 $ 35,103 Prepaid expenses 17,742 21,790 Other 5,022 10,866 Other current assets $ 71,958 $ 67,759 December 31, 2020 2019 (In thousands) Capitalized software, leasehold improvements and equipment, net: Capitalized software and computer equipment $ 132,026 $ 105,956 Leasehold improvements 31,864 32,559 Furniture and other equipment 13,252 13,435 Projects in progress 27,138 19,638 Capitalized software, leasehold improvements and equipment 204,280 171,588 Accumulated depreciation and amortization ( 95,438 ) ( 68,227 ) Capitalized software, leasehold improvements and equipment, net $ 108,842 $ 103,361 93 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2020 2019 (In thousands) Accrued expenses and other current liabilities: Accrued advertising expense $ 30,033 $ 29,682 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 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: On October 19, 2018, ANGI issued 8.6 million shares of its Class A common stock valued at $ 165.8 million in connection with the acquisition of Handy. 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. Supplemental Disclosure of Cash Flow Information: Years Ended December 31, 2020 2019 2018 (In thousands) Cash paid (received) during the year for: Interest expense—third-party $ 5,367 $ 10,290 $ 12,148 Interest expense—related party — 54 155 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, including amounts received from IAC for ANGI Homeservices' share of IAC's consolidated tax liability ( 3,506 ) ( 957 ) ( 172 ) 94 Table of Contents ANGI HOMESERVICES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 18— QUARTERLY RESULTS (UNAUDITED) Quarter Ended March 31 (a) Quarter Ended June 30 (a) Quarter Ended September 30 (a) Quarter Ended December 31 (a) (In thousands, except per share data) 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 (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 (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 March 31 (b) Quarter Ended June 30 (b) Quarter Ended September 30 (b) Quarter Ended 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 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 earnings (loss) per share (c) $ 0.02 $ 0.01 $ 0.04 $ ( 0.00 ) 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. 95 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable.