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Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-02-16 · 218 added, 242 removed, 284 unchanged (62% of the section changed)

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Management Overview

ANGI Homeservices Inc.

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2021, Angi had a network of approximately 240,000 transacting service professionals, each of whom paid for consumer matches and/or performed a job sourced or booked through Angi Ads and

Leads and/or Angi Services.

Collectively, this service professional network provided services in more than 175 categories, ranging from cleaning and installation services to simple home repairs and larger home remodeling projects, and 64 discrete geographic areas in the United States.

Additionally, consumers turned to at least one of our brands to find a professional for approximately 33 million projects during the year ended December 31, 2021.

The Company has two operating segments:

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

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

(i) North America (United States and Canada), which includes Angi Ads, Angi Leads and Angi Services;

and (ii) Europe.

In March 2021, the Company rebranded its North American brands which operate as follows:

Angi Ads operates under the Angi (formerly Angie’s List) brand, Angi Leads operates primarily under the HomeAdvisor, powered by Angi brand, and Angi Services operates primarily under the Handy and Angi Roofing brands.

Angi Ads provides service professionals the capability to engage with potential customers, including quote, invoicing, and payment services.

Angi Leads provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals nationwide for home repair, maintenance and improvement projects.

Angi Services allows consumers to browse and buy common household services at set prices directly from Angi, rather than requesting quotes from vetted service professionals, as well as instantly book appointments online for household services (primarily cleaning and handyman services) with top-quality, pre-screened independent service professionals.

Consumers can request and pay for household services directly through the Angi platform and Angi fulfills the request through the use of independently established home services providers engaged in a trade, occupation and/or business that customarily provides such services.

The matching and pre-priced booking services and related tools and directories are provided to consumers free of charge.

Angi Services also includes roof replacement services fulfilled via the Angi Roofing, LLC business.

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

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

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Defined Terms and Operating Metrics:

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

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

It excludes revenue from Angie’s List and HomeStars.

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

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

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

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

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

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

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

• Angi Ads and Leads Revenue primarily reflects domestic ads and leads revenue, including consumer connection revenue for consumer matches, revenue from service professionals under contract for advertising and membership subscription revenue from service professionals and consumers.

• Angi Services Revenue primarily reflects domestic revenue from pre-priced offerings by which the consumer purchases services directly from the Company and the Company engages a service professional to perform the service and includes revenue from Total Home Roofing, Inc.

(“Angi Roofing”), which was acquired on July 1, 2021.

• Angi Service Requests (“Service Requests”) are fully completed and submitted domestic customer service requests and includes Angi Services requests in the period.

• Angi Monetized Transactions are fully completed and submitted domestic customer service requests that were matched to and paid for by a service professional and includes completed and in-process Angi Services jobs in the period.

• Angi Transacting Service Professionals (“Transacting SPs”) are the number of service professionals that paid for consumer matches through Angi Leads or performed an Angi Services job during the most recent quarter.

• Angi Advertising Service Professionals (“Advertising SPs”) are the number of service professionals under contract for advertising at the end of the period.

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

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

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

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

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

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

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

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

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

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

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

Components of Results of Operations

Sources of Revenue

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

Angi Ads and Leads Revenue is primarily derived from (i) advertising revenue, which includes revenue from service professionals under contract for advertising, (ii) consumer connection revenue, which is comprised of fees paid by service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service), and (iii) membership subscription revenue from service professionals and consumers.

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

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

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

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

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.

Angi Services is primarily comprised of revenue from jobs (i) sourced through the “Book Now” feature which lets consumers complete booking the entire transaction digitally for work that is completed physically, (ii) under managed projects (including Angi Roofing) which are larger home improvement projects, and (iii) through retail partnerships for installation of furniture or other household items.

Operating Costs and Expenses:

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

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

• Cost of revenue - consists primarily of payments made to independent service professionals who perform work contracted under Angi Services arrangements, credit card processing fees, hosting fees, and roofing materials costs associated with Angi Roofing.

• Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including fees paid to search engines;

offline marketing, which is primarily television advertising;

and partner-related payments to those who direct traffic to our brands;

compensation expense (including stock-based compensation expense) and other employee-related costs for our sales force and marketing personnel;

and facilities costs.

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

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

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

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

See “ Principles of Financial Reporting ” for the definition of Adjusted EBITDA and a reconciliation of net loss attributable to Angi Inc.

shareholders to operating loss to consolidated Adjusted EBITDA for the years ended December 31, 2021 and 2020.

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

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For a discussion regarding our financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 16, 2021.

Brand Integration Initiative

In March 2021, the Company changed its name to Angi Inc.

and updated one of its leading websites and brands, Angie’s List, to Angi, and since then, has concentrated its marketing investment in the Angi brand in order to focus its marketing, sales, and branding efforts on a single brand.

We rely heavily on free, or organic, search results from search engine optimization, and paid search engine marketing to drive traffic to our websites.

Our brand integration initiative has adversely affected the placement and ranking of Angi Inc.

websites, particularly Angi.com, in organic search results as Angi does not have the same domain history as Angie’s List.

In addition, we shifted marketing to support Angi, away from HomeAdvisor, which has negatively affected the efficiency of our search engine marketing efforts.

Since the beginning of the integration process, these efforts have had a pronounced negative impact on service requests from organic search results and via our mobile applications, which in turn has resulted in increased paid search engine marketing to generate service requests.

These factors have increased marketing spend and reduced revenue during the year ended December 31, 2021, materially more than expected at the launch of the brand initiative in March 2021.

We expect the pronounced negative impact to organic search results, the increased paid search engine marketing costs and the reduced monetization from our mobile applications to continue until such time as the new brand establishes search engine optimization ranking and consumer awareness is established.

Angi Services Investment

Angi Services was launched in August 2019 and we have invested significantly in Angi Services and expect to continue to do so going forward.

We expect significant future revenue growth as we expand the business, refine the overall experience, and increase penetration in certain geographies and service categories.

This increased investment in Angi Services has contributed to losses for the Company for the year ended December 31, 2021 and this investment is expected to continue through at least 2023.

COVID-19 Update

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

The extent to which developments related to the COVID-19 outbreak and measures designed to curb its spread continue to impact the Company’s business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company’s control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel, discretionary services (including those provided by certain of our service professionals) and other activity, and public reactions to these developments.

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

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

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

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

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

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

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

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

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

The impact on the Company from the COVID-19 pandemic and the measures designed to contain its spread has been varied and volatile.

As previously disclosed, the impact of COVID-19 on the Company initially resulted in a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects).

While we experienced a rebound in service requests in the second half of 2020 and through early 2021, service requests did start to decline in May 2021 compared to the comparable months of 2020 as a result of the surge in 2020 and due to impacts of the Brand Integration Initiative described above.

Moreover, 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 continues to negatively impact our ability to monetize the slightly increased level of service requests.

Although our ability to monetize service requests rebounded modestly in the second half of 2021, we still have not returned to levels we experienced pre-COVID-19.

No assurances can be provided that we will continue to be able to improve monetization, or that service professionals’ businesses and, as a consequence, our revenue and profitability will not continue to be adversely impacted in the future.

The extent to which developments related to the COVID-19 pandemic 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 continuing spread of COVID-19, the severity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and attitudes toward receiving them, materials and supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments.

Results of Operations for the Years Ended December 31, 2021 and 2020

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2021 $ Change % Change 2020

(Amounts in thousands)

(Dollars in thousands)

North America

Angi Ads and Leads:

Consumer connection revenue $ 896,711 $ (2,464) —% $ 899,175

Service professional membership subscription revenue 50,975 (12,897) (20)% 63,872

Advertising revenue 252,010 25,505 11% 226,505

Membership revenue 68,062 (6,011) (8)% 74,073

Other revenue 27,812 (5,324) (16)% 33,136

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

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

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

Total Angi Ads and Leads revenue 1,244,595 11,706 1% 1,232,889

Angi Services revenue 357,976 195,437 120% 162,539

Total North America revenue 1,602,571 207,143 15% 1,395,428

Europe 82,867 10,370 14% 72,497

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2021 Change % Change 2020

(Amounts in thousands)

(In thousands, rounding differences may occur)

Operating metrics:

Marketplace Service Requests

Service Requests 32,730 318 1% 32,412

Monetized Transactions 17,942 1,270 8% 16,672

Transacting SPs (a)

206 (2) (1)% 208

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

Marketplace Transacting SPs 208 22 12 % 186

Advertising SPs 38 (2) (4)% 39

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

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

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

dollar relative to the Euro and British Pound.

_________________________________________________________

(a) Angi Transacting Service Professionals (“Transacting SPs”) are the number of service professionals that paid for consumer matches through Angi Leads or performed an Angi Services job during the most recent quarter.

North America revenue increased $207.1 million, or 15%, driven by increases in Angi Services revenue of $195.4 million, or 120%, and Angi Ads and Leads revenue of $11.7 million, or 1%.

The increase in Angi Services revenue is due primarily to organic growth and, to a lesser extent from Angi Roofing, acquired July 1, 2021.

The increase in Angi Ads and Leads revenue is due primarily to an increase in Advertising revenue of $25.5 million, or 11%.

Europe revenue increased $10.4 million, or 14%, due to growth across its markets from increased consumer demand and the favorable impact of the weakening of the U.S dollar relative to the Euro and the British Pound.

Cost of revenue

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(Dollars in thousands)

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

Cost of revenue (exclusive of depreciation shown separately below) $ 325,880 $ 152,599 88% $ 173,281

As a percentage of revenue 19% 12%

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NM = Not meaningful

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

North America cost of revenue increased $152.6 million, or 89%, and increased as a percentage of revenue, due primarily to the organic growth of Angi Services resulting in increased payments to third-party professional service providers and $51.2

million of costs attributable to the inclusion of Angi Roofing acquired July 1, 2021, primarily for roofing materials and third-party contractors.

Selling and marketing expense

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As a percentage of revenue 52% 52%

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

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

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

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

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

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

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

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

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

North America selling and marketing expense increased $122.5 million, or 17%, driven by increases in advertising expense of $63.6 million, compensation expense of $36.9 million, consulting costs of $11.1 million, and $14.0 million in expense from the inclusion of Angi Roofing.

The increase in advertising expense was due primarily to increases of $52.8 million in online marketing spend and $9.6 million in television spend.

The increase in online marketing spend was attributable to the brand integration initiative described above under “Brand Integration Initiative.” The increase in television spend in 2021 reflects the return to historical spending levels as compared to the cost cutting initiatives during 2020 due to the impact of COVID-19.

The increase in compensation expense was due primarily to increased commission expense, in addition to an increase in sales force headcount, net of an equity based compensation capitalization increase.

The increase in consulting costs was due primarily to various sales initiatives at Angi Services.

Europe selling and marketing expense decreased $1.5 million, or 4%, driven by a decrease in compensation expense of $3.7 million, partially offset by an increase in advertising expense of $2.6 million.

The decrease in compensation expense was primarily due to severance costs recorded in 2020 associated with headcount reductions in France and lower headcount in 2021.

The increase in advertising expense was due, in part, to decreased advertising expense in 2020 to mitigate the negative impact of COVID-19 on revenue.

General and administrative expense

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As a percentage of revenue 24% 25%

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

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

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

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

outsourced personnel costs.

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

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

North America general and administrative expense increased $24.5 million, or 7%, due primarily to an increase of $25.5 million in professional fees, $10.8 million of expense from the inclusion of Angi Roofing, $9.6 million in one-time costs related to the Company reducing its real estate footprint in 2021, increases of $7.5 million in the provision for credit losses, and $6.9 million in software license and maintenance costs, offset by a decrease of $42.4 million in compensation expense.

The increase in professional fees is due primarily to an increase in outsourced personnel costs, and to a lesser extent, legal fees, recruiting fees, and consulting costs.

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

The real estate related costs are the result of impairments of right-of-use lease assets, leasehold improvements and furniture and equipment associated with office space we vacated.

The increase in the provision for credit losses is primarily due to higher Angi Services revenue as the provision for credit losses as a percentage of revenue has remained relatively flat.

The increase in software license and maintenance expense is due primarily to increased investment in software to support our customer service function.

The decrease in compensation expense was due primarily to a decrease of stock-based compensation expense of $54.1 million, partially offset by an increase of $11.4 million in wage related expenses resulting primarily from annual wage increases and a certain departments’ headcount now being aligned to general and administrative functions under the brand integration initiative, contributing $5.8 million of the increase.

The decrease in stock-based compensation expense was due primarily to $30.8 million in stock appreciation rights expense recognized during the twelve months ended December 31, 2020, which was not incurred in 2021 as the awards became fully vested in 2020, and a net decrease of $7.7 million due to the reversal of previously recognized expense related to unvested awards that were forfeited due to management departures in the first quarter of 2021, partially offset by the issuance of new equity awards since 2020.

Europe general and administrative expense increased $7.2 million, or 25%, due primarily to a charge of $7.0 million in compensation expenses related to the acquisition of an additional 25% interest in our MyBuilder business at a premium to fair value and a $1.7 million increase in professional fees related to corporate restructuring, partially offset by a $2.6 million decrease in compensation expense driven by severance costs recorded in 2020 associated with headcount reductions in France.

Product development expense

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As a percentage of revenue 4% 5%

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

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

North America product development expense decreased $3.5 million, or 6%, due primarily to decreases in compensation expense of $4.9 million and lease expense of $1.0 million, partially offset by an increase in software license and maintenance expense of $1.4 million.

The decrease in compensation expense is due to certain departments’ headcount that were previously included within product development now being aligned to general and administrative functions under the brand integration initiative described above under “Brand Integration Initiative.”.

Europe product and development expense increased $5.6 million, or 49%, due to an increase in compensation expense of $5.3 million due primarily to higher headcount and fewer software development projects being capitalized.

Years Ended December 31,

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As a percentage of revenue 4% 4%

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

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

North America and Europe depreciation in 2021 increased from 2020 due primarily to investments in capitalized software to support our products and services.

Operating (loss) income

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(Dollars in thousands)

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

North America $ (63,316) $ (68,127) NM $ 4,811

Europe (13,197) (2,018) (18)% (11,179)

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As a percentage of revenue (5)% —%

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

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

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

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

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

________________________

NM = Not meaningful

North America operating income decreased $68.1 million to a loss of $63.3 million due to a decrease in Adjusted EBITDA of $143.5 million, described below, and an increase of $5.3 million in depreciation, partially offset by decreases of $54.5 million in stock-based compensation expense and $26.2 million in amortization of intangibles.

The increase in depreciation was due primarily to the investments in capitalized software to support our products and services.

The decrease in the amortization of intangibles was due primarily to certain intangible assets becoming fully amortized during 2020.

Europe operating loss increased $2.0 million, or 18%, due primarily to an increase in Adjusted EBITDA loss of $1.4 million, described below, and an increase of $1.3 million in depreciation expense, partially offset by decreases of $0.4 million in stock-based compensation expense and $0.3 million in amortization of intangibles.

At December 31, 2021, there is $ 107.7 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 2.9 years.

7 unchanged sentences

As a percentage of revenue 2% 12%

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

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

For a reconciliation of net loss attributable to Angi Inc.

shareholders to operating loss to consolidated Adjusted EBITDA, see “ Principles of Financial Reporting .” For a reconciliation of operating (loss) income to Adjusted EBITDA for the Company’s reportable segments, see “ Note 1 1 —Segment Information ” to the consolidated financial statements included in “ Item 8 .

Consolidated Financial Statements and Supplementary Data .

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

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

North America Adjusted EBITDA decreased $143.5 million, or 80%, to $35.3 million, and decreased as a percentage of revenue, despite higher revenue of $207.1 million, due primarily to an increase in selling and marketing expense of $122.5 million as well as growth of Angi Services due to factors described above in the cost of revenue and selling and marketing discussions.

Europe Adjusted EBITDA loss decreased $1.4 million, or 23%, due primarily to an increase of $10.4 million in revenue, largely offset by the increase in general and administrative expense of $6.7 million (excluding stock-based compensation expense), which included a charge of $7.0 million related to the acquisition of an additional 25% interest in MyBuilder at a premium to fair value, and the increase in product development expense of $5.6 million.

Interest expense

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

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

As of May 6, 2021, the outstanding balance of the ANGI Group Term Loan was repaid in its entirety.

The ANGI Group Revolving Facility was terminated effective August 3, 2021.

No amounts were ever drawn under the ANGI Group Revolving Facility prior to its termination.

For a detailed description of long-term debt, net, see “ Note 6 —Long-term Debt ” to the consolidated financial statements included in “ Item 8 .

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2021 $ Change % Change 2020

(Dollars in thousands)

(In thousands)

Interest expense $ 23,485 $ 9,307 66% $ 14,178

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

Other income, net

Interest expense increased due primarily to the issuance of the ANGI Group Senior Notes in August 2020 and the write-off of deferred debt issuance costs associated with the termination of the ANGI Group Revolving Facility, partially offset by a decrease in interest expense due to the repayment of the ANGI Group Term Loan during the second quarter of 2021.

Other (expense) income, net

Years Ended December 31,

2021 $ Change % Change 2020

(Dollars in thousands)

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

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

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

(In thousands)

Other (expense) income, net $ (2,509) $ (3,727) NM $ 1,218

Other expense, net in 2021 primarily includes net foreign currency exchange losses of $1.7 million and the write-off of $1.1 million of deferred debt issuance costs related to the ANGI Group Term Loan which was repaid in its entirety during the second quarter of 2021, partially offset by interest income of $0.2 million.

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

shares during the first quarter of 2020.

Income tax benefit

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(Dollars in thousands)

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

Effective income tax rate NM NM

Income tax benefit $ 32,013 $ 16,845 111% $ 15,168

Effective income tax rate 31% NM

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

Consolidated Financial Statements and Supplementary Data .”

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

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

In 2021, the effective income tax rate was higher than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards and a change in judgement about the valuation allowance at the beginning of the year, partially offset by unbenefited foreign losses.

In 2020, the Company recorded an income tax benefit of $15.2 million.

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

PRINCIPLES OF FINANCIAL REPORTING

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We believe 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.

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

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

The following table reconciles net loss attributable to Angi Inc.

shareholders to operating loss to consolidated Adjusted EBITDA:

Years Ended December 31,

(In thousands)

Net (loss) earnings attributable to ANGI Homeservices Inc.

Net loss attributable to Angi Inc.

shareholders $ (71,378) $ (6,283)

1 unchanged sentence

Income tax benefit (32,013) (15,168)

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

Other expense (income), net 2,509 (1,218)

Interest expense 23,485 14,178

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

Operating loss (76,513) (6,368)

Stock-based compensation expense 28,702 83,649

2 unchanged sentences

Adjusted EBITDA $ 27,865 $ 172,804

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

For a reconciliation of operating loss to Adjusted EBITDA for the Company’s reportable segments, see “ Note 1 1 —Segment Information ” to the consolidated financial statements included in “ Item 8.

Consolidated Financial Statements and Supplementary Data .”

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

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

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

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

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

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

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

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

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Financial Position

December 31, 2021 December 31, 2020

(In thousands)

1 unchanged sentence

United States $ 404,277 $ 793,679

$ 793,679 $ 377,648

All other countries 23,859 19,026

19,026 12,917

Total cash and cash equivalents 428,136 812,705

Marketable securities (United States) 49,995 —

Marketable debt securities (United States) — 49,995

Total cash and cash equivalents and marketable debt securities $ 428,136 $ 862,700

3 unchanged sentences

Total long-term debt 500,000 720,000

current portion of Term Loan — 13,750

unamortized debt issuance costs 5,448 7,723

Total long-term debt, net $ 494,552 $ 712,277

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

At December 31, 2021, all of the Company’s international cash can be repatriated without any significant tax consequences.

Cash Flow Information

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(In thousands)

Net cash provided by (used in):

Net cash provided (used in) by:

Operating activities

$ 6,209 $ 188,419

Investing activities

$ (45,072) $ (103,954)

Financing activities

$ (345,168) $ 337,053

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

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

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

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

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

Non-cash adjustments include stock-based compensation expense, provision for credit losses, amortization of intangibles, depreciation, impairment of long-lived and right-of-use assets, non-cash lease expense, and deferred income taxes.

Adjustments to earnings consist primarily of $88.1 million of provision for credit losses, $59.2 million of depreciation, $28.7 million of stock-based compensation expense, $16.4 million of amortization of intangibles, $12.9 million of non-cash lease expense, $12.7 million of impairment charges on long-lived and right-of-use assets, and $8.6 million of revenue reserves, partially offset by $36.3 million of deferred income taxes.

The decrease from changes in working capital consists primarily of an increase of $115.4 million in accounts receivable and a decrease of $16.8 million in operating lease liabilities, partially offset by increases of $14.0 million in accounts payable and other liabilities.

The increase in accounts receivable is due primarily to revenue growth, primarily attributable to Angi Services.

The increase in accounts payable and other liabilities is due primarily to increases in accrued advertising and related payables and accrued roofing material costs related to Angi Roofing.

Net cash used in investing activities includes $70.2 million of capital expenditures, primarily related to investments in capitalized software to support the Company’s products and services, and $25.6 million of cash principally related to the acquisition of Angi Roofing, partially offset by proceeds of $50.0 million from the maturities of marketable debt securities.

Net cash used in financing activities includes $220.0 million for the prepayment of the ANGI Group Term Loan, which otherwise would have matured on November 5, 2023, $61.9 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $35.4 million for the repurchase of 3.2 million shares of Angi Inc.

Class A common stock, on a settlement date basis, at an average price of $11.06 per share, and $27.9 million for the purchase of redeemable noncontrolling interests.

The decrease from changes in working capital consists primarily of an increase in accounts receivable of $79.8 million, a decrease in operating lease liabilities of $13.4 million, and an increase in other assets of $7.7 million, partially offset by an increase in accounts payable and other liabilities of $30.6 million.

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

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

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

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

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

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

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

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

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

Net cash used in investing activities includes capital expenditures of $68.8 million, primarily related to investments in the development of capitalized software to support the Company’s products and services and leasehold improvements, $20.3 million of cash principally related to the acquisition of Fixd Repair, partially offset by $25.0 million of proceeds from maturities of marketable debt securities, and $23.6 million of net proceeds received in 2019 related to the December 31, 2018 sale of Felix.

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

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

Net cash provided by financing activities includes $500.0 million of proceeds from the issuance of the Senior Notes and a $3.1 million distribution from IAC pursuant to the tax sharing agreement, net of $63.7 million for the repurchase of 8.5 million shares of Angi Inc.

Class A common stock, on a settlement date basis, at an average price of $7.47 per share, $64.1 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $27.5 million in principal payments on the Term Loan, including the prepayment of the $13.8 million of principal payments that were otherwise due in 2021, $6.5 million for debt issuance costs, and $4.3 million for the purchase of redeemable noncontrolling interests

Liquidity and Capital Resources

Financing Transactions During the Year Ended December 31, 2020

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

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

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

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

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

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

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

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

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

Financing Arrangements

The ANGI Group Senior Notes were issued on August 20, 2020, the proceeds of which have been used for general corporate purposes, including the acquisition of Angi Roofing, and treasury share repurchases.

As of May 6, 2021, the outstanding balance of the ANGI Group Term Loan was repaid in its entirety.

The outstanding balance of the ANGI Group Term Loan at December 31, 2020 was $220.0 million and bore interest at 2.16%.

The $250.0 million ANGI Group Revolving Facility, which otherwise would have expired on November 5, 2023, was terminated effective August 3, 2021.

No amounts were ever drawn under the ANGI Group Revolving Facility prior to its termination.

Share Repurchase Authorizations and Activity

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

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

Du ring the year ended December 31, 2021, the Company repurchased 3.2 million shares, on a trade date basis, of its common stock at an average price of $11.06 per share, or $35.4 million in aggregate.

From January 1, 2022 through February 11, 2022, the Company repurchased an additional 1.0 million shares at an average price of $7.80 per share, or $8.1 million in aggregate.

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

The Company may purchase shares over an indefinite

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

has 15.0 million shares remaining in its share repurchase authorization as of February 11, 2022.

The Company may purchase shares over an indefinite period of time on the open market and in privately negotiated transactions, depending on those factors Angi Inc.

management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.

Outstanding Stock-based Awards

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

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

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.

The Company may settle equity awards on a gross or a net basis depending upon factors deemed relevant at the time, and if settled on a net basis, Angi remits withholding taxes on behalf of the employee.

At IAC’s option, certain Angi stock appreciation rights can be settled in either Class A shares of Angi or shares of IAC common stock.

If settled in IAC common

stock, the Company reimburses IAC in either cash or through the issuance of Class A shares to IAC.

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

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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.

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

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 for no compensation, which Angi would be obligated to assume and which would be dilutive to Angi’s stockholders.

The following table summarizes the aggregate intrinsic value of all awards outstanding as of February 11, 2022;

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

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(In thousands)

(Shares in thousands)

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

Other ANGI equity awards (a)(b)

Stock appreciation rights $ 5,309 $ 2,654 308

Other equity awards (a)(b)

131,743 65,040 7,747

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

Total outstanding employee stock-based awards $ 137,052 $ 67,694 8,055

_______________

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

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

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

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

Consolidated Financial Statements and Supplementary Data .”

Capital and Other Expenditures

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

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

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

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

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

The Company’s indebtedness could limit its ability to:

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

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

exceeds the ratios set forth in the Term Loan.

There were no such limitations at December 31, 2020.

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

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

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

As a result, IAC has the ability to control ANGI’s financing activities, including the issuance of additional debt and equity securities by ANGI or any of its subsidiaries, or the incurrence of other indebtedness generally.

While ANGI is expected to have the ability to access debt and equity markets if needed, such transactions may require the approval of IAC due to its control of the majority of the outstanding voting power of ANGI’s capital stock and its representation on the ANGI board of directors.

Additional financing may not be available on terms favorable to the Company or at all.

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

(b) The number of shares ultimately needed to settle subsidiary denominated equity awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant award at the time of exercise.

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

Contractual Obligations

AS OF DECEMBER 31, 2020

Payments Due by Period

Contractual Obligations (a)

Years More Than

5 Years Total

(in thousands)

Long-term debt (b)

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

Operating leases (c)

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

Purchase obligations (d)

12,916 22 — — 12,938

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

______________________________________________

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

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

Consolidated Financial Statements and Supplementary Data .”

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

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

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

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

Consolidated Financial Statements and Supplementary Data .”

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

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

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

These operating expenses are not included in the table above.

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

Consolidated Financial Statements and Supplementary Data .”

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

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

Consolidated Financial Statements and Supplementary Data .”

Off-Balance Sheet Arrangements

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

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

The Company enters into various contractual arrangements as a part of its continued operations.

Many of these contractual obligations are discussed in the notes to the financial statements included in “ Item 8—Consolidated and Combined Financial Statements and Supplementary Data .” As of December 31, 2021, material obligations discussed in the notes included principal and interest payments on the Company's long-term debt discussed above and in “ Note 6 — Long -term Debt ,” operating leases discussed in “ Note 1 2 —Leases ,” and postretirement benefits discussed in “ Note 1 5 — Benefit Plans .”

In addition, as of December 31, 2021, the Company has material purchase obligations which represent legally binding agreements to purchase goods and services that specify all significant terms.

These obligations are discussed in “ Note 1 3 —Commitments and Contingencies .”

Capital Expenditures

The Company’s 2022 capital expenditures are expected to be higher than 2021 capital expenditures of $70.2 million by approximately 15% to 20%, due primarily to increased investment in capitalized software to support the development of our products and services.

Liquidity Assessment

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

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

At December 31, 2021, IAC held all Class B shares of Angi Inc., which represent 84.5% of the economic interest and 98.2% of the voting interest of the Company.

As a result, IAC has the ability to control Angi Inc.’s financing activities, including the issuance of additional debt and equity securities by Angi Inc.

or any of its subsidiaries, or the incurrence of other indebtedness generally.

While Angi Inc.

is expected to have the ability to access debt and equity markets if needed, such transactions may require the approval of IAC due to its control of the majority of the outstanding voting power of Angi Inc.’s capital stock and its representation on the Angi Inc.

board of directors.

Additional financing may not be available on terms

favorable to the Company or at all.

In addition, the Company’s existing indebtedness could limit its ability to obtain additional financing.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

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

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

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

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

The Company also maintains reserves for potential revenue adjustments.

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North America and Europe.

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

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

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

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For the Company’s annual goodwill test at October 1, 2021, a qualitative assessment of the North America and Europe reporting units’ goodwill was performed and the Company concluded it was more likely than not that the fair value of these reporting units was in excess of their respective carrying values.

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

In the aggregate, Angi’s October 1, 2021 market capitalization of $6.2 billion exceeded its carrying value by approximately $5.0 billion.

The primary factor that the Company considered in its qualitative assessment for its Europe reporting unit were valuations performed during 2021 that indicated a fair value in excess of the carrying value.

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

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

As of December 31, 2021, the Company is in a three-year cumulative loss position.

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

federal net operating loss (“NOL”) carryforwards of $124.5 million.

The Company expects to generate future taxable income of at least $592.9 million prior to the expiration of these NOLs, $372.2 million of which expire between 2030 and 2037, and the remainder of which never expire, to fully realize this deferred tax asset.

Stock-Based Compensation

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The Company recorded stock-based compensation expense of $28.7 million and $83.6 million for the years ended December 31, 2021 and 2020, respectively.

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

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

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

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

We accomplish these objectives, in part, by issuing equity awards denominated in the equity of our subsidiaries as well as in ANGI.

Included in stock-based compensation expense in the years ended December 31, 2021 and 2020 is $1.0 million and $22.2 million, respectively, related to the modification of previously issued HomeAdvisor equity awards and Angie’s List equity awards, both of which were converted into Angi’s equity awards when the businesses combined on September 29, 2017.

These modified awards finished vesting in the first quarter of 2021.

Additionally, in the first quarter of 2021, the Company recognized a net decrease of $7.7 million due to the reversal of previously recognized expense related to unvested awards that were forfeited due to management departures, and, in connection with the departure of the president and chief operating officer of the Company in December 2020, the Company recognized $14.1 million of expense related to the acceleration of vesting of his unvested stock appreciation rights and RSUs and the extension of the post-termination exercise period for his vested and exercisable stock appreciation rights.

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

We accomplish these objectives, in part, by issuing equity awards denominated in the equity of our subsidiaries as well as in Angi Inc.

We further refine this approach by tailoring certain equity awards to the applicable circumstances.

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these awards are referred to as performance-based awards.

In other cases, we link the vesting of equity awards to the achievement of a value target for a subsidiary or ANGI’s stock price, as applicable;

In other cases, we link the vesting of equity awards to the achievement of a value target for a subsidiary or Angi Inc.’s stock price, as applicable;

these awards are referred to as market-based awards.

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

We provide a path to liquidity by settling the subsidiary denominated awards in IAC or ANGI shares.

In addition, certain former HomeAdvisor (US) awards can be settled in IAC or ANGI awards at IAC’s election.

We provide a path to liquidity by settling the subsidiary denominated awards in IAC or Angi Inc.

In addition, certain former HomeAdvisor (US) awards can be settled in IAC or Angi Inc.

awards at IAC’s election.

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

There were no stock options or stock appreciation rights granted by the Company for the years ended December 31, 2021, 2020 or 2019.

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

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

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

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

The Company also issues RSUs, PSUs and MSUs.

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

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

The Company also issues RSUs, PSUs

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

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis