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. At December 31, 2021, the principal amount of the Company’s outstanding debt is comprised of $500.0 million of ANGI Group Senior Notes, which bears interest at a fixed 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 $28.4 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. 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%, 6%, and 7% for the years ended December 31, 2021, 2020 and 2019, 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 $ 1.2 million, $(0.1) million, and $0.6 million for the year ended December 31, 2021, 2020 and 2019, 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. 47 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 Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Angi Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 March 1, 2022 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 consolidated 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. 48 Table of Contents Stock-Based Compensation Description of the Matter During the year ended December 31, 2021 , the Company recorded stock-based compensation expense of $28.7 million. As disclosed in Note 10 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 March 1, 2022 49 Table of Contents ANGI INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 2021 December 31, 2020 (In thousands, except par value amounts) ASSETS Cash and cash equivalents $ 428,136 $ 812,705 Marketable debt securities — 49,995 Accounts receivable, net of reserves of $ 36,360 and $ 27,839 , respectively 84,387 43,148 Other current assets 70,548 71,958 Total current assets 583,071 977,806 Capitalized software, leasehold improvements and equipment, net 118,267 108,842 Goodwill 916,039 891,797 Intangible assets, net 193,826 209,717 Deferred income taxes 122,693 85,746 Other non-current assets, net 76,245 94,274 TOTAL ASSETS $ 2,010,141 $ 2,368,182 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Accounts payable $ 38,860 $ 30,805 Deferred revenue 53,834 54,654 Accrued expenses and other current liabilities 183,815 148,219 Total current liabilities 276,509 233,678 Long-term debt, net 494,552 712,277 Deferred income taxes 1,883 1,296 Other long-term liabilities 91,670 111,710 Redeemable noncontrolling interests — 26,364 Commitments and contingencies SHAREHOLDERS’ EQUITY: Class A common stock, $ 0.001 par value; authorized 2,000,000 shares; issued 99,745 and 94,238 shares, respectively, and outstanding 80,578 and 78,333 , respectively 100 94 Class B convertible common stock, $ 0.001 par value; authorized 1,500,000 shares; 422,019 and 421,862 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 1,350,457 1,379,469 (Accumulated deficit) retained earnings ( 61,629 ) 9,749 Accumulated other comprehensive income 3,309 4,637 Treasury stock, 19,167 and 15,905 shares, respectively ( 158,040 ) ( 122,081 ) Total Angi Inc. shareholders’ equity 1,134,619 1,272,290 Noncontrolling interests 10,908 10,567 Total shareholders’ equity 1,145,527 1,282,857 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,010,141 $ 2,368,182 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 50 Table of Contents ANGI INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Years Ended December 31, 2021 2020 2019 (In thousands, except per share data) Revenue $ 1,685,438 $ 1,467,925 $ 1,326,205 Operating costs and expenses: Cost of revenue (exclusive of depreciation shown separately below) 325,880 173,281 46,493 Selling and marketing expense 883,643 762,590 733,223 General and administrative expense 405,819 374,096 348,247 Product development expense 70,933 68,803 64,200 Depreciation 59,246 52,621 39,915 Amortization of intangibles 16,430 42,902 55,482 Total operating costs and expenses 1,761,951 1,474,293 1,287,560 Operating (loss) income ( 76,513 ) ( 6,368 ) 38,645 Interest expense ( 23,485 ) ( 14,178 ) ( 11,493 ) Other (expense) income, net ( 2,509 ) 1,218 6,494 (Loss) earnings before income taxes ( 102,507 ) ( 19,328 ) 33,646 Income tax benefit 32,013 15,168 1,668 Net (loss) earnings ( 70,494 ) ( 4,160 ) 35,314 Net earnings attributable to noncontrolling interests ( 884 ) ( 2,123 ) ( 485 ) Net (loss) earnings attributable to Angi Inc. shareholders $ ( 71,378 ) $ ( 6,283 ) $ 34,829 Per share information attributable to Angi Inc. shareholders: Basic loss per share $ ( 0.14 ) $ ( 0.01 ) $ 0.07 Diluted loss per share $ ( 0.14 ) $ ( 0.01 ) $ 0.07 Stock-based compensation expense by function: Selling and marketing expense $ 4,064 $ 4,662 $ 3,717 General and administrative expense 19,768 73,846 56,475 Product development expense 4,870 5,141 8,063 Total stock-based compensation expense $ 28,702 $ 83,649 $ 68,255 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 51 Table of Contents ANGI INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE OPERATIONS Years Ended December 31, 2021 2020 2019 (in thousands) Net (loss) earnings $ ( 70,494 ) $ ( 4,160 ) $ 35,314 Other comprehensive (loss) income: Change in foreign currency translation adjustment ( 1,219 ) 6,827 399 Change in unrealized gains and losses on available-for-sale marketable debt securities — — ( 3 ) Total other comprehensive (loss) income ( 1,219 ) 6,827 396 Comprehensive (loss) income ( 71,713 ) 2,667 35,710 Components of comprehensive income attributable to noncontrolling interests: Net earnings attributable to noncontrolling interests ( 884 ) ( 2,123 ) ( 485 ) Change in foreign currency translation adjustment attributable to noncontrolling interests ( 109 ) ( 811 ) 86 Comprehensive income attributable to noncontrolling interests ( 993 ) ( 2,934 ) ( 399 ) Comprehensive (loss) income attributable to Angi Inc. shareholders $ ( 72,706 ) $ ( 267 ) $ 35,311 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 52 ANGI INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Years Ended December 31, 2021, 2020, and 2019 Angi 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 Inc. Shareholders’ Equity Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Redeemable Noncontrolling Interests Additional Paid-in Capital (Accumulated Deficit) Retained Earnings Treasury Stock Noncontrolling Interests $ Shares $ Shares $ Shares (In thousands) 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 Net earnings (loss) 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 53 ANGI INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Years Ended December 31, 2021, 2020, and 2019 Angi 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 Inc. Shareholders’ Equity Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Redeemable Noncontrolling Interests Additional Paid-in Capital (Accumulated Deficit) Retained Earnings Treasury Stock Noncontrolling Interests $ Shares $ Shares $ Shares (In thousands) Net (loss) earnings ( 23 ) — — — — — — — ( 71,378 ) — — ( 71,378 ) 907 ( 70,471 ) Other comprehensive income (loss) 515 — — — — — — — — ( 1,328 ) — ( 1,328 ) ( 406 ) ( 1,734 ) Stock-based compensation expense — — — — — — — 33,057 — — — 33,057 — 33,057 Issuance of common stock pursuant to stock-based awards, net of withholding taxes — 3 2,919 — — — — ( 61,226 ) — — — ( 61,223 ) — ( 61,223 ) Issuance of common stock to IAC pursuant to the employee matters agreement — 3 2,588 — 157 — — ( 3 ) — — — — — — Purchase of treasury stock — — — — — — — — — — ( 35,959 ) ( 35,959 ) — ( 35,959 ) Purchase of noncontrolling interests ( 28,318 ) — — — — — — — — — — — ( 160 ) ( 160 ) Adjustment of redeemable noncontrolling interests to fair value 1,462 — — — — — — ( 430 ) — — — ( 430 ) — ( 430 ) Other — — — — — — — ( 410 ) — — — ( 410 ) — ( 410 ) Balance as of December 31, 2021 $ — $ 100 99,745 $ 422 422,019 $ — — $ 1,350,457 $ ( 61,629 ) $ 3,309 $ ( 158,040 ) $ 1,134,619 $ 10,908 $ 1,145,527 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 54 Table of Contents ANGI INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Years Ended December 31, 2021 2020 2019 (In thousands) Cash flows from operating activities: Net (loss) income $ ( 70,494 ) $ ( 4,160 ) $ 35,314 Adjustments to reconcile net loss to net cash provided by operating activities: Provision for credit losses 88,076 78,229 64,278 Stock-based compensation expense 28,702 83,649 68,255 Depreciation 59,246 52,621 39,915 Amortization of intangibles 16,430 42,902 55,482 Deferred income taxes ( 36,306 ) ( 15,278 ) ( 3,250 ) Impairment of long-lived and right-of-use assets 12,671 169 30 Non-cash lease expense 12,880 13,659 12,318 Revenue reserves 8,569 10,251 5,934 Other adjustments, net 5,107 1,702 2,241 Changes in assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable ( 115,379 ) ( 79,830 ) ( 78,954 ) Other assets 923 ( 7,672 ) 1,064 Accounts payable and other liabilities 14,018 30,597 24,332 Operating lease liabilities ( 16,847 ) ( 13,391 ) ( 10,705 ) Income taxes payable and receivable 232 ( 1,243 ) 1,650 Deferred revenue ( 1,619 ) ( 3,786 ) ( 3,743 ) Net cash provided by operating activities 6,209 188,419 214,161 Cash flows from investing activities: Acquisitions, net of cash acquired ( 25,607 ) ( 2,264 ) ( 20,341 ) Capital expenditures ( 70,215 ) ( 52,488 ) ( 68,804 ) Purchases of marketable debt securities — ( 99,977 ) — Proceeds from maturities of marketable debt securities 50,000 50,000 25,000 Net proceeds from the sale of a business 750 731 23,615 Proceeds from sale of fixed assets — 20 — Other, net — 24 ( 103 ) Net cash used in investing activities ( 45,072 ) ( 103,954 ) ( 40,633 ) Cash flows from financing activities: Proceeds from the issuance of Senior Notes — 500,000 — Principal payments on Term Loan ( 220,000 ) ( 27,500 ) ( 13,750 ) Debt issuance costs — ( 6,484 ) — Principal payments on related party debt — — ( 1,008 ) Purchase of treasury stock ( 35,403 ) ( 63,674 ) ( 56,905 ) Proceeds from the exercise of stock options — — 573 Withholding taxes paid on behalf of employees on net settled stock-based awards ( 61,908 ) ( 64,079 ) ( 35,284 ) Distribution from IAC pursuant to the tax sharing agreement — 3,071 ( 11,355 ) Purchase of noncontrolling interests ( 27,857 ) ( 4,281 ) ( 71 ) Other, net — — ( 3,732 ) Net cash (used in) provided by financing activities ( 345,168 ) 337,053 ( 121,532 ) Total cash (used) provided ( 384,031 ) 421,518 51,996 Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 45 ) 565 661 Net (decrease) increase in cash and cash equivalents and restricted cash ( 384,076 ) 422,083 52,657 Cash and cash equivalents and restricted cash at beginning of period 813,561 391,478 338,821 Cash and cash equivalents and restricted cash at end of period $ 429,485 $ 813,561 $ 391,478 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 55 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1— ORGANIZATION Nature of Operations 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. During the year ended December 31, 2021, over 240,000 domestic service professionals actively sought consumer matches, completed jobs, or advertised work through Angi Inc. platforms. Additionally, consumers turned to at least one of our brands to find a service professional for approximately 33 million projects during the year ended December 31, 2021. Angi Ads provides service professionals the capability to engage with potential customers, including quoting, invoicing, and payment services. Angi Leads provides consumers with tools and resources to help them find local, pre-screened and customer-rated service professionals. Angi Services allows consumers to browse and buy common household services at set prices, 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. Additionally, Angi Services (including Angi Roofing) manages home improvement projects for consumers. The Company has two operating segments: (i) North America (United States and Canada), which includes Angi Ads, Angi Leads and Angi Services; and (ii) Europe. The brands operate as follows: Angi Ads (formerly Angie’s List) brand, Angi Leads (formerly HomeAdvisor) brand, and the Angi Services (Handy and Angi Roofing) brand. As used herein, “Angi,” the “Company,” “we,” “our,” “us,” and similar terms refer to Angi Inc. and its subsidiaries (unless the context requires otherwise). At December 31, 2021, IAC/InterActiveCorp (“IAC”) owned 84.5 % and 98.2 % of the economic interest and voting interest, respectively, of the Company. 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 Inc. and (ii) IAC and its subsidiaries are considered to be effectively settled for cash at the time the transaction is recorded. See “ Note 1 4 —Related Party Transactions with IAC ” for additional information on transactions between Angi Inc. 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 Inc. may have incurred as a standalone public company for the periods presented. COVID-19 Update 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 initial 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 launched in March 2021. Moreover, many service professionals’ businesses have 56 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) been adversely impacted by labor and material constraints and many service professionals have limited capacity to take on new business, which continue 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 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 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. 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 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 allowance for credit losses and the determination of revenue reserves; the determination of the customer relationship period for certain costs to obtain a contract with a customer; 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’s disaggregated revenue disclosures are presented in “ Note 1 1 —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 Angi Leads service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service). 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. The Company maintains revenue reserves for potential credits issued to Angi Leads services providers. Revenue is also derived from (i) sales of time-based website, mobile and call center advertising to service professionals, (ii) Angi Leads service professional membership subscription fees, (iii) membership subscription fees from consumers, (iv) service warranty subscription and other services and (v) revenue from completed jobs sourced through the Angi Services platforms. Angi 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. Angi 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 upon receipt of payment and is recognized using the straight-line method over the applicable 57 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) subscription period, which is typically one year. Angi 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. Consumers typically pay when a job is scheduled through the Angi Services platform, or when the job is completed for Angi Roofing. Billing practices are governed by the contract terms of each project as negotiated with the consumer. Billings do not necessarily correlate with revenue recognized over time as this is based on the timing of when the consumer receives the promised services. 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 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 was effective January 1, 2020 and 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 ASC 606, 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, 2021 and 2020 and the Company recognized expense of $ 84.7 million and $ 64.8 million, respectively, related to the amortization of these costs. The current contract assets are $ 38.0 million and $ 49.2 million at December 31, 2021, and 2020, respectively. The non-current contract asset balances are $ 1.1 million and $ 0.4 million at December 31, 2021 and 2020, 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 ASC 606, 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 58 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed. Accounts 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 years ended December 31, 2021 and 2020: December 31, 2021 December 31, 2020 (In thousands) Balance at January 1 $ 26,046 $ 19,066 Current period provision for credit losses 88,076 78,229 Write-offs charged against the credit loss reserve ( 82,911 ) ( 73,682 ) Recoveries collected 2,441 2,433 Balance at December 31 $ 33,652 $ 26,046 The revenue reserve was $ 2.7 million and $ 1.8 million at December 31, 2021 and 2020, respectively. The total credit loss and revenue reserve was $ 36.4 million and $ 27.8 million as of December 31, 2021 and 2020. 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, 2021 and 2020, the Company recognized $ 54.5 million and $ 57.6 million of revenue that was included in the deferred revenue balance as of December 31, 2020 and 2019, respectively. The current deferred revenue balances are $ 53.8 million and $ 54.7 million at December 31, 2021 and 2020, respectively. The non-current deferred revenue balances are $ 0.1 million and $ 0.2 million at December 31, 2021 and 2020, 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, and time deposits. Internationally, there are no cash equivalents at December 31, 2021 and 2020. 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 59 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 loss when the impairment is determined to be other-than-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 (expense) income, net. The Company held no marketable debt securities at December 31, 2021. The Company held $ 50.0 million in marketable debt securities at December 31, 2020. 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 $ 86.4 million and $ 67.9 million at December 31, 2021 and 2020, 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, 2021, 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, 2021, 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’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 60 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) of the carrying value. The fair value based on the valuation that was most proximate to, but not as of, October 1, 2021 exceeded the carrying value of the Europe reporting unit by $ 164.2 million. The primary factor that the Company considered in its qualitative assessment for its North America reporting unit was the significant excess of the estimated fair value of the North America reporting unit over its carrying value. The fair value of the North America reporting unit was estimated by subtracting the fair value of the Europe reporting unit, based on the valuation described above, from the October 1, 2021 market capitalization of the Company; the estimated fair value of the North America reporting unit exceeded its carrying value by approximately $ 4.9 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 2021 and 2020. 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 11.1 % to 15.0 % in 2021 and 11.5 % to 15.0 % in 2020, and the royalty rates used ranged from 2.0 % to 5.0 % in 2021 and 2.0 % to 5.5 % in 2020. The 2021, 2020 and 2019 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: 61 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) • Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets. • 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 in the period the associated revenue is recognized 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 $ 556.4 million, $ 487.6 million and $ 484.3 million for the years ended December 31, 2021, 2020 and 2019, 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 62 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Earnings Per Share Basic earnings per share is computed by dividing net earnings attributable to Angi 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 1 0 —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, 2021, the remaining redeemable non-controlling interest was exercised. One of these arrangements was exercised during the year ended December 31, 2020, and none of these arrangements were exercised during the year ended December 31, 2019. 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, 2021, 2020 and 2019, the Company recorded adjustments of $ 28.3 million, $ 1.6 million and $ 8.2 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. 63 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Recent Accounting Pronouncements Accounting Pronouncements Adopted by the Company ASU 2021-08 – Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers In October 2021, the Financial Accounting Standards Board issued ASU No. 2021-08, which changes how entities will recognize assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers. The provisions of ASU No. 2021-08 will require acquiring entities to recognize and measure contract assets and contract liabilities, including deferred revenue, acquired in a business combination in accordance with ASU No. 2014-09 (Topic 606), Revenue from Contracts with Customers, as if it had originated the contracts. The provisions of ASU No. 2021-08 are effective for fiscal years beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. The Company early adopted ASU 2021-08 effective in the fourth quarter of 2021. An entity that early adopts in an interim period is required to apply the amendments (i) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early adoption and (ii) prospectively to all business combinations that occur on or after the date of initial application. Early adoption has no retrospective impact on the Company. The adoption of ASU 2021-08 may have a material impact on the purchase accounting for prospective business combinations. Accounting Pronouncements Not Yet Adopted by the Company 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. 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 to or receivable from IAC under the tax sharing agreement and the current tax provision computed on an as if standalone, separate return basis for GAAP are reflected as adjustments to additional paid-in capital in the consolidated statement of shareholders’ equity and financing activities within the consolidated statement of cash flows. 64 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) U.S. and foreign (loss) earnings before income taxes and noncontrolling interests are as follows: Years Ended December 31, 2021 2020 2019 (In thousands) U.S. $ ( 88,777 ) $ ( 10,913 ) $ 39,821 Foreign ( 13,730 ) ( 8,415 ) ( 6,175 ) Total $ ( 102,507 ) $ ( 19,328 ) $ 33,646 The components of the income tax (benefit) provision are as follows: Years Ended December 31, 2021 2020 2019 (In thousands) Current income tax provision: Federal $ 36 $ ( 306 ) $ ( 43 ) State 3,008 1,408 819 Foreign 1,249 ( 992 ) 806 Current income tax provision 4,293 110 1,582 Deferred income tax benefit Federal ( 29,889 ) ( 5,163 ) ( 3,416 ) State ( 8,712 ) ( 6,249 ) 517 Foreign 2,295 ( 3,866 ) ( 351 ) Deferred income tax benefit ( 36,306 ) ( 15,278 ) ( 3,250 ) Income tax benefit $ ( 32,013 ) $ ( 15,168 ) $ ( 1,668 ) 65 Table of Contents ANGI 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, 2021 2020 (In thousands) Deferred tax assets: Net operating loss (“NOL”) carryforwards $ 212,315 $ 182,449 Long-term lease liabilities 26,182 29,314 Stock-based compensation 5,390 18,955 Other 35,384 28,637 Total deferred tax assets 279,271 259,355 Less valuation allowance ( 66,626 ) ( 77,076 ) Net deferred tax assets 212,645 182,279 Deferred tax liabilities: Intangible assets ( 46,591 ) ( 47,858 ) Capitalized software, leasehold improvements and equipment ( 18,624 ) ( 16,152 ) Right-of-use assets ( 17,270 ) ( 21,496 ) Capitalized costs to obtain a contract with a customer ( 9,263 ) ( 12,233 ) Other ( 87 ) ( 90 ) Total deferred tax liabilities ( 91,835 ) ( 97,829 ) Net deferred tax assets $ 120,810 $ 84,450 The portion of the December 31, 2021 deferred tax assets that will be payable to IAC pursuant to the tax sharing agreement, upon realization, is $ 93.9 million. At December 31, 2021, the Company has federal and state NOLs of $ 592.9 million and $ 479.2 million, respectively, available to offset future income. Of these federal NOLs, $ 220.7 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 2041. Federal and state NOLs of $ 327.5 million and $ 226.6 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, 2021, the Company has foreign NOLs of $ 358.0 million available to offset future income. Of these foreign NOLs, $ 314.3 million can be carried forward indefinitely and $ 43.7 million, if not utilized, will expire at various times between 2022 and 2039. During 2021, the Company recognized tax benefits related to NOLs of $ 44.0 million. At December 31, 2021, the Company has tax credit carryforwards of $ 19.9 million relating to federal and state tax credits for research activities. Of these credit carryforwards, $ 0.8 million can be carried forward indefinitely and $ 19.1 million, if not utilized, will expire between 2024 and 2041. 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, 2021, the Company has a U.S. gross deferred tax asset of $ 210.7 million that the Company expects to fully utilize on a more likely than not basis. During 2021, the Company’s valuation allowance decreased by $ 10.5 million primarily due to a decrease in state and foreign NOLs and currency translation adjustments on foreign NOLs. At December 31, 2021, the Company has a valuation 66 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) allowance of $ 66.6 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, 2021 2020 2019 (In thousands) Income tax (benefit) provision at the federal statutory rate of 21% $ ( 21,527 ) $ ( 4,058 ) $ 7,066 State income taxes, net of effect of federal tax benefit ( 1,379 ) 1,641 2,693 Stock-based compensation ( 10,331 ) ( 2,914 ) ( 12,768 ) Unbenefited losses 4,481 2,899 1,523 Change in judgement on beginning of the year valuation allowance ( 4,165 ) ( 3,544 ) — Research credit ( 2,431 ) ( 2,494 ) ( 3,308 ) Deferred tax adjustment for enacted changes in tax law and rates 768 ( 5,244 ) 502 Net adjustment related to the reconciliation of income tax provision accruals to tax returns 335 ( 743 ) 448 Other, net 2,236 ( 711 ) 2,176 Income tax benefit $ ( 32,013 ) $ ( 15,168 ) $ ( 1,668 ) A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows: December 31, 2021 2020 2019 (In thousands) Balance at January 1 $ 5,268 $ 4,025 $ 2,356 Additions based on tax positions related to the current year 1,317 1,676 1,325 Additions for tax positions of prior years 264 423 344 Reductions for tax positions of prior years ( 91 ) — — Settlements ( 460 ) ( 856 ) — Balance at December 31 $ 6,298 $ 5,268 $ 4,025 The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. At December 31, 2021, accruals for interest are not material and there are no accruals for penalties. At December 31, 2020, there are no accruals for interest and penalties. 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 (“IRS”) has substantially completed its audit of IAC’s federal income tax returns for the years ended December 31, 2013 through 2017, and has begun its audit of the years December 31, 2018 through 2019, which includes the operations of the Company. The statutes of limitations for the years 2013 through 2019 have been extended to December 31, 2023. 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 67 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. At December 31, 2021 and 2020, the Company has unrecognized tax benefits, including interest, of $ 6.3 million and $ 5.3 million respectively; all of which are for tax positions included in IAC’s consolidated tax return filings. If unrecognized tax benefits at December 31, 2021 are subsequently recognized, the income tax provision would be reduced by $ 6.0 million. The comparable amount as of December 31, 2020 is $ 5.1 million. At December 31, 2021, all of the Company’s international cash can be repatriated without any significant tax consequences. NOTE 4— GOODWILL AND INTANGIBLE ASSETS Goodwill and intangible assets, net are as follows: December 31, 2021 2020 (In thousands) Goodwill $ 916,039 $ 891,797 Intangible assets with indefinite lives 171,427 171,888 Intangible assets with definite lives, net of accumulated amortization 22,399 37,829 Total goodwill and intangible assets, net $ 1,109,865 $ 1,101,514 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, 2021: Balance at December 31, 2020 Additions (Deductions) Foreign Currency Translation Balance at December 31, 2021 (In thousands) North America $ 816,307 $ 26,822 $ — $ 64 $ 843,193 Europe 75,490 — — ( 2,644 ) 72,846 Total goodwill $ 891,797 $ 26,822 $ — $ ( 2,580 ) $ 916,039 In July, 2021, Angi acquired certain assets and assumed certain liabilities of Total Home Roofing (“Angi Roofing”) (included in the North America segment), including $ 26.8 million of goodwill. 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). 68 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Intangible assets with indefinite lives are trade names and trademarks acquired in various acquisitions. At December 31, 2021 and 2020, intangible assets with definite lives are as follows: December 31, 2021 Gross Carrying Amount Accumulated Amortization Net Weighted-Average Useful Life (Years) (Dollars in thousands) Service professional relationships $ 97,989 $ ( 97,322 ) $ 667 3.0 Technology 82,351 ( 60,619 ) 21,732 5.5 Trade names 1,415 ( 1,415 ) — 5.0 Total $ 181,755 $ ( 159,356 ) $ 22,399 4.1 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 At December 31, 2021, 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) 2022 $ 14,441 2023 7,958 2024 — 2025 — 2026 — Thereafter — Total $ 22,399 NOTE 5— FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Marketable Debt Securities The Company did no t hold any available-for-sale marketable debt securities at December 31, 2021. At December 31, 2020, current available-for-sale marketable debt securities were as follows: 69 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 were within one year. For the years ended December 31, 2021 and 2020, proceeds from maturities of available-for-sale marketable debt securities were $ 50.0 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, 2021 and 2020. 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. • 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 following tables present the Company’s financial instruments that are measured at fair value on a recurring basis: December 31, 2021 Quoted Market Prices for Identical Assets in Active Markets (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 $ 280,052 $ — $ — $ 280,052 Total $ 280,052 $ — $ — $ 280,052 70 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2020 Quoted Market Prices for Identical Assets in Active Markets (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 Assets measured at fair value on a nonrecurring basis 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. During the year ended December 31, 2021, the Company recorded $ 12.7 million in impairment charges on ROU assets, leasehold improvements, and furniture and equipment, of which $ 9.6 million is a result of the Company reducing its real estate footprint in 2021. Impairment expense was determined by comparing the carrying value of each asset group related to each office space vacated to the estimated fair market value of cash inflows directly associated with each office space. Based on this analysis, if the carrying amount of the asset group is greater than the estimated future undiscounted cash flows, an impairment charge is recognized, measured as the amount by which the carrying amount exceeds the fair value of the asset. 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, 2021 December 31, 2020 Carrying Value Fair Value Carrying Value Fair Value (In thousands) Long-term debt, net (a) $ ( 494,552 ) $ ( 486,875 ) $ ( 712,277 ) $ ( 725,700 ) ________________________ (a) At December 31, 2021 and December 31, 2020, the carrying value of long-term debt, net includes unamortized debt issuance costs of $ 5.4 million and $ 7.7 million, respectively . The fair value of long-term debt is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs. NOTE 6— LONG-TERM DEBT Long-term debt consists of: 71 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2021 December 31, 2020 (In thousands) 3.875 % ANGI Group Senior Notes due August 15, 2028 (“ANGI Group Senior Notes”); interest payable each February 15 and August 15, commencing February 15, 2021 $ 500,000 $ 500,000 ANGI Group Term Loan due November 5, 2023 (“ANGI Group Term Loan”) — 220,000 Total long-term debt 500,000 720,000 Less: unamortized debt issuance costs 5,448 7,723 Total long-term debt, net $ 494,552 $ 712,277 ANGI Group Senior Notes 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 Total Home Roofing, Inc. (“Angi Roofing”) on July 1, 2021, and treasury share repurchases. 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 ANGI Group 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, 2021, there were no limitations pursuant thereto. ANGI Group Revolving Facility 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. ANGI Group Term Loan 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 %. NOTE 7— 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 Inc. 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. 72 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Shares of Angi Inc. 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 Inc. 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 Inc. 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 Inc. 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 Inc. 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, 2021, IAC holds all 422.0 million outstanding shares of the Company’s Class B common stock, and 2.6 million outstanding shares of the Company’s Class A common stock, in total representing approximately 84.5 % economic interest and 98.2 % voting interest in the Company. In the event that Angi Inc. issues or proposes to issue any shares of Angi Inc. 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 outstanding awards under our equity compensation plans, 25.6 million shares of Angi Inc. Class A common stock are reserved for future issuances at December 31, 2021. Common Stock Repurchases On March 9, 2020 and February 6, 2019, the Board of Directors of Angi Inc. authorized the Company to repurchase up to 20 million and 15 million shares of its common stock, respectively. During the year ended December 31, 2021, the Company repurchased 3.2 million shares of Angi Inc. common stock for aggregate consideration, on a trade date basis, of $ 35.4 million. At December 31, 2021, the Company has approximately 16.1 million shares remaining in its share repurchase authorization. 73 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 8— ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following tables presents the components of accumulated other comprehensive income (loss) and items reclassified out of accumulated other comprehensive income (loss) into earnings : Years Ended December 31, 2021 2020 2019 Foreign Currency Translation Adjustment Accumulated Other Comprehensive Income Foreign Currency Translation Adjustment Accumulated Other Comprehensive Income (Loss) Foreign Currency Translation Adjustment Unrealized Gains on Available-For-Sale Debt Securities Accumulated Other Comprehensive (Loss) Income (In thousands) Balance at January 1 $ 4,637 $ 4,637 $ ( 1,379 ) $ ( 1,379 ) $ ( 1,864 ) $ 3 $ ( 1,861 ) Other comprehensive (loss) income ( 1,328 ) ( 1,328 ) 6,016 6,016 485 ( 3 ) 482 Balance at December 31 $ 3,309 $ 3,309 $ 4,637 $ 4,637 $ ( 1,379 ) $ — $ ( 1,379 ) At December 31, 2021, 2020, and 2019, there was no tax benefit or provision on the accumulated other comprehensive income (loss). NOTE 9— (LOSS) EARNINGS PER SHARE The following table sets forth the computation of basic and diluted (loss) earnings per share attributable to Angi Inc. Class A and Class B Common Stock shareholders: Years Ended December 31, 2021 2020 2019 Basic Diluted Basic Diluted Basic Diluted (In thousands, except per share data) Numerator: Net (loss) earnings $ ( 70,494 ) $ ( 70,494 ) $ ( 4,160 ) $ ( 4,160 ) $ 35,314 $ 35,314 Net earnings attributable to noncontrolling interests ( 884 ) ( 884 ) ( 2,123 ) ( 2,123 ) ( 485 ) ( 485 ) Net (loss) earnings attributable to Angi Inc. Class A and Class B Common Stock shareholders $ ( 71,378 ) $ ( 71,378 ) $ ( 6,283 ) $ ( 6,283 ) $ 34,829 $ 34,829 Denominator: Weighted average basic Class A and Class B common stock shares outstanding 502,761 502,761 498,159 498,159 504,875 504,875 Dilutive securities (a) (b) — — — — — 13,044 Denominator for (loss) earnings per share—weighted average shares 502,761 502,761 498,159 498,159 504,875 517,919 (Loss) earnings per share attributable to Angi Inc. shareholders: (Loss) earnings per share $ ( 0.14 ) $ ( 0.14 ) $ ( 0.01 ) $ ( 0.01 ) $ 0.07 $ 0.07 ________________________ 74 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (a) If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options and subsidiary denominated equity and vesting of restricted stock units (“RSUs”). For the years ended December 31, 2021, 2020, and 2019, 17.5 million, 24.9 million, and 5.5 million of potentially dilutive securities, respectively, were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute all earnings per share amounts. (b) Market-based awards and performance-based stock units (“PSUs”) are considered contingently issuable shares. Shares issuable upon exercise or vesting of market-based awards and PSUs are included in the denominator for earnings per share if (i) the applicable market or performance condition(s) has been met and (ii) the inclusion of the market-based awards and PSUs is dilutive for the respective reporting periods. For the years ended December 31, 2021, 2020, and 2019, 2.2 million, 2.0 million and 0.9 million underlying market-based awards and PSUs, respectively, were excluded from the calculation of diluted earnings per share because the market or performance condition(s) had not been met. NOTE 10— STOCK-BASED COMPENSATION The Company currently has one active stock plan, which became effective on September 29, 2017 (“the Combination”). The 2017 plan (“the 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 Inc. common stock, as well as provides for the future grant of these and other equity awards. The Plan authorizes the Company to grant awards to its employees, officers, directors and consultants. At December 31, 2021, there are 8.1 million shares available for grant under the Plan. The 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 Inc. 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 under the Plan generally vest in equal annual installments over a four-year period from the grant date. RSU awards granted under the Plan generally vest either in one installment over a three-year period or in equal annual installments over a four-year period, in each case, from the grant date. MSU awards granted under the Plan 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 Inc. 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, 2021, there was $ 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. The total income tax benefit recognized in the accompanying consolidated statement of operations for the years ended December 31, 2021, 2020, and 2019 related to all stock-based compensation is $ 16.9 million, $ 24.3 million, $ 28.8 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, 2021, 2020, and 2019 is $ 10.8 million, $ 11.4 million, and $ 27.9 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. 75 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock Options and Stock Appreciation Rights Stock options and stock appreciation rights outstanding at December 31, 2021 and changes during the year ended December 31, 2021 were as follows: December 31, 2021 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, 2021 10,689 $ 4.67 Granted — — Exercised ( 9,050 ) 4.19 Forfeited ( 17 ) 6.58 Expired ( 13 ) 10.64 Outstanding at December 31, 2021 1,609 $ 7.32 3.84 $ 5,954 Exercisable 1,609 $ 7.32 3.84 $ 5,954 The aggregate intrinsic value in the table above represents the difference between Angi Inc. closing stock price on the last trading day of 2021 and the exercise price, multiplied by the number of in-the-money awards that would have been exercised had all award holders exercised their awards on December 31, 2021. The total intrinsic value of awards exercised during the years ended December 31, 2021, 2020, and 2019 is $ 103.8 million, $ 120.9 million and $ 107.5 million, respectively. The following table summarizes the information about stock options and stock appreciation rights outstanding and exercisable at December 31, 2021: Awards outstanding & exercisable Range of Exercise Prices Outstanding at December 31, 2021 Weighted average remaining contractual life in years Weighted average exercise price (Shares in thousands) $ 0.01 to $ 10.00 1,086 3.9 $ 3.80 $ 10.01 to $ 20.00 508 3.8 14.41 $ 20.01 to $ 30.00 15 1.6 22.02 1,609 3.8 $ 7.32 There were no stock options or stock appreciation rights granted by the Company for the years ended December 31, 2021, 2020, and 2019. In connection with the Combination, the previously issued HomeAdvisor (US) stock appreciation rights were converted into Angi Inc. equity awards resulting in a modification charge. Included in stock-based compensation expense in the years ended December 31, 2021, 2020, and 2019 were charges of $ 0.9 million, $ 21.1 million, and $ 29.0 million, respectively, related to these modified awards, and the remaining charge will be recognized over the remaining vesting period of the modified awards. No cash was received from stock option exercises during the years ended December 31, 2021 and 2020 because they were net settled in shares of Angi Inc. common stock. Cash received from stock option exercises was $ 0.6 million for the year ended December 31, 2019. 76 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company currently settles all equity awards 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, certain awards can be settled in either Class A shares of Angi Inc. or shares of IAC common stock. If settled in IAC common stock, Angi Inc. 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, 2021 were net settled on that date, ANGI would have issued 0.3 million Class A shares (either to award holders or to IAC as reimbursement) and ANGI would have remitted $ 2.9 million in cash for withholding taxes (assuming a 50 % withholding rate). Assuming all other ANGI equity awards outstanding on December 31, 2021, were net settled on that date, including stock options, RSUs and subsidiary denominated equity described below, ANGI would have issued 9.1 million Class A shares and would have remitted $ 83.5 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 Inc. common stock and with the value of each RSU and PSU equal to the fair value of Angi Inc. 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 Inc.’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 Inc. 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 Inc. 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 Inc. 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, 2021 and changes during the year ended December 31, 2021 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, 2021 9,560 $ 10.19 2,496 $ 7.82 1,958 $ 5.11 Granted 11,670 12.73 3,328 14.39 696 13.51 Vested ( 2,424 ) 12.78 ( 153 ) 6.81 ( 369 ) 5.11 Forfeited ( 5,510 ) 11.28 ( 1,960 ) 6.85 ( 1,111 ) 6.37 Unvested at December 31, 2021 13,296 $ 11.49 3,711 $ 14.27 1,174 $ 8.89 ___________________________ (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 were subject to remeasurement each reporting period until settlement of the award occurred in 2021. The total expense related to these awards recognized was $ 10.4 million, equal to the number of shares vested based on the fair value of Angi Inc. common stock on the settlement date. The weighted average fair value of RSUs granted during the years ended December 31, 2021, 2020, and 2019 based on market prices of Angi Inc. common stock on the grant date was $ 12.73 , $ 7.37 , and $ 13.16 , respectively. The weighted average fair value of MSUs granted during the years ended December 31, 2021 and 2019, based on the lattice model, was $ 14.39 and $ 3.67 , respectively. There were no MSUs granted during the year ended December 31, 2020. The weighted average fair value 77 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) of PSUs granted during the years ended December 31, 2021, 2020, and 2019 based on market prices of Angi Inc. common stock on the grant date was $ 13.51 , $ 6.92 and $ 15.93 , respectively. The total fair value of RSUs that vested during the years ended December 31, 2021, 2020, and 2019 was $ 35.2 million, $ 23.4 million and $ 16.1 million, respectively. The total fair value of MSUs that vested during the years ended December 31, 2021, 2020, and 2019 was $ 2.1 million, $ 5.2 million, and $ 3.2 million, respectively. The total fair value of PSUs that vested during the year ended December 31, 2021 was $ 3.6 million. There were no PSUs that vested during the years ended December 31, 2020 and 2019. Equity Instruments Denominated in the Shares of Certain Subsidiaries Angi Inc. 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 the board of directors of the applicable subsidiary when settled, which will occur at various dates through 2026 and are ultimately settled in IAC common stock or Angi Inc. 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 11— SEGMENT INFORMATION The overall concept that the Company 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. In addition, the Company considers 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, 2021 2020 2019 (In thousands) Revenue: North America $ 1,602,571 $ 1,395,428 $ 1,249,892 Europe 82,867 72,497 76,313 Total $ 1,685,438 $ 1,467,925 $ 1,326,205 The following table presents the revenue of the Company’s segments disaggregated by type of service: 78 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2021 2020 2019 (In thousands) North America Angi Ads and Leads: Consumer connection revenue (a) $ 896,711 $ 899,175 $ 867,307 Advertising revenue (b) 252,010 226,505 214,259 Membership subscription revenue (c) 68,062 74,073 92,975 Other revenue 27,812 33,136 23,844 Total Angi Ads and Leads revenue 1,244,595 1,232,889 1,198,385 Angi Services revenue (d) 357,976 162,539 51,507 Total North America revenue 1,602,571 1,395,428 1,249,892 Europe Consumer connection revenue (e) 68,686 57,692 59,611 Service professional membership subscription revenue 12,939 13,091 14,231 Advertising and other revenue 1,242 1,714 2,471 Total Europe revenue 82,867 72,497 76,313 Total revenue $ 1,685,438 $ 1,467,925 $ 1,326,205 ________________________ (a) Includes fees paid by service professionals for consumer matches through the Angi Ads and Leads platforms. (b) Includes revenue from service professionals under contract for advertising. (c) Includes membership subscription revenue from service professionals and consumers. (d) Includes revenue from pre-priced offerings and revenue from Angi Roofing. (e) 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, 2021 2020 2019 (In thousands) Revenue United States $ 1,581,051 $ 1,379,236 $ 1,234,755 All other countries 104,387 88,689 91,450 Total $ 1,685,438 $ 1,467,925 $ 1,326,205 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, 2021, 2020, and 2019. December 31, 2021 December 31, 2020 (In thousands) Long-lived assets (excluding goodwill and intangible assets): United States $ 111,136 $ 97,841 All other countries 7,131 11,001 Total $ 118,267 $ 108,842 79 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables present operating (loss) income and Adjusted EBITDA by reportable segment: Years Ended December 31, 2021 2020 2019 (In thousands) Operating (loss) income: North America $ ( 63,316 ) $ 4,811 $ 48,967 Europe ( 13,197 ) ( 11,179 ) ( 10,322 ) Total $ ( 76,513 ) $ ( 6,368 ) $ 38,645 Years Ended December 31, 2021 2020 2019 (In thousands) Adjusted EBITDA (f) : North America $ 35,328 $ 178,854 $ 208,192 Europe $ ( 7,463 ) $ ( 6,050 ) $ ( 5,895 ) (f) The Company’s primary financial measure is Adjusted EBITDA, which is defined as operating (loss) 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 following tables reconcile operating (loss) income for the Company’s reportable segments and net loss attributable to Angi Inc. shareholders to Adjusted EBITDA: Year Ended December 31, 2021 Operating Loss Stock-Based Compensation Expense Depreciation Amortization of Intangibles Adjusted EBITDA (In thousands) North America $ ( 63,316 ) $ 28,399 $ 53,815 $ 16,430 $ 35,328 Europe ( 13,197 ) $ 303 $ 5,431 $ — $ ( 7,463 ) Operating loss ( 76,513 ) Interest expense ( 23,485 ) Other expense, net ( 2,509 ) Loss before income taxes ( 102,507 ) Income tax benefit 32,013 Net loss ( 70,494 ) Net earnings attributable to noncontrolling interests ( 884 ) Net loss attributable to Angi Inc. shareholders $ ( 71,378 ) 80 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Loss before income taxes ( 19,328 ) Income tax benefit 15,168 Net earnings ( 4,160 ) Net earnings attributable to noncontrolling interests ( 2,123 ) Net earnings attributable to Angi 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 Inc. shareholders $ 34,829 The following table presents capital expenditures by reportable segment: Years Ended December 31, 2021 2020 2019 (In thousands) Capital expenditures: North America $ 67,772 $ 50,462 $ 64,215 Europe 2,443 2,026 4,589 Total $ 70,215 $ 52,488 $ 68,804 81 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 12— 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. December 31, Leases Balance Sheet Classification 2021 2020 (In thousands) Assets: Right-of-use assets Other non-current assets $ 69,858 $ 87,559 Liabilities: Current lease liabilities Accrued expenses and other current liabilities 17,098 15,700 Long-term lease liabilities Other long-term liabilities 88,423 103,575 Total lease liabilities $ 105,521 $ 119,275 December 31, Lease Cost Income Statement Classification 2021 2020 (In thousands) Fixed lease cost Cost of revenue $ 346 $ 321 Fixed lease cost Selling and marketing expense 7,305 9,913 Fixed lease cost General and administrative expense 16,829 7,545 Fixed lease cost Product development expense 1,232 1,848 Total fixed lease cost (a) 25,712 19,627 Variable lease cost Cost of revenue — — Variable lease cost Selling and marketing expense 1,087 2,314 Variable lease cost General and administrative expense 2,481 1,567 Variable lease cost Product development expense 567 867 Total variable lease cost 4,135 4,748 Net lease cost $ 29,847 $ 24,375 ________________________________ (a) The years ended December 31, 2021 and 2020 includes $ 0.1 million and $ 0.04 million of short-term lease cost, respectively, and $ 1.8 million of sublease income for both years. 82 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Maturities of lease liabilities as of December 31, 2021 (b) : For Years Ending December 31: (In thousands) 2022 $ 22,818 2023 21,103 2024 19,825 2025 19,302 2026 18,377 Thereafter 25,050 Total 126,475 Less: Interest 20,954 Present value of lease liabilities $ 105,521 ________________________________ (b) Lease payments exclude $ 1.2 million of legally binding minimum lease payments for leases signed but not yet commenced. The following are the weighted average assumptions used for lease terms and discount rates as of December 31, 2021 and 2020: December 31, 2021 2020 Remaining lease term 6.0 years 6.9 years Discount rate 5.97 % 5.91 % December 31, 2021 2020 (In thousands) Other information: Right-of-use assets obtained in exchange for lease liabilities $ 3,143 $ 326 Cash paid for amounts included in the measurement of lease liabilities $ 23,506 $ 20,939 83 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 13— 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, 2021 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 $ 26,262 $ 4,515 $ — $ — $ 30,777 Purchase obligations include (i) payments of $ 13.0 million related to advertising commitments to be made in 2022, (ii) payments of $ 6.6 million related to technology contracts spend, (iii) payments of $ 6.1 million related to communication spend, and (iv) payments of $ 3.1 million related to background check services. 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. As a result, a $ 3.8 million legal reserve is established. Management has also identified certain other legal matters where we believe an unfavorable outcome is not probable. 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. 84 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14— RELATED PARTY TRANSACTIONS WITH IAC Relationship with IAC Angi Inc. 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. Contribution Agreement The contribution agreement sets forth the agreements between the Company and IAC regarding the principal transactions necessary for IAC to separate the Angi business from IAC's other businesses, as well as governs certain aspects of our relationship. Under the contribution agreement, the Company agreed to assume all of the assets and liabilities related to the Angi 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, 2021, 2020 and 2019, the Company was charged $ 3.9 million, $ 4.8 million and $ 4.8 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, 2021 and 2020, respectively. Separately, the Company subleases office space to IAC and charged rent of $ 1.6 million, $ 1.8 million, and $ 1.4 million for the years ended December 31, 2021, 2020, and 2019, respectively. IAC subleases office space to the Company and charged the Company $ 0.6 million of rent for the year ended December 31, 2021. IAC did not sublease office space to the Company for the years ended December 31, 2020 and 2019. There were no outstanding receivables due from IAC or payables due to IAC, pursuant to sublease agreements, for the year ended December 31, 2021. 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 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. 85 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At December 31, 2021 and 2020, the Company had outstanding payables of $ 0.3 million and $ 0.9 million, respectively, due to IAC pursuant to the tax sharing agreement, which are included in “Accrued expenses and other current liabilities,” in the accompanying consolidated balance sheet. There were $ 1.5 million of payments to IAC pursuant to this agreement during the year ended December 31, 2021. There were $ 3.1 million of refunds received from IAC pursuant to this agreement during the year ended December 31, 2020. 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 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 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 Inc. 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 Inc. Class A Common Stock, which Angi Inc. would be obligated to assume and which would be dilutive to Angi Inc.'s stockholders. For the years ended December 31, 2021, 2020, and 2019, 0.2 million, 0.3 million, and 0.5 million shares of Angi 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 employees. For the years ended December 31, 2021, 2.6 million shares of Angi Inc. Class A common stock were issued to IAC pursuant to the employee matters agreement as reimbursement for IAC common stock issued in connection with the exercise and settlement of certain Angi Inc. stock appreciation rights. There were no shares of Angi Inc. Class A common stock issued to IAC during the years ended December 31, 2020 and 2019. 86 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 15— 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, 2021, 2020, and 2019 were $ 8.4 million, $ 7.7 million, and $ 6.3 million, respectively. Matching contributions are invested in the same manner as each participant’s voluntary contributions in the investment options provided under the IAC Plan. 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, 2021, 2020, and 2019 were $ 0.7 million, $ 0.6 million, and $ 0.5 million, respectively. 87 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 16— 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 accompanying balance sheet to the total amounts shown in the accompanying statement of cash flows: December 31, 2021 December 31, 2020 (In thousands) Cash and cash equivalents $ 428,136 $ 812,705 Restricted cash included in other current assets 156 407 Restricted cash included in other non-current assets 1,193 449 Total cash and cash equivalents, and restricted cash as shown on the consolidated statement of cash flows $ 429,485 $ 813,561 Restricted cash included in other current assets at December 31, 2021 primarily consisted of funds collected from service providers for disputed payments which were not settled as of the period end, in addition to cash reserved to fund insurance claims. Restricted cash included in other current assets at December 31, 2020 primarily consists of cash received from customers at Angi Inc. 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 non-current assets for all periods presented above primarily consisted of deposits related to leases. Restricted cash included in other non-current assets at December 31, 2021 also included cash held related to a check endorsement guarantee for Angi Roofing. December 31, 2021 2020 (In thousands) Other current assets: Capitalized costs to obtain a contract with a customer $ 37,971 $ 49,194 Prepaid expenses 24,749 17,742 Other 7,828 5,022 Other current assets $ 70,548 $ 71,958 December 31, 2021 2020 (In thousands) Capitalized software, leasehold improvements and equipment, net: Capitalized software and computer equipment $ 153,953 $ 132,026 Leasehold improvements 29,605 31,864 Furniture and other equipment 11,596 13,252 Projects in progress 31,348 27,138 Capitalized software, leasehold improvements and equipment 226,502 204,280 Accumulated depreciation and amortization ( 108,235 ) ( 95,438 ) Capitalized software, leasehold improvements and equipment, net $ 118,267 $ 108,842 88 Table of Contents ANGI INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2021 2020 (In thousands) Accrued expenses and other current liabilities: Accrued employee compensation and benefits $ 46,464 $ 47,310 Accrued advertising expense 36,231 30,033 Current lease liabilities 17,098 15,700 Other 84,022 55,176 Accrued expenses and other current liabilities $ 183,815 $ 148,219 Other (expense) income, net Years Ended December 31, 2021 2020 2019 (In thousands) Interest income $ 239 $ 1,725 $ 7,974 Gain (loss) on the sale of a business (a) 31 ( 454 ) ( 218 ) Foreign exchange (losses) gains ( 1,656 ) ( 57 ) 559 Loss on extinguishment of debt (b) ( 1,110 ) — — Other ( 13 ) 4 ( 1,821 ) Other (expense) income, net $ ( 2,509 ) $ 1,218 $ 6,494 ________________________ (a) Loss from acquisition/sale of a business for the year ended December 31, 2020 includes a $ 0.2 million mark-to-market charge for an indemnification charge related to the Handy acquisition that was settled in Angi Inc. shares during the first quarter of 2020 and a $ 0.3 million charge related to the final earn-out settlement related to the sale of Felix. (b) Represents the write-off of deferred debt issuance costs related to the ANGI Group Term Loan, which was repaid in its entirety during the second quarter of 2021. Supplemental Disclosure of Cash Flow Information: Years Ended December 31, 2021 2020 2019 (In thousands) Cash paid (received) during the year for: Interest expense—third-party $ 21,450 $ 5,367 $ 10,290 Interest expense—related party — — 54 Income tax payments, including amounts paid to IAC for Angi Inc.'s share of IAC's consolidated tax liability 4,647 1,789 12,224 Income tax refunds, including amounts received from IAC for Angi Inc.’s share of IAC's consolidated tax liability ( 587 ) ( 3,506 ) ( 957 ) 89 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable.