Homeservices is a huge market in the U.S. and around the world, but historically it's been fragmented. Contractors like plumbers tend to work independently or in small businesses, and those businesses are highly localized, making it hard for a large corporation take advantage of the market.
However, these challenges present an opportunity for ANGI Homeservices (ANGI), the parent of HomeAdvisor, Angie's List, Handy, and Fixd, and the leader in connecting home service professionals with homeowners. Providing reviews and other screening tools, and mobile apps and other features for connecting, the company helps its customers get in touch with service providers and find the right one for their needs. Over the years, that market has proven a fertile ground for steady growth, and that pattern continued in the company's first quarter.
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The big numbers
Revenue in the quarter rose 19% year over year to $303.4 million, short of estimates of $306.6 million, and was paced by strong growth from its North American marketplace segment, which grew 33% to $219.9 million. Advertising fell 12% to $62.1 million as the company restructures the Angie's List business following the 2017 merger.
During the quarter, the company saw a 15% year-over-year increase in service requests to 5.8 million. Marketplace-paying service professionals increased 14% to 221,000, and revenue per service professional was up 16%.
ANGI's operating loss narrowed from -$10.8 million in the first quarter of 2018 to -$3.6 million in Q1 2019, and due to a tax benefit, it posted a $0.02 per-share profit, up from -$0.02 and better than estimates of a penny-per-share loss.
What management had to say
ANGI Homeservices continues to refine its business to try to deliver higher-value leads and requests for its service providers, and seems to be effectively turning around Angie's List, as the site just had its highest quarterly bookings ever. The company has also been winding down unprofitable revenue streams at Angie's List and is now focused on ramping up its sales force.
On the earnings call and in an interview, CEO Brandon Ridenour highlighted growth in revenue in service requests, which increased 15% in the quarter, showing the marketplace is delivering better results for service providers as well as higher-value requests. Like other marketplaces, one of ANGI Homeservices' challenges has been balancing vendors and customers as it often has more consumer demand that it can fulfill and believes that the market in general needs more service providers.
Meanwhile, the company is adding value with its push into on-demand services by helping customers book same-day appointments, or offering a version of same-day booking. Management said on-demand made up 15% of service requests in the quarter, and as that category takes more share, it should drive higher revenue for the company since it can charge a premium on those requests.
Finally, investments in its mobile app appear to be paying off. Ridenour said on the call, "That continues to be our fastest-growing marketing channel, generating our best customers with the sort of the longest life cycle and best loyalty to us."
The combination of on-demand services and technology improvements in mobile apps and elsewhere should add momentum to ANGI's natural tailwind from homeowners gravitating to the online channel as they search for service providers.
Looking ahead
Management expects revenue growth to accelerate in the back half of the year due to the improvements in Angie's List and innovations elsewhere in the business, forecasting full-year pro forma revenue up 25%, compared to 22% pro forma growth in the first quarter.
On the bottom line, the company maintained guidance of $105 million to $125 million in operating income and $280 million to $300 million in adjusted EBITDA.
ANGI Homeservices seems to be moving in the right direction as it taps into the $400 billion opportunity in home services, but investors were not impressed with its latest report; the stock fell 11% over the two sessions after the results came out.
Looking at the company's $8 billion market value and minimal profits, investors seem to be saying they need more than 20% revenue growth to bid the stock higher. ANGI Homeservices is clearly chasing a long-term opportunity here, but it may take a little while longer for results to materialize for investors.
