What happened
Shares of ANGI Homeservices (ANGI 1.99%) were falling today after the home-services marketplace operator delivered a third-quarter earnings report last night. Though the company mostly matched expectations, investors seemed to be disappointed that the company has been unable to capitalize on a boom in the home-improvement sector. Though demand for home services on its platform has soared, supply from service providers remains constrained, affecting the company's financial performance.
As of 2:23 p.m. EDT, the stock was down 12.5%.
Image source: Getty Images.
So what
Revenue in the quarter at ANGI, which owns HomeAdvisor, Angie's List, and Handy, rose just 9% to $389.9 million, below the company's long-term target of 20% and also missing expectations at $392.1 million.
The company saw its best growth in demand since 2018 as service requests were up 29%, but much of that went unmonetized due to the gap between supply and demand. Its fixed-price services, however, performed well as the company has the ability to raise prices as demand increases relative to supply. Revenue from its marketplace, mostly made up of HomeAdvisor, rose 12%, while sales from Europe declined 3%. Revenue from its advertising business, led by Angie's List, was flat.
On the bottom line, adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA), the company's favored profitability metric, fell 35% to $38.5 million, while reported earnings per share declined from $0.04 to $0.01, which matched estimates.
Now what
ANGI did not provide guidance for the fourth quarter, but majority owner IAC has been giving monthly updates. For October, marketplace service requests at ANGI rose 21%, its weakest growth since April, while October revenue growth was 10%, roughly in line with growth in the third quarter.
Management in the past has noted supply constraints due to complications around COVID-19 and the fact that a number of contractors laid off staff in the early days of the pandemic when they didn't have work. IAC Ceo Joey Levin said,
Navigating the shifting supply and demand dynamics over the next few quarters at ANGI will be tricky, but so long as we're attracting and satisfying a growing percentage of homeowners with their home service needs, regardless of whether we fully monetize those interactions, I believe we'll be in excellent shape for the long run.
While the home-services marketplace continues to grow and customer interest is strong, the slide in the stock isn't that surprising given challenges with monetizing demand.
