Why Angie's List Inc. Stock Popped Today

The local business review specialist jumped after announcing its first-ever profitable third quarter. Here's what investors need to know.

Steve Symington
Steve Symington
Oct 21, 2015 at 6:32PM
Technology and Telecom

What: Shares of Angie's List (NASDAQ:ANGI) rose 11.4% Wednesday after the local business reviews specialist announced better-than-expected third-quarter earnings.

So what: Quarterly revenue rose 7% year over year, to $87 million, driven by an 11% increase in service-provider revenue, to $69.8 million, and partially offset by a 6% decline in membership revenue, to $17.2 million. On the former, Angie's List managed to reverse last quarter's sequential decline in participating service providers, ending the quarter at 53,918. On the latter, while Angie's List grew paid memberships 9% year over year, to 3.25 million, that's a significant deceleration from 25% growth in the same year-ago period. What's more, Angie's list collected $22.29 in revenue per paid member, down from $27.15 per paid member this time last year.

Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortization came in at $3.2 million, compared to an adjusted EBITDA loss of $1.3 million in last year's third quarter. That translated to net income of $0.1 million -- albeit still roughly breakeven on a per-share basis -- marking Angie's List's first-ever profitable third quarter, and a huge improvement over the $5.2 million net loss incurred in Q3 of 2014.

Analysts, on average, were anticipating a wider net loss of $0.05 per share on higher revenue of $89.65 million.

Now what: Angie's List also reduced its full-year 2015 guidance for revenue and adjusted EBITDA. As it stands, the company expects 2015 revenue of $344 million to $348 million, down from its previous range of $357 million to $363 million, and well short of consensus estimates for revenue of $351.9 million. Consequently -- and combined with incremental one-time expenses from its search for a new CEO, as well as professional fees related to activist investor activity -- Angie's list anticipates adjusted EBITDA of $27 million to $30 million, down from its prior guidance of $30 million to $32 million.

Nonetheless, investors are right to be excited by Angie's List as it sits on the cusp of sustained profitability. And going forward, CEO Scott Durchslag promised, "Our top priority is to improve operational execution to reignite revenue growth, drive adjusted EBITDA and deliver free cash flow."

Angie's List plans to do so through a combination of millions in annualized cost reductions to be implemented in 2016, as well as scaling its new Angie's List 4.0 platform, releasing its new service provider mobile app, and improving e-commerce execution. 

"While it will take some time to realize the full benefit," Durchslag elaborated, "I believe improvements will be more visible in our results in 2016. Ultimately, I am confident that through these actions, and given the company's many strengths, Angie's List is well positioned to drive significant value creation for our shareholders and customers alike."