Angie's List Management Discusses Q2 2012 Results - Earnings Call Transcript

Angie's List (ANGI)

Q2 2012 Earnings Call

July 25, 2012 5:00 pm ET

Executives

Brinlea Johnson - Director

William S. Oesterle - Co-Founder, Chief Executive Officer and Director

Angela R. Hicks Bowman - Co-founder and Chief Marketing Officer

Robert R. Millard - Chief Financial Officer and Principal Accounting Officer

Analysts

Nathaniel G. Brogadir - Stifel, Nicolaus & Co., Inc., Research Division

Andre Sequin - RBC Capital Markets, LLC, Research Division

Shawn C. Milne - Janney Montgomery Scott LLC, Research Division

Jason S. Helfstein - Oppenheimer & Co. Inc., Research Division

Aaron M. Kessler - Raymond James & Associates, Inc., Research Division

Yun S. Kim - ThinkEquity LLC, Research Division

Peter Stabler - Wells Fargo Securities, LLC, Research Division

Sameet Sinha - B. Riley & Co., LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen. Welcome to the Angie's List Second Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Brinlea Johnson. You may begin.

Brinlea Johnson

Welcome to the Angie's List second quarter earnings call. As a reminder, today's discussion will include statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including predictions, expectations, estimates or other information that might be considered forward-looking. Throughout today's discussion, we'll present some important factors relating to our business, which may potentially affect these forward-looking statements.

While these forward-looking statements represent our current judgment, these statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements made today. As a result, we caution you against placing undue reliance on these forward-looking statements. And we encourage you to review our most public reports, including our 2011 annual report on Form 10-K, for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. We are not obligating ourselves to revise the results or publicly release any revisions to these forward-looking statements in light of new information or future events.

In addition, starting this quarter, as we refer to earnings, we will also refer to adjusted EBITDA, which we defined as earnings before interest, income taxes, depreciation, amortization and noncash stock-based compensation. Adjusted EBITDA is a non-GAAP financial measure and you can find a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measure in our second quarter earnings release, which is posted on our website at investor.angieslist.com.

We believe that the use of adjusted EBITDA provides additional insight for investors to use in evaluation of ongoing operating results and trends. However, non-GAAP financial measures such as adjusted EBITDA should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP.

William S. Oesterle

Thank you, Brinlea. Good afternoon, everyone. We're going to attempt to keep our comments short, so we can get to questions. We appreciate you joining us. We had a very good quarter. It was both consistent and in line with our expectations. Paid membership continued its rapid growth. We ended the quarter with 1.4 million paid households, growing 74% over the prior year period. On more recent note, last week was the best member sales week in Angie's List history. In fact, just today, we sold -- or we finished the day with over 1.5 million paid households. In spite of all of this rapid membership growth, service provider revenue grew at an even faster rate, 94% over the prior year period. As you know, this performance is critical to the success of our long-term monetization.

Total revenue also reached a new record, matching household growth of 74% over the prior year period. We continued to make very targeted investments in technology in order to improve member experience and build e-commerce functionality, both on the website and via mobile. Our new Palo Alto team is fully engaged. And along with the Indianapolis engineering staff, they are working like busy beavers, chopping wood along the way.

In May, we priced a follow-on offering of stock that facilitated an orderly distribution of shares and helped increase our public float. We also issued an additional 703,235 new shares, raising $8 million in additional capital for future investments. We've had a busy, exciting quarter, with summertime being the most critical season for the Angie's List business.

I'll now turn the call over to Angie.

Angela R. Hicks Bowman

Thanks, Bill. Our marketing continued to perform really well in the second quarter. We sold more new members than ever before. And our CPA came in at $91, which is right in line with our expectations. Strong marginal CPAs allowed us to increase spend by 52%. And as you probably recall, our spend follows a bell curve, with Q2 and Q3 being the highest, as we capitalize on seasonality trends to continue to drive strong membership growth.

During the second quarter, we had success testing sliding our spend. We slided by taking spend dollar out of the week leading into Memorial Day and redeployed them in other weeks. This allowed us to stretch our ad spend dollars and bring more efficiency to the buy. And now to Bob for a closer look at financials.

Robert R. Millard

Thank you, Bill and Angie, and good afternoon, everyone. A quick reminder, my comments on growth rates will refer to year-over-year changes, unless I indicate otherwise.

We delivered a solid second quarter with strong revenue growth and consistent metrics. As you likely saw, we included a market cohort table in our press release today. We believe this table helps explain the growth and maturation of our markets. And therefore, we will be disclosing it on a quarterly basis.

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