Business Overview and History

Angi Inc. was formed in 2017 through the combination of IAC's HomeAdvisor business and Angie's List, creating a dominant player in the fragmented home services market. The company operates a digital marketplace that connects homeowners with pre-screened and customer-rated professionals across over 500 different service categories, ranging from home repair and remodeling to cleaning and landscaping.

Angi Inc. has three operating segments: Ads and Leads, Services, and International. In 2018, the company expanded its offerings and customer base by acquiring Handy Technologies, Inc., a leading platform for connecting consumers with household services professionals.

The company faced significant challenges prior to 2022, with EBITDA declining from $260 million to $35 million and capital expenditures increasing to $115 million. To address these issues, IAC's CEO Joey Levin took on the additional role of Angi's CEO in 2022 to lead the turnaround effort. The company implemented a comprehensive restructuring plan, which included getting rid of low-quality and low-margin revenue streams and significantly reducing capital expenditures to around $50 million.

More recently, Jeff Kip, who had been successfully running the international businesses, was appointed as the CEO of Angi. Under this new leadership, the company has focused on fixing the product and improving the customer experience. These efforts have helped restore Angi's profitability and cash flow, putting the company back on a positive track.

Financial Performance and Ratios

Angi's financial performance has shown signs of improvement, although the company still faces headwinds. In the most recent fiscal year (2024), Angi reported total revenue of $1.19 billion, a 13% decrease from the prior year. This decline was primarily driven by a 14% drop in Ads and Leads revenue, which accounts for the majority of the company's top line.

The company's gross profit margin remained strong at 95%, while its operating margin improved to 2% from -2% in the previous year. Angi's EBITDA, a key metric for the company, increased to $145.3 million, up from $118.5 million in the prior year, reflecting the positive impact of the restructuring efforts.

For the fiscal year 2024, Angi reported net income of $36.85 million, operating cash flow of $155.94 million, and free cash flow of $105.45 million. However, in the most recent quarter (Q4 2024), the company experienced a net loss of $1.29 million on revenue of $267.87 million, which was down 10.8% year-over-year. The decrease in revenue was due to a decline in consumer connection revenue and membership subscription revenue, partially offset by an increase in advertising revenue.

Segment Performance

Ads and Leads, Angi's core business segment, generates the majority of its revenue. In 2024, consumer connection revenue in this segment was $606.56 million. Advertising revenue grew 7% year-over-year to $312.28 million, as Angi was able to increase the advertising sold through its sales force. However, membership subscription revenue declined 18% to $43.08 million due to a decrease in the number of professionals in Angi's network.

The Services segment, which reflects Angi's domestic revenue from pre-priced offerings, saw a 21% decrease in revenue to $93.52 million. This decline was attributed to fewer service requests and the residual effects of Angi's shift to a net revenue reporting model for certain contracts starting in 2023.

Internationally, Angi's revenue grew 11% to $129 million, driven by an expansion of the professional network and higher revenue per professional in European and Canadian markets.

Liquidity

Angi's balance sheet remains solid, with a current ratio of 2.14 and a quick ratio of 2.14, indicating the company's ability to meet its short-term obligations. The company's debt-to-equity ratio of 0.48 suggests a moderately leveraged capital structure. Angi has $416.43 million in cash and cash equivalents and $500 million of 3.88% Senior Notes due 2028. The company does not have any disclosed available credit facilities.

Operational Highlights and Outlook

One of the most significant developments for Angi in recent years was the implementation of a "consumer choice" model, which allows homeowners to directly select the home services professionals they want to work with, rather than being automatically matched. This change, which was initially met with some disruption, has ultimately led to a better customer experience, with homeowner NPS (Net Promoter Score) doubling when they choose the professional themselves.

Additionally, Angi has made progress in strengthening its proprietary lead generation channels, with its SEO-driven organic traffic declining at a slower pace and its SEM-driven traffic returning to growth. The company's single pro product initiative, which simplifies its pricing structure, is expected to drive revenue per monetized transaction higher in the second half of 2025.

Looking ahead, Angi's management team is cautiously optimistic about the company's prospects. For Q1 2025, Angi's outlook is slightly below previous estimates, with revenue expected to be down in the low-20% range year-over-year. However, the company has confidence in revenue improvement across the rest of 2025 and a return to growth in 2026 for several reasons:

1. The first quarter is the toughest comparison of the year, as Angi is sunsetting some non-choice revenue in their proprietary channels.
2. Product improvements are coming that will boost marketing efficiency, matching, and monetization.
3. The single pro product initiative will lead to growth in revenue per monetized transaction by the second half of 2025.
4. Angi expects to return to growth in their proprietary channels in 2025 and be fully growing in 2026.
5. The decline in third-party channels will be significant in 2025 but then flat in 2026, allowing the two to combine for growth.
6. Increased homeowner repeat and pro retention due to the impact of homeowner choice is expected to be a tailwind.

Risks and Challenges

While Angi has made significant strides in its turnaround efforts, the company still faces several risks and challenges that investors should consider:

1. Regulatory and Legal Risks: Angi operates in a highly regulated industry, and changes to laws and regulations governing worker classification, consumer protection, and data privacy could have a material impact on the company's business model and operations. Additionally, there is an ongoing class action lawsuit filed in 2016 alleging that Angi engages in deceptive practices affecting the professionals who join its network. The court has partially certified certain classes seeking injunctive relief related to alleged misappropriation of professionals' intellectual property but declined to certify classes challenging lead quality and seeking monetary relief. Angi remains confident in its ability to prevail on the merits.

2. Competitive Landscape: The home services market remains highly fragmented and competitive, with Angi facing pressure from both traditional and emerging players. The company's ability to maintain its market-leading position will depend on its ability to continually innovate and provide a superior customer experience.

3. Economic Conditions: As a consumer-facing business, Angi is susceptible to fluctuations in the broader economic environment. A prolonged downturn or recession could impact consumer spending on home services and the company's overall financial performance.

4. Integration and Execution Risks: Angi's history of strategic acquisitions and the integration of Angie's List and HomeAdvisor have presented challenges in the past. The company's ability to successfully execute on its operational initiatives and integrate new technologies and platforms will be crucial for its future success.

Industry Trends

The home services industry is highly competitive and fragmented. Industry analysts estimate the overall market is growing at a low-to-mid single-digit CAGR, as the shift from offline to online home services continues. Angi's ability to capitalize on this trend while differentiating itself from competitors will be crucial for its long-term success.

Conclusion

Angi Inc. has undergone a significant transformation in recent years, refocusing its efforts on improving the core business, streamlining operations, and enhancing the customer experience. While the company still faces several risks and challenges, the strategic initiatives undertaken by Angi's management team have laid the groundwork for a return to sustainable growth.

As Angi continues to execute on its turnaround plan and capitalize on the growing demand for home services, investors will be closely watching the company's ability to drive revenue growth, improve profitability, and generate consistent cash flow. With a strengthened foundation and a renewed focus on operational excellence, Angi appears poised to unlock long-term value for its shareholders, despite near-term headwinds in early 2025. The company's confidence in returning to growth in 2026, coupled with its ongoing product improvements and strategic initiatives, suggests a potentially promising outlook for Angi in the coming years.