ANGI : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) – marketscreener.com

GENERAL

 Management Overview Angi Inc., formerly ANGI Homeservices, Inc., ("Angi Inc.," the "Company," "we," "our," or "us") connects quality home service professionals with consumers across 500 different categories, from repairing and remodeling homes to cleaning and landscaping. Over 260,000 domestic service professionals actively sought consumer matches, completed jobs, or advertised work through Angi Inc. platforms during the three months ended June 30, 2021. Additionally, consumers turned to at least one of our brands to find a professional for approximately 34 million projects during the twelve months ended June 30, 2021.  The Company has two operating segments (i) North America (United States and Canada), which includes Angi (formerly Angie's List), HomeAdvisor Powered by Angi, and Handy; and (ii) Europe, which includes Travaux, MyHammer, MyBuilder, Werkspot, and Instapro.  

For a more detailed description of the Company’s operating businesses, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Defined Terms and Operating Metrics:

  Unless otherwise indicated or as the context otherwise requires certain terms, which include the principal operating metrics we use in managing our business, used in this quarterly report are defined below: •Marketplace Revenue primarily reflects domestic marketplace revenues, including consumer connection revenue for consumer matches, revenue from Angi Services offerings sourced through marketplace platforms, and membership subscription revenue from service professionals.  •Advertising and Other Revenue primarily includes revenue from service professionals under contract for advertising and membership subscription fees from consumers. •Angi Services are the Company's pre-priced offerings by which the consumer purchases services directly from the Company and the Company engages a service professional to perform the service. This will include the Total Home Roofing acquisition, which closed on July 1, 2021.  •Marketplace Service Requests are fully completed and submitted domestic customer service requests and includes Angi Services requests sourced through the marketplace platforms in the period. •Marketplace Monetized Transactions are fully completed and submitted domestic customer service requests that were matched to and paid for by a service professional and includes completed and in-process Angi Services jobs sourced through the marketplace platforms in the period. •Marketplace Transacting Service Professionals ("Marketplace Transacting SPs") are the number of marketplace service professionals that paid for consumer matches or performed an Angi Services job sourced through the marketplace platforms in the quarter. •Advertising Service Professionals ("Advertising SPs") are the number of service professionals under contract for advertising at the end of the period. •Senior Notes - On August 20, 2020, ANGI Group, LLC ("ANGI Group"), a direct wholly-owned subsidiary of the Company, issued $500.0 million of its 3.875% Senior Notes due August 15, 2028, with interest payable February 15 and August 15 of each year, commencing February 15, 2021. •ANGI Group Revolving Facility - the $250.0 million ANGI Group revolving credit facility, which otherwise would have expired on November 5, 2023, was terminated effective August 3, 2021. No amounts were ever drawn under the ANGI Group Revolving Facility prior to its termination.                                        24

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Table of Contents

  Components of Results of Operations Sources of Revenue Marketplace Revenue is primarily derived from (i) consumer connection revenue, which is comprised of fees paid by service professionals for consumer matches (regardless of whether the service professional ultimately provides the requested service), (ii) Angi Services, which is comprised of revenue from completed jobs sourced through the marketplace platforms, and (iii) service professional membership subscription fees. Consumer connection revenue varies based upon several factors, including the service requested, product experience offered, and geographic location of service. Advertising and Other Revenue is primarily derived from (i) sales of time-based website, mobile, and call center advertising to service professionals, and (ii) membership subscription fees from consumers. Operating Costs and Expenses: •Cost of revenue - consists primarily of payments made to independent service professionals who perform work contracted under Angi Services arrangements through the marketplace platforms, credit card processing fees, and hosting fees. •Selling and marketing expense - consists primarily of advertising expenditures, which include online marketing, including fees paid to search engines, offline marketing, which is primarily television advertising, and partner-related payments to those who direct traffic to our brands, compensation expense (including stock-based compensation expense) and other employee-related costs for our sales force and marketing personnel, and facilities costs. •General and administrative expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs for personnel engaged in executive management, finance, legal, tax, human resources and customer service functions, fees for professional services (including transaction-related costs related to acquisitions), provision for credit losses, software license and maintenance costs, and facilities costs. Our customer service function includes personnel who provide support to our service professionals and consumers. •Product development expense - consists primarily of compensation expense (including stock-based compensation expense) and other employee-related costs that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and related technology, software license and maintenance costs, and facilities costs. Non-GAAP financial measure Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is a non-GAAP financial measure. See "  Principles of Financial Reporting  " for the definition of Adjusted EBITDA and a reconciliation of net (loss) earnings attributable to Angi Inc. shareholders to operating (loss) income to consolidated Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020. Brand Integration Initiative On March 17, 2021, the Company updated one of its leading websites and brands, Angie's List, to Angi, and concentrated its marketing investment in the Angi brand in order to focus its marketing, sales, and branding efforts on a single brand. We rely heavily on free, or organic, search results from search engine optimization, and paid search engine marketing to drive traffic to our platforms. Our brand initiative has adversely affected the placement and ranking of Angi Inc. websites, particularly Angi.com, in organic search results as Angi does not have the same domain history as Angie's List. In addition, we shifted marketing to support Angi, away from HomeAdvisor, which has negatively affected the efficiency of our search engine marketing efforts. During the second quarter of 2021, these efforts had a pronounced negative impact on Marketplace Service Requests from organic search results and via our mobile applications, which in turn has resulted in increased paid search engine marketing to generate Marketplace Service Requests. The combined effect of this during the three months ended June 30, 2021, has reduced revenue and increased marketing spend, materially more than expected at the launch of the brand initiative in the first quarter of 2021 and more significantly than our forecasts at the beginning of May 2021. We expect the pronounced negative impact to                                        25 --------------------------------------------------------------------------------   Table of Contents organic search results, the increased paid search engine marketing costs and the reduced monetization from our mobile applications to continue until such time as the new brand establishes search engine optimization ranking and consumer awareness is established. Angi Services Investment  Angi Services was launched in August 2019 and for the three and six months ended June 30, 2021 revenue grew 127% and 96%, respectively, versus the comparable prior year periods. We have invested significantly in Angi Services and expect to continue to do so going forward. In the second half of 2021, we expect significant revenue growth as we expand the business, refine the overall experience, and increase penetration in certain geographies. This increased investment in Angi Services has contributed to lower profitability for the Company for the three and six months ended June 30, 2021 and is expected to continue to negatively impact profits through the remainder of 2021. COVID-19 Update  The impact on the Company from the COVID-19 pandemic and the measures designed to contain its spread has been varied and volatile. As previously disclosed, the initial impact of COVID-19 on the Company resulted in a decline in demand for service requests, driven primarily by decreases in demand in certain categories of jobs (particularly discretionary indoor projects). While we have experienced a rebound in service requests in the second half of 2020 and the first half of 2021, many service professionals' businesses had been adversely impacted by labor and material constraints and many service professionals had limited capacity to take on new business, which negatively impacted our ability to monetize this increased level of service requests through the first quarter of 2021. Although our ability to monetize service requests rebounded modestly in the second quarter of 2021, we are still not back to levels we experienced pre-COVID-19. No assurances can be provided that we will continue to be able to improve monetization, or that service professionals' businesses will not be adversely impacted in the future. The extent to which developments related to the COVID-19 pandemic and measures designed to curb its spread continue to impact the Company's business, financial condition and results of operations will depend on future developments, all of which are highly uncertain and many of which are beyond the Company's control, including the continuing spread of COVID-19, the severity of resurgences of COVID-19 caused by variant strains of the virus, the effectiveness of vaccines and attitudes toward receiving them, materials and supply chain constraints, labor shortages, the scope of governmental and other restrictions on travel, discretionary services and other activity, and public reactions to these developments.                                             26
--------------------------------------------------------------------------------   Table of Contents Results of Operations for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 Revenue                                                   Three Months Ended June 30,                                                  Six Months Ended June 30,                                  2021            $ Change           % Change              2020               2021            $ Change           % Change              2020                                                                                           (Dollars in thousands) Revenue:

Marketplace:

 Consumer connection revenue  $ 240,016          $ (1,999)             (1)%            $ 242,015          $ 461,447          $ 10,828               2%             $ 450,619 Angi Services revenue           72,819            40,724              127%               32,095            127,505            62,549               96%               64,956 Service professional membership subscription revenue                         12,390              (627)             (5)%               13,017             24,342            (2,452)             (9)%               26,794 Other revenue                    2,372            (3,674)             (61)%               6,046              5,353            (4,227)             (44)%               9,580 Total Marketplace Revenue      327,597            34,424               12%              293,173            618,647            66,698               12%              551,949 Advertising and Other revenue                         72,348             8,104               13%               64,244            142,339            12,739               10%              129,600 North America                  399,945            42,528               12%              357,417            760,986            79,437               12%              681,549 Europe                          21,043             3,399               19%               17,644             47,031             9,869               27%               37,162 Total revenue                $ 420,988          $ 45,927               12%            $ 375,061          $ 808,017          $ 89,306               12%            $ 718,711  Percentage of Total Revenue: North America                       95  %                                                    95  %              94  %                                                    95  % Europe                               5  %                                                     5  %               6  %                                                     5  % Total revenue                      100  %                                                   100  %             100  %                                                   100  %                                                    Three Months Ended June 30,                                                  Six Months Ended June 30,                                  2021             Change            % Change              2020               2021             Change            % Change              2020                                                                               (In thousands, rounding differences may occur) Operating metrics: Marketplace Service Requests     9,419                38               -%                 9,381             17,128             1,779               12%               15,349 Marketplace Monetized Transactions                     5,006               492               11%                4,514              9,199             1,095               14%                8,104 Marketplace Transacting SPs        225                31               16%                  194 Advertising SPs                     40                 3               6%                    37   For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 North America revenue increased $42.5 million, or 12%, driven by increases in Marketplace Revenue of $34.4 million, or 12%, and Advertising and Other revenue of $8.1 million, or 13%. The increase in Marketplace Revenue is due to an increase in Angi Services revenue of $40.7 million, or 127%, due primarily to an 11% increase in Marketplace Monetized Transactions to 5.0 million, despite Marketplace Service Requests being flat. The increase in Advertising and Other Revenue is due primarily to an increase in Angi revenue driven by a 6% increase in Advertising SPs. Europe revenue increased $3.4 million, or 19%, due to strong growth in its largest markets due to increased consumer demand and the favorable impact of the weakening of the U.S dollar relative to the Euro and the British Pound. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 North America revenue increased $79.4 million, or 12%, driven by increases in Marketplace Revenue of $66.7 million, or 12%, and Advertising and Other revenue of $12.7 million, or 10%. The increase in Marketplace Revenue is due to an increase in Angi Services revenue of $62.5 million, or 96%, and an increase in consumer connection revenue of $10.8 million, or 2%, due primarily to an increase of 12% in Marketplace Service Requests to 17.1 million, resulting in a 14% increase in Marketplace Monetized Transactions to 9.2 million, slightly outpacing the increase in Marketplace Service Requests. The increase in Advertising and Other Revenue is due primarily to the factors described above in the three-month section.                                        27 --------------------------------------------------------------------------------   Table of Contents Europe revenue increased $9.9 million, or 27%, due to strong growth across its markets due to increased consumer demand and the favorable impact of the weakening of the U.S dollar relative to the Euro and the British Pound.  Cost of revenue                                                Three Months Ended June 30,                                                  Six Months Ended June 30,                               2021              $ Change           % Change             2020               2021            $ Change           % Change             2020                                                                                        (Dollars in thousands)
Cost of revenue (exclusive of depreciation shown separately below)        $   69,704            $ 28,662               70%            $ 41,042          $ 123,532          $ 49,261               66%            $ 74,271 As a percentage of revenue                        17%                                                       11%               15%                                                      10%   For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 North America cost of revenue increased $28.6 million, or 70%, due primarily to the growth of Angi Services, resulting in higher payments made to independent third-party service professionals who perform work contracted under Angi Services arrangements to complete service requests from consumers. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 North America cost of revenue increased $49.3 million, or 67%, and increased as a percentage of revenue, due primarily to factors described above in the three-month discussion. Selling and marketing expense                                              Three Months Ended June 30,                                                   Six Months Ended June 30,                             2021             $ Change           % Change              2020               2021            $ Change           % Change              2020                                                                                       (Dollars in thousands)
Selling and marketing expense                 $  239,031          $ 49,047               26%            $ 189,984          $ 444,871          $ 64,928               17%            $ 379,943 As a percentage of revenue                      57%                                                      51%                55%                                                      53%   For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 On a consolidated basis, selling and marketing expense increased to 57% of revenue from 51% of revenue due primarily to the increase in selling and marketing expense at North America.  North America selling and marketing expense increased $47.7 million, or 26%, driven by increases in advertising expense of $29.0 million, compensation expense of $14.2 million, and consulting costs of $4.2 million. The increase in advertising expense was due primarily to increases of $21.9 million in online marketing and $6.8 million in television spend. The increase in online marketing spend was attributable to the brand integration initiative described above under "Brand Integration Initiative". The increase in television spend in 2021 reflects the return to historical spending amounts as compared to the cost cutting initiatives experienced during the second quarter of 2020 due to the impact of COVID-19. The increase in compensation expense was due primarily to increased commission expense, in addition to an increase in sales force headcount. The increase in consulting costs was due primarily to various sales initiatives at Angi Services.  Europe selling and marketing expense increased $1.3 million, or 21%, driven by an increase in advertising expense of $1.9 million, partially offset by a decrease in compensation expense of $0.5 million from lower headcount. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 On a consolidated basis, selling and marketing expense increased to 55% of revenue from 53% of revenue due primarily to the increase in selling and marketing expense at North America. North America selling and marketing expense increased $64.4 million, or 18%, driven by increases in advertising expense of $35.0 million, compensation expense of $23.2 million, and outsourced personnel and consulting costs of $7.1 million. The increase in advertising expense was due primarily to an increase in online marketing spend, partially offset by a decrease in television spend. The increase in online marketing spend was due primarily to the "Brand Integration Initiative," described above. The decrease in television spend was due primarily to reduced spend in the first quarter of 2021 compared to the prior                                        28 --------------------------------------------------------------------------------   Table of Contents year period in anticipation of the aforementioned "Brand Integration Initiative," described above. The increase in compensation expense was due primarily to the factors described above in the three-month discussion. The increase in outsourced personnel and consulting costs were due primarily to various sales initiatives at Angi Services. Europe selling and marketing expense increased $0.5 million, or 2%, driven by an increase in advertising expense of $1.7 million, partially offset by a decrease in compensation expense of $1.1 million from lower headcount. General and administrative expense                                                 Three Months Ended June 30,                                                   Six Months Ended June 30,                                 2021             $ Change           % Change             2020               2021            $ Change           % Change              2020                                                                                          (Dollars in thousands) General and administrative expense                    $   107,486          $ 22,035               26%            $ 85,451          $ 195,648          $ 15,641               9%             $ 180,007 As a percentage of revenue      26%                                                       23%               24%                                                      25%   For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 North America general and administrative expense increased $20.1 million, or 25%, due primarily to $9.6 million in one-time costs as a result of the Company reducing its real estate footprint, an $8.4 million increase in professional fees, and a $1.9 million increase in the provision for credit losses. The real estate related costs are the result of impairments of right-of-use lease assets, leasehold improvements and furniture and equipment associated with office space we are vacating. The increase in professional fees is due primarily to an increase in outsourced personnel costs, legal fees, and recruiting fees. The increase in outsourced personnel costs is due primarily to an increase in call volume related to our customer service function. The increase in the provision for credit losses is driven by higher Marketplace Revenue.  Europe general and administrative expense increased $2.0 million, or 34%, due primarily to a $0.9 million increase in professional fees related to corporate restructuring activities and a $0.5 million increase in compensation expense. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 North America general and administrative expense increased $6.9 million, or 4%, due primarily to an increase of $11.4 million in professional fees, $9.6 million in one-time costs related to the Company reducing its real estate footprint described above in the three-month discussion, a $3.2 million increase in the provision for credit losses, and a $2.3 million increase in software license and maintenance costs, partially offset by a decrease of $22.0 million in compensation expense. The increase in professional fees and provision for credit losses were due primarily to the factors described above in the three-month discussion. The increase in software license and maintenance expense was due primarily to increased investment in software to support our customer service function. The decrease in compensation expense was due primarily to a decrease of stock-based compensation expense of $28.2 million, partially offset by an increase of $5.5 million in wage related expenses resulting primarily from annual wage increases. The decrease in stock-based compensation expense was due primarily to $17.3 million in stock appreciation rights expense recognized in the first half of 2020, which was not incurred in 2021 as the awards became fully vested in 2020, and a net decrease of $7.7 million due to the reversal of previously recognized expense related to unvested awards that were forfeited due to management departures in the first quarter of 2021, partially offset by the issuance of new equity awards since 2020.  Europe general and administrative expense increased $8.8 million, or 65%, due primarily to a charge of $6.0 million related to the acquisition of an additional 21% interest in our MyBuilder business at a premium to fair value, and a $1.4 million increase in professional fees related to restructuring in Germany. Product development expense                                                           Three Months Ended June 30,                                                    Six Months Ended June 30,                                          2021               $ Change           % Change             2020               2021             $ Change           % Change             2020                                                                                                   (Dollars in thousands) Product development expense        $    18,752             $  3,345               22%            $ 15,407          $   36,799          $  4,308               13%            $ 32,491 As a percentage of revenue                4%                                                         4%                 5%                                                       5%                                            29
--------------------------------------------------------------------------------   Table of Contents For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 North America product development expense increased $1.5 million, or 11%, due primarily to increases in compensation expense of $0.8 million, and software license and maintenance expense of $0.4 million. The increase in compensation expense is driven by higher salary expense, due, in part, to increased headcount, partially offset by capitalized internally developed software expenses. Europe product and development expense increased $1.9 million, or 75%, due to an increase in compensation expense of $1.6 million as a result of fewer projects being capitalized. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 North America product development expense increased $1.0 million, or 4%, due primarily to increases in outsourced personnel and consulting costs of $0.7 million and software license and maintenance expense of $0.4 million. The increase in outsourced personnel and consulting costs were in support of projects for the Angi brand change. Europe product and development expense increased $3.3 million, or 63%, due to an increase in compensation expense of $3.1 million due primarily to factors described above in the three-month discussion. Depreciation                                                           Three Months Ended June 30,                                                    Six Months Ended June 30,                                          2021               $ Change           % Change             2020               2021             $ Change           % Change             2020                                                                                                   (Dollars in thousands) Depreciation                       $    15,058             $  2,503               20%            $ 12,555          $   31,027          $  6,334               26%            $ 24,693 As a percentage of revenue                4%                                                         3%                 4%                                                       3%   For the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 North America and Europe depreciation in 2021 increased from 2020 due primarily to investments in capitalized software to support our products and services. Operating (loss) income                                                   Three Months Ended June 30,                                                  Six Months Ended June 30,                                  2021              $ Change           % Change             2020               2021             $ Change           % Change             2020                                                                                           (Dollars in thousands)
North America                $  (32,127)         $ (48,317)              NM             $ 16,190          $ (22,550)         $ (30,632)              NM             $ 8,082 Europe                             (604)            (2,058)              NM                1,454            (10,072)            (3,338)             (50)%            (6,734) Total                        $  (32,731)         $ (50,375)              NM             $ 17,644          $ (32,622)         $ (33,970)              NM             $ 1,348  As a percentage of revenue       (8)%                                                       5%                (4)%                                                      -%   ________________________ NM = Not meaningful For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 North America operating income decreased $48.3 million to a loss of $32.1 million due to a decrease in Adjusted EBITDA of $60.3 million, described below, and an increase of $2.2 million in depreciation, partially offset by decreases of $9.2 million in amortization of intangibles and $5.0 million in stock-based compensation expense. The increase in depreciation was due primarily to the investments in capitalized software to support our products and services. The decrease in stock-based compensation expense was due primarily to $5.6 million for stock appreciation rights and options expense recognized in the second quarter of 2020 which were not incurred in 2021 as the awards became fully vested. The decrease in the amortization of intangibles was due primarily to certain intangible assets becoming fully amortized during 2020.                                         30 --------------------------------------------------------------------------------   Table of Contents Europe operating income decreased $2.1 million to a loss of $0.6 million due primarily to an increase in Adjusted EBITDA loss of $2.0 million, described below, and an increase of $0.2 million in stock-based compensation expense, partially offset by a decrease of $0.1 million in amortization of intangibles.  At June 30, 2021, there is $74.3 million of unrecognized compensation cost, net of estimated forfeitures, related to all equity-based awards, which is expected to be recognized over a weighted average period of approximately 2.7 years. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 North America operating income decreased $30.6 million to a loss of $22.5 million due to a decrease in Adjusted EBITDA of $70.6 million, described below, and an increase of $5.5 million in depreciation, partially offset by decreases of $28.4 million in stock-based compensation expense and $17.0 million in amortization of intangibles. The increase in depreciation and decrease in stock-based compensation expense was due primarily to the factors discussed in the general and administrative expense section above. The decrease in amortization of intangibles was due primarily to the factors described above in the three-month discussion.  Europe operating loss increased $3.3 million, or 50%, due primarily to an increase in Adjusted EBITDA loss of $3.0 million, described below, and an increase of $0.3 million in stock-based compensation expense, partially offset by a decrease of $0.2 million in amortization of intangibles. Adjusted EBITDA                                                   Three Months Ended June 30,                                                  Six Months Ended June 30,                                  2021              $ Change           % Change             2020              2021             $ Change           % Change             2020                                                                                           (Dollars in thousands) North America                $   (5,302)         $ (60,343)              NM             $ 55,041          $ 25,863          $ (70,569)             (73)%           $ 96,432 Europe                              860             (2,035)             (70)%              2,895            (7,119)            (3,020)             (74)%             (4,099) Total                        $   (4,442)         $ (62,378)              NM             $ 57,936          $ 18,744          $ (73,589)             (80)%           $ 92,333   As a percentage of revenue      (1)%                                                       15%               2%                                                       13%   For a reconciliation of net (loss) earnings attributable to Angi Inc. shareholders to operating (loss) income to consolidated Adjusted EBITDA, see "  Principles of Financial Reporting  ." For a reconciliation of operating (loss) income to Adjusted EBITDA for the Company's reportable segments, see "  Note 7-Segment Information  " to the consolidated financial statements included in "  Item 1. Consolidated Financial Statements  ." For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 North America Adjusted EBITDA decreased $60.3 million to a loss of $5.3 million, despite higher revenue of $45.9 million, due primarily to increases in selling and marketing expense of $47.7 million, cost of revenue of $28.6 million, and general and administrative expense of $25.6 million (excluding stock-based compensation expense); each of which are described above. Europe Adjusted EBITDA decreased $2.0 million, or 70%, as higher revenue of $3.4 million was more than offset by the increases in general and administrative expense of $2.2 million (excluding stock-based compensation expense), product development expense of $1.9 million and selling and marketing expense of $1.3 million; each of which are described above. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 North America Adjusted EBITDA decreased $70.6 million, or 73%, to $25.9 million, despite higher revenue of $89.3 million, due primarily to increases in selling and marketing expense $64.4 million, cost of revenue $49.3 million, and general and administrative expense (excluding stock-based compensation expense) of $35.1 million; each of which are described above. Included in these increases are $4.0 million in expense related to impairments at the Fixd Services business and from management changes in the first quarter of 2021, and an increase of $3.2 million in provision for credit losses due to higher Marketplace Revenue. Europe Adjusted EBITDA loss increased $3.0 million, or 74%, due primarily to the increase in general and administrative expense of $9.1 million (excluding stock-based compensation expense), including a charge of $6.0 million related to the                                        31

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Table of Contents acquisition of an additional 21% interest in MyBuilder at a premium to fair value, and the increase in product development expense of $3.3 million, partially offset by an increase of $9.9 million in revenue.

Interest expense

  Interest expense relates to interest on the ANGI Group Senior Notes and ANGI Group Term Loan and commitment fees on the undrawn ANGI Group Revolving Facility. For a detailed description of long-term debt, net, see "  Note 4-Long-term Debt  " to the consolidated financial statements included in "  Item 1. Consolidated Financial Statements  ."                                                     Three Months Ended June 30,                                                    Six Months Ended June 30,                                     2021               $ Change           % Change             2020               2021              $ Change           % Change             2020                                                                                                  (In thousands)
Interest expense             $    5,814               $  4,194               NM             $ 1,620          $   12,431            $  8,537               NM             $ 3,894   For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 Interest expense increased due primarily to the issuance of the ANGI Group Senior Notes in August 2020, partially offset by a decrease in interest expense due to the repayment of the ANGI Group Term Loan during the second quarter of 2021. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 Interest expense increased due primarily to the issuance of the Senior Notes in August 2020, partially offset by a decrease in interest expense of the ANGI Group Term Loan due primarily to lower interest rates and the decrease in the average outstanding balance compared to the prior year period. Other (expense) income, net                                            Three Months Ended June 30,                                                   Six Months Ended June 30,                            2021              $ Change           % Change            2020                2021               $ Change           % Change            2020                                                                                          (In thousands)
Other (expense) income, net            $     (636)         $    (848)              NM             $  212          $    (1,403)            $ (2,036)              NM             $  633   For the three months ended June 30, 2021 and 2020 Other expense, net in 2021 primarily includes the write-off of $1.1 million of deferred debt issuance costs related to the ANGI Group Term Loan which was repaid in its entirety during the second quarter of 2021, partially offset by a net foreign currency exchange gain of $0.4 million and interest income of $0.1 million. Other income, net in 2020 principally includes interest income of $0.2 million. For the six months ended June 30, 2021 and 2020 Other expense, net in 2021 primarily includes the write-off of $1.1 million of deferred debt issuance costs related to the ANGI Group Term Loan which was repaid in its entirety during the second quarter of 2021 and net foreign currency exchange losses of $0.5 million, partially offset by interest income of $0.1 million. Other income, net in 2020 primarily includes interest income of $1.4 million, partially offset by net foreign currency exchange losses of $0.3 million, and a $0.2 million mark-to-market charge for an indemnification claim related to the Handy acquisition that was settled in Angi Inc. shares during the first quarter of 2020.                                        32 --------------------------------------------------------------------------------   Table of Contents Income tax benefit (provision)                                                Three Months Ended June 30,                                                   Six Months Ended June 30,                                2021              $ Change           % Change             2020               2021             $ Change           % Change             2020                                                                                        (Dollars in thousands)
Income tax benefit (provision)              $    9,129             $ 12,154               NM             $ (3,025)         $   18,418          $ 12,478              210%            $ 5,940 Effective income tax rate                           23%                                                        19%                40%                                                      NM   For further details of income tax matters, see "  Note 2-Income Taxes  " to the consolidated financial statements included in "  Item 1. Consolidated Financial Statements  ." For the three months ended June 30, 2021 compared to the three months ended June 30, 2020 In 2021, the effective income tax rate was higher than the statutory rate of 21% due primarily to the benefit of the change in the annual expected effective income tax rate, partially offset by nondeductible stock-based compensation expense. In 2020, the effective income tax rate was lower than the statutory rate of 21% due primarily to benefiting previously unbenefited foreign net operating loss carryforwards. For the six months ended June 30, 2021 compared to the six months ended June 30, 2020 In 2021, the effective income tax rate was higher than the statutory rate of 21% due primarily to excess tax benefits generated by the exercise and vesting of stock-based awards.  In 2020, the Company recorded an income tax benefit of $5.9 million. The income tax benefit was due primarily to a $5.7 million reduction to deferred taxes due to the true-up of the state tax rate of an indefinite-lived intangible asset and benefiting previously unbenefited foreign net operating loss carryforwards.                                         33

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                       PRINCIPLES OF FINANCIAL REPORTING We report Adjusted EBITDA as a supplemental measure to U.S. generally accepted accounting principles ("GAAP"). This measure is one of the primary metrics by which we evaluate the performance of our businesses, on which our internal budgets are based and by which management is compensated. We believe that investors should have access to, and we are obligated to provide, the same set of tools that we use in analyzing our results. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. We endeavor to compensate for the limitations of the non-GAAP measure presented by providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the non-GAAP measure. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measure, which we discuss below. Definition of Non-GAAP Measure Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is defined as operating income excluding: (1) stock-based compensation expense; (2) depreciation; and (3) acquisition-related items consisting of amortization of intangible assets and impairments of goodwill and intangible assets, if applicable. We believe this measure is useful for analysts and investors as this measure allows a more meaningful comparison between our performance and that of our competitors. Adjusted EBITDA has certain limitations because it excludes the impact of these expenses. The following table reconciles net (loss) earnings attributable to Angi Inc. shareholders to operating (loss) income to consolidated Adjusted EBITDA:                                                                  Three Months Ended June 30,                 Six Months Ended June 30,                                                                     2021                 2020                 2021                 2020                                                                                              (In thousands) 

Net (loss) earnings attributable to Angi Inc. shareholders $ (30,293) $ 12,667 $ (28,362) $ 3,709 Add back: Net earnings attributable to noncontrolling interests

                    241               544                     324               318 Income tax (benefit) provision                                        (9,129)            3,025                 (18,418)           (5,940) Other expense (income), net                                              636              (212)                  1,403              (633) Interest expense                                                       5,814             1,620                  12,431             3,894 Operating (loss) income                                              (32,731)           17,644                 (32,622)            1,348 Add back: Stock-based compensation expense                                       9,543            14,759                  11,577            40,334 Depreciation                                                          15,058            12,555                  31,027            24,693 Amortization of intangibles                                            3,688            12,978                   8,762            25,958 Adjusted EBITDA                                              $        (4,442)         $ 57,936          $       18,744          $ 92,333   For a reconciliation of operating (loss) income to Adjusted EBITDA for the Company's reportable segments, see "  Note 7-Segment Information  " to the consolidated financial statements included in "  Item 1. Consolidated Financial Statements  ." Non-Cash Expenses That Are Excluded from Our Non-GAAP Measure Stock-based compensation expense consists of expense associated with the grants, including unvested grants assumed in acquisitions, of stock appreciation rights, restricted stock units ("RSUs"), stock options, performance-based RSUs ("PSUs") and market-based awards. These expenses are not paid in cash and we view the economic costs of stock-based awards to be the dilution to our share base; we also include the related shares in our fully diluted shares outstanding for GAAP earnings per share using the treasury stock method. PSUs and market-based awards are included only to the extent the applicable performance or market condition(s) have been met (assuming the end of the reporting period is the end of the contingency period). The Company is currently settling all stock-based awards on a net basis and remits the required tax-withholding amounts from its current funds. Depreciation is a non-cash expense relating to our capitalized software, leasehold improvements and equipment and is computed using the straight-line method to allocate the cost of depreciable assets to operations over their estimated useful lives, or, in the case of leasehold improvements, the lease term, if shorter.                                        34 --------------------------------------------------------------------------------   Table of Contents Amortization of intangible assets and impairments of goodwill and intangible assets are non-cash expenses related primarily to acquisitions. At the time of an acquisition, the identifiable definite-lived intangible assets of the acquired company, such as service professional relationships, technology, memberships, customer lists and user base, and trade names, are valued and amortized over their estimated lives. Value is also assigned to acquired indefinite-lived intangible assets, which comprise trade names and trademarks, and goodwill that are not subject to amortization. An impairment is recorded when the carrying value of an intangible asset or goodwill exceeds its fair value. We believe that intangible assets represent costs incurred by the acquired company to build value prior to acquisition and the related amortization and impairments of intangible assets or goodwill, if applicable, are not ongoing costs of doing business.                                        35

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              FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
 Financial Position                                                                                            December 31,                                                                     June 30, 2021              2020                                                                            

(In thousands) Cash and cash equivalents and marketable debt securities: United States

                                                     $      563,024          $    793,679 All other countries                                                       21,236                19,026 Total cash and cash equivalents                                          584,260               812,705 Marketable debt securities (United States)                                     -                49,995 Total cash and cash equivalents and marketable debt securities                                                        $      584,260          $    862,700  Long-term debt: Senior Notes                                                      $      500,000          $    500,000 Term Loan                                                                      -               220,000 Total long-term debt                                                     500,000               720,000  Less: unamortized debt issuance costs                                      5,805                 7,723 Total long-term debt, net                                         $      494,195          $    712,277   The Company's international cash can be repatriated without significant tax consequences. For a detailed description of long-term debt, see "  Note 4-Long-term Debt  " to the consolidated financial statements included in "  Item 1. Consolidated Financial Statements  ." Cash Flow Information In summary, the Company's cash flows are as follows:                                           Six Months Ended June 30,                                              2021                2020                                                (In thousands) Net cash provided by (used in): Operating activities                $       59,253            $ 127,797 Investing activities                $       15,037            $ (23,934) Financing activities                $     (303,171)           $ (72,863)   Net cash provided by operating activities consists of earnings adjusted for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense, provision for credit losses, amortization of intangibles, depreciation, impairment of long-lived and right-of-use assets, and deferred income taxes. 2021 Adjustments to earnings consist primarily of $42.7 million of provision for credit losses, $31.0 million of depreciation, $12.3 million of impairment charges on long-lived and right-of-use assets, $11.6 million of stock-based compensation expense, $8.8 million of amortization of intangibles, and $4.7 million of revenue reserves, partially offset by $20.3 million of deferred income taxes. The decrease from changes in working capital consists primarily of an increase of $63.2 million in accounts receivable partially offset by increases of $43.2 million in accounts payable and other liabilities and $5.3 million of deferred revenue. The increase in accounts receivable is due primarily to revenue growth in North America. The increase in accounts payable and other liabilities is due primarily to an increase in accrued advertising and related payables. The increase in deferred revenue is driven primarily by increases in membership payments.                                        36 --------------------------------------------------------------------------------   Table of Contents Net cash provided by investing activities includes proceeds of $50.0 million from the maturities of marketable debt securities, partially offset by $35.7 million of capital expenditures, primarily related to investments in capitalized software to support the Company's products and services. Net cash used in financing activities includes $220.0 million for the prepayment of the ANGI Group Term Loan, which otherwise would have matured on November 5, 2023, $54.6 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $22.9 million for the purchase of redeemable noncontrolling interests, and $5.6 million for the repurchase of 0.5 million shares of Angi Inc. Class A common stock, on a settlement date basis, at an average price of $11.87 per share. 2020 Adjustments to earnings consist primarily of $40.3 million of stock-based compensation expense, $39.3 million of provision for credit losses expense, $26.0 million of amortization of intangibles, and $24.7 million of depreciation, partially offset by $6.3 million of deferred income taxes. The deferred income tax benefit primarily relates to an adjustment to deferred taxes resulting from a true-up of the state tax rate. The decrease from changes in working capital consists primarily of an increase in accounts receivable of $48.2 million, partially offset by an increase in accounts payable and other liabilities of $35.9 million. The increase in accounts receivable is due primarily to revenue growth in North America. The increase in accounts payable and other liabilities is due primarily to an increase in accrued advertising and related payables. Net cash provided by investing activities includes capital expenditures of $24.7 million, primarily related to investments in capitalized software to support the Company's products and services and leasehold improvements. Net cash used in financing activities includes $54.4 million for the repurchase of 7.7 million shares of ANGI common stock, on a settlement date basis, at an average price of $7.02 per share, $11.5 million for the payment of withholding taxes on behalf of employees for stock-based awards that were net settled, $6.9 million for the principal payments on the ANGI Group Term Loan, and $3.2 million for the purchase of redeemable noncontrolling interests, partially offset by a $3.1 million payment from IAC pursuant to the tax sharing agreement.  Liquidity and Capital Resources Financing Arrangements The ANGI Group Senior Notes were issued on August 20, 2020, the proceeds of which are intended for general corporate purposes, including potential future acquisitions and return of capital.  

As of May 6, 2021, the outstanding balance of the ANGI Group Term Loan was repaid in its entirety. The outstanding balance of the ANGI Group Term Loan at December 31, 2020 was $220.0 million and bore interest at 2.16%.

  The $250.0 million ANGI Group Revolving Facility, which otherwise would have expired on November 5, 2023, was terminated effective August 3, 2021. No amounts were ever drawn under the ANGI Group Revolving Facility prior to its termination.  Share Repurchase Authorizations and Activity During the six months ended June 30, 2021, the Company repurchased 0.5 million shares, on a trade date basis, of its common stock at an average price of $11.87 per share, or $5.6 million in aggregate. From July 1, 2021 through August 3, 2021, Angi Inc. repurchased an additional 0.7 million shares at an average price of $11.68 per share, or $7.7 million in aggregate. Angi Inc. has 18.1 million shares remaining in its share repurchase authorization as of August 3, 2021. The Company may purchase shares over an indefinite period of time on the open market and in privately negotiated transactions, depending on those factors Angi Inc. management deems relevant at any particular time, including, without limitation, market conditions, share price and future outlook.  Outstanding Stock-based Awards The Company may settle equity awards on a gross or a net basis upon factors deemed relevant at the time, and if settled on a net basis, with Angi remits withholding taxes on behalf of the employee At IAC/InterActiveCorp's ("IAC") option, certain Angi stock appreciation rights can be settled in either Class A shares of Angi or shares of IAC common stock. If settled in IAC                                        37 --------------------------------------------------------------------------------   Table of Contents common stock, the Company reimburses IAC in either cash or through the issuance of Class A shares to IAC. The Company currently settles all equity awards on a net basis. Pursuant to the employee matters agreement, in the event of a distribution of Angi capital stock to IAC stockholders in a transaction intended to qualify as tax-free for U.S. federal income tax purposes, the Compensation Committee of the IAC Board of Directors has the exclusive authority to determine the treatment of outstanding IAC equity awards. Such authority includes (but is not limited to) the ability to convert all or part of IAC equity awards outstanding immediately prior to the distribution into equity awards denominated in shares of Angi Class A Common Stock for no compensation, which Angi would be obligated to assume and which would be dilutive to Angi's stockholders. The following table summarizes the aggregate intrinsic value of all awards outstanding as of July 30, 2021; assuming these awards were net settled on that date, the withholding taxes that would be paid by the Company on behalf of employees upon exercise or vesting that would be payable (assuming these equity awards are net settled with a 50% tax rate), and the shares that would have been issued are as follows:                                             Aggregate intrinsic             Estimated            Estimated shares to                                               value of awards           withholding taxes             be issued                                                 outstanding                  payable                                                                          (In thousands) Stock appreciation rights                   $           8,455          $          4,228                     367 Other equity awards(a)(b)                             164,636                    69,216                   6,157 Total outstanding employee stock-based awards                                      $         173,091          $         73,444                   6,524   _______________ (a)Includes stock options, RSUs, and subsidiary denominated equity. (b)The number of shares ultimately needed to settle subsidiary denominated equity awards and the cash withholding tax obligation may vary significantly as a result of the determination of the fair value of the relevant award at the time of exercise. In addition, the number of shares required to settle these awards will be impacted by movement in the Company's stock price.  Capital Expenditures The Company's 2021 capital expenditures are expected to be higher than 2020 capital expenditures of $52.5 million by approximately 35% to 40%, due primarily to increased investment in capitalized software to support the development of our products and services. Liquidity Assessment The Company's liquidity could be negatively affected by a decrease in demand for its products and services due to COVID-19 or other factors. As described in the "COVID-19 Update" section above, to date, the COVID-19 outbreak and measures designed to curb its spread have adversely impacted the Company's business.  At June 30, 2021, IAC held all Class B shares of Angi Inc., which represent 84.1% of the economic interest and 98.1% of the voting interest of the Company. As a result, IAC has the ability to control Angi Inc.'s financing activities, including the issuance of additional debt and equity securities by Angi Inc. or any of its subsidiaries, or the incurrence of other indebtedness generally. While Angi Inc. is expected to have the ability to access debt and equity markets if needed, such transactions may require the approval of IAC due to its control of the majority of the outstanding voting power of Angi Inc.'s capital stock and its representation on the Angi Inc. board of directors. Additional financing may not be available on terms favorable to the Company or at all. In addition, the Company's existing indebtedness could limit its ability to obtain additional financing. The Company believes its existing cash, cash equivalents, and expected positive cash flows generated from operations will be sufficient to fund its normal operating requirements, including capital expenditures, debt service, the payment of withholding taxes paid on behalf of employees for net-settled stock-based awards, and investing and other commitments, for the foreseeable future.                                        38

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                            CONTRACTUAL OBLIGATIONS During the six months ended June 30, 2021, other than the repayment of the outstanding balance of the ANGI Group Term Loan of $220.0 million, there have been no material changes to the Company's contractual obligations since the disclosure in our Annual Report on Form 10-K for the year ended December 31, 2020.                                         39

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Analyst Recommendations on ANGI INC.