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Angie's List shares soar on first-ever quarterly profit

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Shares of Angie’s List shot up 26 percent, or $3.65 a share, in trading late Thursday morning in reaction to a fourth-quarter profit announced Wednesday and an upbeat outlook for the Web-based publisher of consumer-written service provider reviews.

It was a turning point for the firm, as Angie’s List has confounded critics by plowing hundreds of millions of dollars into marketing over 16 years without ever turning a profit.

Instead, the Indianapolis-based company chose a path that depends on reaching a critical mass of paid members in a rapidly expanding number of cities, now about 200 markets.

That nirvana-like attainment of critical mass occurred in the fourth quarter, when the Indianapolis-based company posted a $2.4 million profit. That compared to a loss of $5.8 million, or 14 cents a share, in the same quarter in 2011. Angie’s List also announced that fourth-quarter revenue rose 68 percent to $46.2 million.

Company executives gave some clues as to how the company hit the milestone during a metrics-laden presentation to analysts late Wednesday. Some analysts had not expected Angie’s List to be profitable until late 2013, given the high cost of acquiring members in new markets. As the service matures its operations in several cities, expenses are expected to drop and margins improve.

Co-founder and Chief Marketing Officer Angie Hicks-Bowman said the company during the fourth quarter increased new-member sales 45 percent and increased marketing spending “only” 10 percent—resulting in a 24-percent reduction in cost per acquisition.

The value of advertising contracts from service providers—plumbers, heating contractors and such—soared 80 percent to $132.7 million.

“We’ve got everything kind of working,” said CEO William Oesterle.

“A 24-percent decline in [cost per acquisition] is obviously pretty tremendous,” Oppenheimer Securities analyst Jason Helfstein told company executives, asking how much of the efficiency improvement is sustainable.

Hicks-Bowman rattled of a list of positive trends. “I anticipate that these wins that we’ve experienced continue into [2013],” she said.

Chief Financial Officer Robert Millard put the outlook for first quarter revenue at $51 million to $52 million. That would be up sharply from first quarter 2012 revenue of $31.1 million.

For all of 2012, Angie’s List lost $52.8 million, or 92 cents a share, compared with a loss of $49 million, or $1.60 per share, the previous year. Revenue soared 73 percent to $155.8 million.

“We made significant investments in our business during the year and achieved meaningful strides in our ability to monetize our membership base,” CEO Oesterle said in a statement Wednesday.

The company is pouring massive amounts of money into television advertising, fueled by $72 million in proceeds from an initial public stock offering in November 2011.

Older markets like Indianapolis tend to generate the most revenue for Angie’s List. Generally, the older the market, the higher the membership fee–roughly $63 a year in Indianapolis versus around $30 a year in a newer market like New York City.

Raymond James analyst Aaron Kessler said in a report Thursday that Angie’s List did “significantly better” than expected as far as reducing costs of acquiring new members and lowering selling expenses. It also looks on track to have a higher base of recurring service provider business.

As a result, Kessler stated, the company is set up well to “rapidly grow revenues, increase investments in products and technology and maintain a solid cash position.”

 

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  • Crickets
    It has been disappointing to see many criticize Angie's List in these postings. Angie's List is a growing Indiana company who has employed many, including people I know personally, and is doing good things for our community. While I don't expect everyone to agree with their business model, the tone of posts has been very disparaging and demeaning. I find it interesting, however, that the naysayers aren't posting this time with the first profit shown. Keep up the good work, Angie's List.

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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