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Angie’s List expected to continue financial losses

February 22, 2012

Angie’s List Inc. is expected to continue its streak of financial losses when reporting its first earnings as a public company after the stock market closes on Wednesday.

Analysts surveyed by Thomson Reuters predict the Indianapolis-based provider of online consumer reviews will post a loss of 11 cents per share for the quarter ended Dec. 31. Based on approximately 56.9 million outstanding shares, the loss would total more than $6.2 million.

Earnings in the current quarter, which ends March 31, are expected to be even worse. A per-share loss of 19 cents is forecast, or approximately $10.8 million.

The company, which provides reviews of plumbers, electricians and other service providers, hasn’t turned an annual profit since it was founded 17 years ago. It reported a net loss of $43.2 million in the nine months ended Sept. 30, 2011, more than the $19 million loss during the same period in 2010.

But at least one of the half-dozen analysts following Angie’s List is bullish on its long-term outlook. Jordan Rohan of the Stifel Nicolaus & Co. office in New York rates the stock a “buy” and thinks shares could rise to $21 each within the next three years.

Angie’s List went public in mid-November after raising $114 million in an initial public offering. The company sold 8.8 million shares for $13 apiece, and shares quickly surged to as high as $18.75 in its trading debut.

The stock opened at $14.93 on Wednesday morning, still above its debut price, but descended some 50 cents in early trading.

“Angie’s List can reach profitability any time the management team sees fit,” Rohan said in an e-mail. “There is a tradeoff between the hyper-growth of the member base and profitability of the company."

Spending on national advertising to support its growth isn’t cheap. The company spent $48 million on advertising through the first nine months of 2011, a 58-percent increase from the same period a year earlier, according to a Securities and Exchange Commission filing.

The company’s ability to become profitable has been a concern of market experts since Angie’s List announced its intention to go public in late August.

Angie’s List is available in 175 U.S. markets and entered 135 of those within the past three years, driving up expenses. As those markets mature, however, marketing expenses should decrease, helping the company to ultimately become profitable, Rohan said.

Angie's List currently claims membership of more than 1 million paying households.

Stifel Nicolaus projects a $3 million loss, before special charges such as interest and amortization, in the fourth quarter. Earnings from the three months ended Dec. 31 will be reported late Wednesday afternoon.

“If the loss is narrower, we believe the trajectory toward profitability will be clear,” Rohan said.

Fourth-quarter revenue is expected to rise to $25.4 million, up from $16.1 million in the year-earlier period, according to analysts in the Thomson Reuters survey.  For the current quarter, analysts predict revenue of $28.4 million.

Angie’s List should have ended 2011 with $88 million in revenue, up 49 percent from $59 million in 2010, according to analysts.

Angie Hicks started the company in 1995 and served as its president until 1998. Now chief marketing officer, Hicks has trimmed her stake in the company from 1.8 percent to 1.5 percent.
 

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