Shares of Angie’s List fell sharply in after-hours trading Wednesday evening after the Indianapolis-based company disclosed fourth-quarter profit that fell short of analysts’ expectations.
Although the firm reported a rare profit of $2.8 million, or 5 cents per share, analysts polled by Thomson Reuters anticipated 13 cents. Soon after the earnings release late Wedneday afternoon, shares had tumbled $2.51—more than 14 percent.
The provider of consumer-written reviews of service companies beat analyst revenue estimates of $68.5 million, coming in at $68.8 million. That was an increase of 49 percent over revenue in the same quarter last year.
Revenue growth came mostly from service providers, whose contribution rose 57 percent from the same quarter last year to $51 million. The company also said its growing e-commerce business—a segment of service-provider revenue—generated $6 million during the quarter, an increase of 72 percent.
Membership revenue rose 29 percent, to $17.7 million.
"We are reporting a solid fourth quarter capping a year that included many significant milestones," said Angie's List CEO Bill Oesterle in prepared comments. "We executed well on our strategic objectives in 2013, including making meaningful investments in our products and technology, strengthening our ability to monetize our membership through our marketplace initiatives, and delivering excellent improvements in operating leverage."
For 2013, Angie’s List lost $32.9 million, or 57 cents a share, compared with a loss of $52.9 million, or 92 cents, in 2012. Revenue in 2013 hit $245.6 million, a 58-percent increase from $155.8 million in 2012.
The company spends heavily on marketing to expand into new markets and to build out existing markets that tend to become more profitable with time. It faces growing competition from such sites as Yelp, which don't charge consumers membership fees.
Since December, three lawsuits have been filed against the company in federal court, alleging executives haven’t been forthcoming about an evolving business model that now relies mostly on advertisements from the service providers its members review.
The suits contend that officers and directors last year provided a rosy picture of the company’s prospects even as they sold some of their own shares and conducted membership-pricing experiments that suggest the company's growth prospects may be limited.