Angie’s List swings to a profit, misses on revenue

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Fresh off the official lowering of its longstanding paywall, Angie's List Inc. swung to a profit in the second quarter this year, beating analyst expectations.

The Indianapolis-based company, which provides online reviews of home services providers, recorded a profit of $4.8 million, or 8 cents per share, in the quarter ended June 30, up from a loss of $8.3 million, or 14 cents per share, in the same quarter last year. It was the fifth time in seven quarters that the company reported a profit.

Analysts surveyed by Thompson Reuters expected a loss a of 4 cents per share in the quarter.

The company announced July 13 that it officially lowered its paywall, allowing users to read and write service provider reviews for free. It began piloting the move across the country in June. All told, the company added 152,586 free members in the quarter, bringing its total of paid and unpaid members to 3.3 million at the end of the quarter.

On a conference call with analysts Wednesday morning, CEO Scott Durchslag said the company had added a total of 700,000 new free members as of Tuesday "and we now have 3.7 million members total."

Angie's List fell short on quarterly revenue projections. It pulled in $83.1 million during the period, down 5 percent from a year ago. Analysts had expected revenue of  $86.2 million.

The company said service provider revenue dipped because of an increase in attrition, lower originations and lower e-commerce revenue, "due in part to disruptions associated with the migration to the company's new AL 4.0 technology platform."

It attributed membership revenue decreases to reduced marketing spending in the quarter and the "ongoing member shift to lower-priced tiers that occurred prior to the removal of the company's ratings and reviews paywall."

After raking in $87.3 million in revenue in the second quarter of last year, Angie's List has seen quarter-over-quarter revenue decline for four straight periods.

Despite lower revenue, the firm was able to produce a profit this quarter largely by cutting operating expenses 19 percent year-over-year, to $76.9 million in the latest quarter.

Marketing spending was slashed by about 50 percent, to $14 million, in the period versus the year-ago quarter. Company officials said it did so to gear up for a upcoming marketing blitz around its new business model, which still includes paid tiers.

"We expect to significantly increase marketing spending in the third quarter compared to the second quarter," Chief Financial Officer Tom Fox said on the conference call.

Angie's List shares rose 7.5 percent in the first 15 minutes of trading Wednesday morning.

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