UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2014~~March 31, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35339

ANGIE’S LIST, INC.

(Exact name of registrant as specified in its charter)



Delaware		27-2440197
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
1030 E. Washington Street Indianapolis, IN		46202
(Address of principal executive offices)		(Zip Code)

~~(888) 888-5478~~

~~(Registrant’s telephone number, including area code)~~

(888) 888-5478

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of registrant’s common stock outstanding as of ~~October~~April 20, ~~2014~~2015 was 58,516,677.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

Angie’s List, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)


							March 31, 2015			December 31, 2014
	September 30, 2014			December 31, 2013
	(Unaudited)						(Unaudited)
Assets
Cash and cash equivalents	$	62,319		$	34,803		$	52,935		$	39,991
Restricted cash	50			50
Short-term investments	16,739			21,055			24,540			24,268
Accounts receivable, net of allowance for doubtful accounts of $1,312 and $1,107 at September 30, 2014 and December 31, 2013, respectively	14,250			12,385
Accounts receivable, net of allowance for doubtful accounts of $1,436 and $1,651 at March 31, 2015 and December 31, 2014, respectively							15,841			15,141
Prepaid expenses and other current assets	18,196			13,651			22,237			18,120
Total current assets	111,554			81,944			115,553			97,520
Property, equipment and software, net	43,443			18,657			57,865			51,264
Goodwill	1,145			1,145			1,145			1,145
Amortizable intangible assets, net	3,031			3,500			2,469			2,755
Other assets, noncurrent	1,874			397			1,756			1,854
Total assets	$	161,047		$	105,643		$	178,788		$	154,538

Liabilities and stockholders’ deficit
Accounts payable	$	16,309		$	6,838		$	11,773		$	5,490
Accrued liabilities	32,010			21,770			33,541			23,189
Deferred membership revenue	38,114			35,560			31,835			33,767
Deferred advertising revenue	47,638			39,448			51,476			48,399
Current portion of obligations under leases	217			—
Total current liabilities	134,288			103,616			128,625			110,845
Long-term debt, net	58,793			14,918			58,914			58,854
Deferred membership revenue, noncurrent	5,058			4,909			4,564			4,744
Deferred advertising revenue, noncurrent	605			521			583			669
Obligations under leases	351			—
Other liabilities, noncurrent	1,342			169			1,660			1,600
Total liabilities	200,437			124,133			194,346			176,712
Commitments and contingencies (Note 9)							—			—
Stockholders’ deficit:
Preferred stock, $0.001 par value: 10,000,000 shares authorized, no shares issued or outstanding at September 30, 2014 and December 31, 2013	—			—
Common stock, $0.001 par value: 300,000,000 shares authorized, 67,075,389 and 67,014,757 shares issued and 58,516,677 and 58,456,045 shares outstanding at September 30, 2014 and December 31, 2013, respectively	67			67
Preferred stock, $0.001 par value: 10,000,000 shares authorized, no shares issued or outstanding at March 31, 2015 and December 31, 2014							—			—
Common stock, $0.001 par value: 300,000,000 shares authorized, 67,075,389 and 67,075,389 shares issued and 58,516,677 and 58,516,677 shares outstanding at March 31, 2015 and December 31, 2014, respectively							67			67
Additional paid-in-capital	263,951			257,505			268,151			265,895
Treasury stock, at cost: 8,558,712 shares of common stock at September 30, 2014 and December 31, 2013	(23,719		)	(23,719		)
Treasury stock, at cost: 8,558,712 shares of common stock at March 31, 2015 and December 31, 2014							(23,719		)	(23,719		)
Accumulated deficit	(279,689		)	(252,343		)	(260,057		)	(264,417		)
Total stockholders’ deficit	(39,390		)	(18,490		)	(15,558		)	(22,174		)
Total liabilities and stockholders’ deficit	$	161,047		$	105,643		$	178,788		$	154,538

See accompanying notes.

Table of Contents

Angie’s List, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)


													Three Months Ended March 31,
	Three Months Ended September 30,						Nine Months Ended September 30,						2015		2014
	2014			2013			2014			2013
	(Unaudited)						(Unaudited)						(Unaudited)
Revenue
Membership	$	18,279		$	17,050		$	55,095		$	47,598		$	17,339	$	18,300
Service provider	63,027			48,450			177,764			129,288			66,204		54,357
Total revenue	81,306			65,500			232,859			176,886			83,543		72,657
Operating expenses
Operations and support	14,119			11,016			39,413			29,418			13,998		11,548
Selling	32,078			23,960			88,478			65,582			28,609		26,122
Marketing	22,508			28,189			81,909			75,870			16,276		23,481
Product and technology	8,696			7,565			24,243			20,064			8,416		7,457
General and administrative	8,639			7,798			25,080			20,304			10,962		7,356
Operating loss	(4,734		)	(13,028		)	(26,264		)	(34,352		)
Operating income (loss)													5,282		(3,307		)
Interest expense, net	—			468			579			1,395			912		461
Loss on debt extinguishment	458			—			458			—
Loss before income taxes	(5,192		)	(13,496		)	(27,301		)	(35,747		)
Income (loss) before income taxes													4,370		(3,768		)
Income tax expense	15			15			45			45			10		15
Net loss	$	(5,207	)	$	(13,511	)	$	(27,346	)	$	(35,792	)
Net loss per common share — basic and diluted	$	(0.09	)	$	(0.23	)	$	(0.47	)	$	(0.62	)
Net income (loss)													$	4,360	$	(3,783	)
Net income (loss) per common share — basic and diluted													$	0.07	$	(0.06	)
Weighted average number of common shares outstanding — basic and diluted	58,516,677			58,389,311			58,507,892			58,164,232			58,516,677		58,491,230

See accompanying notes.

Table of Contents

Angie’s List, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)



	Three Months Ended March 31,
	2015			2014

	(Unaudited)
Operating activities
Net income (loss)	$	4,360		$	(3,783	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,590			1,220
Amortization of debt discount, deferred financing fees and bond premium	171			106
Non-cash stock-based compensation	2,256			1,533
Changes in certain assets:
Accounts receivable	(700		)	(1,053		)
Prepaid expenses and other current assets	(4,117		)	(2,081		)
Changes in certain liabilities:
Accounts payable	6,075			2,201
Accrued liabilities	10,732			14,843
Deferred advertising revenue	2,991			3,475
Deferred membership revenue	(2,112		)	(1,516		)
Net cash provided by operating activities	21,246			14,945

Investing activities
Purchases of investments	(3,120		)	(2,595		)
Sales of investments	2,835			2,640
Property, equipment and software	(1,116		)	(2,257		)
Capitalized website and software development costs	(6,754		)	(3,953		)
Intangible assets	(93		)	(390		)
Net cash used in investing activities	(8,248		)	(6,555		)

Financing activities
Proceeds from exercise of stock options	—			461
Payments on capital lease obligations	(54		)	—
Net cash (used in) provided by financing activities	(54		)	461
Net increase in cash and cash equivalents	$	12,944		$	8,851
Cash and cash equivalents, beginning of period	39,991			34,803
Cash and cash equivalents, end of period	$	52,935		$	43,654

Supplemental cash flow disclosures
Capital expenditures incurred but not yet paid	$	2,080		$	974

See accompanying notes.

Table of Contents

Angie’s List, Inc.

~~Consolidated Statements of Cash Flows~~

~~(in thousands)~~

Nine Months Ended
September 30,
2014 2013
(Unaudited)
Operating activities
Net loss $ (27,346 ) $ (35,792 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 4,018
2,874
Amortization of debt discount, deferred financing fees and bond premium 301
420
Non-cash loss on debt extinguishment 266
—
Non-cash compensation expense 5,945
2,666
Changes in certain assets:
Accounts receivable (1,865 ) (2,849 )
Prepaid expenses and other current assets (4,545 ) 4,810
Changes in certain liabilities:
Accounts payable 7,546
(3,175 )
Accrued liabilities 12,653
21,423
Deferred advertising revenue 8,274
12,577
Deferred membership revenue 2,703
10,494
Net cash provided by operating activities 7,950
13,448

Investing activities
Purchase of investments (13,164 ) (27,572 )
Sale of investments 17,400
16,855
Acquisition of business assets —
(2,150 )
Property, equipment and software (12,904 ) (5,685 )
Capitalized website and software development costs (12,785 ) —
Intangible assets (841 ) (701 )
Net cash used in investing activities (22,294 ) (19,253 )

Financing activities
Proceeds from exercise of stock options 501
4,776
Principal payments on long-term debt (15,000 ) —
Proceeds from long-term debt issuance 60,000
—
Fees paid to lender (1,210 ) —
Cash paid for financing fees (1,879 ) —
Payment of contingent consideration from acquisition of business assets (500 ) —
Payments on capital lease obligations (52 ) —
Net cash provided by financing activities 41,860
4,776
Net increase (decrease) in cash and cash equivalents $ 27,516
$ (1,029 )
Cash and cash equivalents, beginning of period 34,803
42,638
Cash and cash equivalents, end of period $ 62,319
$ 41,609

Supplemental cash flow disclosures
Capital expenditures incurred but not yet paid $ 2,454
$ —

~~See accompanying notes.~~

~~Table of Contents~~

~~Angie’s List, Inc.~~

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(in thousands, except share and per share data)

1. Summary of Significant Accounting Policies

~~Nature of Operations~~

Angie’s List, Inc. (collectively with its wholly owned subsidiaries, the “Company”) operates a ~~consumer-driven~~national local services consumer review service and marketplace where consumers can research, shop for ~~its members to research, hire, rate~~ and ~~review~~purchase local ~~professionals~~services for critical needs, such as home, health ~~care~~ and automotive services, as well as rate and review the providers of these services. Ratings and reviews, which are available only to the ~~Company’s~~Company's members, ~~help its~~assist members ~~to find~~in identifying and hiring the best provider for their local service needs. Membership subscriptions are sold on a monthly, annual and multi-year basis. The consumer rating network ~~“Angie’s List”~~"Angie's List" is maintained and updated based on ~~member~~consumer feedback. The Company also sells advertising in its monthly publication, on its website and mobile applications and through its call center to service providers that meet certain ~~rating~~ratings criteria. In addition, the Company's e-commerce marketplace offerings provide ~~its members~~consumers with the opportunity to purchase services directly through the ~~Company~~Company's marketplace from highly-rated service ~~providers that are rated on its website.~~providers. The ~~Company’s~~Company's services are provided in ~~metropolitan areas~~markets located across the continental United States.

The accompanying unaudited ~~Consolidated Financial Statements~~condensed consolidated financial statements were prepared in conformity with ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all ~~of the~~ information and footnotes necessary for fair presentation of financial position, results of operations and cash flows in conformity with U.S. ~~generally accepted accounting principles.~~GAAP. Operating results from interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The Company is subject to seasonal patterns that generally affect its business. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates, but management does not believe such differences will materially affect Angie’s List, Inc.’s financial position or results of operations. The Consolidated Financial Statements reflect all adjustments considered, in the opinion of management, necessary to fairly present the results for the periods. Such adjustments are of a normal recurring nature.

For additional information, including a discussion of the Company’s significant accounting policies, refer to the audited ~~Consolidated Financial Statements~~consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, ~~2013. As used herein, the terms “Angie’s List”, “Company”, “we”, “our” and “us” mean Angie’s List, Inc. and its consolidated subsidiaries.~~2014.

Operating Segments

Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one operating segment.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes as well as the disclosure of contingent assets and liabilities and reported revenue and expenses. Actual results could differ from those estimates. The condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered, in the opinion of management, necessary to fairly present the results for the periods.

Table of Contents

Revenue Recognition and Deferred Revenue

The Company recognizes revenue when all of the following conditions are met: there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fees is reasonably assured and the amount of fees to be paid by the customer is fixed or determinable.

~~Table of Contents~~

Membership Revenue

Revenue from the sale of membership subscriptions is recognized ratably over the term of the associated subscription. Prior to 2014, the Company generally received a one-time, nonrefundable enrollment fee at the time a member joined. Enrollment fees are deferred and recognized on a straight-line basis over an estimated average membership life of 80 months for annual or multi-year members and 13 months for monthly members, which is based on historical membership experience. The Company reviews the estimated average membership ~~life~~lives on an annual basis, or more frequently if circumstances change. Changes in member behavior, performance, competition and economic conditions may cause attrition levels to change, which could impact the estimated average membership ~~life.~~lives. The Company ~~ceased~~discontinued charging one-time nonrefundable enrollment fees in 2014.

Service Provider Revenue

Revenue from the sale of advertising in the Company’s Angie's List Magazinepublication is recognized in the ~~month~~period in which the ~~Company’s monthly~~ publication is published and distributed. Revenue from the sale of website, mobile and call center advertising is recognized ratably over the time period the advertisements run. Revenue from e-commerce vouchers is recognized on a net basis when the voucher is delivered to the purchaser. While the Company is not the merchant of record with respect to its customers for these transactions, it does offer customers refunds in certain circumstances. ~~Revenue~~Accordingly, revenue from e-commerce transactions is recorded net of a reserve for estimated refunds. The Company's e-commerce revenue was $7,033 and $6,472 for the three months ended September 30, 2014 and 2013, respectively, and $21,075 and $16,090 for the nine months ended September 30, 2014 and 2013, respectively.

Deferred Revenue

Deferred revenue includes the unamortized portion of revenue associated with membership and ~~advertising~~service provider fees for which the Company received payment in advance of services or advertising to be provided. Deferred revenue is recognized as revenue when the related services or advertising are actually provided.

Income Taxes - Valuation Allowance

The Company evaluates whether it will realize the benefits of its net deferred tax assets and establishes a valuation allowance to reduce the carrying value of its deferred tax assets to the amount considered more likely than not to be recognized. Deferred tax assets arise as a result of tax loss carryforwards and various differences between the book basis and the tax basis of such assets. The Company periodically reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences. Should there be a change in the ability to recover deferred tax assets, the tax provision would be adjusted in the period in which the assessment is changed. There has been no change to the Company's assessment during the three months ended March 31, 2015.

While the Company is reporting net income within the condensed consolidated statement of operations for the three months ended March 31, 2015, the Company estimates that taxable income will be considerably less in 2015 as any taxable income will be reduced by net operating loss carryforwards. The Company maintains a full valuation allowance against its deferred tax assets, and as a result, there is no federal income tax expense recorded within the condensed consolidated statement of operations for the three months ended March 31, 2015.

Contractual Obligations

~~During the current year, the Company executed a new capital lease obligation for technology hardware and software with payments due through 2017 and also entered into~~The Company's contractual obligations primarily consist of long-term noncancellable operating ~~lease agreements with payments due~~leases expiring through 2020 and long-term debt comprised of a $60,000 term loan scheduled to mature on September 26, 2019. There were no significant changes in the Company's contractual obligations from those disclosed in the Annual Report on Form 10-K for the ~~purpose of office space expansion.~~year ended December 31, 2014. Total combined future minimum payment obligations ~~on these new~~under long-term noncancellable operating leases ~~amounts~~amount to approximately ~~$11,171 through 2020, with approximately $477~~$10,353 as of ~~that amount due over~~March 31, 2015, while the ~~remainder~~Company had $58,914 in outstanding borrowings, net of ~~2014. Additionally, we refinanced our long-term debt during~~fees paid to the ~~third quarter of 2014, resulting in~~lender, under the ~~retirement of our previous $15,000~~ term loan ~~and $15,000 revolving credit facility and~~as of the ~~issuance of a new $60,000 term loan and $25,000 delayed draw term loan, both of which are scheduled to mature on September 26, 2019.~~

same date.

Table of Contents

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-05: Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement ("ASU 2015-05"). The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the update specifies that the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. The update further specifies that the customer should account for a cloud computing arrangement as a service contract if the arrangement does not include a software license. ASU 2015-05 will be effective for the Company in fiscal year 2016. The Company is currently assessing the future impact of this update to the consolidated financial statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03: Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). The update sets forth a requirement that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in this update. ASU 2015-03 will be effective for the Company in fiscal year 2016. The Company is currently assessing the future impact of this update to the consolidated financial statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15: Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). The update sets forth a requirement for management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue as a going concern, a responsibility that did not previously exist in U.S. GAAP. The amendments included in this update require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period, including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 will be effective for the Company in fiscal year 2016. The Company is currently assessing the future impact of this update to the consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09: Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that "an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services." The update also requires significantly expanded disclosures related to revenue recognition. ASU 2014-09 will be effective for the Company in fiscal year 2017. The Company is currently evaluating the future impact and method of adoption of this update with respect to the consolidated financial statements.

~~In July 2013, the FASB issued Accounting Standards Update No. 2013-11:~~ ~~Income Taxes (Topic 740): Presentation~~

Table of ~~an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists~~ (“ASU 2013-11”). An entity is required to present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the reporting date. The guidance eliminates the diversity in practice in the presentation of unrecognized tax benefits but does not alter the way in which entities assess deferred tax assets for realizability. ASU 2013-11 became effective and was adopted by the Company in fiscal year 2014 with no material impact to the consolidated financial statements.Contents

~~Reclassification of Prior Year Presentation~~

~~Certain prior year amounts were reclassified for consistency with the current period presentation. These reclassifications did not materially impact reported results of operation.~~

2. Net ~~Loss~~Income (Loss) Per Common Share

Basic and diluted net ~~loss~~income (loss) per common share is computed by dividing consolidated net ~~loss~~income (loss) by the weighted average number of common shares outstanding for the period. Basic and diluted net ~~loss~~income (loss) per common share was ~~$(0.09)~~$0.07 and ~~$(0.23)~~$(0.06) for the three months ended ~~September 30,~~March 31, 2015 and 2014, ~~and 2013, respectively, and $(0.47) and $(0.62) for the nine months ended September 30, 2014 and 2013,~~ respectively.

The following potentially dilutive equity securities are not included in the diluted net ~~loss~~income (loss) per common share calculation as they would have an antidilutive effect:

September 30, 2014 September 30, 2013
Stock options 5,665,904
2,980,233

~~Table of Contents~~

3. Fair Value Measurements

Whenever possible, quoted prices in active markets are used to determine the fair value of ~~our~~the Company's financial instruments. ~~Our~~The Company's financial instruments are not held for trading or other speculative purposes. The estimated fair value of financial instruments was determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts ~~that we~~the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may materially impact the estimated fair value amounts.

Fair Value Hierarchy

Fair value is based on the price that would be received ~~to sell~~upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with ASC 820, Fair Value Measurement ~~Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards~~, defined and established a framework for measuring fair value and expanded disclosures about fair value measurements for financial assets and liabilities that are adjusted to fair value on a recurring basis and/or financial assets and liabilities that are measured at fair value on a non-recurring basis that were adjusted to fair value during the ~~period. In accordance with ASC 820, we~~Company categorized ~~our~~the financial assets and liabilities that are adjusted to fair value based on the priority of the inputs to the valuation technique, following the three-level fair value hierarchy prescribed by ASC 820, as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs that are used when little or no market data is available.

Valuation Techniques

The Company’s money market fund investments are classified as cash equivalents ~~are classified~~ within Level 1 of the fair value hierarchy on the basis of valuations using quoted market prices. Short-term investments consist of corporate bonds and certificates of deposit with maturities of more than 90 days but less than one year. As many fixed income securities do not trade daily, fair values are often derived using recent trades of securities with similar features and characteristics. When recent trades are not available, pricing models are used to determine these prices. These models calculate fair values by discounting future cash flows at estimated market interest rates. Such market rates are derived by calculating the appropriate spreads over comparable U.S. Treasury securities, based on the credit quality, industry and structure of the asset. Typical inputs and assumptions to pricing models include, but are not limited to, a combination of benchmark yields, reported trades, issuer spreads, liquidity, benchmark securities, bids, offers, reference data and industry and economic events. The Company’s fixed income corporate bond investments and certificates of deposit with fixed maturities are valued using recent trades or pricing models and are therefore classified within Level 2 of the fair value hierarchy.

Recurring Fair Value Measurements

There were no movements between fair value measurement levels for the Company’s cash equivalents and investments during 2015 to date or 2014, and there were no material unrealized gains or losses as of ~~September 30, 2014~~March 31, 2015 or December 31, ~~2013.~~2014.

Table of Contents

The following tables summarize the Company's financial instruments ~~of the Company~~ at fair value based on the fair value hierarchy for each class of instrument as of ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013:~~2014:


			Fair Value Measurement at September 30, 2014 Using								Fair Value Measurement at March 31, 2015 Using
	Carrying Value at September 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value at March 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds	$	5,027	$	5,027	$	—	$	—	$	331	$	331	$	—	$	—
Investments:
Certificates of deposit	15,715		—		15,700		—		21,520		—		21,514		—
Corporate bonds	1,024		—		1,024		—		3,020		—		3,017		—
Total assets	$	21,766	$	5,027	$	16,724	$	—	$	24,871	$	331	$	24,531	$	—


			Fair Value Measurement at December 31, 2013 Using								Fair Value Measurement at December 31, 2014 Using
	Carrying Value at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Value at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds	$	655	$	655	$	—	$	—	$	365	$	365	$	—	$	—
Certificates of deposit									240		—		240		—
Investments:
Certificates of deposit	13,750		—		13,734		—		21,235		—		21,211		—
Corporate bonds	7,305		—		7,303		—		3,033		—		3,028		—
Total assets	$	21,710	$	655	$	21,037	$	—	$	24,873	$	365	$	24,479	$	—

The carrying amounts of the term loans approximate fair value, using Level 2 inputs, as these borrowings bear interest at variable (market) rates at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, respectively.

Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis under circumstances and events, including those described in Note 6, "Goodwill and Amortizable Intangible Assets," that are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets in the event of an impairment is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value.

Assets and liabilities acquired in business combinations are recorded at their fair value as of the date of acquisition. ~~Refer to Note 6 for the fair values of assets acquired and liabilities assumed in connection with the prior year acquisition of substantially all the assets of SmartHabitat (“BrightNest”).~~

The carrying amounts of accounts receivable and accounts payable reported in the condensed consolidated balance sheets approximate fair value.

Table of Contents

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets was comprised of the ~~following:~~following as of March 31, 2015 and December 31, 2014:


	September 30, 2014		December 31, 2013		March 31, 2015		December 31, 2014
Prepaid and deferred commissions	$	10,967	$	9,395	$	11,242	$	11,378
Other prepaid expenses and current assets	7,229		4,256		10,995		6,742
Total prepaid expenses and other current assets	$	18,196	$	13,651	$	22,237	$	18,120

~~Table of Contents~~

5. Property, Equipment and Software

Property, equipment and software was comprised of the ~~following:~~following as of March 31, 2015 and December 31, 2014:


	September 30, 2014			December 31, 2013			March 31, 2015			December 31, 2014
Furniture and equipment	$	12,010		$	7,965		$	12,908		$	12,450
Land	2,375			1,464			3,105			3,101
Buildings and improvements	14,706			8,711			17,692			17,082
Software	5,025			2,629			4,818			4,696
Capitalized website and software development costs	17,467			3,320			29,832			23,214
	51,583			24,089
Total property, equipment and software							68,355			60,543
Less accumulated depreciation	(8,140		)	(5,432		)	(10,490		)	(9,279		)
	$	43,443		$	18,657
Total property, equipment and software, net							$	57,865		$	51,264

Included in the Company's net property, equipment and software balance at ~~September 30, 2014~~March 31, 2015 was approximately ~~$18,323~~$28,703 in construction in progress, comprised of ~~$16,197~~$127 for furniture and equipment, $1,273 for buildings and improvements, $56 for software and $27,247 for capitalized website and software development costs, ~~including $760 for~~which includes $1,776 of capitalized ~~interest, $1,160 for software, $913 for buildings and improvements and $53 for furniture and equipment.~~ interest.

At December 31, ~~2013,~~2014, the Company's construction in progress balance was ~~$2,418,~~$22,418, consisting ~~primarily~~ of $76 for furniture and equipment, $826 for buildings and improvements, $138 for software and $21,378 for capitalized website and software development ~~costs.~~costs, which included $1,410 of capitalized interest.

Table of Contents

6. Goodwill and Amortizable Intangible Assets

The Company has goodwill as well as certain amortizable intangible assets consisting of data acquisition costs, a member list, content, core technology and other intangible assets related to the purchase of a website domain name. ~~The goodwill and amortizable intangible asset balances reflect the goodwill, member list, content and core technology acquired during the August 2, 2013 acquisition~~Amortization of substantially all the assets of BrightNest for a purchase price of $2,650, inclusive of $1,920 in acquired intangible assets and goodwill of $730. The purchase price consisted of $2,150 in cash paid at closing and an additional $500 that was paid out during the third quarter of the current year as contingent consideration on the one-year anniversary of the closing. Revenues and expenses related to BrightNest, which are not material, are included in the consolidated results of operations from the date of acquisition.

~~Amortization on~~ the intangible assets is computed using the straight-line method over the estimated lives of the ~~assets.~~ assets, which are six years for the member list and three years for the content, core technology, data acquisition costs and other intangible assets, respectively.

Amortizable intangible assets ~~at September 30, 2014~~as of March 31, 2015 and December 31, ~~2013~~2014 are as follows:


	Cost		Accumulated Amortization		Net		Amortization Period (in years)	Cost		Accumulated Amortization		Net		Weighted-Average Remaining Amortization Period (in years)
September 30, 2014
March 31, 2015
Member list	$	1,670	$	325	$	1,345	6.0	$	1,670	$	464	$	1,206	4.3
Content	140		54		86		3.0	140		78		62		1.3
Core technology	110		43		67		3.0	110		61		49		1.3
Data acquisition costs	3,690		2,399		1,291		3.0	2,598		1,638		960		1.4
Other intangible assets	300		58		242		3.0	300		108		192		1.9
	$	5,910	$	2,879	$	3,031
Total amortizable intangible assets								$	4,818	$	2,349	$	2,469


	Cost		Accumulated Amortization		Net		Amortization Period (in years)	Cost		Accumulated Amortization		Net		Weighted-Average Remaining Amortization Period (in years)
December 31, 2013
December 31, 2014
Member list	$	1,670	$	122	$	1,548	6.0	$	1,670	$	394	$	1,276	4.6
Content	140		12		128		3.0	140		66		74		1.6
Core technology	110		16		94		3.0	110		52		58		1.6
Data acquisition costs	3,296		1,566		1,730		3.0	3,488		2,358		1,130		1.2
	$	5,216	$	1,716	$	3,500
Other intangible assets								300		83		217		2.2
Total amortizable intangible assets								$	5,708	$	2,953	$	2,755

The Company’s recorded goodwill balance at ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013~~2014 was $1,145.

7. Accrued Liabilities

Accrued liabilities was comprised of the following as of March 31, 2015 and December 31, 2014:



	March 31, 2015		December 31, 2014
Accrued sales commissions	$	2,238	$	2,627
Sales and use tax	3,651		4,263
Accrued compensation	8,462		6,126
Uninvoiced accounts payable	8,712		2,749
Legal settlement accrual	1,642		2,183
Other accrued liabilities	8,836		5,241
Total accrued liabilities	$	33,541	$	23,189

Table of Contents

~~7. Accrued Liabilities~~8. Debt and Credit Arrangements

~~Accrued liabilities~~Long-term debt, net, was comprised of the ~~following:~~following as of March 31, 2015 and December 31, 2014:

September 30,
2014 December 31,
2013
Accrued sales commissions $ 2,116
$ 2,570
Sales and use tax 3,788
3,158
Accrued compensation 7,991
5,229
Uninvoiced accounts payable 8,091
2,977
Legal accrual 3,550
4,000
Other accrued liabilities 6,474
3,836
Total accrued liabilities $ 32,010
$ 21,770

~~8. Debt and Credit Arrangements~~



	March 31, 2015			December 31, 2014
Term loan	$	60,000		$	60,000
Fees paid to lender	(1,086		)	(1,146		)
Total debt, net	58,914			58,854
Less current maturities	—			—
Total long-term debt, net	$	58,914		$	58,854

On September 26, 2014, the Company entered into a financing agreement ~~that provides~~ for a $60,000 term loan and a $25,000 delayed draw term loan.

Amounts outstanding under the financing agreement bear interest at a per annum rate, at the option of the Company, equal to (i) the LIBOR rate for the interest period in effect, subject to a floor of 0.5%, plus 6.75% or (ii) the reference rate, which is based on the prime rate as published by the Wall Street Journal, subject to a floor of 3.25%, plus 5.75%. The financing agreement requires monthly interest-only payments on the first business day of each month until maturity on any principal amounts outstanding under either debt facility. The financing agreement obligates the Company to make quarterly principal payments on the term loan of $750 on the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining balance of the term loan at maturity. The Company is required to make principal payments on the outstanding balance of the delayed draw term loan equal to 1.25% of the amount of such loan funded at or prior to the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining outstanding balance of the delayed draw term loan at maturity. From the effective date of the financing agreement through September 26, 2017, the Company is also required to pay a commitment fee equal to 0.75% per annum of the unborrowed amounts of the delayed draw term loan.

The Company may prepay the amounts outstanding under the financing agreement at any time and is required to prepay the loans with (i) the net proceeds of certain asset sales, issuances of debt or equity, and certain casualty events, and (ii) up to 50% of consolidated excess cash flow, as defined in the financing agreement, for each fiscal year during the term of the financing agreement, commencing with the year ended December 31, 2015. The Company must pay a 1% premium on prepayments made on or before September 26, 2015, subject to certain exceptions set forth in the financing agreement. The Company’s obligations under the financing agreement are guaranteed by each of its subsidiaries and are secured by first priority security interests in all of their respective assets and a pledge of the equity interests of the Company’s subsidiaries. The term loan and the delayed draw term loan mature on September 26, 2019. As of ~~September 30, 2014,~~March 31, 2015, the Company had ~~$58,793~~$58,914 in outstanding borrowings, net of fees paid to the lender of ~~$1,207,~~$1,086, under the term loan and ~~available credit~~availability of $25,000 under the delayed draw term loan.

The financing agreement contains various restrictive covenants, including restrictions on the Company's ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to stockholders or repurchase outstanding stock, enter into ~~related party~~related-party transactions and make capital expenditures, other than upon satisfaction of the conditions set forth in the financing agreement. The Company is also required to comply with certain financial covenants, including minimum consolidated EBITDA as defined in the financing agreement, minimum liquidity, maximum consolidated capital expenditures and minimum membership revenue. Upon an event of default, which includes certain customary events such as, among other things, a failure to make required payments when due, a failure to comply with covenants, certain bankruptcy and insolvency events, defaults under other material indebtedness, or a change in control, the lenders may accelerate amounts outstanding, terminate the agreement and foreclose on all collateral. The Company was in compliance with all financial and non-financial covenants at ~~September 30, 2014.~~March 31, 2015.

~~Table~~As a result of ~~Contents~~

~~The Company used a portion of the proceeds from the term loan to pay bank and lender fees and transaction costs associated with~~its entry into the new financing ~~agreement. Furthermore,~~agreement in September 2014, the Company ~~also used a portion~~incurred financing costs of the term loan proceeds to simultaneously repay in full the outstanding balance of $15,000 on the Company’s previous term loan, thereby terminating the related loan and security agreement. The Company incurred approximately $192 in incremental interest and fees$1,957 that were capitalized as a result of the prepayment, including additional interest of $105 and prepayment penalties of $75. The prepayment penalties, additional interest and other fees and expenses associated with the prepayment of the Company’s previous loan and security agreement, together with $221 related to the write-off of the previous deferred financing ~~fees~~fee asset and ~~$45 for the recognition of the remaining warrant~~are being amortized into interest expense ~~under~~over the ~~prior debt facility, are included within the loss on debt extinguishment of $458 contained in the consolidated statement of operations for both the three and~~ ~~nine~~ ~~month periods ended September 30, 2014.~~

~~On August 31, 2011, the Company entered into a loan and security agreement that provided for a $15,000~~ term loan and a $15,000 revolving credit facility, scheduled to mature in August 2015. The term loan bore interest at a per annum rate equal to the greater of (i) the current cash interest rate of LIBOR plus 10% or (ii) 10.5% and required monthly interest-only payments until maturity. The revolving credit facility required monthly interest-only payments on advances, bearing interest at a per annum rate equal to LIBOR plus 5%. In addition, when less than 50% of the revolving credit facility was drawn, the Company was required to pay a non-usage charge of 0.50% per annum of the average unused portion of the credit facility. ~~The term loan contained a provision for penalties upon early prepayment,~~Deferred financing fees, net of accumulated amortization, totaled $1,756 and ~~together with the revolving credit facility, was secured by substantially all of the Company’s assets. The loan~~$1,854 at March 31, 2015 and security agreement contained various restrictive covenants, including restrictions on the Company’s ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to stockholders or enter into certain types of related party transactions. The Company was also required to comply with certain financial covenants, including a minimum asset coverage ratio, and non-financial covenants. The Company was in compliance with all financial and non-financial covenants under the previous loan and security agreement at December 31, 2013, at which point in time the Company had $14,918 in outstanding borrowings under the term loan and available credit of $15,000 under the revolving credit facility. The Company retired this debt on September 26, 2014.

2014, respectively.

1312

Table of Contents

9. Commitments and Contingencies

Legal Matters

From time to time, the Company has or may become party to litigation incident to the ordinary course of business. The Company assesses the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, the Company considers other relevant factors that could impact its ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. The Company’s reserves may change in the future due to new developments or changes in strategy in handling these matters. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of ~~these~~the matters listed below will not have a material adverse effect on its business, consolidated financial position, results of operations or cash flows. Regardless of the outcome, litigation can adversely impact the Company ~~due to~~as a result of defense and settlement costs, diversion of management resources and other factors.

~~Fritzinger v. Angie’s List, Inc~~. On August 14, 2012, a lawsuit seeking class action status was filed against the Company in the U.S. District Court for the Southern District of Indiana (the “Court”). The lawsuit alleges claims of breach of contract and unjust enrichment, alleging that the Company automatically renews membership fees at a higher rate than customers are led to believe, breaching their membership agreements. On September 22, 2014, the Court issued an Order approving the parties' proposed settlement terms. Under the settlement terms, total cash payments to the class will be $107. Additionally, 734,299 class members will receive a one month Angie's List membership, and 353,130 class members will receive a five dollar e-commerce voucher. The Company estimates that attorney's fees and litigation fees will amount to $875. The Company recorded a $4,000 legal accrual related to the settlement at December 31, 2013. Based on the terms of the proposed settlement approved by the Court during the quarter, the Company revised its estimate of liability and reduced the legal accrual recorded to $3,550 at September 30, 2014. The Company believes this amount represents the best estimate of its ultimate liability with respect to this litigation.

Putative Securities Class Action Litigation. On December 23, 2013, the first of two putative securities class action complaints was filed in the United States District Court for the Southern District of Indiana, naming the Company and various of its current and former directors and officers as defendants. The first complaint is styled as Baron v. Angie’s List, Inc. et al., 1:13-cv-2032. On January 9, 2014, the second putative securities class action was filed in the United States District Court for the Southern District of Indiana. The second complaint is styled as Bartolone v. Angie’s List, Inc., et ~~al.~~al, 1:14-cv-0023. Both complaints allege that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) by making material misstatements in and omitting material information from the Company’s public disclosures concerning the Company’s business prospects. On June 16, 2014, the Court consolidated the two cases and appointed United Food & Commercial Workers Local 464A Pension Fund as lead plaintiff (“Local 464A”). On August 29, 2014, Local 464A filed its consolidated Amended Complaint (the "Amended Complaint"). The Amended Complaint alleges that Angie's List made material misrepresentations and omissions regarding its paid membership model ("PPM"). The ~~defendants' responsive pleading is due on October 28, 2014.~~defendants filed a motion to dismiss the Amended Complaint, which has yet to be ruled upon by the Court.

Korda v. Oesterle, et al. On January 3, 2014, a derivative complaint was filed in the United States District Court for the Southern District of Indiana, naming the Company’s Board of Directors and various current and former officers as individual defendants. The Company is named as a nominal defendant. The complaint is styled as Korda v. Oesterle, et al., 1:14-cv-00004. The complaint asserts that the individual defendants breached their fiduciary duty based on their knowledge that the Company’s public statements during 2013 concerning the Company’s business prospects were allegedly misleading. The complaint also alleges that certain defendants breached their fiduciary duty by selling shares of Angie’s List common stock between December 2012 and December 2013. The plaintiff asks for unspecified amounts in damages, interest and costs as well as ancillary relief. The ~~parties have agreed to a stay of~~Court issued an order staying the action pending a ruling on athe motion to dismiss Local 464A’s ~~consolidated amended complaint~~Amended Complaint in the Putative Securities Class Action Litigation described above.

Clark v. Oesterle, et al. On October 17, 2014, a derivative complaint was filed in the Court of Chancery of the State of Delaware, naming members of the Company’s Board of Directors and various current and former officers as individual defendants. The Company is named as a nominal defendant. The complaint is styled as Clark v. Oesterle, et al., C.A. No. 10255. The complaint alleges that the individual defendants breached their fiduciary duties by making misleading representations regarding, among other things, the Company’s business prospects. The complaint also alleges that certain individual defendants breached their fiduciary duties by selling shares of Angie’s List common stock between February 2013 and October 2013. The plaintiff asks for unspecified amounts in damages, interest and costs as well as ancillary relief. The Court issued an order staying the action pending a ruling on the motion to dismiss Local 464A’s Amended Complaint in the Putative Securities Class Action Litigation described above.

Moore v. Angie’s List, Inc. On March 11, 2015, a lawsuit seeking class action status was filed against the Company in the U.S. District Court for the Eastern District of Pennsylvania (the “Court”). The lawsuit alleges claims of breaches of contract and covenant of good faith and fair dealing, fraud and fraudulent inducement, unjust enrichment and violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, alleging, in part, that the Company lures consumers to purchase membership fees for “access to purportedly unfiltered reviews, ratings and search result rankings.” On April 10, 2015, the Court issued an Order approving the parties' proposed responsive pleadings deadline.

1413

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. All statements other than statements of historical fact, including statements regarding market and industry prospects and future results of operations or financial position, made in this Form 10-Q are forward-looking. In many cases, you can identify forward-looking statements by terminology, such as “may”, “should”, "will", “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. The forward-looking information may include, among other information, statements concerning our estimated and projected earnings, revenues, costs, expenditures, cash flows, growth rates, financial results, our plans and objectives for future operations, growth initiatives or strategies, or the expected outcome or impact of pending or threatened litigation. There may also be other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors, many of which are beyond the Company’s control.

The Company has based these forward-looking statements on its current expectations and projections about future events. Although the Company believes that the assumptions on which the forward-looking statements contained herein are based are reasonable, any of those assumptions could prove to be inaccurate. As a result, the forward-looking statements based upon those assumptions also could be incorrect. Risks and uncertainties may affect the accuracy of forward-looking statements. Some, but not all, of these risks are listed in Item 1A. of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2013~~2014 and, as applicable, in Item 1A1A. of Part II of this Form 10-Q.

The forward-looking statements included in this report are made only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or ~~otherwise.~~otherwise, except as required by law.

Overview

We operate a ~~consumer-driven~~national local services consumer review service ~~for our members to~~and marketplace where consumers can research, ~~hire, rate, review~~shop for and purchase local services for critical needs, such as home, health ~~care~~ and automotive ~~services.~~services, as well as rate and review the providers of these services across 253 markets in the United States. Our ratings and reviews, which are available only to our members, ~~help~~assist our members ~~find~~in identifying and hiring the best provider for their local service needs. We ~~had nearly 3.0~~concluded the quarter ended March 31, 2015 with more than 3.1 million paid ~~memberships at September 30, 2014. We allow local service providers who are highly rated by our members to advertise discounts and other promotions to our members.~~memberships.

We generate revenue from both consumers, including our members as well as non-members, and ~~our~~ service providers. ~~We derive~~The primary source of membership revenue ~~from~~is subscription fees, ~~and, in certain cases prior to the current year, nonrefundable enrollment fees for monthly, annual and multi-year memberships. These fees were~~which are typically charged in ~~advance. Subscription fees~~advance and are recognized ratably over the subscription ~~period, while enrollment fees, which we ceased charging during 2014, are recognized ratably over the expected life of the membership. As of September 30, 2014,~~period. At March 31, 2015, approximately ~~95%~~96% of our total membership base purchased annual or multi-year memberships. These subscription fees represent a significant source of working capital and provide a relatively predictable revenue stream. During 2014, in an effort to drive deeper penetration via enhanced membership growth and retention and to generate increased service provider participation, we introduced a new tiered pricing membership model on a national basis, offering three different membership plans with varying levels of service and benefits at tiered price points. The introduction of tiered pricing decreased membership fees, on average, across all markets and is resulting in reduced membership revenue per paid member as members are largely opting for the membership plan offering with the lowest price point tier to date.

We derive service provider revenue principally from term-based sales of advertising to ~~local~~ service providers. We enable service providers who are rated highly by our members to advertise discounts and other promotions to our members. Our members grade ~~local~~ service providers on an “A” to “F” scale, and we invite ~~local~~ service providers with an average grade of “B” or better and at least two reviews submitted in the last three years to advertise to our members through any or all of our ~~website, email promotions, monthly magazine and call center.~~platforms. Service provider contracts can be prepaid or invoiced monthly at the option of the service provider and carry an early termination penalty. We recognize service provider revenue ratably over the period in which an advertising campaign is run. Our high service provider renewal rates, both in number of service providers renewing and as a percentage of initial contract value renewed, provide us with aan additional relatively predictable revenue stream.

1514

Table of Contents

In addition to traditional advertising on our ~~website and in our publications,~~platforms, our e-commerce marketplace solutions offer ~~our members, as well as visitors to our website and mobile applications,~~consumers the opportunity to purchase services through us from highly-rated service ~~providers rated highly on our web and mobile platforms.~~providers. These e-commerce offerings are available ~~through both email promotions and~~ through postings on our website and mobile applications as well as email promotions and are ~~becoming~~ an ~~increasingly~~ important aspect of our business. When ~~the member purchases~~ a ~~service,~~consumer completes an e-commerce purchase from our marketplace, the transaction is processed through Angie’s ~~List.~~List, and we receive a portion of the price paid as a processing fee. The ~~member~~purchaser can then indicate scheduling preferences automatically using our tools or work directly with the service provider to schedule the service. ~~These e-commerce~~E-commerce offerings provide our ~~members~~consumers with an easier and more convenient way to fulfill their service needs and may offer a discount as well. We have increased ~~and expect to continue to increase,~~ our focus on our e-commerce ~~offerings~~marketplace as a way to further enhance the value of our services for both consumers and service providers.

~~Increasing~~As we continue the process of transitioning our business to a marketplace model wherein we act as an intermediary in local services transactions between consumers and service providers, our approach to generating revenue from e-commerce has evolved such that e-commerce is now a core component of the value proposition we offer to service providers and an increasingly important aspect of our service provider packaging, pricing and monetization strategies. Accordingly, we are making substantial investments in the development of our marketplace platforms and initiatives, including a complete redesign and rebuild of our website and user interface, in an effort to provide greater value to consumers, improve consumer engagement, drive higher dollar service provider renewals, increase the number of service providers who sell e-commerce and enhance service provider retention. Additionally, we are investing in technology to enable the mechanisms by which we objectively measure the quality of interactions between service providers and members, which is an important component of our focus on driving better transaction outcomes between service providers and consumers. Our completely redesigned mobile application gives consumers three easy ways to get work done: (1) search for providers, (2) shop for specific home improvement services and (3) SnapFix a project, which is our revolutionary new feature that streamlines the process of hiring a service professional.

While we continue to expand the breadth and depth of the service provider side of our business, attracting new paid ~~memberships~~members and ~~expanding~~strengthening our market reach ~~are~~remain among our key growth strategies. To establish a new market, we begin by offering free memberships and actively soliciting members’ reviews of local service providers. As the number of members and the number of reviews of service providers grows, we begin charging membership fees and offering advertising opportunities to eligible local service providers. Historically, we begin to convert most markets to paid membership status within 24 months after launch. Increased penetration in a market results in more ~~member~~ reviews of ~~local~~ service providers, which ~~increases~~enhances the value of our service to consumers and drives further ~~membership~~ growth in that market. ~~Increased~~Market penetration also generates growth in ~~a market also drives increased advertising sales to~~ service ~~providers~~provider revenue and supports higher advertising rates as the pool of ~~members~~consumers actively seeking to hire service providers grows. However, our ability to increase advertising rates tends to lag increased penetration of our markets due to our inability to increase rates under existing service provider contracts prior to renewal.

Our primary strategy for new member acquisition is national offline and online ~~advertising.~~advertising, including an increasing emphasis on digital marketing platforms. Our marketing expense is generally higher in the second or third ~~quarter~~quarters of the year as we increase our investment in advertising to attract consumers during the periods when we have found they are most actively seeking ~~Angie’s List~~our services. We traditionally focused our marketing efforts on acquiring new members to increase our market penetration. In 2014, we began to shift our marketing focus from solely driving member growth to also highlighting our e-commerce offerings and marketplace initiatives, the objective of which was to take better advantage of traffic to our site and open our platforms and services to a broader base of consumers. Our marketing strategy includes a mix of offline advertising via national cable and broadcast television, national broadcast radio and magazines as well as online through search engine marketing, web display and other forms of digital advertising. We also utilize our original content to supplement our marketing spend and further strengthen our brand as well as to drive more marketplace transactions through search engine optimization ("SEO"). We optimize our marketing channel mix and creative to improve targeting effectiveness, drive efficiency in our spend and amplify our messaging.

As described further in the “Market Cohort Analysis” herein, we believe that our estimated penetration rate and average revenue per market will increase as markets mature, and over the long-term, we believe that these increased revenues will ~~more than~~ offset our operating ~~expenses.~~expenses and declines in membership pricing. Given that our marketing contracts are typically short-term, we can rapidly adjust marketing expense and thus decrease total operating expenses to reduce cash used in operations or generate cash and profits from operations should we begin to experience adverse trends in marketing cost per paid membership acquisition or wish to optimize for ~~profitability at the expense of rapid growth.~~profitability. We believe that our high membership renewal rates and “word of mouth” referrals from existing members, combined with effective purchasing of lower volumes of advertising and increased utilization of ~~search engine optimization, or~~ SEO should enable us to maintain and potentially grow the size of our paid membership base ~~at a lower~~should we decide to reduce our overall level of ~~overall~~ advertising spending.

1615

Table of Contents

Market Cohort Analysis

To ~~analyze~~assist with the evaluation of our ~~progress in executing our expansion plan,~~performance, we compile certain financial and operating data ~~regarding~~for our markets, ~~we have entered,~~ grouped by the years in which the markets transitioned to paid membership status. The table below summarizes this data for the twelve month ~~period~~periods ended ~~September 30,~~March 31, 2015 and 2014 by each respective cohort. The pre-2003 cohort includes our ten most established markets where we initially built out our business model. The markets in this cohort include several mid-sized urban markets in the Midwest as well as Chicago and Boston. The ~~2003 through 2007~~2003-2007 cohort ~~includes~~is comprised of the first major subset of markets, including many of our largest potential markets, ~~which~~that we targeted in our national expansion strategy. The markets in these older cohorts have generally achieved penetration rates that allow us to transition beyond introductory membership and advertising rates. The 2008-2010 and post-2010 cohorts include markets that most recently converted to paid status and that still utilize predominantly lower membership and advertising rates as the markets in these cohorts generally arepost-2007 cohort primarily consists of smaller markets that we entered to fill out our national presence.

Cohort
# of
Markets

Average
Revenue/
Market (1)

Membership
Revenue/Paid
Membership (2)

Service
Provider
Revenue/Paid
Membership (3)

Average
Marketing
Expense/
Market (4)
Total Paid
Memberships (5)
Estimated
Penetration
Rate (6)
Annual
Membership
Growth
Rate (7)
Pre-2003
10

$ 7,258,018

$ 34.01

$ 108.50

$ 1,416,968
564,568
14.9 % 24 %
2003-2007
35

5,416,899

30.35

99.70

1,486,922
1,622,252
11.7 % 25 %
2008-2010
103

341,123

16.35

41.03

204,621
674,337
12.0 % 23 %
Post 2010
105

39,230

12.05

28.46

59,383
122,282
7.3 % 51 %
Total
253

2,983,439



	Pre-2003						2003-2007						Post-2007						Total
	March 31,						March 31,						March 31,						March 31,
	2015			2014			2015			2014			2015			2014			2015			2014
# of Markets	10			10			35			35			208			208			253			253
Average Revenue/Market (1)	$	7,696,718		$	6,662,119		$	5,851,214		$	4,766,477		$	211,270		$	156,235		$	1,287,367		$	1,051,165
Average Marketing Expense/Market (2)	$	1,214,269		$	1,375,876		$	1,276,429		$	1,456,256		$	112,324		$	127,476		$	316,921		$	360,643

Membership Revenue/Paid Member (3)	$	30.89		$	38.54		$	27.83		$	33.79		$	15.66		$	16.47		$	25.18		$	30.11
Service Provider Revenue/Paid Member (4)	$	110.87		$	113.63		$	103.33		$	100.09		$	42.03		$	37.12		$	88.47		$	86.01
Total Revenue/Paid Member	$	141.76		$	152.17		$	131.16		$	133.88		$	57.69		$	53.59		$	113.65		$	116.12

Total Paid Memberships (5)	592,037			493,817			1,694,950			1,427,873			816,380			707,014			3,103,367			2,628,704
Estimated Penetration Rate (6)	16		%	13		%	13		%	10		%	12		%	9		%	13		%	10		%
Annual Membership Growth Rate (7)	20		%	29		%	19		%	34		%	16		%	40		%	18		%	35		%



(1)	Average revenue per market is calculated by dividing the revenue recognized for the markets in a given cohort by the number of markets in the cohort at period end.


(2)	Membership revenue per paid membership is calculated as our membership revenue in the cohort divided by the average number of paid memberships in the cohort. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort.

~~(3)~~	Service provider revenue per paid membership is calculated as service provider revenue in the cohort divided by the average number of paid memberships in the cohort. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort.

~~(4)~~	Average marketing expense per market is calculated first by allocating marketing expense to each cohort based on the percentage of our total target demographic for all markets in each cohort, as determined by third-party data, and then dividing the allocated cohort marketing expense by the number of markets in the cohort at period end. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort. According to a ~~September 2014~~March 2015 demographic study by Merkle Inc. that we commissioned, there were approximately 2827 million households in the United States in our target demographic, which consists of homeowners aged 35 to 64 with an annual household income of at least $75,000. Approximately 2524 million of these households were in our markets. The average number of households per market in our target demographic was ~~380,000, 400,000, 60,000~~370,000, 390,000 and ~~20,000~~30,000 for the pre-2003, 2003-2007 ~~2008-2010~~ and ~~post-2010~~post-2007 cohorts, ~~respectively.~~respectively, for the period ended March 31, 2015. According to a March 2014 demographic study by Merkle Inc., there were approximately 29 million households in the United States in our target demographic, and approximately 26 million of these households were in our markets. The average number of households per market in our target demographic was 390,000, 410,000 and 40,000 for the pre-2003, 2003-2007 and post-2007 cohorts, respectively, for the period ended March 31, 2014.


(3)	Membership revenue per paid membership is calculated as membership revenue in the cohort divided by the average number of paid memberships in the cohort. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort.


(4)	Service provider revenue per paid membership is calculated as service provider revenue in the cohort divided by the average number of paid memberships in the cohort. We calculate this average per market to facilitate comparisons among cohorts, but it is not intended to represent typical characteristics of actual markets within the cohort.


(5)	~~Includes total paid memberships as of September 30, 2014.~~ Total paid memberships in each cohort as of March 31, 2015 and 2014 includes a de minimis number of complimentary memberships in our paid markets for the period presented.


(6)	Estimated penetration rate is calculated by dividing the number of paid memberships in a given cohort as of ~~September 30,~~March 31, 2015 and 2014 by the number of households meeting our target demographic criteria in that cohort.


(7)	Annual membership growth rate isrepresents the rate of increase in the total number of paid memberships in the cohort between ~~September 30,~~March 31, 2015 and 2014 for the current year and March 31, 2014 and ~~2013.~~2013 for the prior year.

1716

Table of Contents

Our average revenue per market ~~and total revenue per paid membership have~~has generally ~~increased~~grown with the maturity and corresponding increased penetration of our ~~markets in prior periods. In the future, we expect total~~markets. Total revenue per paid membership ~~to fluctuate~~fluctuates from period to period, reflecting the timing of our ability to adjust ~~advertising~~service provider rates given our ~~advertising~~ contract terms and membership pricing innovations designed to drive increased penetration. ~~For example:~~In the first quarter of 2015, total revenue per paid membership was down across certain cohorts and in total as compared to the prior year, which primarily reflects the impacts associated with the adoption of tiered pricing and, more recently, the shift to service provider subscription pricing. Factors that may drive fluctuations in total revenue per paid membership include:

Our average ~~advertising~~service provider contract term is typically approximates one year, and we are only able to increase rates for a given participating service provider upon contract renewal. As such, there is a lag in our ability to leverage increased penetration in a market into increased ~~advertising~~service provider rates;

Increasingly, we are seeing members opt for annual memberships, and as such, the percentage of our membership base on monthly memberships ~~has declined.~~is declining. While we believe annual memberships are more beneficial to members and promote high renewal rates, these memberships generate ~~lower~~reduced proceeds ~~than~~as compared to monthly memberships on an annualized basis; ~~and~~

On average across all markets, we are utilizing lower membership pricing and generating reduced membership revenue per paid member as part of ~~a new~~our tiered pricing membership structure for varying levels of service and benefits that was introduced on a national basis during the ~~previous quarter in order to drive~~prior year with the goal of driving deeper penetration via enhanced membership growth and retention ~~as well as to increase~~and generating increased service provider ~~participation.~~participation; and

~~Our~~As we continue the process of transitioning our business to a marketplace model, our approach to generating revenue from e-commerce has evolved such that e-commerce is now a core component of the value proposition we offer to service providers and an increasingly important aspect of our service provider packaging, pricing and monetization strategies. The shift to subscription pricing for service providers concurrent with the aforementioned transition is resulting in lower e-commerce take rates and putting near-term downward pressure on service provider revenue with the expectation that the associated benefit will materialize over time in the form of higher dollar subscription renewals, increases in the number of service providers that sell e-commerce and enhanced service provider retention.

One of our most important growth ~~strategy~~strategies remains ~~driving~~expanding our membership ~~growth,~~base, which creates the network effects of a more valuable service for consumers and a more attractive commercial platform for service providers. We intend to continue to evaluate and adopt innovative packaging, pricing and ~~packaging~~monetization strategies, such as tiered membership offerings, in an effort to deliver compelling value to our members and thereby support membership growth and retention. Although ~~these overall~~the dynamics associated with the introduction of such strategies have caused and may continue to cause membership revenue per paid membership to decline sequentially in some of our cohorts, we believe that the increase in our membership base is critical for producing overall growth in average revenue per market, service provider revenue per paid membership and total revenue per paid membership across all cohorts.

As a market matures, our penetration rate typically increases. Historically, while the absolute number of paid members may grow faster in ~~large~~larger markets, our ~~small and medium size~~smaller markets often achieve greater penetration over a shorter period of time ~~period~~ than our larger markets. We believe that a principal reason for our lower penetration rates in ~~large~~larger markets is the manner in which we market Angie’s List to our target demographic in such markets. We spend the majority of our marketing dollars on national advertising, including an increasing emphasis on digital marketing platforms, and we believe that this ~~advertising~~marketing strategy provides us the most cost effective and efficient manner of acquiring new paid memberships. However, advertising nationally means we deliver the same volume of advertising regardless of the size of the market. Since each market differs in terms of the number of advertising outlets available, the impact of our spending on national advertising varies across markets. In our experience, smaller markets typically provide fewer advertising outlets than larger markets. Therefore, we believe the same volume of advertising in a smaller market is more effective in building brand awareness and generating new memberships than in larger markets. We expect to continue to see lower relative penetration rates in our larger markets for these reasons. As several of these larger markets are in the 2003-2007 cohort, over time our penetration rate in this cohort may lag other cohorts.

1817

Table of Contents

Key Operating Metrics

In addition to the line items in our condensed consolidated financial statements, we regularly review a number of other operating metrics related to our membership and service provider bases to evaluate our business, determine the allocation of resources and make decisions regarding business strategies. We believe ~~information on~~ these metrics isare useful for investors and analysts to understand the underlying trends in our business. The following table summarizes our key operating metrics, which are unaudited, for the three ~~and nine~~ months ended ~~September 30, 2014~~March 31, 2015 and ~~2013~~: 2014:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2014			2013			2014			2013			2015			2014
Total paid memberships (end of period)	2,983,439			2,378,867			2,983,439			2,378,867			3,103,367			2,628,704
Gross paid memberships added (in period)	350,376			371,318			1,035,814			993,556			229,987			286,626
Marketing cost per paid membership acquisition (in period)	$	64		$	76		$	79		$	76		$	71		$	82
First-year membership renewal rate (in period)	74		%	75		%	74		%	75		%	71		%	73		%
Average membership renewal rate (in period)	77		%	78		%	77		%	78		%	75		%	76		%
Participating service providers (end of period)	51,997			44,876			51,997			44,876			54,341			51,522
Total service provider contract value (end of period, in thousands)	$	236,303		$	181,975		$	236,303		$	181,975		$	263,349		$	211,635

Total paid memberships. Total paid memberships reflects the number of paid memberships at the end of each period presented. Total paid memberships also includes a de minimis number of complimentary memberships in our paid markets for all periods presented. We generally expect that there will be one membership per household and, as such, each membership may actually represent multiple individual consumers.

Gross paid memberships added. Gross paid memberships added, which tends to fluctuate based on our level of investment in ~~national~~ advertising, reflects the total number of new paid memberships added in a reporting period and is an important performance indicator as increasing paid memberships is a key growth strategy.

Marketing cost per paid membership acquisition. We calculate marketing cost per paid membership acquisition in a reporting period as marketing expense divided by gross paid memberships added in that period. As we advertise in national media, a portion of our marketing expenditures also increase the number of unpaid memberships. On a comparative basis, marketing cost per paid membership acquisition can reflect our success in generating new paid memberships through our SEO efforts, “word of mouth” referrals and experimentation and adjustments to our marketing expense to focus on more effective advertising outlets for membership ~~acquisition.~~acquisition, as well as changes in membership pricing. We typically incur higher marketing expense in the second or third ~~quarter~~quarters of the year in order to attract consumers during the periods when we have found they are most actively seeking ~~Angie’s List~~our services. We generally reduce our marketing expense in the fourth quarter due to decreased consumer activity in the service sector and higher advertising rates associated with holiday promotional activity. In 2014, we accelerated our marketing expenditures in the second quarter, and as such, we curtailed marketing spend in the third quarter and expect to substantially reduce marketing expense in the fourth quarter.

Membership renewal rates. First-year membership renewal rate reflects the percentage of paid memberships expiring in the reporting period after the first year of membership that are renewed. Average membership renewal rate reflects the percentage of all paid memberships expiring in the reporting period that are renewed. Renewal rates do not include monthly memberships, which comprised approximately 5%4% of our total membership base as of ~~September 30, 2014~~.March 31, 2015. Given the correlation between increased penetration and higher total revenue per paid membership, we view first-year membership renewal rate and average membership renewal rate as key indicators of expected operating results in future periods. The decline in first-year membership renewal rate for the three months ended March 31, 2015 as compared to the three months ended March 31, 2014 reflects the impact of the expiration of promotional membership rates offered in 2014 as well as modest pressure from lower credit card success rates.

Participating service providers. We include in participating service providers the total number of service providers under contract for advertising, e-commerce or both at the end of the period. For the periods ended June 30, 2014, September 30, 2014 and December 31, 2014, the number of participating service providers, including those only under contract for e-commerce, was 53,374, 54,392 and 54,240, respectively.

Total service provider contract value. We calculate service provider contract value as the total contract value of active service provider contracts at the end of the period. Contract value is the total payment obligation of a service provider to us, including amounts already recognized in revenue, over the stated term of the contract.

In addition, we also track contract value backlog as a key metric. Contract value backlog consists of the portion of service provider contract value at the stated date which is not yet recognized as revenue. At ~~September 30,~~March 31, 2015 and 2014, ~~and~~ ~~2013~~, our contract value backlog was ~~$145.8~~$165.6 million and ~~$114.3~~$132.1 million,, respectively.

1918

Table of Contents

Results of Operations

The following tables set forth our results of operations for the periods presented in absolute dollars and as a percentage of our revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.


													Three Months Ended March 31,
	Three Months Ended September 30,						Nine Months Ended September 30,						2015		2014
	2014			2013			2014			2013
	(dollars in thousands)						(dollars in thousands)						(in thousands)
Revenue
Membership	$	18,279		$	17,050		$	55,095		$	47,598		$	17,339	$	18,300
Service provider	63,027			48,450			177,764			129,288			66,204		54,357
Total revenue	81,306			65,500			232,859			176,886			83,543		72,657
Operating expenses
Operations and support(1)	14,119			11,016			39,413			29,418
Selling(1)	32,078			23,960			88,478			65,582
Operations and support (1)													13,998		11,548
Selling (1)													28,609		26,122
Marketing	22,508			28,189			81,909			75,870			16,276		23,481
Product and technology(1)	8,696			7,565			24,243			20,064
General and administrative(1)	8,639			7,798			25,080			20,304
Operating loss	(4,734		)	(13,028		)	(26,264		)	(34,352		)
Product and technology (1)													8,416		7,457
General and administrative (1)													10,962		7,356
Operating income (loss)													5,282		(3,307		)
Interest expense, net	—			468			579			1,395			912		461
Loss on debt extinguishment	458			—			458			—
Loss before income taxes	(5,192		)	(13,496		)	(27,301		)	(35,747		)
Income (loss) before income taxes													4,370		(3,768		)
Income tax expense	15			15			45			45			10		15
Net loss	$	(5,207	)	$	(13,511	)	$	(27,346	)	$	(35,792	)
Net income (loss)													$	4,360	$	(3,783	)



~~(1)~~	~~Includes non-cash stock-based compensation as follows:~~


(1) Includes non-cash stock-based compensation as follows:
Operations and support	$	20	$	19		$	45	$	52		$	20	$	13
Selling	109		50			292		101			10		104
Product and technology	387		(408		)	838		(45		)	196		209
General and administrative	1,901		1,015			4,770		2,558			2,030		1,207
	$	2,417	$	676		$	5,945	$	2,666
Total non-cash stock-based compensation											$	2,256	$	1,533


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2014		2013		2014		2013		2015		2014
Revenue
Membership	22	%	26	%	24	%	27	%	21	%	25	%
Service provider	78		74		76		73		79	%	75	%
Total revenue	100	%	100	%	100	%	100	%	100	%	100	%
Operating expenses
Operations and support	17		17		17		17		17	%	16	%
Selling	39		36		38		37		34	%	36	%
Marketing	28		43		35		43		20	%	32	%
Product and technology	11		12		10		11		10	%	10	%
General and administrative	11		12		11		11		13	%	10	%
Operating loss	(6	)	(20	)	(11	)	(19	)
Operating income (loss)									6	%	(4	)%
Interest expense, net	—		1		1		1		1	%	1	%
Loss on debt extinguishment	—		—		—		—
Loss before income taxes	(6	)	(21	)	(12	)	(20	)
Income (loss) before income taxes									5	%	(5	)%
Income tax expense	—		—		—		—		—	%	—	%
Net loss	(6	)%	(21	)%	(12	)%	(20	)%
Net income (loss)									5	%	(5	)%

2019

Table of Contents

Comparison of the three months ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~

Revenue


									Three Months Ended March 31,
	Three Months Ended September 30,								2015			2014			% Change
	2014			2013			% Change
	(dollars in thousands)								(dollars in thousands)
Revenue
Membership	$	18,279		$	17,050		7	%	$	17,339		$	18,300		(5	)%
Service provider	63,027			48,450			30	%	66,204			54,357			22	%
Total revenue	$	81,306		$	65,500		24	%	$	83,543		$	72,657		15	%

Percentage of revenue by type
Membership	22		%	26		%			21		%	25		%
Service provider	78		%	74		%			79		%	75		%
Total revenue	100		%	100		%			100		%	100		%

Total paid memberships (end of period)	2,983,439			2,378,867			25	%	3,103,367			2,628,704			18	%
Gross paid memberships added (in period)	350,376			371,318			(6	)%	229,987			286,626			(20	)%
Participating service providers (end of period)	51,997			44,876			16	%	54,341			51,522			5	%

Total revenue increased ~~$15.8~~$10.9 million for the three months ended ~~September 30, 2014~~March 31, 2015 as compared to the three months ended ~~September 30, 2013.~~March 31, 2014.

Membership revenue ~~increased $1.2~~decreased $1.0 million year over year, primarily due to ~~a 25% increase in~~ the ~~total number of paid memberships, partially offset by a 15%~~20% decrease in membership revenue per paid membership in the three months ended ~~September 30, 2014.~~March 31, 2015 as compared to the prior year, offset by the 18% increase in total number of paid memberships over the same time period. The decrease in membership revenue per paid membership ~~resulted~~is largely the result of reductions in ~~part from growth in paid memberships in markets where average membership fees per paid membership are lower. In addition, we reduced new~~ membership fees, on average, across all markets ~~in the current year as compared~~related to the ~~prior year as a result of a new~~ tiered pricing ~~structure~~membership model that was introduced on a national basis during the second quarter ~~further contributing to~~of the prior year ~~over year decline in~~as members are largely opting for the membership ~~revenue per paid membership.~~plan offering with the lowest price point tier. The decrease in membership revenue per paid membership in the three months ended ~~September 30, 2014~~March 31, 2015 also resulted from an increase from ~~93%~~94% to ~~95% in~~96% of total memberships constituting annual and multi-year memberships year over year. ~~Consumers pay more per month~~Membership revenue accounted for ~~a monthly~~21% and 25% of total revenue for the three months ended March 31, 2015 and 2014, respectively, and we expect membership ~~than for an annual membership. Therefore, in periods in which our~~revenue as a percentage of ~~memberships shifts~~total revenue to ~~more annual~~continue to decline as a result of the implementation of our tiered pricing membership plans, which is putting downward pressure on both our membership revenue and ~~multi-year memberships,~~ our membership revenue per paid ~~membership decreases.~~member.

Service provider revenue increased ~~$14.6~~$11.9 million ~~to 78% of total revenue,~~year over year, primarily as a result of a ~~16% increase in the number of local service providers participating in our advertising programs and a 12%~~15% increase in service provider revenue per participating service ~~provider.~~provider as well as the impact associated with the 5% increase in the number of participating service providers as we continue the process of transitioning our business to a marketplace model and evolve our service provider packaging, pricing and monetization strategies in doing so. Service provider revenue primarily consists of revenue from advertising contracts with service providers. As our penetration of a given market increases, we are typically able to charge higher rates for advertising as service providers are able to reach a larger base of potential customers. However, as we only increase advertising rates at the time of contract renewal, increases in service provider revenue in a given market may trail increases in market penetration. ~~E-commerce revenue of $7.0 million and $6.5 million~~Revenue from our e-commerce marketplace is also included in service provider revenue ~~for the three months ended September 30, 2014~~ and ~~2013, respectively. Our e-commerce revenue is generated by our Angie’s List Big Deal and Storefront offerings. We expect the revenue contribution from these offerings to~~will fluctuate from period to period as ~~the~~ offerings evolve and due to seasonality. Service provider revenue accounted for 79% and 75% of total revenue for the three months ended March 31, 2015 and 2014, respectively, and we expect service provider revenue as a percentage of total revenue to continue to increase as we enhance the value proposition we offer service providers and leverage new service provider packaging, pricing and monetization strategies.

2120

Table of Contents

Operations and support


									Three Months Ended March 31,
	Three Months Ended September 30,								2015			2014			% Change
	2014			2013			% Change
	(dollars in thousands)								(dollars in thousands)
Operations and support	$	14,119		$	11,016		28	%	$	13,998		$	11,548		21	%
Percentage of revenue	17		%	17		%			17		%	16		%
Non-cash stock-based conversation									$	20		$	13

Operations and support expense increased ~~$3.1~~$2.5 million for the three months ended ~~September 30, 2014~~March 31, 2015 as compared to the three months ended ~~September 30, 2013.~~March 31, 2014. This increase was due in part to a ~~$1.4~~$1.0 million increase in ~~operations and support~~ personnel-related costs as we increased our operations and support headcount year over year by approximately 15% in order to service our growing member and service provider populations. Additionally, we incurred ~~an approximately $1.0~~a $0.9 million increase in publication costs associated with the increased circulation of the Angie’s List Magazine as we continue to expand our membership. There was also a $0.6 million increase in credit card processing fees year over year related to the growing volume of membership enrollment and service provider transactions. Operations and support expense remained constant as a percentage of revenue as compared to the prior year quarter. We generally expect operations and support expense to increase as we grow our membership and service provider bases, subject to seasonal trends.

~~Selling~~

Three Months Ended September 30,
2014
2013 % Change
(dollars in thousands)
Selling $ 32,078

$ 23,960
34 %
Percentage of revenue 39 %
36 %
Non-cash stock-based compensation $ 109

$ 50

Selling expense increased $8.1 million for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. This increase is largely related to growth in service provider revenue, which increased 30% over the same period in the prior year. Additionally, we increased the number of sales personnel and management responsible for originating new advertising contracts and e-commerce transactions by 17% to 860 since the prior year quarter. We also increased the number of sales personnel and management responsible for contract renewals by 45% to 270 year over year. Selling expense as a percentage of revenue increased to 39% for the three months ended September 30, 2014 from 36% for the three months ended September 30, 2013. As selling expense primarily consists of commissions, we expect it to fluctuate with service provider revenue and the composition of that revenue over time.

~~Marketing~~

Three Months Ended September 30,
2014
2013 % Change
(dollars in thousands)
Marketing $ 22,508

$ 28,189
(20) %
Percentage of revenue 28 %
43 %
Gross paid memberships added in the period 350,376

371,318
(6) %
Marketing cost per paid membership acquisition $ 64

$ 76

Marketing expense decreased $5.7 million for the three months ended September 30, 2014 compared to the three months ended September 30, 2013 due to a planned decrease in national advertising during the third quarter of the current year. Accordingly, marketing expense as a percentage of revenue decreased from the prior year period as total third quarter revenue increased by approximately 24% while we reduced our marketing expenditures in the third quarter of the current year as compared to the previous year. Our marketing cost per paid membership acquisition decreased from $76 for the three months ended September 30, 2013 to $64 for the three months ended September 30, 2014, reflecting efficiency in our spend as marketing expenditures decreased by approximately 20% year over year, while gross paid memberships added during the period only decreased by 6% over the same time period. In 2014, we accelerated our marketing expenditures in the second quarter, and as such, we curtailed marketing spend in the third quarter and plan to significantly reduce marketing expense in the fourth quarter, consistent with historical precedent.

~~Table of Contents~~

~~Product and technology~~

Three Months Ended September 30,
2014
2013 % Change
(dollars in thousands)
Product and technology $ 8,696

$ 7,565
15 %
Percentage of revenue 11 %
12 %
Non-cash stock-based compensation $ 387

$ (408 )

Product and technology expense increased $1.1 million for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. The increase in product and technology expense was primarily attributable to the combined impact of a $0.2 million increase in product and technology personnel costs, a $0.3 million increase in technology-related outsourced services and a $0.3 million increase in depreciation and amortization expense, all of which is associated with our continued investment in our technology platform in order to service our growing base of members and service providers. We expect product and technology expense, which includes costs associated with new product development as well as maintenance of our website, to increase in future periods as we maintain our investment in our technology infrastructure to support current and anticipated future growth, including implementing new technologies focused on driving enhanced customer experiences and business efficiencies. Product and technology expense as a percentage of revenue decreased slightly compared to the prior year period. We expect product and technology expense as a percentage of revenue to be relatively consistent from period to period.

~~General and administrative~~

Three Months Ended September 30,
2014
2013 % Change
(dollars in thousands)
General and administrative $ 8,639

$ 7,798
11 %
Percentage of revenue 11 %
12 %
Non-cash stock-based compensation $ 1,901

$ 1,015

General and administrative expense increased $0.8 million for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. The most significant drivers behind the fluctuation in general and administrative expense year over year were a $2.3 million increase in personnel-related costs, $0.9 million of which was related to increases in general and administrative non-cash stock-based compensation expense, attributable to headcount increases and a $0.2 million increase in depreciation and amortization expense, offset by a $0.9 million reduction in expenditures for professional services and a $1.0 million decline in bad debt expense. We experienced a slight decrease in general and administrative expense as a percentage of revenue for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013. While we expect general and administrative expense as a percentage of revenue to generally remain constant or decrease over time as we realize efficiencies and economies of scale as we grow, we anticipate an increase to general and administrative expense in absolute dollars and as a percentage of revenue during the fourth quarter.

~~Interest expense~~

~~Interest expense for the three months ended~~ ~~September 30, 2014~~ ~~was $0 as compared to $0.5 million for the three months ended~~ ~~September 30, 2013~~ ~~as a result of current quarter capitalized interest on long-term software projects.~~

~~Loss on debt extinguishment~~

As a result of the current quarter debt refinancing, which included the retirement of our previous debt facility, we recorded an approximate $0.5 million loss on debt extinguishment for the three months ended ~~September 30, 2014~~ associated with the recognition of the remaining warrant interest expense under the previous debt facility, prepayment penalties and incremental interest incurred upon early retirement of the previous debt and the write-off of the remaining unamortized portion of the deferred financing fees capitalized under our previous debt facility.

~~Table of Contents~~

~~Comparison of the nine months ended September 30, 2014 and 2013~~

~~Revenue~~

Nine Months Ended September 30,
2014 2013 % Change
(dollars in thousands)
Revenue
Membership $ 55,095
$ 47,598
16 %
Service provider 177,764
129,288
37 %
Total revenue $ 232,859
$ 176,886
32 %
Percentage of revenue by type
Membership 24 % 27 %
Service provider 76 % 73 %
Total revenue 100 % 100 %

Total paid memberships (end of period) 2,983,439
2,378,867
25 %
Gross paid memberships added (in period) 1,035,814
993,556
4 %
Participating service providers (end of period) 51,997
44,876
16 %

~~Total revenue increased $56.0 million for the~~ ~~nine~~ ~~months ended September 30, 2014 as compared to the~~ ~~nine~~ ~~months ended September 30, 2013.~~

Membership revenue increased $7.5 million year over year, primarily due to a 25% increase in the total number of paid memberships, partially offset by an 8% decrease in membership revenue per paid membership in the nine months ended September 30, 2014 as compared to the same period of time in the prior year. The decrease in membership revenue per paid membership resulted in part from growth in paid memberships in markets where average membership fees per paid membership are lower. In addition, we reduced new membership fees, on average, across all markets in the current year as compared to the prior year as a result of a new tiered pricing structure that was introduced on a national basis during the previous quarter, further contributing to the year over year decline in membership revenue per paid membership. The decrease in membership revenue per paid membership in the nine months ended September 30, 2014 also resulted from an increase from 93% to 95% in total memberships constituting annual and multi-year memberships year over year.

Service provider revenue increased $48.5 million to 76% of total revenue year over year, primarily as a result of a 16% increase in the number of local service providers participating in our advertising programs and a 19% increase in service provider revenue per participating service provider. Service provider revenue primarily consists of revenue from advertising contracts with service providers. As our penetration of a given market increases, we are typically able to charge higher rates for advertising as service providers are able to reach a larger base of potential customers. However, as we only increase advertising rates at the time of contract renewal, increases in service provider revenue in a given market may trail increases in market penetration. E-commerce revenue of $21.1 million and $16.1 million is also included in service provider revenue for the nine months ended September 30, 2014 and 2013, respectively. We expect the revenue from these offerings to fluctuate from period to period as the offerings evolve and due to seasonality.

~~Table of Contents~~

~~Operations and support~~

Nine Months Ended September 30,
2014 2013 % Change
(dollars in thousands)
Operations and support $ 39,413
$ 29,418
34 %
Percentage of revenue 17 % 17 %

~~Operations and support expense increased $10.0 million for the~~ ~~nine~~ ~~months ended September 30, 2014 compared to the~~ ~~nine~~ months ended September 30, 2013. This increase was due in part to a $4.5 million increase in personnel-related costs as we increased our operations and support headcount year over year by approximately 24% in order to service our growing member and service provider populations. Additionally, we incurred a $3.0 million increase in publication costs associated with the increased circulation of the ~~Angie’s List Magazine~~ ~~as we continue to expand our membership. There was also a $1.3~~$0.7 million increase in credit card processing fees year over year attributable to the growing volume of membership enrollment and service provider ~~transactions as well as a $1.0 million increase in outsourced services.~~transactions. Operations and support expense ~~remained constant~~increased slightly as a percentage of revenue year over year. We expect operations and support expense to continue to increase as we grow our membership and service provider bases, subject to seasonal trends.

Selling


									Three Months Ended March 31,
	Nine Months Ended September 30,								2015			2014			% Change
	2014			2013			% Change
	(dollars in thousands)								(dollars in thousands)
Selling	$	88,478		$	65,582		35	%	$	28,609		$	26,122		10	%
Percentage of revenue	38		%	37		%			34		%	36		%
Non-cash stock-based compensation	$	292		$	101				$	10		$	104

Selling expense increased ~~$22.9~~$2.5 million for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 compared to the ~~nine~~three months ended ~~September 30, 2013. This increase is largely related to~~March 31, 2014, much of which correlates with the growth in service provider revenue ~~which increased 37%~~ over the same ~~period in the prior year. In addition, we~~time period. We increased the number of sales personnel and management responsible for contract renewals by 10% year over year to 261, and, together with the 745 sales personnel and management responsible for originating new advertising contracts and e-commerce transactions ~~by 17% to 860 year over year, and we also increased~~as of the ~~number~~end of ~~sales personnel and management responsible for contract renewals by 45% to 270 over~~ the ~~same time period, contributing~~quarter, this contributed to an approximately ~~$19.4~~$2.2 million increase in selling compensation and personnel-related costs for commissions, wages and other employee benefits for the three months ended March 31, 2015 as compared to the prior year ~~over year.~~period. Selling expense as a percentage of total revenue ~~increased marginally~~experienced a slight decline in the first quarter of 2015 as compared to ~~38% for the nine months ended September 30, 2014 from 37% for the comparison period, a trend that aligns with our~~2014. Our general expectation is that selling expense ~~which is primarily comprised of commissions,~~ will fluctuate with service provider revenue and the composition of that revenue over ~~time.~~time, but for fiscal year 2015, we expect selling expense to decline as a percentage of service provider revenue as compared to 2014.

Table of Contents

Marketing


									Three Months Ended March 31,
	Nine Months Ended September 30,								2015			2014			% Change
	2014			2013			% Change
	(dollars in thousands)								(dollars in thousands)
Marketing	$	81,909		$	75,870		8	%	$	16,276		$	23,481		(31)	%
Percentage of revenue	35		%	43		%			20		%	32		%
Gross paid memberships added in the period	1,035,814			993,556			4	%
Marketing cost per paid membership acquisition	$	79		$	76
Gross paid memberships added (in period)									229,987			286,626			(20)	%
Marketing cost per paid membership acquisition (in period)									$	71		$	82

Marketing expense ~~increased $6.0~~decreased $7.2 million for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 as compared to the ~~nine~~three months ended ~~September 30, 2013 as a result~~March 31, 2014. While we continue to make significant investments in increasing our paid membership base and expanding our market reach via national offline and online advertising, the pace of aour marketing spend in the first quarter of 2015 was slower than it was for the same period in 2014 based on the planned ~~increase in national advertising~~timing of our current year ~~over year to acquire new members. Marketing~~spend trajectory and our focus on the efficiency and effectiveness of our spend. Accordingly, marketing expense as a percentage of revenue decreased from the prior year period as total revenue increased ~~at a greater rate than~~by 15% year over year, while marketing expense ~~increased in absolute dollars.~~declined by 31% over the same time period. Our marketing cost per paid membership acquisition ~~increased~~declined from ~~$76~~$82 for the ~~nine~~three months ended ~~September 30, 2013~~March 31, 2014 to ~~$79~~$71 for the ~~nine~~three months ended ~~September 30,~~March 31, 2015, reflecting efficiency in our spend as well as the combined impact of tiered pricing, improved brand awareness, successful SEO efforts, improved effectiveness in purchasing advertising and "word of mouth" benefits associated with increased market penetration. In 2014, we began to shift our marketing focus from solely driving member growth to also highlighting our e-commerce offerings and marketplace initiatives, and that strategy remains in place in 2015. Consistent with the seasonality that characterizes our business, we expect marketing expense and marketing cost per paid membership acquisition to peak in the second or third quarters of the year. We expect marketing expense to decrease as a percentage of revenue for fiscal year 2015 as compared to 2014, and we anticipate that average marketing ~~expenditures increased by approximately 8%~~cost per paid membership acquisition will decline year over year ~~while gross paid memberships added during the period only increased by 4% over the same time period. In 2014, we accelerated our marketing expenditures in the second quarter, and~~ as ~~such, we curtailed marketing spend in the third quarter and plan to significantly reduce marketing expense in the fourth quarter, consistent with historical precedent.~~well.

~~Table of Contents~~

Product and technology


									Three Months Ended March 31,
	Nine Months Ended September 30,								2015			2014			% Change
	2014			2013			% Change
	(dollars in thousands)								(dollars in thousands)
Product and technology	$	24,243		$	20,064		21	%	$	8,416		$	7,457		13	%
Percentage of revenue	10		%	11		%			10		%	10		%
Non-cash stock-based compensation	$	838		$	(45	)			$	196		$	209

Product and technology expense increased ~~$4.2~~$1.0 million for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 as compared to the ~~nine~~three months ended ~~September 30, 2013.~~March 31, 2014. The increase in product and technology expense was ~~due~~largely attributable to ~~the combined impact of~~ a ~~$1.5~~$0.8 million year over year increase in technology-related outsourced services, ~~a $1.0 million increase in general office and utilities expenditures, a $0.7 million increase in personnel-related costs and a $0.6 million increase in depreciation and amortization expense, all of~~ which can be attributed to costs incurred for the maintenance of our ~~continued investment in~~existing technology infrastructure ~~to support current~~ and ~~anticipated future growth, including implementing~~website as well as our investments in new product development and the implementation of new technologies and applications focused on driving enhanced customer experiences and business efficiencies. We expect product and technology expense, which includes costs associated with new product development as well as maintenance of our website, to increase in absolute dollars in future periods as we continue to develop our technology platform and service our growing base of members and service providers. Product and technology expense as a percentage of revenue was ~~relatively~~ consistent ~~representing a slight 1% decrease, compared~~year over year, and we expect this trend to ~~the prior year~~generally perpetuate from period to period. We ~~expect~~anticipate that product and technology expense will increase in absolute dollars for fiscal year 2015 as ~~a percentage of revenue~~compared to ~~be relatively consistent from period to period.~~2014 as we execute on the development efforts around our technology platforms and infrastructure and subsequently launch and transition during the year.

Table of Contents

General and administrative


									Three Months Ended March 31,
	Nine Months Ended September 30,								2015			2014			% Change
	2014			2013			% Change
	(dollars in thousands)								(dollars in thousands)
General and administrative	$	25,080		$	20,304		24	%	$	10,962		$	7,356		49	%
Percentage of revenue	11		%	11		%			13		%	10		%
Non-cash stock-based compensation	$	4,770		$	2,558				$	2,030		$	1,207

General and administrative expense increased ~~$4.8~~$3.6 million for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 as compared to the ~~nine~~three months ended ~~September 30, 2013.~~March 31, 2014. The most significant ~~drivers behind~~driver of the fluctuation in general and administrative expense year over year ~~were~~was a ~~$3.4~~$4.2 million increase in personnel-related costs, including a ~~$2.2~~$0.8 million increase in non-cash stock-based compensation ~~expense. Additionally, we experienced a $1.1 million increase~~expense, attributable to 34% growth in ~~outsourced services necessitated to facilitate~~our headquarters headcount over the ~~continued~~prior year. The additional personnel reflect hiring in strategic growth areas such as marketing, human resources, finance and ~~development of our operations, a $0.7 million~~project management. The increase in general ~~office~~ and ~~utilities expenditures for the expansion and upgrading of our office facilities during the current year, a $0.6 million increase in depreciation and amortization~~administrative expense ~~and $0.4 million in additional dues and fees expense, all of which were~~attributable to personnel-related costs was offset by a ~~decline~~year over year reduction in ~~bad debt~~general and administrative expense related to the satisfaction of ~~$0.9 million and a decrease in professional service fees~~the obligation associated with the litigation settlement accrual during the first quarter of ~~$0.8 million~~2015 in the ~~nine month period~~amount of $0.5 million. As a percentage of revenue, general and administrative expense increased slightly for the three months ended ~~September 30, 2014~~March 31, 2015 as compared to the ~~prior year. General and administrative expense as a percentage of revenue was constant as compared to the prior year period. We~~three months ended March 31, 2014. While we expect general and administrative expense as a percentage of revenue to generally remain constant or decrease over time as we realize efficiencies and economies of scale as we ~~grow.~~grow, we anticipate that general and administrative expense will increase in absolute dollars and as a percentage of revenue in fiscal year 2015 as compared to 2014 as the impact of personnel added in 2014 is annualized.

Interest expense

Interest expense for the three months ended March 31, 2015 was ~~approximately $0.6~~$0.9 million as compared to $0.5 million for the ~~nine~~three months ended March 31, 2014, reflecting the impact of recurring monthly interest payments on the outstanding long-term debt and monthly interest charges for loan fee and debt discount amortization related to the September ~~30,~~ 2014 ~~as compared to $1.4 million for the nine months ended September 30, 2013. The year over year decrease in interest expense was the result of current year~~debt financing transaction, offset by capitalized interest on ~~long-term~~website and software ~~projects.~~

~~Loss on debt extinguishment~~

~~As a result of the current quarter debt refinancing, which included the retirement of our previous debt facility, we recorded an approximate $0.5 million loss on debt extinguishment for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2014~~ associated with the recognition of the remaining warrant interest expense under the previous debt facility, prepayment penalties and incremental interest incurred upon early retirement of the previous debt and the write-off of the remaining unamortized portion of the deferred financing fees capitalized under our previous debt facility.

development.

2623

Table of Contents

Liquidity and Capital Resources

General

At ~~September 30, 2014,~~March 31, 2015, we had ~~$62.3~~$52.9 million in cash and cash equivalents and ~~$16.7~~$24.5 million in short-term investments. Cash and cash equivalents consists of bank deposit accounts and money market funds as well as any investments in corporate bonds or certificates of deposit with contractual maturities of three months or less, which, at times, may exceed federally insured limits. Short-term investments consist of corporate bonds and certificates of deposit with maturities of more than 90 days but less than one year. To date, the carrying values of these investments approximates their fair values, and we have incurred no loss in these accounts.

Summary cash flow information for the ~~nine~~three months ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~ is set forth below.


	Nine Months Ended September 30,
	2014			2013			Three Months Ended March 31,
	(in thousands)						2015			2014
Net cash provided by operating activities	$	7,950		$	13,448		$	21,246		$	14,945
Net cash used in investing activities	(22,294		)	(19,253		)	(8,248		)	(6,555		)
Net cash provided by financing activities	41,860			4,776
Net cash (used in) provided by financing activities							(54		)	461

Net Cash Provided by Operating Activities

Our operating cash flows will continue to be impacted principally by the extent to which we continue to pursue our growth strategy, including ~~investment~~investments in national advertising and ~~technology personnel and equipment,~~our transition to a marketplace model, changes in price per average paid membership, the size and composition of our sales force responsible for originating and renewing service provider contracts and ~~changes~~fluctuations in headcount as we grow our business. Our largest source of operating cash flows is cash collections from our ~~members~~service providers and ~~service providers.~~members. We expect positive operating cash flows in some periods and negative operating cash flows in others, depending on seasonality and the extent of our investments in future growth of the business.

Cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 of ~~$8.0~~$21.2 million, which includes first quarter net income of $4.4 million, was ~~achieved despite a net loss of $27.3 million. Cash provided by operating activities was largely~~predominately attributable to a ~~$20.2~~$16.8 million net increase in accounts payable and accrued liabilities driven by increases in accrued marketing expenses, trade accounts payable, accrued e-commerce, accrued base payroll and the expected timing of payment of these balances. Additionally, the increase in total combined deferred advertising revenue, offset by the corresponding decline in total combined deferred membership revenue, resulted in a net $0.9 million increase to operating cash flow for the quarter, reflecting the impact of increases in service provider contract values and concurrent decreases in membership revenue per paid membership. Non-cash activity, including $2.3 million in non-cash compensation and $1.6 million in depreciation and amortization, accounted for a $4.0 million positive contribution to operating cash flows for the quarter. Uses of cash included a $4.1 million increase in prepaid expenses and other current assets associated with certain technology and marketing service agreements and a $0.7 million increase in accounts receivable attributable to growth in service provider billings.

Cash provided by operating activities for the three months ended March 31, 2014 of $14.9 million was achieved despite a net loss of $3.8 million. Our cash provided by operating activities was primarily attributable to a $17.0 million net increase in accounts payable and accrued liabilities related to increases in accrued marketing expenses, accrued e-commerce, accrued base payroll, ~~accrued e-commerce,~~ general ~~trade~~ accounts payable and the expected timing of payment of these balances. ~~Additionally, we experienced an~~The increase in ~~total combined~~ deferred advertising revenue of ~~$11.0~~$3.5 million, ~~year over year as a result of an~~which related to the increase ~~in both the number of paid memberships and~~ in the number of service providers participating in our advertising programs, ~~thereby positively impacting operating~~also contributed to cash ~~flow. Furthermore,~~provided by operations for the period ended March 31, 2014. In addition, our net loss was adjusted for ~~$10.5~~$2.8 million of non-cash expenses, which included ~~$5.9~~$1.5 million of stock-based compensation expense ~~$4.0~~and $1.2 million of depreciation and ~~amortization, $0.3 million related to the non-cash loss on debt extinguishment and $0.3 million attributable to the amortization of the debt discount, deferred financing fees and the bond premium.~~amortization. Uses of cash included a ~~$1.9~~$1.1 million increase in accounts receivable attributable to an increase in service provider billings, ~~and~~ a ~~$4.5~~$2.1 million increase in prepaid expenses and other current assets ~~associated with prepaid commissions~~ and a ~~receivable due for state tax payroll incentives.~~

~~Cash provided by operating activities for the nine months ended September 30, 2013 of $13.4~~$1.5 million was achieved despite a net loss of $35.8 million. Our cash provided by operating activities was attributable to a deferred revenue increase of $23.1 million as a result of an increase in both the number of our paid memberships and in the number of service providers participating in our advertising programs, an $18.2 million net increase in accounts payable and accrued liabilities primarily related to increases in accrued marketing expenses, accrued commissions and the timing of payment of these balances, and a decrease in ~~prepaid expenses~~deferred membership revenue.

Table of $4.8 million primarily attributable to our change in the compensation structure for our sales force responsible for new advertising originations. In addition, our net loss was adjusted for $6.0 million of non-cash expenses, which included $2.7 million of stock-based compensation expense, $2.9 million of depreciation and amortization, and $0.4 million attributable to the amortization of debt discount and deferred financing fees. Uses of cash included a $2.8 million increase in accounts receivable attributable to an increase in service provider billings.Contents

Net Cash Used in Investing Activities

Our use of cash in investing activities of ~~$22.3~~$8.2 million for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 was largely attributable to the total combined ~~$25.7~~$7.9 million in capital expenditures for property, equipment and software ~~related capital expenditures~~ during the ~~year,~~quarter, consisting of ~~$12.9 million for facilities and information technology hardware and software and nearly $12.8~~$6.8 million for capitalized website and software development ~~costs~~ as we continue to make significant ~~upgrades to~~investments in the technology infrastructure supporting our web and mobile

~~Table of Contents~~

platforms to sustain our current and ~~implement new information~~anticipated future growth as well as $1.1 million for campus expansion and improvement efforts and upgrades and additions to technology infrastructure to support our growth. We expect that our capital expenditures during the fourth quarter of the year will approximate our capital expenditures in each of the first three quarters, subject to the timing of developmenthardware and payment of associated amounts due. We also spent approximately $0.8 million to date during the year on data acquisition to acquire consumer reports on service providers and to purchase a website domain name. The combined impact from each of the aforementioned uses of cash in investing activities during thesoftware. Our current ~~year was offset by a $4.2 million positive cash inflow related to our sales~~period purchases of investments, net of ~~purchases,~~sales at maturity, in corporate bonds and certificates of deposit with maturities of more than 90 days but less than one ~~year.~~year also contributed to our use of cash in investing activities in the amount of $0.3 million as purchases of short-term investments exceeded sales in the quarter. We also spent $0.1 million during the quarter in the form of data acquisition costs to acquire consumer reports on service providers.

Our use of cash in investing activities in the ~~nine~~three months ended ~~September 30, 2013~~March 31, 2014 was largely attributable to ~~purchases, net of sales, of $10.7~~the total combined $6.2 million in ~~investments in corporate bonds, commercial paper~~property, equipment and ~~certificates~~software related spend during the period, consisting of ~~deposit with maturities between ninety days and one year, $5.7~~$2.3 million for facilities and information technology hardware and software ~~$2.2~~and nearly $4.0 million for capitalized website and software development costs, as we continued to make significant upgrades to our web and mobile platforms and implement new information technology infrastructure to support our growth. We also spent approximately $0.4 million during the ~~purchase of BrightNest assets in August 2013 and $0.7 million for~~quarter on data acquisition to acquire consumer reports on service ~~providers.~~providers and to purchase a website domain name.

Net Cash (Used in) Provided by Financing Activities

Net cash ~~provided by~~used in financing activities ~~of $41.9 million~~ for the ~~nine~~three months ended ~~September 30, 2014 consisted, in part, of proceeds from the exercise of employee stock options, offset by~~March 31, 2015 was entirely attributable to payments on our capital lease ~~obligation. In addition, as a result of the debt refinancing transaction completed~~obligation during the third quarter, we received debt proceeds of $60 million, offset by fees paid to the lender of $1.2 million, paid out cash for financing costs amounting to $1.9 million and incurred a $15 million cash outflow related to the retirement of the Company's previous debt facility. Current year financing cash flows were also impacted by an additional $0.5 million in contingent consideration that was paid out during the third quarter to satisfy our final obligation related to the 2013 BrightNest acquistion, which was due and payable on the one-year anniversary of the closing of the transaction.quarter.

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2013~~March 31, 2014 consisted solely of proceeds from the exercise of employee stock options.

Debt Obligations

On September 26, 2014, we entered into a financing agreement that provided for a ~~$60~~$60.0 million term loan and a ~~$25~~$25.0 million delayed draw term loan. Amounts outstanding under the financing agreement bear interest at a per annum rate, at the option of ~~the Company,~~us, equal to (i) the LIBOR rate for the interest period in effect, subject to a floor of 0.5%, plus 6.75% or (ii) the reference rate, which is based on the prime rate as published by the Wall Street Journal, subject to a floor of 3.25%, plus 5.75%. The financing agreement requires monthly interest-only payments on the first business day of each month until maturity on any principal amounts outstanding under either debt facility. The financing agreement obligates ~~the Company~~us to make quarterly principal payments on the term loan of $0.8 million on the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining balance of the term loan at maturity. We are required to make principal payments on the outstanding balance of the delayed draw term loan equal to 1.25% of the amount of such loan funded at or prior to the last day of each calendar quarter, commencing with the quarter ending September 30, 2016, and to repay the remaining outstanding balance of the delayed draw term loan at maturity. The financing agreement contains a provision for penalties related to early prepayment. Our obligations under the financing agreement are guaranteed by each of our subsidiaries and are secured by first priority security interests in all of our respective assets and a pledge of the equity interests of our subsidiaries. The term loan and the delayed draw term loan mature on September 26, 2019. As of ~~September 30, 2014,~~March 31, 2015, we had ~~$58.8~~$58.9 million in outstanding borrowings, net of fees paid to the lender of ~~$1.2~~$1.1 million, under the term loan and ~~available credit~~availability of ~~$25~~$25.0 million under the delayed draw term loan.

The financing agreement contains various restrictive covenants, including restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to stockholders or repurchase outstanding stock, enter into ~~related party~~related-party transactions and make capital expenditures. We are also required to comply with certain financial covenants, including minimum consolidated EBITDA as defined in the financing agreement, minimum liquidity, maximum consolidated capital expenditures and minimum membership revenue. Upon an event of default, which includes, among other things, a failure to make required payments when due, a failure to comply with covenants, certain bankruptcy and insolvency events, defaults under other material indebtedness, or a change in control, the lenders may accelerate amounts outstanding, terminate the agreement and foreclose on all collateral. We were in compliance with all financial and non-financial covenants at ~~September 30, 2014.~~

We used a portion of the proceeds from the term loan to retire the $15 million of debt that was outstanding under our previous credit facility and to pay bank and lender fees and transaction costs associated with the new financing agreement, resulting in a non-operating loss on debt extinguishment of $0.5 million within the consolidated statement of operations for both the three and ~~nine~~ ~~month periods ended September 30, 2014.~~March 31, 2015.

2825

Table of Contents

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet ~~activities. We~~activities, other than long-term noncancellable operating leases as described below, nor do ~~not hold~~we maintain any off-balance ~~sheet interest~~interests in variable interest entities, ~~which include special purpose~~special-purpose entities ~~and~~or other structured finance entities.

Contractual Obligations

Our contractual obligations ~~relate~~ primarily ~~to debt obligations, non-cancellable~~consist of long-term noncancellable operating leases and a capital lease. During the current year, we executed a new capital lease obligation for technology hardware and software with payments due through 2017, and we also entered into long-term operating lease agreements with payments dueexpiring through 2020 for the purpose of expanding our office space. Total combined future minimum payment obligations on these new leases amount to approximately $11.2 million through 2020, with approximately $0.5 million of that amount due over the remainder of 2014. Additionally, we refinanced ourand long-term debt ~~during the third quarter~~comprised of ~~2014, resulting in the retirement of our previous $15~~a $60.0 million term loan ~~and $15 million revolving credit facility and the issuance of a new $60 million term loan and $25 million delayed draw term loan, both of which are~~ scheduled to mature on September 26, 2019. There were no ~~other significant~~material changes in our contractual obligations from those disclosed in ~~our~~the Annual Report on Form 10-K for the year ended December 31, ~~2013.~~2014. Total combined future minimum payment obligations under long-term noncancellable operating leases amount to approximately $10.4 million as of March 31, 2015, while we had $58.9 million in outstanding borrowings, net of fees paid to the lender, under the term loan as of the same date.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with ~~generally accepted accounting principles in the United States, or~~ U.S. GAAP. The preparation of ~~these~~the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. There were no material changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the year ended December 31, ~~2013.~~2014.

Recent Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our condensed consolidated financial statements, see Note 1, "Summary of Significant Accounting Policies" in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 11. of this Form 10-Q.

2926

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in our exposure to market risk since the disclosure in our Annual Report on Form 10-K for the year ended December 31, ~~2013~~.2014. Please refer to Part II, Item 7A. ~~Quantitative~~"Quantitative and Qualitative Disclosures about Market ~~Risk~~Risk" included in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2013~~2014 for a more complete discussion of the market risks we encounter.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Based on their evaluation atas of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures ~~were~~are effective at the reasonable assurance ~~level as of~~ ~~September 30, 2014~~.level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

3027

Table of Contents

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information pertaining to legal proceedings can be found in Part I, Item 1. ~~Financial Statements~~"Financial Statements" — Note 9, "Commitments and ~~Contingencies”~~Contingencies,” of this Quarterly Report on Form 10-Q and is incorporated by reference herein.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. In addition to the information set forth in this Quarterly Report on Form 10-Q, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2013~~.2014. The risks discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. ~~The risks outlined below as well as additional~~Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may become important factors that may materially affect our business, financial condition and future results. The trading price of our common stock could decline due to any of these risks or uncertainties, and you may lose all or part of your investment.

~~Risks Related to Our Business~~

~~If security measures at third-parties are breached, our ability to automatically renew memberships and service provider commitments could be harmed.~~

Many of our members and service providers shop at third-parties, including retailers such as Target and Home Depot, and pay by credit card at such places. While we assume third-parties maintain programs to adequately protect their customers’ personal information, including bank account and credit card information, the techniques used to obtain unauthorized access change frequently, and third-parties may be unable to implement sufficient preventive measures to protect that information. If any of our members’ or service providers’ bank account or credit card information is compromised by a security breach at a third-party, members or service providers may be forced to open a new bank account or obtain a new credit card, and the payment information we have on file for those impacted members or service providers would no longer be valid, impairing our ability to automatically renewing the affected members’ or service providers’ accounts at the end of the applicable term. Our inability to automatically renew these memberships and other commitments may have a significant negative impact on our revenue, and our business could be harmed as a result.

We may not realize the expected business benefits of our efforts to reorganize our sales force, and the reorganized department could prove difficult to integrate, disrupt our business or adversely affect our operating income and revenues.

As part of our business strategy, we periodically make changes to the structure of our sales department, and we expect that we will continue to make such changes in the future. For example, in the third quarter of 2014, we reduced our sales force by 97 people. Such reorganizations involve numerous risks, including:

~~the potential failure to achieve the expected benefits of the reorganization;~~

~~difficulties in and the cost of reorganizing operations, services and personnel;~~

~~diversion of financial and managerial resources from existing operations;~~

~~potential loss of key employees;~~

~~inability to generate sufficient revenue to offset reorganization costs;~~

~~liabilities and expenses associated with the reorganization, both known and unknown; and~~

~~negative impacts on our operating income and revenues due to the reduction in productivity and efficiency caused by the reorganization process.~~

~~If we fail to properly evaluate and execute internal reorganizations, our business may be seriously harmed, and the value of your investment may decline.~~

~~Table of Contents~~

~~The covenants in the instruments that govern our current indebtedness may limit our operating and financial flexibility.~~

~~The covenants in the instruments that govern our credit facility limit our ability to:~~

~~incur debt and liens;~~

~~pay dividends;~~

~~make redemptions and repurchases of capital stock;~~

~~make loans and investments;~~

~~make capital expenditures;~~

~~prepay, redeem or repurchase debt, other than under our credit facility;~~

~~engage in acquisitions, consolidations, asset dispositions, sale-leaseback transactions and affiliate transactions;~~

~~change our business;~~

~~amend our material agreements;~~

~~issue and sell capital stock of subsidiaries;~~

~~restrict distributions from subsidiaries; and~~

~~grant negative pledges to other creditors.~~

The credit facility also contains financial covenants that require us to achieve certain minimum levels of membership revenue and EBITDA and to maintain minimum levels of liquidity. The credit facility is secured by a pledge of substantially all of our assets and, through a delayed draw term loan facility, provides a source of liquidity to allow us to fund our current and future operations. A breach of any of the covenants or requirements in the credit facility could result in a default under the credit facility, unless we are able to obtain the necessary waivers or amendments. Upon the occurrence of an event of default that is not waived, and subject to any appropriate cure periods, the lenders could elect to exercise any of their available remedies, which may include the right to not lend any additional amounts to us or, in certain instances, to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable. If we are unable to repay the borrowings with respect to the credit facility when due, the lender would be permitted to proceed against its collateral. If the lender takes any or all of these steps, our operating results and financial condition could be materially and adversely impacted, and we may be unable to continue to fund our operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On November 17, 2011, our registration statement on Form S-1 (File No. 333-176503) was declared effective for our initial public offering. There have been no changes regarding the use of proceeds from our initial public offering from the disclosure in our final prospectus filed with the SEC pursuant to Rule 424(b).None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~Not applicable.~~None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3228

Table of Contents

ITEM 6. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
~~10.01~~	Financing Agreement, dated as of September 26, 2014, by and among Angie's List, Inc., other subsidiaries of Angie's List, Inc. joined after in such capacity as Borrowers, certain subsidiaries of Angie's List, Inc. as Guarantors, the lenders from time to time party thereto as Lenders and TCW Asset Management Company as Collateral Agent and Administrative Agent ^					X
~~10.02~~	Pledge and Security Agreement, dated as of September 26, 2014, by and among Angie's List, Inc., AL Campus Kids, LLC and AL BV Investments, Inc. as Grantors and TCW Asset Management Company as Collateral Agent					X
31.01	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
31.02	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
32.01	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act *					X
32.02	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act *					X
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, (ii) Condensed Consolidated Statements of Operations for the ~~Three~~three months ended March 31, 2015 and ~~Nine Months ended September 30,~~ 2014, ~~and 2013,~~ (iii) Condensed Consolidated Statements of Cash Flows for the ~~Nine Months~~three months ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~ and (iv) Notes to Condensed Consolidated Financial Statements					X

^ A request for confidential treatment was filed for certain portions of the indicated document. Confidential portions have been omitted and filed separately with the Commission as required by Rule 24b-2.

* Furnished, not filed.

3329

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on ~~October 22, 2014.~~April 23, 2015.



	ANGIE’S LIST, INC.

	By:	/s/ CHARLES HUNDT
	Name:	Charles Hundt
	Title:	Chief Accounting Officer ~~and Controller~~ (Duly Authorized Officer and Principal Accounting Officer)

3430

Table of Contents

EXHIBIT INDEX



		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
~~10.01~~	Financing Agreement, dated as of September 26, 2014, by and among Angie's List, Inc., other subsidiaries of Angie's List, Inc. joined after in such capacity as Borrowers, certain subsidiaries of Angie's List, Inc. as Guarantors, the lenders from time to time party thereto as Lenders and TCW Asset Management Company as Collateral Agent and Administrative Agent ^					X
~~10.02~~	Pledge and Security Agreement, dated as of September 26, 2014, by and among Angie's List, Inc., AL Campus Kids, LLC and AL BV Investments, Inc. as Grantors and TCW Asset Management Company as Collateral Agent					X
31.01	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
31.02	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act					X
32.01	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act*					X
32.02	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act*					X
101	Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, (ii) Condensed Consolidated Statements of Operations for the ~~Three~~three months ended March 31, 2015 and ~~Nine Months ended September 30,~~ 2014, ~~and 2013,~~ (iii) Condensed Consolidated Statements of Cash Flows for the ~~Nine Months~~three months ended ~~September 30,~~March 31, 2015 and 2014 ~~and 2013~~ and (iv) Notes to Condensed Consolidated Financial Statements					X

* Furnished, not filed.

3531



PART I – FINANCIAL INFORMATION		32

ITEM 1.	Condensed Financial Statements	32

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1514

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	3027

ITEM 4.	Controls and Procedures	3027

PART II – OTHER INFORMATION		3128

ITEM 1.	Legal Proceedings	3128

ITEM 1A.	Risk Factors	3128

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3228

ITEM 3.	Defaults Upon Senior Securities	3228

ITEM 4.	Mine Safety Disclosures	3228

ITEM 5.	Other Information	3228

ITEM 6.	Exhibits and Financial Statement Schedules	3329



Cohort	# of Markets	Average Revenue/ Market (1)		Membership Revenue/Paid Membership (2)		Service Provider Revenue/Paid Membership (3)		Average Marketing Expense/ Market (4)		Total Paid Memberships (5)	Estimated Penetration Rate (6)		Annual Membership Growth Rate (7)
Pre-2003	10	$	7,258,018	$	34.01	$	108.50	$	1,416,968	564,568	14.9	%	24	%
2003-2007	35	5,416,899		30.35		99.70		1,486,922		1,622,252	11.7	%	25	%
2008-2010	103	341,123		16.35		41.03		204,621		674,337	12.0	%	23	%
Post 2010	105	39,230		12.05		28.46		59,383		122,282	7.3	%	51	%
Total	253									2,983,439

March 31,
2015

March 31,
2014

Stock options

Restricted stock units